Mano Vikrant Singh v Cargill: Enforceability of Forfeiture Provision in Incentive Plan

In Mano Vikrant Singh v Cargill TSF Asia Pte Ltd, the Singapore High Court addressed whether a forfeiture provision in an employee incentive award plan, which forfeits deferred incentive payments if the employee competes with the employer, constitutes an unenforceable restraint of trade. Mano Vikrant Singh sought a declaration that the forfeiture provision was void and an order for payment of US$1,741,894 in deferred incentive payments. The High Court dismissed the originating summons, holding that the forfeiture provision was not in restraint of trade.

1. Case Overview

1.1 Court

High Court

1.2 Outcome

Originating Summons dismissed with costs.

1.3 Case Type

Civil

1.4 Judgment Type

Grounds of Decision

1.5 Jurisdiction

Singapore

1.6 Description

Singapore High Court judgment on whether a forfeiture provision in an incentive plan is an unenforceable restraint of trade. The court dismissed the claim.

1.7 Decision Date

2. Parties and Outcomes

Party NameRoleTypeOutcomeOutcome TypeCounsels
Mano Vikrant SinghPlaintiffIndividualClaim DismissedLost
Cargill TSF Asia Pte LtdDefendantCorporationJudgment for DefendantWon

3. Judges

Judge NameTitleDelivered Judgment
Steven ChongJudgeYes

4. Counsels

Counsel NameOrganization
Mark SeahRodyk & Davidson LLP
Philip JeyaretnamRodyk & Davidson LLP
Germaine TanRodyk & Davidson LLP
Mohan GopalanDrew & Napier LLC
Justin KwekDrew & Napier LLC
Blossom HingDrew & Napier LLC
Kimberley LengDrew & Napier LLC

4. Facts

  1. Mano Vikrant Singh was employed by Cargill TSF Asia Pte Ltd as a senior trader.
  2. Singh's compensation included a base salary, cash bonus, and deferred incentive payments.
  3. The Incentive Award Plan contained a forfeiture provision, which stipulated that deferred incentive payments would be forfeited if the employee competed with Cargill within two years of leaving.
  4. Singh resigned from Cargill and subsequently joined a competitor, Xangbo Global Markets Pte Ltd.
  5. Cargill refused to pay Singh's outstanding deferred incentive payments, citing the forfeiture provision.
  6. Singh argued that the forfeiture provision was an unenforceable restraint of trade.

5. Formal Citations

  1. Mano Vikrant Singh v Cargill TSF Asia Pte Ltd, Originating Summons No 103 of 2011, [2011] SGHC 241

6. Timeline

DateEvent
Mano Vikrant Singh joined the Cargill Group.
Mano Vikrant Singh was assigned to work with Cargill Asia Pacific Ltd.
Mano Vikrant Singh resigned from the Cargill Group.
Mano Vikrant Singh rejoined the Cargill Group as TSF business co-ordinator at Cargill Financial Services Corp.
Mano Vikrant Singh was assigned to work in Singapore as CAPL’s TSF Innovation Co-ordinator.
Cargill TSF Asia Pte Ltd sent an employment contract letter to Mano Vikrant Singh.
Mano Vikrant Singh accepted the employment contract.
Mano Vikrant Singh entered into a Non-Compete Agreement with Cargill TSF Asia Pte Ltd.
Cargill TSF Asia Pte Ltd awarded Mano Vikrant Singh a bonus of US$400,000 for the 2006/2007 financial year.
Mano Vikrant Singh incorporated Xangbo Management Pte Ltd (later renamed Xangbo Global Markets Pte Ltd).
Cargill TSF Asia Pte Ltd awarded Mano Vikrant Singh a bonus of US$3,200,000 for the 2007/2008 financial year.
Mano Vikrant Singh gave notice of his resignation.
Cargill TSF Asia Pte Ltd accepted Mano Vikrant Singh’s resignation.
Amount of outstanding Deferred Incentive Payments remaining on Mano Vikrant Singh’s account was US$1,741,894 excluding accrued interest.
Judgment was reserved.

