Ace Capital Growth Sdn Bhd v Kua Kee Hoon & 5 Ors (WA-22NCC-565-11/2020)

High Court of Malaysia20 May 2021

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DALAM MAHKAMAH TINGGI DI KUALA LUMPUR DALAM WILAYAH PERSEKUTUAN, MALAYSIA GUAMAN SIVIL NO.: WA-22NCC-565-11/2020 ANTARA ACE CAPITAL GROWTH SDN BHD (NO. PENDAFTARAN: 200901037559/ 880690-K) ...PLAINTIF DAN 1. KUA KEE KOON (NO. K/P: 801031-10-5943) 2. TTT BULLION SDN BHD (NO. PENDAFTARAN: 202001011405/ 1367725-K) 3. CHEANG KOK KEET (NO. K/P: 790303-08-5793) 4. HO KAT ANN (NO. K/P: 650529-08-6065) 5. LEOW CHEE WAI (NO. K/P: 650322-08-52257001 25-08-6053) 6. LEOW CHEE LIP (NO. K/P: 700125-08-6053) ...DEFENDAN-DEFENDAN JUDGMENT (Enclosure 3 - Injunction) Page 1 of 20 INTRODUCTION 1. The Plaintiff commenced this action against 6 Defendants. The 1 Defendant (“D1”) was a former employee and Director who had subsequently incorporated the 2" Defendant (“D2”) which the Plaintiff pleads is in competition with it and that D1 had breached his fiduciary duties by attempting to solicit its customers as well as inducing the Plaintiff's sales team to resign and join D2. 2. Whilst D1 was the majority shareholder and a Director of D2, it is pleaded that the 3 4", 5" and 6'" Defendants (“D3, D4, D5 and D6”) are the other shareholders of D2 with D3 being the only other Director of D2 besides D1. 3. Simultaneously with the filing of its Writ and Statement of Claim, the Plaintiff had filed an application in Enclosure 3 seeking the following injunctive relief:- “4, an injunction to restrain the 1% to 6 Defendants whether acting by themselves, their directors, officers, servants or agents or any of them or otherwise howsoever.- as regards confidential information of a confidential, trade secret and/or proprietary character and developed by the Plaintiff, either -alone or with others and pertaining to the Plaintiff's trade and Page 2 of 20 business including information relating to Plaintiff's products. Customers, suppliers, pricing methods, historical, current and projected financial information, marketing information, technical data and know-how, confidential evaluations of technical and business information in the public domain (‘Confidential Information’) from divulging, using or in any way dealing including but not limited to parting with possession, custody or control or otherwise of the Confidential Information or any articles or materials containing Confidential information; 1.1. from obtaining a business advantage belonging fo the Plaintiff and competing with the Plaintiff in the business including but not limited to the following:- 1.1.1 distributing, selling or in any way trading and/or dealing with precious metals and/or gold bullion trading traded by the Plaintiff (“Plaintiffs Products”) including but not limited to:- (a) — Scrap gold bars; (b) Cast gold bars; and (c) Minted gold bars. 1.1.2 soliciting, canvassing or enticing orders for the Plaintiffs Products and/or services from any party including without limitation the customers of the Plaintiff or persons with whom the Plaintiff has dealings or otherwise dealing with any such customer or person for the sale of products which are the same as and/or similar to the Plaintiff's Products;” Page 3 of 20 The said application was heard inter-partes whereby all 6 Defendants were represented by the same solicitors who opposed the application. Upon considering the facts of the case and upon hearing submissions, | had on 20 May 2021 partly allowed Enclosure 3 whereby | had only made an order in relation to the some of the relief prayed for i.e in relation to the Defendants being injuncted from using the Plaintiff's confidential information and to restrain the Defendants from soliciting, canvassing or enticing orders from any of the Plaintiff's customers and/or from taking active steps to solicit, canvas or entice services or to obtain business from any of the Plaintiff's customers that were customers or suppliers as at October 2020. Such injunctions were to be in place pending final disposal of the suit. | did not accede to the Plaintiff's application for an injunction to be issued against the Defendants as prayed for in paragraph 1.1.1 above which, in my view, effectively sought to restrict the Defendants from distributing, selling or trading with precious metal and/or gold bullion. Page 4 of 20 Whilst the Defendants did not appeal against my order of 20" May 2021, the Plaintiff had filed a Notice of Appeal only on 30" August 2021 against my decision. Although the Notice of Appeal states that the Plaintiff “merayu terhadap keseluruhan keputusan’ it proceeds to state that “Kandungan 3 adalah dibenarkan setakat satu injunksi....".. | am therefore assuming that the Plaintiff's dissatisfaction stems from my refusal to grant injunctive relief as set out and sought in prayer 1.1.1 of Enclosure 3. Notwithstanding that such Notice of Appeal was filed more