CLAAS Medical Centre v Ng Boon Ching: Restraint of Trade, Third Party Rights
In CLAAS Medical Centre Pte Ltd (formerly known as Aesthetics Associates Pte Ltd) v Ng Boon Ching, the Singapore Court of Appeal heard an appeal regarding the enforceability of a restraint of trade clause. CLAAS Medical Centre, the Appellant, sought to set off a debt of $236,500 owed to Dr. Ng Boon Ching, the Respondent, against a counterclaim of $1 million for breach of a restrictive covenant. The Court of Appeal allowed the appeal, finding that CLAAS Medical Centre had the right to enforce the restrictive covenant, and awarded judgment in favor of the Appellant in the sum of $763,500.
1. Case Overview
1.1 Court
Court of Appeal1.2 Outcome
Appeal allowed with costs. Judgment in favor of the Appellant in the sum of $763,500.
1.3 Case Type
Civil
1.4 Judgment Type
Grounds of Decision
1.5 Jurisdiction
Singapore
1.6 Description
The Court of Appeal addressed whether a restraint of trade clause was enforceable by a third party under the Contracts (Rights of Third Parties) Act.
1.7 Decision Date
2. Parties and Outcomes
| Party Name | Role | Type | Outcome | Outcome Type | Counsels |
|---|---|---|---|---|---|
| CLAAS Medical Centre Pte Ltd (formerly known as Aesthetics Associates Pte Ltd) | Appellant | Corporation | Appeal allowed | Won | Aqbal Singh, Josephine Chong |
| Ng Boon Ching | Respondent | Individual | Appeal dismissed | Lost | Rabi Ahmad s/o M Abdul Ravoof |
3. Judges
| Judge Name | Title | Delivered Judgment |
|---|---|---|
| Chao Hick Tin | Justice of the Court of Appeal | Yes |
| Andrew Phang Boon Leong | Justice of the Court of Appeal | No |
| V K Rajah | Justice of the Court of Appeal | No |
4. Counsels
| Counsel Name | Organization |
|---|---|
| Aqbal Singh | Unilegal LLC |
| Josephine Chong | Unilegal LLC |
| Rabi Ahmad s/o M Abdul Ravoof | Rabi Ahmad & Co |
4. Facts
- Respondent sold his medical practice and distributorship business to the Appellant.
- The sale was facilitated through BCNG Holdings, a company incorporated by the Respondent.
- The shareholders agreement contained a restraint of trade clause.
- The Appellant exercised its option to purchase the Respondent’s remaining shares.
- Respondent subsequently set up his own competing practice.
- Appellant claimed the Respondent breached the restraint of trade clause.
- The Appellant is not a party to the November Agreement but sought to enforce it under the Contracts (Rights of Third Parties) Act.
5. Formal Citations
- CLAAS Medical Centre Pte Ltd (formerly known as Aesthetics Associates Pte Ltd) v Ng Boon Ching, Civil Appeal No 35 of 2009, [2010] SGCA 3
- CLAAS Medical Centre Pte Ltd (formerly known as Aesthetics Associates Pte Ltd) v Ng Boon Ching, , [2009] 3 SLR(R) 78
6. Timeline
| Date | Event |
|---|---|
| Respondent commenced private practice as a general and family medical practitioner. | |
| Respondent relocated his clinic from Midpoint Orchard to Chinatown Point. | |
| Respondent set up AHA Centre, a sole proprietorship. | |
| Appellant incorporated as Aesthetics Associates Pte Ltd. | |
| Respondent subscribed for and was issued 100,000 shares in the Appellant. | |
| Shareholders Agreement entered into by the Respondent, the six doctors, and the Appellant. | |
| Appellant took over the running of the Dr B C Ng Laser Surgery at Chinatown Point. | |
| Name of clinic changed to BCNG Laser & Medical Aesthetics. | |
| Appellant exercised its right to purchase the Respondent’s remaining 40% shareholding in BCNG Holdings. | |
| Shareholders Agreement entered into by the Respondent and the six doctors. | |
| Appellant opened a branch clinic at OUB Centre. | |
| Dr. Soh Liang Joseph became a shareholder and director of the Appellant. | |
| Supplemental Shareholders Agreement entered into between the six original shareholders of the Appellant, the Respondent and Dr Soh. | |
| Respondent sent an email to the other shareholders of the Appellant informing them that he was looking to sell his entire 23% shareholding in the Appellant. | |
| Respondent gave notice to the Board of Directors of the Appellant of his intention to sell his 23% shareholding in the Appellant. | |
| Respondent had advanced interest-free loans amounting to $286,500 to the Appellant. | |
| Respondent transferred all his shares in the Appellant to Dr Wong and tendered his resignation as a director of both the Appellant and BCNG Holdings. | |
| Respondent’s last day of work with the Appellant. | |
| Unimedic Pte Ltd acquired 499,993 shares, representing 99.9% of the shareholdings in the Appellant. | |
| Respondent set up his own general and aesthetic medical practice in the name of Dr B C Ng Aesthetics. | |
| Judgment reserved. |
7. Legal Issues
- Enforceability of Restraint of Trade Clause
- Outcome: The court held that the restraint of trade clause was enforceable after severing the unreasonable portion.
