Wong Bark Chuan David v Man Financial (S) Pte Ltd

• Jurisdiction: Singapore
• Judge: Woo Bih Li J
• Judgment Date: 18 January 2007
• Neutral Citation: [2007] SGHC 5
• Date: 18 January 2007
• Subject Matter: Whether restrictive covenants amounting to restraint of trade and therefore invalid,Whether allegation giving rise to such issue must first be pleaded,Contract,Term of termination agreement between company and former employee that former employee would receive compensation for compliance with terms of agreement,Whether former employee entitled to compensation even if restrictive covenants found to be invalid,Whether compliance with restrictive covenants constituting sole consideration for compensation under agreement,Agreement containing restrictive covenants,Illegality and public policy,Restraint of trade,Termination agreement concluded between company and former employee
• Docket Number: Suit No 706 of 2005
• Published date: 09 February 2007
• Defendant Counsel: Andre Maniam, Ameera Ashraf, Jaclyn Neo and Wong Baochen (Wong Partnership)
• Court: High Court (Singapore)
• Plaintiff Counsel: Chia Ho Choon and Spring Tan (KhattarWong)

18 January 2007 Judgment reserved.

Woo Bih Li J:

Introduction

1 The plaintiff, Wong Bark Chuan, David (“Mr Wong”) was the managing director and chief executive officer (“CEO”) of the defendant Man Financial (S) Pte Ltd (“MF”) which provided brokerage services. On 13 June 2005, he was asked to resign and placed on garden leave for three months from 13 June 2005 to 13 September 2005 while he served out a 3-month notice period. Mr Wong and MF then entered into an agreement regarding the termination of his employment. The terms therefore were contained in a termination agreement (in the form of a letter) dated 13 June 2005 (“the TA”) which he accepted on 23 June 2005. The TA contained provisions on non-solicitation and non-competition for a period of 7 months up to 13 January 2006. Under the TA, Mr Wong was to receive certain benefits on 13 September 2005 provided he was not in breach of any of the terms of the TA. The benefits were:

(a) 13,014 shares in Man Group plc and

(b) US$263,000.

I will refer to them collectively as “the Compensation”.

2 MF alleged that Mr Wong had breached paragraphs C.1 and C.3 of the TA by soliciting the employment of employees or former employees of MF and by participating or rendering advice to a competitor, Refco (S) Pte Ltd (“Refco”). Therefore, MF declined to pay the Compensation.

3 Consequently, Mr Wong commenced this action to claim the Compensation. Although MF relied only on breaches of paragraphs C.1 and C.3 of the TA to defend its position, I set out below paragraphs B.1 and B.2, C.1 to C.4 and D.1 as they have some bearing on the issues or arguments:

B. Payment on Termination

B.1. In consideration of you:-

(a) serving out your Notice Period on leave from the office, and

(b) agreeing to the terms and conditions set forth herein, apart from paying you your full salary and allowances during the Notice Period the Company agrees to pay you:

(i) 13,014 shares in Man Group plc granted to you under the terms of the Man Group plc 2002, 2003 and 2004 coinvestment schemes (as at close of business 10 June 2005 valued at approximately US$330,000); and

(ii) a goodwill payment of US$263,000.

B.2. Save in the event that you breach any of the terms of this Termination Agreement, the sums set out in B.1(b) above will be paid to you in full and without deduction at the end of the Notice Period, on 13 September 2005.

C. Non-Solicitation and Non-Competition

C.1. In further consideration of the foregoing, you agree that for a period of seven (7) months from the Termination Date, that is, up to 13 January 2006 you shall not directly or indirectly employ or solicit the employment of (whether as an employee, officer, director, agent or consultant) any person who is or was at any time during the period 13 June 2004 to 13 June 2005 an officer, director, representative or employee of the Company. For avoidance of doubt, you shall not be deemed to employ any person unless you are involved or have otherwise provided input into the decision to hire such individual.

C.2. In further consideration of the foregoing, you agree that for a period of seven (7) months from the Termination Date, that is, up to 13 January 2006, you shall not directly or indirectly either for yourself or for any other business in person, solicit, call upon, attempt to solicit or attempt to call upon any party who is or was at any time during the period 13 June 2004 to 13 June 2005 a client of the Company and you will not accept any business from such clients of the Company for yourself or for any employer during such period. The said restriction shall apply anywhere in the world, and for products and services in direct competition with products and services offered by the Company.

C.3. In further consideration of the foregoing, you agree that you will not either directly or indirectly for a period of seven (7) months from the Termination Date, that is up to 13 January 2006, anywhere in the world, organize, own, manage, operate, participate in, render advice to, control, or have an investment or ownership interest in any business that engages in the marketing and/or sale of products, services and/or systems which are in competition with those provided by the Company.

C.4. You agree that this Paragraph C is reasonable and necessary for the protection of the Company’s interests, and that you have agreed to these clauses in consideration of the amounts to be paid to you as set out in Paragraph B above.

D. Release and Discharge

In further consideration of the foregoing, you hereby unconditionally and irrevocably discharge and release the Company, its parent, officers and directors, and their successors and assigns from any and all claims, demands, causes of action, suits, charges, violation and/or liability whatsoever, known or unknown involving any matter arising out of or in any way related, directly or indirectly, to your employment with the Company or the termination thereof other than your entitlements and benefits under this Termination Agreement.