than 3 months after the decision, | will nonetheless now set out a summary of the facts/pleaded case, the respective contentions/submissions and the reasons for my decision in only partly allowing Enclosure 3. THE FACTS/PLEADED CASES 9. From the Statement of Claim, the background facts and the basis of the Plaintiffs claim can be summarised as follows:- Page 5 of 20 9.1 9.2 9.3 9.4 the Plaintiff is the sale and marketing arm of the ACE Group of Companies which is in the business of trading precious metals with emphasis on gold bullion trading; D1 was a Director of the Plaintiff from 22" November 2019 until his resignation on 2"? October 2020. D1 was also the Plaintiffs Chief Operating Officer since 2011 who was subsequently re-designated to Chief Sales Officer in 2018; in such positions, D1 had unrestricted access to the Plaintiff's confidential information and owed fiduciary as well as statutory and contractual duties to the Plaintiff, all of which have been set out in detail; the Plaintiff became aware in or around May 2020 that its customers had received solicitation letters from D2 offering services which were similar to those proffered by the Plaintiff and that D1 and D3 were the contact persons; Page 6 of 20 9.5 a search with Suruhanjaya Syarikat Malaysia (“SSM”) revealed that D2 was incorporated on 15" May 2020 whilst D1 was still Director of the Plaintiff and itis contended that neither D1 nor D2 sought the Plaintiff's permission prior to its incorporation; 9.6 that Di had between May 2020 to August 2020 approached its employees to induce them to resign where after the Plaintiff's entire sales team left and joined employment with D2; 9.7 it is pleaded that the Plaintiff has suffered a loss of business since the departure of D1 and it is contended that D1 has become a constructive trustee for the Plaintiff for all monies received due to the breaches by D1 which the Plaintiff is entitled to trace; and Page 7 of 20 9.8 In relation to the other Defendants, the Plaintiff pleads that D3 to D6 had unlawfully conspired to injure the Plaintiff's business by unlawful means by incorporating D2 to compete and to destruct the Plaintiff business. 10. Through their Statement of Defence, the following was the Defendants’ pleaded case in essence; 10.1 that D1 was forced to resign from the Plaintiff in March 2020 pursuant to a dispute with another director/majority shareholder whereafter he was precluded from being involved in the management of the Plaintiff and not paid salaries etc. since April 2020. In this regard, D1 has provided records of the Employee Provident Fund which indicates that contributions to the same had ceased in April 2020 As such, it is contended that he only incorporated D2 after he had resigned from the Plaintiff; Page 8 of 20 10.2 D1 acknowledges that he owes the Plaintiff various duties but denies any breaches of the same as alleged; 10.3 that D1 and D3 have been involved in the gold industry for many years and have acquired their own knowledge of products, customers etc; 10.4 that D4, D5 and D6 were mere investors/ shareholders who were not at all involved nor had any knowledge of D2’s operations/ business; 10.5 that the clause on restraint of trade in D1’s letter of appointment was void in light of Section 28 of the Contracts Act 1950 (“CA”); 10.6 that the Plaintiff has not at all identified/clarified what is their confidential information; 10.7 D1 denies inducing the Plaintiff's employees to resign and/but that they had voluntarily resigned to join D2 as they were more comfortable with D1; Page 9 of 20 10.8 that the Plaintiff's claim herein was actuated by bad faith and merely an attempt by the Plaintiff to stifle D1 from carrying out his lawful trade and or to compete fairly; and 10.9 that the Plaintiffs allegations of conspiracy are baseless and denied. 11. In its Reply, the Plaintiff states that Di’s averment that he was forced to resign in March 2020 misconceived and self-serving. It further maintains that D1 did indeed have full access to the Plaintiff's confidential information relating to its sales operations and activities. The Plaintiff further pleads that D1’s obligations remain even post termination of employment. THE RIVAL CONTENTIONS/ANALYSIS 12. Bearing in mind that the Defendants have not appealed against the injunctive orders | made on 20" May 2020, | do not propose to set out in detail the reasons why-| made such orders. However, as highlighted above, there is no dispute that D1 was an employee of the Plaintiff at all material times and had in fact accepted a letter of Page 10 of 20 offer of employment dated 1S‘ December 2011 which contain the terms and conditions of his employment. Of significance, Section III and Section IV of such letter of employment provided express clauses in relation to Restraint of Trade and Confidentiality as follows:- “Section-lil: Restraint of Trade Clauses: a) Employee, in