Hengxin Technology v Jiang Wei: Breach of Contract & Non-Compete Dispute

In 2009, the High Court of Singapore heard a consolidated action between Hengxin Technology Ltd and its former directors, Jiang Wei and Qian Lirong, regarding breaches of their service agreements. Hengxin Technology claimed that Jiang and Qian violated their fiduciary duties and the non-competition clauses of their agreements by forming a competing company. The court dismissed Hengxin Technology's claims, finding the non-competition clause unenforceable and ruling that the company had repudiated the service agreements. The court awarded Jiang and Qian judgment on their counterclaims for unpaid bonuses and damages.

1. Case Overview

1.1 Court

High Court

1.2 Outcome

Suits dismissed; judgment for defendants on counterclaims.

1.3 Case Type

Civil

1.4 Judgment Type

Judgment Reserved

1.5 Jurisdiction

Singapore

1.6 Description

Hengxin Technology sues former directors for breach of contract and fiduciary duties. The court dismissed the claims and allowed the directors' counterclaims.

1.7 Decision Date

2. Parties and Outcomes

Party NameRoleTypeOutcomeOutcome TypeCounsels
Hengxin Technology LtdPlaintiffCorporationClaim DismissedLost
Jiang WeiDefendantIndividualJudgment for Defendant on CounterclaimWon
Qian LirongDefendantIndividualJudgment for Defendant on CounterclaimWon

3. Judges

Judge NameTitleDelivered Judgment
Lai Siu ChiuJudgeYes

4. Counsels

Counsel NameOrganization
Anparasan s/o KamachiKhattarWong
Haresh KamdarKhattarWong
Tham Hsu HsienAllen & Gledhill LLP
Paul OngAllen & Gledhill LLP
Andrew Yeo Khirn HinAllen & Gledhill LLP
Koh Bi'naAllen & Gledhill LLP

4. Facts

  1. Jiang and Qian were former directors of Hengxin Technology Ltd.
  2. Jiang and Qian had service agreements with Hengxin Technology Ltd.
  3. Jiang and Qian resigned from Hengxin Technology Ltd in January 2007.
  4. Hengxin Technology Ltd alleged Jiang and Qian breached their service agreements.
  5. Hengxin Technology Ltd claimed Jiang and Qian formed a competing company.
  6. Hengxin Technology Ltd terminated Qian's employment with immediate effect.
  7. The non-competition clause in the service agreements restricted activities for two years after termination.

5. Formal Citations

  1. Hengxin Technology Ltd v Jiang Wei, Suit 161/2008, 162/2008, [2009] SGHC 259

6. Timeline

DateEvent
Hengxin Technology Ltd incorporated.
Jiang Wei and Qian Lirong entered into service agreements with Hengxin Technology Ltd.
Hengxin Technology Ltd listed on the Stock Exchange of Singapore Ltd.
Cui Genxiang and Roger Ng Yang Kwang called for an extraordinary general meeting.
Jiang Wei and Qian Lirong resigned as directors of Hengxin Technology Ltd.
Extraordinary general meeting held; Qian Lirong removed from positions.
Hengxin Technology notified Qian Lirong of resolutions passed at the extraordinary general meeting.
Qian Lirong issued a leave notice ordering all staff/workers to go on leave.
Cui Genxiang, Zhang Zhong and Xu Guochen attempted to effect management handover.
Factory resumed production.
Wang Xin Bin requested Jiang Wei to return to work.
Jiang Wei reported for work.
Jiang Wei was notified that he was relieved of his position as the head of sales.
Hengxin Technology Ltd terminated Qian Lirong’s employment.
Jiang Wei tendered his resignation.
Hengxin Technology Ltd filed suits against Jiang Wei and Qian Lirong.
Hengxin Technology Ltd accepted Jiang Wei’s resignation.
Qian Lirong was appointed the chairman/general manager of Trigiant.
Suits were consolidated by order of court.
Judgment Reserved.

7. Legal Issues

  1. Breach of Contract
    • Outcome: The court found that the company had repudiated the service agreements, entitling the defendants to damages.
    • Category: Substantive
    • Sub-Issues:
      • Wrongful Termination
      • Repudiation of Contract
      • Failure to Pay Bonus
  2. Enforceability of Non-Competition Clause
    • Outcome: The court held that the non-competition clause was unreasonably wide and unenforceable.
    • Category: Substantive
    • Sub-Issues:
      • Reasonableness of Scope
      • Protection of Legitimate Interests
      • Restraint of Trade
  3. Breach of Fiduciary Duty
    • Outcome: The court found insufficient evidence to support the claim that the defendants had breached their fiduciary duties.
    • Category: Substantive
    • Sub-Issues:
      • Conflict of Interest
      • Misuse of Confidential Information
      • Diversion of Business

