SINGAPORE: COURT DENIES INJUNCTION TO PREVENT EMPLOYEE FROM JOINING COMPETITOR

An employee resigned and started working for a competitor. His former employer sought an interim injunction to prevent him from doing so, and from soliciting clients and employees, based on certain post-employment restraints entered into between the employee and the former employer. The General Division of the Singapore High Court in Shopee Singapore Pte Ltd v Lim Teck Yong [2024] SGHC 29 rejected the injunction application, finding that there was no serious case to be tried that the restraints were enforceable.

Background

Post employment restraints

The defendant employee had entered into post-employment restraints with the plaintiff employer (Former Employer), which provided that the employee would not, for a period of 12 months in the "Restricted Territories" after his termination date:

• "seek or accept employment with or engagement by or otherwise perform services for or engage in business as or be in any way interested in or connected with a Competitor";
• "seek, solicit, or endeavour to entice away from [the Former Employer] all or part of the account of any business of any Client";
• "solicit or procure the services of or endeavour to entice away from [the Former Employer] or employment or assist in or procure the employment by another of any officer, employee or consultant of [the Former Employer] where that person is someone with whom he/she has had material dealings or contact during the twelve (12) months immediately preceding the Termination Date …".

The term "Restricted Territories" is defined as "Singapore and such other countries within which [the Former Employer] or any Group Company thereof operates at the Termination Date and in relation to such country, during the twelve (12) months immediately preceding the Termination Date, the Employee:

(a) undertook duties for [the Former Employer] or any Group Company thereof with respect to the business of [the Former Employer] or any Group Company;

(b) had a degree of management responsibility for the business of [the Former Employer] or any Group Company or a material part thereof; and/or

(c) was privy to Confidential Information regarding the business of [the Former Employer] or any Group Company".

Confidentiality agreements

In addition to the above restraints, the employee had also entered into a confidentiality agreement where the employee agreed to "at all times, both during his/her employment by [the Former Employer] and after his/her termination, (a) hold in the strictest confidence and will not disclose any Proprietary Information …".

The employee resigned and started working for a competitor. The Former Employer claimed that the employee breached his post-employment restraints and sought interim injunctions to restrain the employee from accepting employment with the competitor, and to restrain him from soliciting the Former Employer’s clients and employees. In the alternative, the Former Employer sought a springboard injunction to restrain the employee from accepting employment with any of the Former Employer’s competitors.

Findings

The court applied the principles set out in American Cyanamid Co v Ethicon Ltd [1975] AC 396 in assessing whether the interlocutory injunction application should be granted. In particular, the Former Employer must show that:

• (a) there was a serious question to be tried that the restraints were enforceable (ie that there was a legitimate proprietary interest and that the restraints went no further than was reasonably necessary to protect that interest);
• (b) there was a serious question to be tried that the restraints had been breached; and
• (c) if (a) and (b) were satisfied, that the balance of convenience lay in favour of granting the interim injunction.

The court answered (a) in the negative and dismissed the interim injunction application.

On legitimate proprietary interest, the Former Employer claimed that the restraints sought to protect confidential information. However, the court found that confidential information was already protected by the confidentiality agreement, and there were serious doubts that the restraints sought to protect any legitimate proprietary interest.

On reasonableness, the court questioned the geographical scope of the restraints, which essentially covered all countries where the Former Employer operated during the 12 months prior to the last day of employment and for which the employee had confidential information.

The confidential information, according to the Former Employer, concerned generic categories of information which the employee acquired by participating in regular regional operations meetings such as growth and business plans, seller and listing management, pricing and marketing strategies and statistics on orders. No specific confidential information was pleaded. The generality of this information practically meant that the employee would be excluded from being employed in all the markets where the Former Employer was operating, even though these were markets he was not working in or had no responsibilities for, or had no specific information about, in the 12 months preceding the termination. The court had serious doubts that this would be regarded as reasonable.

Key Takeaways

The case highlights the importance of careful drafting of post-employment restraints. Employers must identify the specific interest they are trying to protect, and the restraint must be reasonable and necessary to protect that interest. A general desire to protect 'confidential information' may not be sufficient, especially if the employee has entered into separate confidentiality agreements. Employers should regularly review their post-employment restraints to ensure they continue to provide the best protection.