Lek Gwee Noi v Humming Flowers: Restrictive Covenant, Non-Competition, and Non-Solicitation

In Lek Gwee Noi v Humming Flowers & Gifts Pte Ltd, the High Court of Singapore heard an appeal regarding the enforceability of a restrictive covenant in the employment agreement of Lek Gwee Noi, the plaintiff, against Humming Flowers & Gifts Pte Ltd, the defendant. The plaintiff sought a declaration that the restrictive covenant was void and unenforceable. The High Court allowed the plaintiff's appeal, finding the restrictive covenant entirely void and unenforceable, reversing the District Judge's decision.

1. Case Overview

1.1 Court

High Court

1.2 Outcome

Appeal Allowed

1.3 Case Type

Civil

1.4 Judgment Type

Grounds of Decision

1.5 Jurisdiction

Singapore

1.6 Description

High Court case concerning the enforceability of a restrictive covenant in an employment agreement. The court found the covenant void and unenforceable.

1.7 Decision Date

7 April 2014

2. Parties and Outcomes

Party Name	Role	Type	Outcome	Outcome Type	Counsels
Lek Gwee Noi	Plaintiff, Appellant	Individual	Appeal Allowed	Won	Tan Tee Jim of Lee & Lee Freddy Lim of Lee & Lee Dharma Sadasivan of Lee & Lee
Humming Flowers & Gifts Pte Ltd	Defendant, Respondent	Corporation	Appeal Dismissed	Lost	Lok Vi Ming of Rodyk & Davidson LLP Tan Yee Siong of Rodyk & Davidson LLP Alvin Liong of Rodyk & Davidson LLP

3. Judges

Judge Name	Title	Delivered Judgment
Vinodh Coomaraswamy	JC (as he then was)	Yes

4. Counsels

Counsel Name	Organization
Tan Tee Jim	Lee & Lee
Freddy Lim	Lee & Lee
Dharma Sadasivan	Lee & Lee
Lok Vi Ming	Rodyk & Davidson LLP
Tan Yee Siong	Rodyk & Davidson LLP
Alvin Liong	Rodyk & Davidson LLP

4. Facts

Plaintiff worked in the flowers, gifts, hampers, and wreaths business since 1991.
Defendant acquired the business in which the plaintiff was employed in 2008.
Plaintiff continued as sales manager after the acquisition, now employed by the defendant.
Plaintiff's employment agreement contained post-termination non-competition and non-solicitation covenants.
Plaintiff resigned from the defendant's employment in November 2011, effective December 2011.
Plaintiff informed the defendant of her intention to set up her own business selling flowers and gifts.
Defendant reminded the plaintiff of her non-competition covenant and threatened legal action.

5. Formal Citations

Lek Gwee Noi v Humming Flowers & Gifts Pte Ltd, Originating Summons No. 110 of 2012 (Registrar's Appeal (State Courts) No. 2 of 2013 and 5 of 2013), [2014] SGHC 64

6. Timeline

Date	Event
1991-01-01	Plaintiff started working at Humming House Tradition as a clerk.
1998-01-01	Plaintiff became sales manager at Humming House Tradition.
2000-01-01	Humming House Tradition's business transferred to Humming House Flowers and Gifts Pte Ltd.
2005-01-01	Noel Gifts approached Lek Sek Kwee to discuss potential acquisition of Humming House.
2007-01-01	Lek Sek Kwee approached Noel Gifts regarding acquisition of Humming House.
2007-12-28	Defendant incorporated as a wholly-owned subsidiary of Noel Gifts.
2008-01-07	Sale and purchase agreement signed between defendant, Humming House, and Humming House's shareholders.
2008-01-07	Defendant handed plaintiff a draft employment agreement.
2008-07-25	Plaintiff signed employment agreement.
2011-11-01	Plaintiff tendered resignation from defendant.
2011-12-31	Plaintiff's last day in defendant's employment.
2012-01-03	Plaintiff informed defendant of intention to set up own business.
2012-01-13	Defendant objected to plaintiff's plan and threatened to sue.
2012-03-22	Plaintiff commenced proceedings seeking declaration that clause 13 is void.
2012-05-17	Defendant applied to convert proceedings into an action commenced by writ.
2012-06-08	District Judge allowed defendant's application.
2012-09-14	High Court heard appeal and allowed it.
2012-12-06	District Judge determined plaintiff's principal application.
2013-01-01	Registrar's Appeal (State Courts) No. 2 of 2013 and 5 of 2013
2014-04-08	High Court allowed the plaintiff’s appeal and dismissed the defendant’s appeal.

