Smile Inc Dental Surgeons Pte Ltd v Lui Andrew Stewart: Breach of Contract & Restraint of Trade

Smile Inc Dental Surgeons Pte Ltd sued its former employee, Dr. Andrew Stewart Lui, in the High Court of Singapore on 16 December 2011, for breaches of express and implied terms of his employment contract. Smile alleged that Dr. Lui breached restrictive covenants by practicing dentistry within three kilometers of Smile's clinic and soliciting Smile's patients. Smile also claimed Dr. Lui breached implied duties of good faith and fidelity. The court, presided over by Justice Woo Bih Li, dismissed Smile's action, finding the restrictive covenants to be void as unreasonable restraints of trade and that Dr. Lui did not breach any implied terms of the contract.

1. Case Overview

1.1 Court

High Court

1.2 Outcome

Action Dismissed

1.3 Case Type

Civil

1.4 Judgment Type

Grounds of Decision

1.5 Jurisdiction

Singapore

1.6 Description

Smile Inc sues ex-employee Dr. Lui for breach of contract. Court dismisses the action, finding restraint of trade clauses unreasonable.

1.7 Decision Date

2. Parties and Outcomes

Party NameRoleTypeOutcomeOutcome TypeCounsels
Smile Inc Dental Surgeons Pte LtdPlaintiffCorporationAction DismissedLost
Lui Andrew StewartDefendantIndividualAction DismissedWon

3. Judges

Judge NameTitleDelivered Judgment
Woo Bih LiJudgeYes

4. Counsels

Counsel NameOrganization
Aqbal Singh s/o Kuldip SinghPinnacle Law LLC
Wong Siew HongInfinitus Law Corporation
Teh Ee-VonInfinitus Law Corporation

4. Facts

  1. Dr. Lui was employed by Smile Inc as an associate dental surgeon.
  2. The employment contract contained a radial clause restricting Dr. Lui from practicing within 3km of Smile's clinics.
  3. The contract also included non-solicitation and non-dealing clauses.
  4. Dr. Lui incorporated Dental Essence while still employed by Smile.
  5. Dr. Lui secured a tenancy for Dental Essence near Smile's Forum Clinic.
  6. Dr. Lui resigned from Smile and began operating Dental Essence.
  7. Smile alleged Dr. Lui breached the contract by practicing near Smile and soliciting patients.

5. Formal Citations

  1. Smile Inc Dental Surgeons Pte Ltd v Lui Andrew Stewart, Suit No 847 of 2009, [2011] SGHC 266
  2. Smile Inc Dental Surgeons Pte Ltd v Lui Andrew Stewart, Civil Appeal No 145 of 2011, [2012] SGCA 39

6. Timeline

DateEvent
Smile Inc Dental Surgeons Pte Ltd incorporated in Singapore.
Smile opened its first dental clinic at Suntec City.
Smile opened its second dental clinic at Forum the Shopping Mall.
Employment contract signed between Smile Inc and Dr. Lui.
Dr. Lui commenced work with Smile.
Dr. Lui assigned to work full-time at the Forum Clinic.
Smile set up a third clinic at One Raffles Quay.
Large light box signage erected on the external facade of the Forum shopping mall.
Smile ran a series of advertisements in Motherhood Magazine.
Smile ran a series of advertisements in Motherhood Magazine.
Smile ran a series of advertisements in Ma Ma Bao Bei.
Dr. Lui incorporated Dental Essence Pte Ltd.
Dr. Lui entered into a tenancy agreement for premises at Tudor Court on behalf of Dental Essence.
Dr. Lui gave written notice of his resignation to Smile.
Smile agreed that Dr. Lui’s last day of work with Smile would be 18 April 2009.
Dr. Lui's last day of work with Smile.
Dental Essence obtained a licence from the MOH to operate a dental clinic.
Dental Essence began operations.
Carolyn Strover testimonial in Expat Living magazine.
Smile commenced action against Dr. Lui.
Large light box signage removed from the external facade of the Forum shopping mall.
Smile closed the Forum Clinic.
Action was bifurcated upon application by Dr Lui.
Dr. Lui elected to make a submission of no case to answer.
Court dismissed the action by Smile with costs to be paid to Dr Lui.
Appeal to this decision in Civil Appeal No 145 of 2011 was dismissed by the Court of Appeal.

7. Legal Issues

  1. Breach of Contract
    • Outcome: The court found that the defendant did not breach the contract.
    • Category: Substantive
  2. Restraint of Trade
    • Outcome: The court held that the restrictive covenants were void as unreasonable restraints of trade.
    • Category: Substantive
  3. Implied Terms of Contract
    • Outcome: The court found that the defendant did not breach any implied terms of the contract.
    • Category: Substantive

