A SALES manager who resigned from her job with a flowers and gifts company to set up a business in the same line will get to compete against her former company, thanks to a High Court ruling.
Ms Lek Gwee Noi, 52, had sought a legal declaration that a clause in her contract with former employer Humming Flowers & Gifts Pte Ltd was void and unenforceable.
The clause forbade her from working in the same business in Singapore, Malaysia or any other country where the company has offices, for two years after she resigned. It also barred her from taking away customers of the company who bought from it during her employment.
Ms Lek - who has been in the flowers, gifts and hampers trade all of her working life - had resigned in December 2011 and sought to start her own business in the following month.
However the company, a wholly owned subsidiary of market leader Noel Gifts International, threatened to sue her if she breached the clause.
Justice Vinodh Coomaraswamy, in his 90-page judgment grounds released last week, found the clause was "too wide" and "unreasonable".
Such clauses are known as restrictive covenants. They form a key area of employment law but one with few court precedents.
The judge noted that the law is stricter about restrictive covenants in job contracts than it is in business sale contracts.
In this case, Ms Lek's job contract contained a restrictive covenant but so did the sales deal by which the owners of Humming House Flowers & Gifts sold its business to Noel Gifts and Humming Flowers. Ms Lek worked for Humming House before the sale in 2008 and continued employment with Humming Flowers after the sale.
In job contracts, restrictive covenants are void unless they protect a legitimate interest of the employer and are reasonable in the interests of the parties and the public. "It is the nature of the interest and how it arises which calibrates the court's approach to enforcing that covenant," the judge said. "This case offers a neat illustration."
Senior Counsel Lok Vi Ming and lawyer Tan Yee Siong argued that Humming Flowers needed to protect its confidential information, which Ms Lek would have been privy to, and protect its trade connections.
But the judge ruled there were already other clauses in the contract that prevented the company's confidential information from being used by her.
The judge, however, agreed the company had trade connections to protect and this was a legitimate interest.
Ms Lek, represented by Senior Counsel Tan Tee Jim and lawyer Freddy Lim, had conceded that she had established personal relationships and rapport with her former company's customers and had argued she should now be free to use these for her own business.
Justice Vinodh found the restriction on Ms Lek unreasonable as it was too wide in scope and area. The clause had prevented her from competing in any business which the company took up.
He said such a "blanket ban" was "far too wide to preserve (Humming's) trade connection with a finite set of customers of whom (Ms Lek) has knowledge and over whom she has influence". He added that including Malaysia in the restrictions on Ms Lek also made the clause unreasonably wide in order to protect Humming's legitimate interest.
The judge ruled that the two- year ban on Ms Lek was also "unreasonably long" after hearing arguments from both sides. Humming is appealing in the case.