Ng Boon Ching v Claas Medical Centre: Restraint of Trade & Third Party Rights

In Ng Boon Ching v Claas Medical Centre Pte Ltd, the High Court of Singapore heard a case where Dr. Ng Boon Ching sued Claas Medical Centre for $236,500 in outstanding loans, which Claas admitted but counterclaimed for $1 million, alleging breach of a non-competition clause in a Shareholders Agreement. The court, presided over by Justice Belinda Ang Saw Ean, ruled in favor of Dr. Ng, dismissing Claas's counterclaim. The court found that Claas, not being a party to the November Agreement, could not invoke the Contracts (Rights of Third Parties) Act. Additionally, the court held the non-competition clause to be an unenforceable restraint of trade and the liquidated damages clause to be a penalty.

1. Case Overview

1.1 Court

High Court

1.2 Outcome

Judgment for Plaintiff; Defendant's counterclaim dismissed with costs.

1.3 Case Type

Civil

1.4 Judgment Type

Judgment reserved

1.5 Jurisdiction

Singapore

1.6 Description

Dr. Ng sued Claas for outstanding loans. Claas counterclaimed for breach of a non-competition clause. The court dismissed the counterclaim, finding the clause unenforceable.

1.7 Decision Date

2. Parties and Outcomes

Party NameRoleTypeOutcomeOutcome TypeCounsels
Ng Boon ChingPlaintiffIndividualJudgment for PlaintiffWon
Claas Medical Centre Pte LtdDefendantCorporationCounterclaim DismissedLost

3. Judges

Judge NameTitleDelivered Judgment
Belinda Ang Saw EanJudgeYes

4. Counsels

Counsel NameOrganization
Rabi Ahmad s/o M Abdul RavoofRabi Ahmad & Co
Josephine ChongUniLegal LLC
Aqbal SinghUniLegal LLC

4. Facts

  1. Dr. Ng sued Claas for $236,500 in outstanding loans.
  2. Claas counterclaimed for $1 million, alleging breach of a non-competition clause.
  3. Dr. Ng sold his clinic and distributorship business to Claas for $3.2 million.
  4. The sale included a non-competition clause in a shareholders' agreement.
  5. Claas was not a party to the November Agreement containing the non-competition clause.
  6. Dr. Ng set up a competing aesthetic medical practice shortly before the expiry of the restrictive covenant.
  7. Unimedic acquired a majority shareholding in Claas but was not a party to the November Agreement.

5. Formal Citations

  1. Ng Boon Ching v Claas Medical Centre Pte Ltd, Suit 745/2007, [2009] SGHC 54

6. Timeline

DateEvent
Dr. Ng started his clinic known as B C Ng Clinic and Surgery.
Dr. Ng relocated his clinic to Chinatown Point.
Dr. Ng started AHA Centre.
BCNG Holdings Pte Ltd was incorporated.
The plaintiff and the six doctors entered into a Shareholders Agreement (the April Agreement).
Claas took over the running of the clinic at Chinatown Point.
The clinic name was changed to BCNG Laser & Medical Aesthetics.
Another Shareholders Agreement (the November Agreement) was entered into by the plaintiff and the six doctors.
Claas opened a branch clinic at OUB Centre.
A Supplemental Shareholders Agreement was entered into between the seven original shareholders of Claas and Dr Joseph Soh.
Differences began to surface between the plaintiff and the other original shareholders including Dr Soh.
Dr. Wong and Dr. Lim indicated their intention to sell their shares in Claas.
The plaintiff sent an email to the other shareholders of Claas informing them that he was looking to sell his entire 23% shareholding in Claas.
The plaintiff gave notice to the Board of Directors of Claas of his intention to sell his 23% shareholding in Claas.
The plaintiff informed the other shareholders of his decision to withdraw his permission for the clinic to use as its hotline mobile telephone number 96151515 and www.bcng.com.sg as its website.
Dr. Wong sent an email to Dr. Ng informing him that Healthway Medical Group was keen on acquiring his 23% shareholding in Claas as well as the shares of the other shareholders.
The plaintiff and Dr. Wong met to discuss Healthway Medical Group’s intended acquisition of Claas and to the release of his $1.2m fixed deposits.
Dr Gerard Tan sent an email to Mr Fan Kow Hin confirming their understanding relating to HMG and/or Universal Healthway’s acquisition of the entire shareholding of Claas.
Mr Fan emailed to Dr Gerard Tan the proposed Memorandum of Understanding on HMG and/or Universal Healthway’s acquisition of Claas.
The plaintiff transferred all his Claas shares to Dr Wong and resigned as a director of Claas and BCNG Holdings.
Dr. Ng left BCNG Holdings.
Unimedic Pte Ltd acquired 499,993 shares representing 99.9% of the shareholdings in Claas from the six doctors and Dr Soh.
Dr. Ng's clinic, Dr B C Ng Aesthetics, became operational.
Judgment reserved.