8. Remedies Sought

  1. Injunction
  2. Damages
  3. Account of Profits
  4. Declaration that covenants were void

9. Cause of Actions

  • Breach of Contract
  • Breach of Fiduciary Duty

10. Practice Areas

  • Commercial Litigation
  • Employment Litigation

11. Industries

  • Telecommunications
  • Manufacturing

12. Cited Cases

Case NameCourtAffirmedCitationJurisdictionSignificance
Thorsen Nordenfelt v The Maxim Nordenfelt Guns and Ammunition Company LimitedHouse of LordsYes[1894] AC 535United KingdomCited for the test of reasonableness of covenants in restraint of trade.
Man Financial (S) Pte Ltd v Wong Bark Chuan DavidCourt of AppealYes[2008] 1 SLR 663SingaporeCited for the principle that trade secrets and trade connections are legitimate proprietary interests that can be protected by non-competition clauses.
Buckman Laboratories (Asia) Pte Ltd v Lee Wei HoongHigh CourtNo[1999] 3 SLR 333SingaporeCited for the principle that the court will not uphold clauses that inhibit competition or protect the plaintiff from competition from a former employee.
Stratech Systems Ltd v Nyam Chiu Shin & OthersCourt of AppealYes[2005] 2 SLR 579SingaporeCited for the principle that the plaintiff must plead with specificity and produce evidence that showed the defendants had taken confidential information from its computers.
Faccenda Chicken Ltd v FowlerCourt of AppealNo[1987] 1 Ch 117United KingdomCited for the principle that the courts will not uphold a covenant pertaining to the skill, experience, know-how and general knowledge acquired by an employee during his course of employment.
FSS Travel & Leisure Systems Ltd v JohnsonUnknownNo[1999] FSR 505UnknownCited for the principle that protection cannot be legitimately claimed in respect of the skill, experience, know-how and general knowledge acquired by the employee as part of his job during his course of employment.
Morrish v NTL Group LtdCourt of Session Inner HouseYes[CSIH] 56ScotlandCited for the principle that the court should reject the Company’s argument that a term should be implied into the Service Agreement that the Company was entitled to terminate Qian’s employment by giving him six months’ salary in lieu of notice.
Konski v PeetUnknownNo[1915] 530EnglandCited to reinforce its argument that payment of salary in lieu of notice did not amount to repudiatory breach even though the contract of employment did not contain a provision for termination by payment of salary in lieu of notice.
General Billposting Company Limited v AtkinsonHouse of LordsYes[1909] AC 118United KingdomCited for the submission that the court should reject the Company’s argument that a term should be implied into the Service Agreement that the Company was entitled to terminate Qian’s employment by giving him six months’ salary in lieu of notice.
Shepherd Andrew v BIL International LtdHigh CourtNo[2003] SGHC 145SingaporeCited for the principle that the law did not allow an employer to rely retrospectively on an employee’s misconduct as a defence to an employee’s prior claim for compensation or bonus.
Morrish v NTL Group LtdScottish Court of AppealYes[2007] SC 805ScotlandCited for the principle that the Company’s argument that Qian’s services could be terminated by payment of salary in lieu of notice did not adequately compensate him and must fail in the light of Morrish v NTL Group Ltd.
Dalkia Utilities Services PLC v Celtech International LtdUnknownNo[2006] 1 Lloyd’s LR 599UnknownCited for their contention that the Company cannot rely on any subsequent alleged misconduct on the part of Qian as a defence to his earlier claim for bonus.
Shepherd v Felt & Textiles of Australia LtdHigh Court of AustraliaNo[1931] 45 CLR 359AustraliaCited for the principle that the Company did not wrongfully dismiss Qian and subsequently discovered it could have had grounds to dismiss him with cause.
Boston Deep Sea Fishing and Ice Co v AnsellCourt of AppealNo(1888) 39 Ch D 339United KingdomCited for the principle that the Company did not wrongfully dismiss Qian and subsequently discovered it could have had grounds to dismiss him with cause.
Rock Refrigeration Limited v Jones & AnorCourt of AppealYes[1997] 1 All ER 1United KingdomCited for the principle that where an employer repudiated a contract of employment and that repudiation was accepted by the employee, the employee was thereupon released from his obligations under the contract and restrictive covenants otherwise valid against him could not be enforced.
Parfums Rochas SA v Davidson Singapore Pte LtdHigh CourtNo[2000] 2 SLR 148SingaporeCited for the principle that once the Company had affirmed the Service Agreement (by its reference to clause 2.2 in the termination notice), it could not rely on his alleged breaches known at the time, to justify termination ex-post facto.
Brown Noel Trading Pte Ltd v Donald & McCarthyHigh CourtNo[1997] 1 SLR 1SingaporeCited for the principle that estoppel can only be raised in respect of facts that took place in the period before, not after, termination.
The MoorcockCourt of AppealNo(1889) 14 PD 64United KingdomCited for the principle that it is not necessary to import an implied term that the Company can terminate with payment of salary in lieu of notice in order to give business efficacy to the Service Agreement.

13. Applicable Rules

Rule Name
No applicable rules

14. Applicable Statutes

Statute NameJurisdiction
No applicable statutes

15. Key Terms and Keywords

15.1 Key Terms

  • Service Agreement
  • Non-Competition Clause
  • Fiduciary Duty
  • Repudiation
  • Restraint of Trade
  • Bonus
  • Confidential Information
  • RF Coaxial Cables
  • Extraordinary General Meeting
  • Termination Letter

15.2 Keywords

  • breach of contract
  • non-competition
  • fiduciary duty
  • employment
  • Singapore
  • directors
  • telecommunications
  • Hengxin Technology
  • Jiang Wei
  • Qian Lirong

17. Areas of Law

Area NameRelevance Score
Service Agreements80
Breach of Contract75
Director's Duties70
Contract Law70
Non-Competition Clause65
Company Law65
Fiduciary Duties60
Employment Law55
Wrongful Termination55
Restraint of Trade50

16. Subjects

  • Contract Law
  • Employment Law
  • Corporate Law
  • Competition Law