7. Legal Issues

Enforceability of Restrictive Covenant
- Outcome: The court held that the restrictive covenant was entirely void and unenforceable.
- Category: Substantive
- Sub-Issues:
  - Reasonableness of geographical scope
  - Reasonableness of activity restriction
  - Reasonableness of temporal scope
  - Protection of trade secrets
  - Protection of trade connections
- Related Cases:
  - [1916] 1 AC 688
  - [2008] 1 SLR(R) 663
  - [1894] 1 AC 535
  - [2012] 4 SLR 308
  - [2005] 2 SLR(R) 579
Doctrine of Severance
- Outcome: The court held that the objectionable parts of the restrictive covenant could not be severed to save the remainder of the covenant.
- Category: Procedural
- Sub-Issues:
  - Blue pencil test
  - Divisibility of promises
  - Alteration of contractual meaning
  - Notional severance
- Related Cases:
  - [2000] 1 SLR(R) 74
  - [2010] 2 SLR 386
  - [1920] 3 KB 571
  - [1974] 1 Ch 129
  - [1988] IRLR 388

8. Remedies Sought

Declaration that restrictive covenant is void and unenforceable

9. Cause of Actions

Breach of Contract (potential)
Declaratory judgment

10. Practice Areas

Commercial Litigation
Employment Law
Contract Disputes

11. Industries

Retail
Flowers and Gifts

12. Cited Cases

Case Name	Court	Affirmed	Citation	Jurisdiction	Significance
Herbert Morris, Limited v Saxelby	House of Lords	Yes	[1916] 1 AC 688	England and Wales	Approved in Man Financial for the policy of protecting a person’s fundamental liberty to earn a living.
Man Financial (S) Pte Ltd (formerly known as E D & F Man International (S) Pte Ltd) v Wong Bark Chuan David	Court of Appeal of Singapore	Yes	[2008] 1 SLR(R) 663	Singapore	Approved Herbert Morris, Limited v Saxelby and Thorsten Nordenfelt (Pauper) v The Maxim Nordenfelt Guns and Ammunition Company, Limited for the conditions to be satisfied for a restrictive covenant to be enforceable.
Thorsten Nordenfelt (Pauper) v The Maxim Nordenfelt Guns and Ammunition Company, Limited	House of Lords	Yes	[1894] 1 AC 535	England and Wales	Approved in Man Financial for the conditions to be satisfied for a restrictive covenant to be enforceable.
Smile Inc Dental Surgeons Pte Ltd v Lui Andrew Stewart	Court of Appeal of Singapore	Yes	[2012] 4 SLR 308	Singapore	Approved Thorsten Nordenfelt (Pauper) v The Maxim Nordenfelt Guns and Ammunition Company, Limited for the conditions to be satisfied for a restrictive covenant to be enforceable.
Allied Dunbar (Frank Weisinger) Ltd v Weisinger	High Court (Chancery Division)	Yes	[1988] IRLR 60	England and Wales	Cited for the principle that the true threshold question is whether the restrictive covenant is aimed at protecting a legitimate interest of the covenantee as against the covenantor.
The Commissioners of Inland Revenue v Muller & Co's Margarine, Limited	House of Lords	Yes	[1901] 1 AC 217	England and Wales	Approved in Staywell Hospitality Group Pty Ltd v Starwood Hotels & Resorts Worldwide, Inc and another and another appeal for the definition of goodwill.
Staywell Hospitality Group Pty Ltd v Starwood Hotels & Resorts Worldwide, Inc and another and another appeal	Court of Appeal of Singapore	Yes	[2014] 1 SLR 911	Singapore	Approved The Commissioners of Inland Revenue v Muller & Co's Margarine, Limited for the definition of goodwill.
Cactus Imaging Pty Limited v Glenn Peters	Supreme Court of New South Wales	Yes	[2006] NSWSC 717	Australia	Cited with approval in Man Financial for the principle that a covenantee's legitimate interest need not arise from a right of property.
Oxford v Moss	Crown Court	Yes	(1979) 68 Cr App Rep 183	England and Wales	Cited for the principle that information is not property.
Force India Formula One Team Ltd v 1 Malaysia Racing Team Sdn Bhd	High Court of Justice	Yes	[2012] EWHC 616 (Ch)	England and Wales	Cited for the principle that information is not property.
