ARTICLE
5 December 2023

Case Update: Singapore High Court On What Constitutes Confidential Information

In this case, the employee had an employment contract with another entity.
Singapore Employment and HR
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Significance

In Asia Petworld Pte Ltd v Sivabalan s/o Ramasami [2022] SGHC 128, the General Division of the Singapore High Court (Philip Jeyaretnam J) analysed certain categories of information to determine if they were subject to implied general confidentiality obligations post-employment. The Court affirmed a key principle that the knowledge and experience that an employee acquires during his employment is not protectable confidential information post-employment.

Background

In this case, the employee had an employment contract with another entity (SingPet). However, the employee eventually began working for the plaintiff (which was run by the same director of SingPet). No employment contract was entered into between them. As such, it was deemed that there was no express terms on confidentiality obligations in the employment contract.

Nonetheless, the defendant was held to be subject to an equitable duty of confidence derived from his implied duty of good faith and fidelity to the employer.

Legal Principles

The Court re-affirmed long-established principles about what constitutes confidential information (or information that possess the necessary quality of confidence).

First, not all information would be deemed protectable by implied confidentiality obligations. It would cover information which is of a sufficiently high degree of confidentiality as to amount to a "trade secret". But it may not cover information which is only 'confidential' in the sense that an unauthorized
disclosure of such information to a third party while the employment subsisted would be a clear breach of the duty of good faith: Tang Siew Choy and others v Certact Pte Ltd [1993] 1 SLR(R) 835 at [16] citing Faccenda Chicken Ltd v Fowler [1986] 1 All ER 617.

Second, the knowledge and experience that an employee acquires during his employment is not protectable confidential information post-employment: Asia Business Forum Pte Ltd v Long Ai Sin and another [2003] 4 SLR(R) 658 ("Asia Business Forum") at [15] and [17], citing Sir W C Leng & Co Limited v Andrews [1909] 1 Ch 763 at 773.

Whether Specific Types of Information Are Confidential

The Court then analysed each category of information to determine whether it is protectable as confidential information after the employee has left the employment.

Identity of suppliers

The Court found at [45]-[48] that the identity of suppliers which the employee had acquired in the course of working for the plaintiff over the years was not protectable by confidentiality obligations post-employment. It's significant that there was no list of suppliers which the employee had taken with him when he left. So, the information was only in the employee's "head".

True costs of products

The Court found at [49] that since the true cost of products could be obtained from a supplier, this cannot be confidential information protectable by the plaintiff post-employment.

Cost factoring - formula for calculating landed costs

At [50]-[51], the Court found that the information asserted by the plaintiff was not a particular formula, but "the factor or percentage by which it multiplies true cost to obtain landed cost". This was not confidential. The Court said that "the knowledge acquired by the first defendant about how to account for factors such as foreign exchange fluctuations, price variations between suppliers and cost of freight in arriving at landed cost would be knowledge and experience acquired by him in the course of his work".

Fulfilment fee rate

At [52]-[53], the Court found that the "fulfilment fee is the percentage of the landed cost which is charged to the plaintiff's customers per order. The plaintiff makes use of a system whereby the percentage decreases as the volume of orders increase. This is a widely used and commonly understood system." However, the Court said that "the fulfilment fee rate is no different from the general pricing rates of any business selling into a market. That its unit rate reduces the higher the volume of sales is neither unusual nor special. When a salesman leaves a company, he may well be able to remember how that company priced its products. While it would be wrong for him to take with him unpublished price lists, he is not prevented from using his knowledge and recollection of company's prices in his new business. Thus, the fulfilment fee rate is also not information possessing the requisite quality of confidence."

In conclusion, the Court found at [54] that "the Information is confidential only in the sense that it would be a breach of the first defendant's duty of good faith to reveal it to a competitor while he was still an employee and such information was current and of value. The Information is not confidential in that it constitutes trade secrets which are protectable after he ceased to be an employee."

The Court added an observation that any knowledge that the employee carried in his head concerning prices paid or charged by the plaintiff would have quickly lost its relevance given that markets for purchase and sale of products and currency exchange are not static. This would be a factor in determining whether information alleged to be confidential is protectable post-employment.

Inquiry as to damages for interim injunction

The Court further said at [81]-[82] that the interim injunction obtained by the plaintiff, being a "springboard" injunction, i.e. not based on an express restrictive covenant but based on on the ground that the alleged activities of the employee would entail the use of the plaintiff's confidential information, which would afford him an illegitimate advantage if not restrained, the plaintiff ought in the first place to have limited it temporally on the basis of two considerations:

(a) the time after which the alleged misuser of confidential information would have been able to achieve his objective lawfully without misuse of confidential information; and

(b) the time after which the confidential information would lose currency and value.

Given that the plaintiff failed at trial to establish its claim in breach of confidentiality, the plaintiff has not justified its seeking and obtaining the interim injunction.

However, in order for an injunctee to obtain an order for an inquiry as to damages, it must show an arguable case that it had in fact sustained loss falling within the terms of the plaintiff's undertaking as to damages: Tribune Investment Trust Inc v Soosan Trading Co Ltd [2000] 2 SLR(R) 407 at [55].

However, given the defendants' positions the defendants have not shown an arguable case that they have suffered loss as a result of the interim injunction. No inquiry as to damages was ordered as such.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

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