The Issues

4 The issues are:

(a) whether Mr Wong had solicited the employment of various employees or former employees of MF to work in Refco,

(b) whether Mr Wong had participated in or rendered advice to Refco,

(c) if (a) and/or (b) applies, whether Mr Wong was prima facie in breach of paragraphs C.1 and/or C.3,

(d) if so, whether paragraphs C.1 and/or C.3 was invalid for being in unreasonable restraint of trade,

(e) if paragraphs C.1 and/or C.3 was invalid, whether Mr Wong would still be entitled to the Compensation, and whether the allegation giving rise to this issue must first be pleaded,

(f) whether the requirement in paragraph B.2 that Mr Wong must not be in breach of any of the terms in the TA to be entitled to the Compensation was an unenforceable penalty.

Whether Mr Wong had solicited the employment of various employees or former employees to work in Refco

5 MF asserted that Mr Wong had solicited the employment of Tricia Ng Geok Tin and Tan Siang Hwee who were MF’s employees during the prohibited period of 13 June 2005 to 13 January 2006, as well as the employment of 11 others who had left MF before or during the prohibited period.

6 From the affidavit of evidence-in-chief (“AEIC”) of Mr Lai Eng Keat, as clarified and amended by his oral evidence, I set out below the names of those other 11 persons and particulars of the dates of their resignations from MF, the dates of letters of offer to each of them from Refco, their last dates with MF and the dates they commenced employment with Refco:

	resignation	letters of; offers from; Refco	Financial	Refco
(“Fennie”)	13 June 2005	4 Aug 2005	30 Jun 2005	16 Aug 2005
also known as; Dickson Woon; (“Dickson”)	20 Jun 2005	30 Jun 2005	8 Jul 2005	11 Jul 2005
Joey Sim (“Joey”)	20 Jun 2005	30 Jun 2005	31 Jul 2005	16 Aug 2005
Diana Sim (“Diana”)	20 Jun 2005	1 Jul 2005	6 Aug 2005	16 Aug 2005
David Tan	21 Jun 2005	12 Jul 2005	20 Sept 2005	21 Sept 2005
(“Malcolm”)	22 Jun 2005	16 Jun 2005	21 Jul 2005	25 Jul 2005
June Lim (“June”)	23 Jun 2005	5 Aug 2005	28 Jun 2005	16 Aug 2005
(“Voo”)	27 Jun 2005	5 Jul 2005	26 Jul 2005	27 Jul 2005
also known as Dennis; Seet (“Dennis”)	1 Jul 2005	28 Jun 2005	15 Aug 2005	16 Aug 2005
(“Jacob”)	23 Aug 2005	18 Jul 2005	2 Sept 2005	5 Sept 2005
(“Vincent”)	24 Aug 2005	22 Aug 2005	24 Sept 2005	26 Sept 2005

7 I also set out the names of the witnesses for Mr Wong and for MF:

PW1 Mr Wong, the plaintiff.

PW2 Dickson. He was a vice president and chief dealer of MF’s Foreign Exchange desk before he moved to Refco. At the time of the trial he was no longer with Refco but was a senior dealer at Philip Futures Pte Ltd.

PW3 Voo. He was vice president responsible for the development of the foreign exchange business of MF before he moved to Refco. At the time of the trial he was no longer with Refco but was an associate at DBS Vickers Securities Online (S) Pte Ltd.

PW4 June. She had held various positions in MF before she joined Refco. At the time of the trial she was a homemaker.

PW5 Jacob. He was an independent account executive at MF and then at Refco meaning that he was servicing his own clients. At the time of the trial he was an independent account executive with OCBC Securities Private Limited.

PW6 Dennis. He was at one time the chief operating officer (“COO”) and the de facto deputy CEO of MF. In early 2004, he moved out of the COO role to assume direct responsibility for business units including general brokerage, equities and Taiwan. However, he continued to assist Mr Wong with management on an ad hoc basis. He left MF for Refco but at the time of the trial he was unemployed.

DW1 Lai Eng Keat (“Eng Keat”). He was working with Mr Wong at MF and at the time of the trial he was the Deputy CEO and COO of MF.

DW2 Seow Hock Hin (“Hock Hin”). He was at all material times a senior vice president at Refco.

DW3 Tricia Ng Geok Tin (“Tricia”). She was at all material times working at MF. At the time of the trial she was a vice president of MF.

DW4 Tan Siang Hwee (“Siang Hwee”). She was also at all material times working at MF. At the time of the trial she was also a vice president of MF.

DW5 Daniel Yeo Chin Tuan (“Daniel”). He was working in MF and took over as CEO of MF from Mr Wong. He was still holding that position at the time of trial.

8 Christopher John Robert Smith who was the Chairman and COO of Man Financial Ltd at all material times also executed an AEIC. His attendance for cross-examination was not required and his AEIC was admitted with the leave of the court. The lead counsel for Mr Wong was Mr Chia Ho Choon. The lead counsel for MF was Mr Andre Maniam.

9 Mr Wong’s evidence was that although he had had discussions with Tan Hup Thye (“Hup Thye”) who was the Managing Director and CEO of Refco about the possibility of his joining Refco before the TA was entered into, Mr...