any business or enterprise or association of persons, both corporate and unincorporated which carries on a competing business. b) The employee agrees and undertakes in favour of the employer that during the restraint period Eight (8 months) and in Malaysia he/she will not directly or indirectly work for a direct competitor of Ace Global Metal Sdn Bhd and Ace Capital Growth Sdn Bhd. c) The Employee Must Not canvas, or solicit the business of, or maintain any personal records of any client of Ace Global Metal Sdn Bhd and Ace Capital Growth Sdn Bhd. Section-IV: Confidentiality a) The employee must not during the Employment (other than in the proper performance of his duties) or at any time thereafter use for his own purposes or disclose to any third party any Confidential Information and must use his best endeavors to prevent such disclosure. Page 11 of 20 b) d) Intellectual property includes a variety of properties, for example computer programs, technical documentation and inventions. Certain intellectual property is, or can be made subject to special protection through copyright, patent right, trademark right, etc. All Confidential Information and all other documents, papers and property (including Intellectual Property) which may have been made or prepared by, or at the request of, the Employee or have come into his/her possession or under his/her control in the course of the Employment or which relate in any way to the Company and/or any Group Company or its or their businesses, prospective businesses or affairs or those of any customer, supplier, agent, distributor or sub-contractor of the Company and/or any Group company are, as between the Company or the relevant Group Company as the case may be. The employee must deliver up all such documents and other property, including all copies, to the Company immediately upon the termination of the Employment (or at any earlier time on demand). The Employee must immediately inform the Company if he becomes aware of the possession, use or knowledge of any of the Confidential Information by any person not authorized to possess, use or have knowledge of the Confidential Information, whether during the Employment or thereafter and must at the Board’s request provide such reasonable assistance as is required to deal with such event. Page 12 of 20 The employee shall, on request by the Company, delete all Confidential Information from any reusable material and destroy aif other documents and tangible items which contain or refer to any Confidential Information and which are in the Employee’s possession or under the Employee’s control. The provisions of this Clause do not apply to any Confidential Information which: i) is in or enters the public domain other than by breach of this Agreement; or fi) is obtained from a third party who is lawfully authorized to disclose such information; or iii) is authorized for release by the prior written consent of the Board. iv) Nothing in this Clause will prevent the Employee from disclosing Confidential Information where it is required to be disclosed by judicial, administrative, governmental or regulatory process in connection with any action, suit, proceeding or claim or otherwise by applicable law Failure by the Employee to comply with this Clause shall constitute a breach of this Agreement entitling the Company to terminate it immediately.” Page 13 of 20 13. 14. Whilst there is a dispute between the parties as to when D1 actually ceased employment and/or his directorship with the Plaintiff, as expressly provided in his contract, it is clear that the duties of confidentiality and non-solicitation of business survives even after employment ceases. As such, in my view, the injunction granted in so far as non-using of confidential information as well as non- solicitation was merely to enforce D1’s contractual obligations as contained in such letter of appointment. Furthermore, | am of the view that such order preserve status quo for the Plaintiff pending final disposal of this matter. The principles governing an application for interlocutory injunction are trite and as set out in the cases of American Cyanamid Co v Ethicon Ltd [1975] AC 396 and Keet Gerald Francis Noel John v Mohd Noor Harun Bin Abdullah [1995] 1 MLJ 193 in that the applicant will need to show that:- a) there are serious issues to be tried; b) the balance of convenience in granting the injunctive relief sought lies in favour of the applicant; and c) damages is not an adequate remedy. Page 14 of 20 15. Applying the above to the facts, | am satisfied that in light of the express terms in D1’s letter of appointment, the Plaintiff has succeeded in showing that there are serious issues to be tried and that the balance of convenience lay in their favour in respect of the orders | made as highlighted above. In this regard, | would refer to the case of Svenson Hair Centre Sdn Bhd v Irene Chin Zee Ling