Stratech Systems Ltd v Nyam Chiu Shin (alias Yan Qiuxin) and others	Court of Appeal of Singapore	Yes	[2005] 2 SLR(R) 579	Singapore	Cited for the principle that where trade secrets or confidential information are protected by other express provisions in an employment agreement, the employer must be able to point to a legitimate interest 'over and above' the protection of trade secrets or confidential information in order to justify a restrictive covenant.
Centre for Creative Leadership (CCL) Pte Ltd v Byrne Roger Peter and others	High Court of Singapore	Yes	[2013] 2 SLR 193	Singapore	Discussed the difficulty of the principle in Stratech Systems Ltd v Nyam Chiu Shin (alias Yan Qiuxin) and others.
The Littlewoods Organisation Ltd v Harris	Court of Appeal	Yes	[1978] 1 All ER 1026	England and Wales	Reviewed in Centre for Creative Leadership (CCL) Pte Ltd v Byrne Roger Peter and others for the principle that a restrictive covenant can be justified as protecting trade secrets or confidential information even if there are other express clauses in the same contract which do so.
Turner v Commonwealth & British Minerals Ltd	High Court	Yes	[2000] IRLR 114	England and Wales	Reviewed in Centre for Creative Leadership (CCL) Pte Ltd v Byrne Roger Peter and others for the principle that a restrictive covenant can be justified as protecting trade secrets or confidential information even if there are other express clauses in the same contract which do so.
Thomas v Farr plc	High Court	Yes	[2007] ICR 932	England and Wales	Reviewed in Centre for Creative Leadership (CCL) Pte Ltd v Byrne Roger Peter and others for the principle that a restrictive covenant can be justified as protecting trade secrets or confidential information even if there are other express clauses in the same contract which do so.
Smile Inc Dental Surgeons Pte Ltd v Lui Andrew Stewart	High Court of Singapore	Yes	[2012] 1 SLR 847	Singapore	Elaborated on the factors that the court considers in applying the principle that the employer’s trade connection is a sufficient legitimate interest.
M & S Drapers (a firm) v Reynolds	Court of Appeal	Yes	[1957] 1 WLR 9	England and Wales	Discussed whether an employer has a legitimate interest in the trade connection of an employee which predates her employment by the employer.
National Aerated Water Co Pte Ltd v Monarch Co, Inc	Court of Appeal of Singapore	Yes	[2000] 1 SLR(R) 74	Singapore	Cited for the principle that if a restrictive covenant is reasonable as between the parties bearing in mind those circumstances, it will not become void simply because it could also be construed to cover unlikely situations outside their reasonable contemplation.
Beckett Investment Management Group Ltd & ors v Glynn Hall & ors	Court of Appeal	Yes	[2007] EWCA Civ 613	England and Wales	Affirming Stenhouse Australia Ltd v Marshall William Davidson Phillips for the principle that the court should take into account the realities of modern business and must not be too inhibited by considerations of corporate personality when construing a restrictive covenant.
Stenhouse Australia Ltd v Marshall William Davidson Phillips	Privy Council (on appeal from Australia)	Yes	[1974] 1 AC 391	Australia	Affirmed in Beckett Investment Management Group Ltd & ors v Glynn Hall & ors for the principle that the court should take into account the realities of modern business and must not be too inhibited by considerations of corporate personality when construing a restrictive covenant.
CLAAS Medical Centre Pte Ltd v Ng Boon Ching	Court of Appeal of Singapore	Yes	[2010] 2 SLR 386	Singapore	Expressly approved and applied English law on the doctrine of severance as expressed in Attwood v Lamont; T Lucas and Co Ltd v Mitchell and Sadler v Imperial Life Assurance Co of Canada Ltd.
Attwood v Lamont	Court of Appeal	Yes	[1920] 3 KB 571	England and Wales	Contains one of the earliest formulations of the doctrine of severance.