7. Legal Issues

  1. Enforceability of Restraint of Trade Clause
    • Outcome: The court held that the restraint of trade clause was unenforceable due to its excessive width and unreasonableness.
    • Category: Substantive
    • Sub-Issues:
      • Reasonableness of restraint
      • Protection of goodwill
      • Legitimate proprietary interest
    • Related Cases:
      • [2008] 1 SLR 663
      • [1916] AC 688
      • [1894] AC 535
  2. Application of Contracts (Rights of Third Parties) Act
    • Outcome: The court held that the defendant could not rely on the Contracts (Rights of Third Parties) Act to enforce the non-competition clause, as the parties did not intend the clause to be enforceable by a third party.
    • Category: Procedural
    • Sub-Issues:
      • Third party beneficiary
      • Intention of contracting parties
    • Related Cases:
      • [2004] 1 Lloyd’s Rep 38
  3. Penalty vs. Liquidated Damages
    • Outcome: The court held that the liquidated damages clause constituted a penalty and was therefore unenforceable.
    • Category: Substantive

8. Remedies Sought

  1. Monetary Damages
  2. Set-off

9. Cause of Actions

  • Breach of Contract
  • Debt Claim

10. Practice Areas

  • Commercial Litigation

11. Industries

  • Healthcare

12. Cited Cases

Case NameCourtAffirmedCitationJurisdictionSignificance
Nisshin Shipping Co Ltd v Cleaves & Co LtdNot AvailableYes[2004] 1 Lloyd’s Rep 38England and WalesCited for the interpretation of Contracts (Rights of Third Parties) Act, specifically regarding the intention of parties concerning third-party enforcement.
Essen System Builders (S) Pte Ltd v Chew Boon HeeNot AvailableYes[1997] 1 SLR 671SingaporeCited by the plaintiff regarding the issue of consideration in the November Agreement, but distinguished by the defendant.
Man Financial (S) Pte Ltd v Wong Bark Chuan DavidCourt of AppealYes[2008] 1 SLR 663SingaporeCited for the principles governing restraint of trade covenants, particularly the distinction between employment contracts and sale of business contexts.
Office Angels v Rainer-ThomasNot AvailableYes[1991] IRLR 214England and WalesCited for the principles of reasonableness in restraint of trade covenants, emphasizing the need for adequate protection of the covenantee's benefit.
Herbert Morris v SaxelbyHouse of LordsYes[1916] AC 688England and WalesCited for the principle that a restraint of trade covenant must afford no more than adequate protection to the benefit of the party in whose favor it is imposed.
Kores Manufacturing Co Ltd v Kolok Manufacturing LtdNot AvailableYes[1959] Ch 109England and WalesCited for the distinction between covenants in restraint of trade in the context of sale of business versus employment.
Nordenfelt v Maxim NordenfeltHouse of LordsYes[1894] AC 535England and WalesCited for the principle that covenants in connection with the sale of goodwill are valid where the full benefit of the purchase cannot be otherwise secured.
Shell UK v Lostock GarageNot AvailableYes[1976] 1 WLR 1187England and WalesCited for the principle that the reasonableness of a contractual restraint of trade must be judged in light of the facts and circumstances at the time the contract was made.
Systems Reliability Holdings plc v SmithNot AvailableYes[1990] IRLR 377England and WalesCited for the principle that the form in which a business is carried on does not affect the substance of the relations between the parties.
Sadler v Imperial Life Assurance Company of Canada LtdNot AvailableYes[1988] IRLR 388CanadaCited for the threefold test to determine if a contract remains effective after severance of an unenforceable provision.

13. Applicable Rules

Rule Name
No applicable rules

14. Applicable Statutes

Statute NameJurisdiction
Contracts (Rights of Third Parties) Act (Cap 53B, 2002 Rev Ed)Singapore

15. Key Terms and Keywords

15.1 Key Terms

  • Restraint of Trade
  • Non-Competition Clause
  • Contracts (Rights of Third Parties) Act
  • Shareholders Agreement
  • Liquidated Damages
  • Goodwill
  • Aesthetic Medicine
  • Penalty Clause

15.2 Keywords

  • contract
  • restraint of trade
  • third party rights
  • shareholder agreement
  • singapore
  • aesthetic medicine

17. Areas of Law

Area NameRelevance Score
Restraint of Trade90
Contract Law90
Illegality and public policy50
Severance40
Remedies40
Privity of contract40
Corporate Law30
Estoppel30
Business Law30
Costs20

16. Subjects

  • Contract Law
  • Restraint of Trade
  • Civil Procedure