2008

8 CLJ 386 where Vincent Ng J makes the following findings as to what information has been judicially recognised as confidential information:- “And, it must be recognised that particulars such as customer's names, lists and details have also been judicially recognised as being confidential in nature, and wrongful utilization of such particulars warrants injunctive protection.” 16. | also find guidance in the case of Schmidt Scientific Sdn Bhd v Ong Han Suan [1997] 5 MLJ 632, where Kamalanathan Ratnam JC (as His Lordship was then) held:- “The plaintiff contended that the defendants had breached their duty of fidelity and good faith while in the employment of the plaintiff by taking away and making copies of the confidential information and/or trade secrets of the plaintiff. | find that this duty of good faith or fidelity does not just require that the employee refrains from misuse or from Page 15 of 20 17. 18. disclosing information whilst still in the employment of the plaintiff. To my mind, there is also an implied duty that prohibits the employee from using any confidential information obtained during his employment without the employer's. consent for his own or someone else’s use after the employment contract ends. Thus, it is a breach of the fidelity clause and the implied duty to remove a customer list or to deliberately set out to memorize the said list with the intention of using it later, even though any use or disclosure is confined to the post-employment period. In such a case, the eventual exploitation of the information is considered to be no more than an extension of the original breach of good faith and fidelity.” In relation to the prayer sought for the Defendants to be injuncted from distributing, selling or dealing with precious metal and gold bullion, the Defendant opposed the same on the following basis:- a) thatitin effect suppressed healthy competition in the industry; and b) was a blatant attempt to restrain trade. At the outset, there is no dispute that the terms and conditions of employment clearly imposed a restraint of trade period of 8 months in Malaysia whereby it provides that D1 will not directly or indirectly work for a direct competitor. Page 16 of 20 19. 20. 21. However, in my view, there is certainly merit in the Defendants’ submission that such a restraint of trade clause is rendered void by Section 28 of the Contracts Act 1950. It is now accepted that an ex-employer cannot prevent a previous employee from using skill and knowledge in his trade or profession which he has learnt in the cause of his employment. Such know how is different from secret or confidential information. See the cases of VSL Prestressing (Australia) Pty Ltd v DJ Mulholland [1971] 2 MLJ 89 and Svenson Hair Center Sdn Bhd v Irene Chin Zee Ling

