RESTRAINT OF TRADE:

RESTRAINT OF TRADE:

Additional reading material

This is an excellent article on Restraint of Trade . Forget about reading the full court judgements, if you are not really trained, you step out more confused than ever.

So this article is good enough.

http://www.lawgazette.com.sg/2013-04/725.htm

Mano Vikrant Singh v Cargill TSF Asia [2012]

A clause provided for bonus based on the employee’s

performance. The bonus payments were on a deferred

basis and payable if the employee did not join a

competitor of the employer for 2 years after the

termination of his employment.

However, the Singapore Court of Appeal in Mano Vikrant Singh v Cargill TSF Asia Pte Ltd  [2012] SGCA 42 (“Cargill”) had recently warned that framing a clause in a manner that is different from the traditional restraint of trade clause would not prevent the Court from looking into the substance of the provision rather than the form, and that what needs to be considered is the true nature of the provision ([27]).

The restrictive covenant in Cargillinvolved deferred bonus payments, which were only payable if the employee did not join a competitor of the employer for two years after the termination of his employment. The Court of Appeal held that this amounted to an indirect restraint of trade as the deferred bonus payments had already vested in the employee at the time of termination. A disincentive clause, forfeiting a substantial financial reward to restrain an employee from joining a competitor, clearly fell foul of the doctrine of restraint of trade.³

There were various findings in Cargillwhich supported the argument that the bonus payments had already accrued to the employee prior to the termination of his employment. Amongst other matters, the Court of Appeal had found that the deferred bonus was based on past performance of the employee and no further incentive was paid to the employee for not competing. Further, interest was payable on the deferred bonus and the term “forfeited” itself plainly implies that the bonus would have to be vested in the first place for it to be taken away.

Centre for Creative Leadership (CCL) Pte Ltd v

Byrne Roger Peter and others (2013)

A clause provided for a 1-year restraint against “the

delivery of competitive programs within any city in which an

office of any client or potential clients of the Company or its

parent organization to whom he has generated, designed,

or delivered a Company or parent company program or

other service is located”.

Justice Woo Bih Li observed, however, that a client contact may not relocate and no referrals between offices may be made within the year, particularly since there was a lack of supporting evidence.

Moreover, the restraint unreasonably prevents an employee from delivering a competitive programme even where he does not seek assistance from his contact or in places where the employer does not intend to deliver a similar programme. The ex-employee is also potentially subjected to a worldwide restraint against a client whom he had dealt with many years before, and this again shows that the clause is unreasonably wide and unenforceable.
The Court in CCL did not accept the restraint clause, but neither did it reject the possibility of a global restraint clause under reasonable circumstances. It is hence possible that the Singapore Courts could be open to such circumstances where it is justifiable to restrain an employee from competing across the globe.

“The Employee shall not, in Singapore and anywhere else in

the world and for a period of 2 or more years, whether as

proprietor, partner, director, shareholder, member, employee,

consultant, agent, representative or otherwise, and whether for

reward or not, directly or indirectly carry on or be employed by

any company in the abovementioned territory, perform

competing services with the Company or any other related or

unrelated businesses.”