7. Legal Issues

  1. Restraint of Trade
    • Outcome: The court held that the forfeiture provision in the incentive award plan was not in restraint of trade.
    • Category: Substantive
    • Sub-Issues:
      • Enforceability of forfeiture provision
      • Reasonableness of restraint
      • Proprietary interest of employer
    • Related Cases:
      • [2008] 1 SLR(R) 663
      • [1916] 1 AC 688
      • (1869) LR 9 Eq 345
      • [1997] 1 WLR 1527
      • [1933] 1 KB 793
      • [1967] 1 WLR 273
      • [1974] WLR 134
      • [2007] IEHC 18
      • [1988] IRLR 388
  2. Consideration
    • Outcome: The court found that the forfeiture provision was not the whole or main consideration for the deferred incentive payments.
    • Category: Substantive
    • Sub-Issues:
      • Sufficiency of consideration
      • Main consideration for deferred incentive payments

8. Remedies Sought

  1. Declaration that the Forfeiture Provision is void
  2. Order that the Forfeiture Provision be severed from the Incentive Award Plan T&Cs
  3. Payment of US$1,741,894
  4. Contractual interest on the above sum

9. Cause of Actions

  • Breach of Contract
  • Declaration that Forfeiture Provision is Void

10. Practice Areas

  • Commercial Litigation
  • Employment Litigation

11. Industries

  • Financial Services
  • Commodity Trading

12. Cited Cases

Case NameCourtAffirmedCitationJurisdictionSignificance
Man Financial (S) Pte Ltd (formerly known as E D & F Man International (S) Pte Ltd) v Wong Bark Chuan DavidCourt of AppealYes[2008] 1 SLR(R) 663SingaporeCited for the public policy underlying the restraint of trade doctrine, balancing freedom of trade and contract, and the importance of the free flow of expertise.
Herbert Morris, Limited v SaxelbyHouse of LordsYes[1916] 1 AC 688United KingdomCited for the principle that individuals should be at liberty to work for themselves and not deprive themselves or the state of their labor, skill, and talents.
Leather Cloth Company v LorsontCourt of ChanceryYes(1869) LR 9 Eq 345United KingdomCited for the balance between individual liberty to work and the ability to sell one's skills advantageously, allowing reasonable restrictions.
Marshall v N M Financial Management LtdCourt of AppealYes[1997] 1 WLR 1527United KingdomCited regarding forfeiture-for-competition clauses and the principle that there is no basis for distinguishing between traditional restraint of trade clauses and forfeiture-for-competition clauses.
Wyatt v Kreglinger and FernauCourt of AppealYes[1933] 1 KB 793United KingdomCited as a key case where a similar forfeiture provision was considered, and the court found the agreement void as being in restraint of trade.
Bull v Pitney-Bowes LtdHigh CourtYes[1967] 1 WLR 273United KingdomCited for the proposition that courts will not allow employers to achieve by indirect means what they cannot otherwise do through direct means.
Stenhouse Australia Ltd v Marshall William Davidson PhillipsPrivy CouncilYes[1974] WLR 134AustraliaCited for the principle that whether a provision is in restraint of trade is to be determined by its practical effect rather than its form.
Finnegan v J & E DavyHigh CourtYes[2007] IEHC 18IrelandCited for the principle that whether a clause is a restraint of trade is to be determined by its substance and effect and not merely its form.
Sadler v Imperial Life Assurance Co of Canada LtdHigh CourtYes[1988] IRLR 388United KingdomCited for the principle that the effect of the provision is that the employee has to give up some freedom which he would otherwise have had.
Jeffrey A Z HilligossvCargill Incorporated et alCourt of Appeals of MinnesotaYes2001 Minn App LEXIS 1017United StatesCited as a case involving Cargill Incorporated, but ultimately not helpful to the key issue before the court.
Ralph S Harris v Myron R Bolin (as Trustee of M R Bolin Advertising Public Relations Agency Inc Profit Sharing Trust) and othersSupreme Court of MinnesotaYes310 Minn 391United StatesCited for the principle that forfeiture provisions in profit-sharing plans are illegal restraints of trade if they are triggered by joining a competitor.
Rochester Corporation v RochesterCourt of Appeals for the Fourth CircuitYes(1971) 450 F2d 118United StatesCited as a case that upheld forfeiture clauses, but the court disagreed with its reasoning.
Amory H Bradford v The New York Times CompanyUnited States Court of Appeals for the Second CircuitYes(1974) 501 F2d 51United StatesCited for applying the restraint of trade doctrine to a forfeiture-for-competition clause in an incentive plan.
John J Cheney v Automatic Sprinkler Corporation of AmericaSupreme Judicial Court of MassachusettsYes(1979) 377 Mass 141United StatesCited for applying the restraint of trade doctrine to a forfeiture-for-competition clause in a compensation plan due to an imbalance in bargaining positions.