8. Remedies Sought

  1. Damages
  2. Account of Profits
  3. Injunction (originally, but not pursued)

9. Cause of Actions

  • Breach of Contract
  • Breach of Implied Terms
  • Restraint of Trade

10. Practice Areas

  • Commercial Litigation
  • Employment Litigation

11. Industries

  • Healthcare

12. Cited Cases

Case NameCourtAffirmedCitationJurisdictionSignificance
Bansal Hemant Govindprasad and another v Central Bank of IndiaHigh CourtYes[2003] 2 SLR(R) 33SingaporeCited for the principles governing the effect of a submission of no case to answer.
Clarke v NewlandEnglish Court of AppealYes[1991] 1 All ER 397England and WalesCited for the principles of interpretation applicable to restraint of trade clauses.
Beckett Investment Management Group Ltd v HallEnglish Court of AppealYes[2007] EWCA Civ 613England and WalesCited for the principle that the same principles apply to the construction of a clause impugned as an unlawful restraint of trade as to any other written term.
Home Counties Dairies Ltd and another v Skilton and anotherCourt of AppealYes[1970] 1 WLR 526England and WalesCited for the principle that a clause valid in ordinary circumstances remains valid even if it covers unlikely circumstances.
Heller Factoring (Singapore) Ltd v Ng Tong YangHigh CourtYes[1993] 1 SLR(R) 495SingaporeCited for approving the statement in Home Counties Dairies Ltd and another v Skilton and another.
National Aerated Water Co Pte Ltd v Monarch Co, IncHigh CourtYes[2000] 1 SLR(R) 74SingaporeCited for its implicit understanding of Home Counties Dairies Ltd and another v Skilton and another.
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 its implicit understanding of Home Counties Dairies Ltd and another v Skilton and another and for stating the relevant legal principles regarding covenants in restraint of trade.
Thorsten Nordenfelt (Pauper) v The Maxim Nordenfelt Guns and Ammunition Company, LimitedHouse of LordsYes[1894] AC 535United KingdomCited as the legal foundation for the justification of a restraint of trade, requiring reasonableness in reference to the interests of the parties and the public.
Austin Knight (UK) Ltd v HindsHigh CourtYes[1994] FSR 52England and WalesCited for the distinction between solicitation and mere dealing with former customers.
Vancouver Malt and Sake Brewing Company, Limited v Vancouver Breweries, LimitedPrivy CouncilYes[1934] AC 181CanadaCited for the principle that covenants restrictive of competition must be ancillary to some main transaction and reasonably necessary to render that transaction effective.
Herbert Morris, Limited v SaxelbyHouse of LordsYes[1916] AC 688United KingdomCited for the principle that a restraint on an employee is upheld only if the employer has a proprietary right, such as trade connection or trade secrets, for the protection of which the restraint is reasonably necessary.
Buckman Laboratories (Asia) Pte Ltd v Lee Wei HoongHigh CourtYes[1999] 1 SLR(R) 205SingaporeCited for the relevance of the extent of knowledge of, and influence over, customers in establishing a legitimate proprietary interest.
S W Strange Ltd v MannHigh CourtYes[1965] 1 WLR 629England and WalesCited for the customer-centered approach, emphasizing that knowledge is immaterial unless it can be leveraged to gain influence.
Arthur Murray Dance Studios of Cleveland, Inc v WitterCourt of Common PleasYes105 NE 2d 685Ohio, USACited for identifying 'employer's hold' and 'customer inconvenience' as factors relevant to the issue of influence.
Routh v JonesHigh CourtYes[1947] 1 All ER 179England and WalesCited for the principle that a medical practice employer has a legitimate proprietary interest to protect against unfair competition from an employee.
Campbell, Imrie and Shankland v ParkBritish Columbia Supreme CourtYes[1954] 2 DLR 170CanadaCited for the principle that a chartered accountant has a confidential relationship with clients, giving rise to a legitimate proprietary interest for the employer.
Robin M Bridge v Deacons (A Firm)Privy CouncilYes[1984] 1 AC 705Hong KongCited for the principle that the relationship of solicitor and client is confidential, similar to medical men and other professionals.
Koops Martin v Dean ReevesNew South Wales Supreme CourtYes[2006] NSWSC 449AustraliaCited for the principle that a particular solicitor, accountant, or doctor may be seen as the persona of the firm by the client.
Fitch v DewesHouse of LordsYes[1921] 2 AC 158United KingdomCited for the principle that a restriction unlimited in duration does not necessarily lead to the conclusion that it is unreasonable.
Office Angels Ltd v Rainer-Thomas and O’ConnorEnglish Court of AppealNo[1991] IRLR 214England and WalesCited for the principle that a covenant prohibiting the carrying on of business by a former employee in a specified area for a specified time will always be approached with caution by the court.
Transport North American Express Inc v New Solutions Financial CorpOntario Superior Court of JusticeNo200 DLR (4th) 560CanadaCited for the view that the blue-pencil type of severance was a relic of a bygone area.
Transport North American Express Inc v New Solutions Financial CorpOntario Court of AppealNo214 DLR (4th) 44CanadaCited for the minority judgment's endorsement of the discretionary severance approach.
Vandashima (Singapore) Pte Ltd and another v Tiong Sing Lean and anotherHigh CourtYes[2006] SGHC 132SingaporeCited as a case where an injunction was granted and confined to Indonesia, where the relevant plaintiff had developed its business.