- Category: Substantive
- Sub-Issues:
- Reasonableness of scope
- Reasonableness of duration
- Legitimate proprietary interest
- Third Party Rights under Contracts (Rights of Third Parties) Act
- Outcome: The court held that the Appellant had the right to enforce the clause under the Contracts (Rights of Third Parties) Act.
- Category: Procedural
- Sub-Issues:
- Intention to confer benefit
- Rebuttable presumption
- Liquidated Damages vs. Penalty
- Outcome: The court held that the liquidated damages clause was a genuine pre-estimate of loss and therefore enforceable.
- Category: Substantive
- Sub-Issues:
- Genuine pre-estimate of loss
- Extravagant and unconscionable amount
8. Remedies Sought
- Monetary Damages
- Set-off
9. Cause of Actions
- Breach of Contract
- Breach of Restrictive Covenant
10. Practice Areas
- Commercial Litigation
- Corporate Law
11. Industries
- Healthcare
12. Cited Cases
| Case Name | Court | Affirmed | Citation | Jurisdiction | Significance |
|---|---|---|---|---|---|
| CLAAS Medical Centre Pte Ltd (formerly known as Aesthetics Associates Pte Ltd) v Ng Boon Ching | High Court | Yes | [2009] 3 SLR(R) 78 | Singapore | Cited as the decision from which the appeal arose. |
| The Laemthong Glory (No 2) | N/A | Yes | [2005] 1 Lloyd’s Rep 688 | N/A | Illustrated the operation of ss 2(1)(b) and 2(2) of the Contracts (Rights of Third Parties) Act. |
| Man Financial (S) Pte Ltd v Wong Bark Chuan David | Court of Appeal | Yes | [2008] 1 SLR(R) 663 | Singapore | Summarized the law on restraint of trade clauses. |
| Thorsten Nordenfelt v The Maxim Nordenfelt Guns and Ammunition Company, Limited | House of Lords | Yes | [1894] AC 535 | United Kingdom | Represented the law on restraint of trade clauses. |
| Vancouver Malt and Sake Brewing Company, Limited v Vancouver Breweries, Limited | Privy Council | Yes | [1934] AC 181 | N/A | Cited regarding the restriction of the freedom to trade. |
| Robin M Bridge v Deacons | N/A | Yes | [1984] 1 AC 705 | N/A | Cited as a case very much on point regarding restrictive covenants. |
| Dunlop Pneumatic Tyre Company, Limited v New Garage and Motor Company, Limited | House of Lords | Yes | [1915] AC 79 | United Kingdom | Explained the question of whether a sum stipulated was a penalty or liquidated damages. |
| Philips Hong Kong Limited v The Attorney General of Hong Kong | Privy Council | Yes | [1993] 1 HKLR 269 | Hong Kong | Observed that it will normally be insufficient to establish that a provision is objectionably penal to identify situations where the application of the provision could result in a larger sum being recovered by the injured party than his actual loss. |
| Hong Leong Finance Ltd v Tan Gin Huay | Court of Appeal | Yes | [1999] 1 SLR(R) 755 | Singapore | Endorsed the statement of the law in Philips Hong Kong Limited v The Attorney General of Hong Kong. |
| Commercial Plastics Ltd v Vincent | N/A | Yes | [1965] 1 KB 623 | N/A | Cited regarding the reasonableness of a clause is to be judged as at the date the contract was entered into, and not after. |
| Queensland Co-operative Milling Association v Pamag Pty Ltd | N/A | Yes | (1973) 133 CLR 260 | Australia | Cited regarding the reasonableness of a clause is to be judged as at the date the contract was entered into, and not after. |
| Attwood v Lamont | N/A | Yes | [1920] 3 KB 571 | N/A | Cited regarding the principle of severance. |
| T Lucas and Co Ltd v Mitchell | N/A | Yes | [1974] Ch 129 | N/A | Cited regarding the principle of severance. |
| Sadler v Imperial Life assurance Co of Canada Ltd | N/A | Yes | [1988] IRLR 388 | N/A | Cited regarding the principle of severance. |
13. Applicable Rules
| Rule Name |
|---|
| No applicable rules |
14. Applicable Statutes
| Statute Name | Jurisdiction |
|---|---|
| Contracts (Rights of Third Parties) Act (Cap 53B, 2002 Rev Ed) | Singapore |
15. Key Terms and Keywords
15.1 Key Terms
- Restraint of Trade
- Restrictive Covenant
- Shareholders Agreement
- Contracts (Rights of Third Parties) Act
- Liquidated Damages
- Goodwill
- Aesthetic Medicine
- Severance
- Locus Standi
15.2 Keywords
- restraint of trade
- third party rights
- contracts
- liquidated damages
- aesthetic medicine
- singapore
- commercial
- litigation
16. Subjects
- Contract Law
- Commercial Law
- Restraint of Trade
- Third Party Rights
17. Areas of Law
- Contract Law
- Restraint of Trade
- Third Party Rights
- Commercial Law