Diane P Deming v Nationwide Mutual Insurance Company et al and other mattersSupreme Court of ConnecticutYes(2006) 279 Conn 745United StatesCited for the view that forfeiture provisions are restraints of trade because they present a powerful deterrent to the employee’s right to compete.
Food Fair Stores, Inc et al v GreeleyCourt of Appeals of MarylandYes(1972) 264 Md 105United StatesCited for holding that a forfeiture-for-competition clause which forfeited retirement benefits was a restraint of trade.
Lavey v Edwards et al and other mattersSupreme Court of OregonYes(1973) 264 Ore 331United StatesCited for applying the restraint of trade doctrine to a forfeiture-for-competition clause which forfeited pension contributions.
Richard C Pollard v Autotote LtdUnited States Court of Appeals for the Second CircuitYes(1988) 852 F2d 67United StatesCited for holding that Delaware courts would subject forfeiture-for-competition clauses to a reasonableness standard.
Securitas Security Services USA, Inc v Kenneth JenkinsSuperior Court of MassachusettsYes16 Mass L Rep 486United StatesCited for holding that under Massachusetts law, courts must apply a reasonableness standard to forfeiture-for-competition clauses.
Gene W Sheppard v Blackstock Lumber Company IncSupreme Court of WashingtonYes(1975) 85 Wn2d 929United StatesCited for holding that a reasonableness test applied to a forfeiture-for-competition clause which forfeited an employee’s undrawn share in a profit-sharing retirement plan.
Richard Fraser d/b/a R A Fraser Agency and another v Nationwide Mutual Insurance Co et alDistrict Court for the Eastern District of PennsylvaniaYes(2004) 334 F Supp 2d 755United StatesCited for reasoning that a forfeiture-for-competition clause allows the agent to choose whether to compete, weighing the costs and benefits of each option.
John W Johnson v MPR Associates IncDistrict Court for the Eastern District of VirginiaYes(1994) 894 F Supp 255United StatesCited for holding that a provision in an employee stock transfer agreement requiring the employee to tender his shares if he joined a competitor was not a restraint of trade.
Milton J Kristt (Individually and as a Representative under a Deed of Trust) v John J Whelan et al (as Trustees under a Deed of Trust)Supreme Court of New York Appellate DivisionYes(1957) 4 AD2d 195United StatesCited for holding that an amendment to a trust forfeiting the interest of a beneficiary if that beneficiary competed with the company was not contrary to public policy and did not restrain competition.
Peninsula Business Services Ltd v SweeneyEmployment Appeal TribunalYes(2003) EAT/1096/02/SMUnited KingdomCited for holding that a commission penalty suffered on resignation did not arise under a contractual term involving an unlawful restraint of trade.
Tullet Prebon plc and others v BGC Brokers LP and othersHigh CourtYes[2010] EWHC 484United KingdomCited for holding that provisions for the repayment of signing or retention payments where the employee does not serve out the full term are not provisions in restraint of trade.
Hairman v FileNET Corporation Pty LtdNew South Wales Industrial Relations CommissionYes[2001] NSWIRComm 318AustraliaCited for finding that a clause which forfeited the balance commission upon resignation was not a restraint.
Rick Lloyd v Commonwealth Bank of Australia LtdNew South Wales Industrial Relations CommissionYes[2006] NSWIRComm 129AustraliaCited for rejecting the argument that the forfeiture of a deferred bonus upon the employee’s resignation from employment was in restraint of trade.
Thorsten Nordenfelt v The Maxim Nordenfelt Guns and Ammunition Company, LimitedHouse of LordsYes[1894] AC 535United KingdomCited for the principle that in determining whether a clause in restraint of trade is reasonable, the clause must be shown to be reasonable in the interests of the parties and in the interests of the public.

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

  • Forfeiture Provision
  • Incentive Award Plan
  • Deferred Incentive Payments
  • Restraint of Trade
  • Non-Compete Agreement
  • Trade and Structured Finance
  • Structured Solutions
  • Product Approval Form
  • Employee Choice Rationale
  • Payment-for-Loyalty Clauses

15.2 Keywords

  • restraint of trade
  • forfeiture provision
  • incentive plan
  • employment contract
  • deferred incentive
  • non-compete
  • singapore
  • cargill
  • mano vikrant singh

17. Areas of Law

Area NameRelevance Score
Restraint of Trade95
Employment Law90
Contract Law70
Breach of Contract60

16. Subjects

  • Employment Contracts
  • Incentive Plans
  • Restraint of Trade
  • Contract Law