The Enforceability of a Forfeiture-for-Competition clause in an Employment Contract

A recent Singapore Court of Appeal decision in Mano Vikrant Singh v Cargill TSF Asia Pte Ltd [2012] SGCA 42, overturned the Singapore High Court's decision in Mano Vikrant Singh v Cargill TSF Asia Pte Ltd [2011] SGHC 241, and held that the restraint of trade doctrine applies to a forfeiture provision which forfeits an employee's benefits when the employee is found to be competing against the employer.

This article discusses the landmark decision by the Court of Appeal with respect to the forfeiture provision and the restraint of trade doctrine.

Facts

The Appellant, Mano Vikrant Singh ("Mr Singh") was an employee of the Respondent, Cargill TSF Asia Pte Ltd ("Cargill TSF"). In 2007, the parties entered into an Employment Contract and a Non-Compete Agreement where Mr Singh agreed not to compete with Cargill TSF for one year after termination of his employment. Clause 3 of the Non-Compete Agreement provided:

3. Competition and Solicitation Restrictions. Employee agrees that during Employee's employment with CTSF or any other company within Cargill's TSF Business Unit, and for a period of one year immediately following the termination of Employee's employment with CTSF or any other company within Cargill's TSF Business Unit, regardless of the reason for termination, Employee will not:

(a) as a partner, officer, employee, director, stockholder, proprietor, other equity owner, contractor, consultant, representative or agent engage in the business of creating, marketing or delivering, directly or indirectly, structured trade and non-trade financial products that are similar to TSF Products and Services in countries where Cargill's TSF Business Unit creates or markets structured trade or nontrade financial products.

(b) as a partner, officer, employee, director, stockholder, proprietor, other equity owner, contractor, consultant, representative, or agent employ or attempt to employ, directly or indirectly, any of Cargill's TSF Business Unit employees on behalf of any other entity engaged in the business of creating, marketing or delivering structured trade or non-trade financial products that are similar to TSF Products and Services in countries where Cargill's TSF Business Unit creates or markets structured trade or nontrade financial products.

The Non-Compete Agreement was found to be a reasonable restraint and thus enforceable by the High Court. The Court of Appeal agreed with this finding.

At the end of each financial year, Cargill TSF awarded...