2008

7 MLJ 903. Furthermore, | found the prayer sought in paragraph 1.1.1 too wide and as impinging with the doctrine of restraint of trade. | find instructive the following decision in the case of Ganesh Raja Nagaiah & Ors v NR Rubber Industries Sdn Bhd [2017] 4 CLJ 420; [2017] 1 MLRA 603 where the Court of Appeal in setting aside an injunction granted by the High Court held as follows:- (3) The respondent’s prayers did not identify the nature of the information for which the respondent sought to seek injunction. In fact, the prayers were oppressive of the second Page 17 of 20 22. 23. and third defendants. The prayers were too wide and sufficient to impinge with the doctrine of restraint of trade. The trial Judge failed to take cognisance of the principles of restraint of trade in his Lordship’s judgment. With due respect to the Plaintiff, in my considered view prayer 1.1.1 is an attempt by the Plaintiff to use the doctrine of confidential information to place fetters on the ability of D1 as an ex-employee to compete and as such ought not to be granted. (See the Federal Court decision of Dynacast (Melaka) Sdn Bhd & Ors v Vision Cast Sdn Bhd & Anor [2016] 6 CLJ 176). As such, in respect of the prayer sought in paragraph 1.1.1, | find the balance of convenience does not lie in favour of the Plaintiff. ‘Having found that there are issues to be tried, | must now consider where the justice of the case lies and to weigh the harm such injunction would produce by its grant against the harm that would result from its refusal. As enunciated in the case of Keet Gerald Francis (supra), | should have in the forefront of my mind that the remedy sought is discretionary and intended to produce a just result for the period pending trial proper to maintain status quo. Bearing in mind that the nature of D2’s business as stated in the SSM search is that of “Gold Bullion dealers”, then, in my view, granting such an Page 18 of 20 24. 25. order would: not only significantly interfere with D2’s business but would effectively mean that they would have to shut down and not do any business at all pending conclusion of this matter. As such, | find that the justice of the case lies in refusing prayer 1.1.1 as it would cost more harm to the Defendant to grant the same. In my further considered view, the orders granted in relation to the confidential information as well as the non-solicitation and canvassing are sufficient to safeguard the plaintiff's interest and to maintain status quo pending trial. The above are the reasons for my having made the orders as | did on 20" May 2021 in partly granting Enclosure 3. Date: 25" October 2021 Anand Ponnudurai Judicial Commissioner High Court NCC‘ Kuala Lumpur Page 19 of 20 Counsel: Mr David Cheong (Messrs David Lai & Tan) for the Plaintiff. Yeoh Tze Hwa together with Tay Shieh Chin and Tan Zi Kang (Messrs Yeoh Shim Siow & Lay Kuan) for the Defendants. Legislation: Section 28 of the Contracts Act 1950 Cases: American Cyanamid Co v Ethicon Ltd [1975] AC 396 Keet Gerald Francis Noel John v Mohd Noor Harun Bin Abdullah [1995] 1 MLJ 193 Svenson Hair Centre Sdn Bhd v Irene Chin Zee Ling [2008] 8 CLJ 386 Schmidt Scientific Sdn Bhd v Ong Han Suan [1997] 5 MLJ 632 VSL Prestressing (Australia) Pty Ltd v DJ Mulholland [1971] 2 MLJ 89 Svenson Hair Center Sdn Bhd v Irene Chin Zee Ling [2008] 7 MLJ 903 Ganesh Raja Nagaiah & Ors v NR Rubber Industries Sdn Bhd [2017] 4 CLJ 420; [2017] 1 MLRA 603 Dynacast (Melaka) Sdn Bhd & Ors v Vision Cast Sdn Bhd & Anor [2016] 6 CLUJ 176 Page 20 of 20

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Case metadata

Court: High Court of Malaysia
Decision date: 20 May 2021
Case number: WA-22NCC-565-11/2020
Coram: YA TUAN ANAND PONNUDURAI
Practice area: Application for injunction to restrain Defendants from utilising confidential information of the Plaintiff and not to solicit/canvass orders from the Plaintiff’s customers
Version: 14520_ace capital (enc. 3) goj.pdf 1
Published: 24 Oct 2021
Source ID: 7578d021-fa25-41bf-b95f-3bf3cf08d582

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Application for injunction to restrain Defendants from utilising confidential information of the Plaintiff and not to solicit/canvass orders from the Plaintiff’s customersinjunction also applied to restrain Defendants from distributing, selling or trading in precious metalsconfidential information and non-canvassing clause in the contractCourt to weigh the harm if such injunction is granted and whether it in effect impinges the doctrine of restraint of trade. Application allowed in part

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Ace Capital Growth Sdn Bhd - plaintiff - ejudgment_parties
Kua Kee Hoon & 5 Ors - defendant - ejudgment_parties

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Ace Capital Growth Sdn Bhd v Kua Kee Hoon & 5 Ors (WA-22NCC-565-11/2020)

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