Singapore: Breach of confidentiality and confidence claim

This case revolves around Four Ex-Employees leaving the claimant company, Clearlab SG Pte Ltd ("Clearlab") and joining a rival company, Aquilus Lens International Pte Ltd ("Aquilus"); the key issue is a breach of confidence and the use of confidential information. The claimant also brought claims for: conspiracy, breach of employment contract, breach of fiduciary duty, inducing breach of contract, dishonest assistance, knowing receipt, conversion and breach of supply agreement.

Summary

Clearlab succeeded in the majority of their claims against the Four Ex-Employees and Aquilus. The court awarded a 5 year injunction against Aquilus to prevent them from manufacturing or participating in the manufacture of contact lenses (using the specific method in contention between the parties). Clearlab was also awarded a permanent injunction against Aquilus using, disclosing or otherwise benefitting from its confidential information. This judgment should provide comfort for corporations facing issues with ex- employees as it provides authority for the courts taking a fair and equitable approach in protecting company confidentiality.

Background Facts

The primary claims were brought against Ting Chong Chai ("Ting"), who was head of engineering and technical development at Clearlab, Rathinaraj David, Goo Wee Hong and Ng Chee Han (together the "Four Ex-Employees"). Claims were also brought against Aquilus and Ho Kar Kit ("Ho") (who incorporated Aquilus) and three further defendants who are generally ancillary to the main claims discussed below. Clearlab was incorporated in May 2007 to manufacture contact lenses. The Four Ex-Employees joined the company throughout 2008. In 2010, Aquilus came in to existence, initially the intention was for the company to distribute contact lenses, but the business plan later shifted to manufacturing contact lenses. Throughout 2011 the Four Ex-Employees left Clearlab to join Aquilus and by October 2011 Clearlab had filed a writ of summons in this matter and applied for a search order against Ting and Aquilus.

Breach of confidentiality

The confidential information in question related to the manufacturing of contact lenses. To succeed in an action for breach of confidence, where no contract is involved, the following 3 elements must be proven:

• the information must possess the necessary quality of confidentiality (note that a distinction is drawn between confidential information protected by contract and skill and knowledge acquired during the course of employment, which an employee should be able to utilise as a matter of public policy);
• the information must have been imparted in circumstances importing an obligation of confidence; and
• there must be an unauthorised use of that information to the detriment of the party claiming the breach. Where there is a contract expressly imposing confidentiality obligations, the second element may be satisfied

simply by reference to the contract.

In relation to possessing the quality of confidence, the court found that the core list of information put forward by Clearlab was confidential. This decision was based on their view that the information was integral to the Clearlab manufacturing process, used Clearlab equipment and materials, was the result of extensive experimentation and was not publically available or information that was shared with any other contact lens manufactures. The court also took into account Clearlab's corporate policies, including IT security and physical restriction to accessing documents, which indicated a firm intention to maintain confidentiality.

In relation to the obligation of confidence, a number of the defendants were under a contractual obligation of confidence and so this element was easily proven. With regards to Aquilus, the third party recipient of information and the corporate vehicle through which the other defendant's sought to use the confidential information, the position was slightly more complicated. The general rule of law is that the knowledge of the defendants of confidentiality of information being passed on will be imputed to the company. Therefore, Aquilus, through the knowledge of its employees, was put on notice of the confidentiality of the information that came into its possession and therefore had an equitable obligation of confidentiality.

In relation to unauthorised use, the courts found this was clearly made out based on circumstances, motivations and business plans of the defendant's and the fact that the Four Ex-Employees had surreptitiously taken a large number of documents from Clearlab which they later deleted once they realised there was a search order.

Conspiracy

Clearlab claimed that all the defendants were engaged in a conspiracy to breach Clearlab's rights of confidentiality and to use this information to benefit Aquilus. There was ample evidence to support the existence of a plan to set up a competing business using Clearlab's confidential information and it's execution by several defendants.

The following elements must be established to make out conspiracy by unlawful means:

• there was a combination of two or more persons who carried out certain acts;
• the alleged conspirators had the intention to cause damage or injury to the claimant through those acts;
• the acts were unlawful;
• the acts were performed in furtherance of the agreement; and
• the claimant suffered loss as a result of the conspiracy.

The court held this could clearly be made out against the Four Ex-Employees, Aquilus and Ho, but not the other defendants.

Breach of employment contract

The conduct of the Four Ex-Employees was the subject of a series of further claims. Ting, specifically, was alleged to have breached clauses prohibiting him from soliciting Clearlab's employees and customers as well as a clause to serve Clearlab exclusively during the course of his employment. In addition, all employees were alleged to have breached: (i) a non-compete clause; (ii) a return of materials clause; and (iii) a duty of good faith and fidelity clause.

The court discussed that as the majority of the above referred to clauses were drafted plainly and unambiguously, the issue of breach involved a straightforward factual inquiry. The only head of claim which warranted a lengthy discussion was duty of good faith and fidelity. The duty of good faith was both implied and an express term of the Four Ex-Employees contracts. The court held that taking an employer's confidential information for one's own benefit and to the detriment of the employer is a breach of good faith. Ting had further breached his obligations to Clearlab by splitting his time between Clearlab and Aquilus in the months leading up to the termination of his employment.

Impact

This case provides a useful analysis of the facts that the court will take into account when deciphering whether there has been a breach of confidence in relation to use of confidential information. The case also clearly sets out the factors that will be taken into account when assessing a conspiracy claim. The overall theme of this judgment is that the courts will take a pragmatic and common sense approach when reviewing such matters - the principles of law involved are generally straight forward and it will be a matter of applying the facts and circumstance to each head of claim.