T Lucas and Co Ltd v Mitchell	Court of Appeal	Yes	[1974] 1 Ch 129	England and Wales	Approved in CLAAS Medical Centre Pte Ltd v Ng Boon Ching for the doctrine of severance.
Sadler v Imperial Life Assurance Co of Canada Ltd	High Court	Yes	[1988] IRLR 388	England and Wales	Approved in CLAAS Medical Centre Pte Ltd v Ng Boon Ching for the doctrine of severance.
Ng Boon Ching v CLAAS Medical Centre Pte Ltd	High Court of Singapore	Yes	[2009] 3 SLR(R) 78	Singapore	Trial judge decision in CLAAS Medical Centre Pte Ltd v Ng Boon Ching.
Goodinson v Goodinson	Court of Appeal	Yes	[1954] 2 QB 118	England and Wales	Cited in Man Financial for the basic test centres on whether the objectionable promise is substantially the whole or the main consideration for the promise sought to be enforced.
Bennett v Bennett	Court of Appeal	Yes	[1952] 1 KB 249	England and Wales	Cited in Man Financial for the basic test centres on whether the objectionable promise is substantially the whole or the main consideration for the promise sought to be enforced.
Beckett Investment Management Group Ltd & ors v Glynn Hall & ors	Court of Appeal	Yes	[2007] EWCA Civ 613	England and Wales	Approved the Sadler threefold test for severance.
Marshall v NM Financial Management Ltd	High Court	Yes	[1995] 4 All ER 785	England and Wales	Set out the Sadler propositions and added a fourth, namely that the severance must be consistent with the public policy underlying the avoidance of the offending part.
Transport North American Express Inc v New Solutions Financial Corp	Superior Court of Justice	Yes	(2001) 200 DLR (4th) 560	Canada	First instance decision in Transport North American Express Inc v New Solutions Financial Corp.
Transport North American Express Inc v New Solutions Financial Corp	Court of Appeal	Yes	(2002) 214 DLR (4th) 44	Canada	Court of Appeal decision in Transport North American Express Inc v New Solutions Financial Corp.
Transport North American Express Inc v New Solutions Financial Corp	Supreme Court of Canada	Yes	[2004] 1 SCR 249	Canada	Supreme Court of Canada decision in Transport North American Express Inc v New Solutions Financial Corp.
Morley Shafron v KRG Insurance Brokers (Western) Inc	Supreme Court of Canada	Yes	[2009] 1 SCR 157	Canada	Held that, on policy grounds, that doctrine can have no application to contracts of employment, relying on Lord Moulton’s dicta in Mason.
Canadian American Financial Corp (Canada) Ltd v King	British Columbia Court of Appeal	Yes	(1989) 60 DLR (4th) 293	Canada	Approved and applied in Morley Shafron v KRG Insurance Brokers (Western) Inc for the narrow blue pencil test.
Chartbrook Ltd and another v Persimmon Homes Ltd and another	House of Lords	Yes	[2009] 1 AC 1101	England and Wales	Discussed in Marley v Rawlings and another for the dividing line between the remedy of rectification and other devices such as construction for giving effect to the parties’ intentions.
Marley v Rawlings and another	Supreme Court	Yes	[2014] UKSC 2	United Kingdom	Discussed Chartbrook Ltd and another v Persimmon Homes Ltd and another for the dividing line between the remedy of rectification and other devices such as construction for giving effect to the parties’ intentions.

13. Applicable Rules

Rule Name
No applicable rules

14. Applicable Statutes

Statute Name	Jurisdiction
Companies Act (Cap 50, 2006 Ed)	Singapore

15. Key Terms and Keywords

15.1 Key Terms

Restrictive covenant
Non-competition covenant
Non-solicitation covenant
Trade connection
Trade secrets
Goodwill
Doctrine of severance
Blue pencil test
Relevant company
Related company

15.2 Keywords

restrictive covenant
non-competition
non-solicitation
employment agreement
trade secrets
trade connection
severance
Singapore
High Court

17. Areas of Law

Area Name	Relevance Score
Restraint of Trade	90
Employment Law	85
Contract Law	60
Breach of Contract	40
Estoppel	20
Formation of contract	20
Agency Law	10

16. Subjects

Employment Contracts
Restraint of Trade
Contract Law
Civil Procedure