GW Plowman & Son, Ltd v AshHigh CourtYes[1964] 2 All ER 10England and WalesCited as a case where the court interpreted the relevant provision in a narrower manner than the literal interpretation thereof bearing in mind the context of the trade of the employer in question.
Robb v GreenQueen's Bench DivisionYes[1895] 2 QB 1England and WalesCited for the principle that an employee may take preparatory steps to enter into business for himself, provided he does not fraudulently undermine his master by breaking the confidence reposed in him.
Sanders v ParryHigh CourtNo[1967] 1 WLR 753England and WalesCited for the principle that an employee has a duty to protect his master's interests and retain clients of his master.
Pacific Autocom Enterprise Pte Ltd v Chia Wah SiangHigh CourtYes[2004] 3 SLR(R) 73SingaporeCited for approving the second paragraph quoted from Sanders v Parry.
Laughton and Hawley v Bapp Industrial Supplies LtdEmployment Appeal TribunalYes[1986] ICR 634England and WalesCited for the principle that an intention to compete expressed in letters is no breach of the implied duty of loyalty.
Balston Limited & another v Headline Filters Limited & anotherHigh CourtYes[1987] FSR 330England and WalesCited for the principle that it was not wrong for Mr. Head to acquire Headline, obtain a lease of premises for it and order materials in preparation for the commencement of business after Mr. Head ceased to be employed by Balston.
Balston Limited & another v Headline Filters Limited & anotherHigh CourtYes[1990] FSR 385England and WalesCited for the principle that an intention by a director of a company to set up business in competition with the company after his directorship has ceased is not to be regarded as a conflicting interest within the context of the principle.
Lancashire Fires Limited v SA Lyons & Company Limited and othersCourt of AppealYes[1996] FSR 629England and WalesCited for the principle that the distinction is between preliminary steps by way of preparation, and “actual competitive activity”.
Universal Westech (S) Pte Ltd v Ng Thiam KiatHigh CourtYes[1996] 3 SLR(R) 429SingaporeCited for the principle that employees took steps to prepare to compete with their employers, but did not compete with them before they left.
Ng Thiam Kiat and others v Universal Westech (S) Pte Ltd and another appealCourt of AppealYes[1997] 2 SLR(R) 439SingaporeCited for the principle that the second defendant had breached his duty of fidelity by becoming a director of the third defendant whilst he was still employed by the plaintiffs.
Thomas & Betts (S.E. Asia) Pte Ltd v Ou Tin Joon and anotherHigh CourtYes[1998] SGHC 57SingaporeCited for the principle that mere preparatory acts to compete were insufficient to constitute a breach of the implied duty of good faith and fidelity.
British Midland Tool Ltd v Midland International Tooling LtdHigh CourtYes[2003] 2 BCLC 523England and WalesCited for the principle that a director is under a duty to report actual or threatened competitive activity where the activity involves others even if the director was also involved in the same activity.
Shepherds Investments Ltd and another v Walters and othersHigh CourtYes[2007] 2 BCLC 202England and WalesCited for the principle that the precise point at which preparations for the establishment of a competing business by a director become unlawful will turn on the actual facts of any particular case.
Helmet Integrated Systems Limited v Mitchell TunnardHigh CourtYes[2006] FSR 41England and WalesCited for the principle that acts of preparation before departure are not actionable; there is no breach of the duty of good faith and fidelity on the part of an employee to decide to set up in competition with his employer and take preliminary steps to do so.
Helmet Integrated Systems Ltd v Tunnard and othersCourt of AppealYes[2007] IRLR 126England and WalesCited for the principle that Mr Tunnard was under no obligation, be it fiduciary or otherwise, to inform his employer about his activities in preparation for competition with it after he left its employment.
University of Nottingham v FishelHigh CourtYes[2000] ICR 1462England and WalesCited for instances where an employee may also have fiduciary obligations.
Cobbetts LLP and Lee Crowder (A Firm) v Mark Reginald Stuart HodgeHigh CourtYes[2009] EWHC 786England and WalesCited as authority for the proposition that an individual employee may, in certain circumstances, owe specific fiduciary obligations arising from the nature and scope of his work.
Samsung Semiconductor Europe Ltd v DochertyCourt of SessionYes[2011] SLT 806ScotlandCited for the summary of various key propositions from Nottingham which were not disputed by his opponent.

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

  • Restrictive Covenants
  • Radial Clause
  • Non-Solicitation Clause
  • Non-Dealing Clause
  • Good Faith
  • Fidelity
  • Restraint of Trade
  • Legitimate Proprietary Interest
  • Patient Pool

15.2 Keywords

  • breach of contract
  • restraint of trade
  • dental
  • employment
  • solicitation
  • non-compete
  • Singapore

17. Areas of Law

Area NameRelevance Score
Employment Law90
Restraint of Trade85
Contract Law75
Dentistry Law60
Agency Law30
Litigation25
Legal Ethics and Professional Responsibility20
Company Law15

16. Subjects

  • Contract Law
  • Employment Law
  • Restraint of Trade
  • Dental Practice