Singapore High Court discharges interim injunctions restraining former employee from working for rival

30 May 2024

MoneySmart Singapore Pte Ltd v Artem Musienko [2024] SGHC 94

In MoneySmart Singapore Pte Ltd v Artem Musienko, the Singapore High Court discharged interim injunctions granted in favour of MoneySmart Singapore Pte Ltd (“MoneySmart”) that prevented a former employee, Artem Musienko (“Musienko”), from working at CAG Regional Singapore Pte Ltd (“CAGRS”), a subsidiary of a rival firm of MoneySmart. The High Court found that the non-compete clause in the employment agreement between Musienko and MoneySmart (“Employment Agreement”) was not valid and enforceable, and that the confidentiality clause therein had not been breached.

Facts

MoneySmart provides online financial product comparison services for consumers to review, compare, and purchase financial products from financial institutions. It has operations in Singapore and Hong Kong, and a presence in Taiwan and the Philippines. In 2022, MoneySmart launched an in-house insurance brand called “Bubblegum”, which offers direct-to-consumer digital insurance products such as travel insurance and car insurance for the Singapore market.

From 4 July 2022 to 12 January 2024, Musienko was employed as head of technology for MoneySmart’s Bubblegum division. Musienko led the design, product, and technology department in Bubblegum to create the Bubblegum platform and mobile application, and to ensure that this platform was working.

The Employment Agreement included:

  • a non-compete clause which stated that Musienko must not “engage with any business or organisation in South-East Asia or any other country where MoneySmart (or associated companies) operates which provides online financial product comparison services” for a period of 12, six, or three months (depending on the court’s determination following the date of termination of Musienko’s employment with MoneySmart) (“Non-Compete Clause”); and
  • a confidentiality clause which provided that Musienko must not “use or disclose to any third party” confidential information of MoneySmart (“Confidentiality Clause”).

On 15 January 2024, Musienko commenced employment as head of engineering, insurance, with CAGRS. On 29 January 2024, MoneySmart, relying on the Non-Compete Clause and the Confidentiality Clause, obtained an interim injunction in the High Court which prohibited Musienko from working for CAGRS. The interim injunctions were granted on MoneySmart’s undertaking not to enforce the injunctions against Musienko until full arguments had been heard from the parties and the High Court determined that those injunctions should continue. On 8 February 2024, Musienko filed an application to set aside the interim injunctions.

High Court’s decision

The High Court discharged both interim injunctions.

Non-Compete Clause

As the Singapore Court of Appeal established in Man Financial (S) Pte Ltd (formerly known as E D & F Man International (S) Pte Ltd) v Wong Bark Chuan David [2008] 1 SLR(R) 663 (“Man Financial”), in determining whether a restraint of trade clause is enforceable, the court will adopt a two-step test:

First, the court will consider whether the restraint of trade protects a legitimate interest of the employer.

If so, the restraint of trade will be enforceable if it is reasonable in the interests of the parties and reasonable in the public interest.

Where the protection of confidential information or trade secrets is already covered by another contractual clause, the covenantee (in this case, MoneySmart) will have to demonstrate that the restraint of trade clause in question (in this case, the Non-Compete Clause) covers a legitimate proprietary interest over and above the protection of confidential information or trade secrets. This is sometimes known as the Stratech Principle, following the Court of Appeal decision in Stratech Systems Ltd v Nyam Chiu Shin [2005] 2 SLR(R) 579 at [48] - [49] and applied by the Court of Appeal in Man Financial at [92].

MoneySmart already had a confidentiality clause to protect its confidential information or trade secrets.

Nevertheless, MoneySmart sought to enforce the Non-Compete Clause. This was rejected by the High Court, by applying the Stratech Principle. In particular, the High Court rejected MoneySmart’s argument that there was a legitimate proprietary interest over and above the protection of confidential information or trade secrets for the Non-Compete to protect, “given the difficulty of policing any breach of the [C]onfidentiality [C]lause”. MoneySmart’s essential argument was that because MoneySmart may be unable to obtain the desired protection over its confidential information through the Confidentiality Clause (since a breach is hard to police), the Non-Compete Clause should be allowed to operate to deliver greater protection over MoneySmart’s confidential information.

The High Court rejected this argument. The court ruled that, however difficult it might be to police the breach of the Confidentiality Clause, it remained the case that the legitimate proprietary interest that MoneySmart sought to protect - confidential information or trade secrets - was already covered by the Confidentiality Clause. There was no other legitimate proprietary interest
(apart from confidential information or trade secrets) for the Non-Compete Clause to protect.

The High Court also rejected MoneySmart’s argument that the Non-Compete Clause protected its legitimate interest of maintaining a stable and trained workforce. MoneySmart had neither shown that its digital insurance business operated in a small and specialised industry, nor had it demonstrated that it had invested much time and resources by providing Musienko with specialised training. As the Non-Compete Clause did not satisfy the first step of the test in Man Financial, it was not necessary to consider whether the Non-Compete Clause was reasonable. Nevertheless, the High Court addressed the issue for completeness and found that the Non-Compete Clause was not reasonable in its scope of prohibited activity, geographical scope, and temporal scope:

  • Scope of activity: There was, at best, only a very tenuous connection between the restriction against engaging with any business which provides online financial product comparison services, and the work done by Musienko while employed by MoneySmart (which primarily concerned Bubblegum and digital insurance-related matters).
  • Geographical scope: Musienko’s scope of work was only in respect of Bubblegum, which offered products to Singapore residents only. He was not involved in MoneySmart’s online financial product comparison services, which products in Singapore and Hong Kong. Neither was Musienko involved in any other geographical market in Southeast Asia. In those circumstances, it would be reasonable to only limit Musienko from participating in the Singapore market.
  • Temporal scope: The Non-Compete Clause was drafted in a cascading manner (the restraint period was drafted with different possible temporal periods applicable to him), leaving the vulnerable employee uncertain as to which restriction bound him in law until the issue wase actually determined by a court.

Confidentiality Clause

The High Court found that there was no evidence that the information alleged to have been accessed by Musienko was confidential because much of the information had already been shared publicly by MoneySmart and MoneySmart had not treated the information as confidential until the proceedings had commenced. Accordingly, MoneySmart failed to establish that there was a good arguable case that Musienko had breached the Confidentiality Clause.

Conclusion

This case demonstrates the technical difficulties that an employer may face in enforcing non-competes.

Non-competes are part of the law of restraint of trade, which is a technical and complex area of law which seeks to balance the employer’s freedom to contract and protect its business interests, against the employee’s freedom and right to a livelihood and practise his professional skills.

For an example of a successful enforcement of the law of non-competes argued by Allen & Gledhill Partner Tay Yong Seng, please see our article “Singapore High Court enforces international two-year non-compete”, which provides an analysis of Tan Kok Yong Steve v Itochu Singapore Pte Ltd [2018] SGHC 85.

For an academic paper on an overview of the law of non-competes by Tay Yong Seng, published in Singapore Academy of Law’s Singapore Practitioner (Employment), click here.

Reference materials

The judgment in MoneySmart Singapore Pte Ltd v Artem Musienko is available on the Singapore Courts website www.judiciary.gov.sg.