Buckman Laboratories (Asia) v Lee Wei Hoong (Digest Issue No 04/99, January 20 1999),
is a case that illustrates the principles of Singapore law applicable to contractual restraints of trade and confidentiality undertakings imposed by employers in employment contracts. Such restraints of trade are prima facie unenforceable under Singapore law but they are enforceable if the restrictions can be shown to be reasonable in the circumstances both as between the parties and by reference to the interests of the public at large.

In order for an employer to enforce a post-termination restraint of trade clause against a former employee, it is necessary for the employer to show that the restraint is necessary to protect a legitimate proprietary interest in the employer's trade secrets and business connections.

In the Buckman Case the employer sought to enforce confidentiality undertakings and post-termination restrictions contained in the employment contract of its former employee by applying for an injunction to restrain the former employee from working with competitors of the company and from disclosing confidential information.

The court dismissed the application. It stated that the approach to be taken in ascertaining the validity of restraint provisions was, first, to determine what the legitimate business interests of the employer were and, second, to consider whether the provisions as drafted were no wider than necessary to protect those interests. The court would not give effect to provisions if their main purpose was to inhibit competition in business.

The restraint provisions in this case imposed a restriction of one year. The geographical area covered by the restraint was very wide. It applied not only to countries in which the employee had significant customer contact, but also to countries where the employer was merely trying to establish a permanent presence. The restriction applied to all products and services supplied by the company both at the time of termination of the employee's employment and for one year thereafter. It was not limited to the pulp and paper industry which the employee's employment related to.

The wide scope of the restriction led the court to infer that the provisions' main purpose was to inhibit competition by former employees. There was also a suggestion that identical restraint provisions were included in the employment contracts of all the company's local employees regardless of the kind of work they did, their seniority, or the level of information to which they had access. The court expressed the view that if this were true, it would be another factor pointing towards the true purpose of the restraint provisions being to restrain competition rather than to protect the company's legitimate business interests.

Realizing that some of the restraint provisions might be found to be unreasonable and therefore invalid, the company sought to save some portions of the provisions by requesting the court to separate those which were invalid from those which could stand. The court declined to do this on the basis that it would lead to uncertainty. An employee would be left in an invidious position of not knowing the extent of his obligations and not knowing what he could and could not do with regard to his future employment after leaving the company.

In relation to the undertaking not to disclose confidential information, the employee argued that the information he had access to was not confidential or was easily discoverable by competitors. The court also noted that the employee's position as a technical service specialist was a relatively junior one.

While in relation to both the restraint of trade issue and the confidentiality issue the court found that the company had satisfied the requirement of showing a serious question to be tried, the balance of convenience lay against granting the injunction applied for. In considering this the court took into account the weakness of the company's case. The court noted that where there is reasonable doubt as to the plaintiff's eventual success, it is preferable not to disturb the status quo (ie, that the employee was no longer working for the company and had already started working for another company). The court also noted the relative youth of the employee and the blight that such an injunction could cause on his future career.

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