Renoir Consulting (Malaysia) Sdn Bhd v Alison Watson & Lim Loong Kong (24NCC(ARB)-35-11/2016)

(h), (i), 5 and 6 Rules of Court 2012 In the matter of Section 37 and/or Section 42 of the Arbitration Act 2005 In the matter of an Arbitration Award dated 14.10.2016 in an Arbitration in Kuala Lumpur between Renoir Consulting (Malaysia) Sdn Bhd and Alison Watson & Lim Loong Kong 2 BETWEEN RENOIR CONSULTING (MALAYSIA) SDN BHD …PLAINTIFF

LIM LOONG KONG …DEFENDANTS ____________________________________________________________ BEFORE YA KHADIJAH BINTI IDRIS JUDICIAL COMMISSIONER 3 JUDGEMENT INTRODUCTION [1] Via this Originating Summons (“OS”), the Plaintiff applied, under Section 37 and/or Section 42 of the Arbitration Act 2005 (“Arbitration Act”) for the following order:

The whole of the Arbitration Award dated 14 October 2016 made by the learned arbitrator, Dato’ K.C. Vohrah pursuant to an arbitration in Kuala Lumpur under the auspices of the Kuala Lumpur Regional Center for Arbitration (“KLRCA”) be set aside;

An Order that this Honourable Court assesses the loss and damage caused to the Plaintiff by the breaches of the First Defendant and the Second Defendant in such manner deemed fit by this Honourable Court;

Alternative to prayer (b) above, an Order that this matter be referred to another arbitral panel consisting of a single 4 arbitrator to be appointed by the Director of the KLRCA to assess the loss and damage suffered by the Plaintiff;

An Order that the First Defendant and the Second Defendant are to jointly and severally pay the loss and damage to be assessed within 7 days of such assessment;

An Order that the First Defendant and the Second Defendant are to pay interest at the rate of 5% per annum from 29 July 2015 (the date the Statement of Claim was filed in the arbitration proceedings) until full realisation on the sum assessed as damages;

The First Defendant and the Second Defendant jointly and severally to bear all legal costs and other costs incurred by the Plaintiff in the Arbitration proceedings;

The costs of and incidental to this application be borne by the First Defendant and the Second Defendant on a solicitor-client basis; and 5

Such further and/or other relief as this Honourable Court deems fit. [2] On 9 August 2017, the Plaintiff’s claim was dismissed with cost Dissatisfied with my decision, the Plaintiff appealed. THE FACTUAL BACKGROUND [3] The Plaintiff is a private limited company incorporated in Malaysia and is part of the Renoir Group. Renoir Group provides knowledge and management consultancy services for industrial and commercial enterprises. [4] The First Defendant (“1st Defendant”) is a British citizen and was employed by the Plaintiff as a Telemarketing Manager via a Contract of Employment dated 1 September 2014 (“the 1st Defendant’s Employment Contract”). The 1st Defendant’s Employment Contract is exhibited as Exhibit AMS-2 in the Plaintiff’s Affidavit in Support affirmed by Renoir Group Legal Adviser, Mr. Amir bin Mohd Salleh on 24 November 2016 (“the Plaintiff’s Affidavit in Support”). 6 [5] The Second Defendant (“2nd Defendant”) is a Malaysian citizen and was employed by the Plaintiff as an Operations Manager via a Contract of Employment dated 23 February 2012 (“the 2nd Defendant’s Employment Contract”). The 2nd Defendant’s Employment Contract is exhibited as Exhibit AMS-3 in the Plaintiff’s Affidavit in Support. (The 1st and the 2nd Defendants’ Employment Contracts will be collectively referred to as “the Employment Contracts”) [6] There are 2 key teams in the Renoir Group –

The telemarketers team who will reach out to potential clients; and

The projects team who will service the clients and maintain a close working relationship with the client’s high-level employees. [7] The 1st Defendant belongs to the first key team whereas the 2nd Defendant belongs to the latter. 7 [8] Between January to February 2015, the Plaintiff discovered that –

The 2nd Defendant and one Karim El Zein (“Karim”), an employee of an affiliate of the Plaintiff, set up a management consultancy company in Singapore on 6 March 2014 by the name of Lim & Zien Consulting Pte Ltd (“Lim & Zien Singapore”). The 2nd Defendant holds 50% shares in Lim & Zein Singapore and one of the two directors of the said company. The other shareholder and director of Lim & Zein Singapore is Karim. At the time of the incorporation of Lim & Zein Singapore, Karim was still in the employment of the Plaintiff as he left the Plaintiff on 7 May 2014;

Subsequently on 25 June 2014 the 2nd Defendant incorporated Lim & Zien Consulting Sdn Bhd in Malaysia (“Lim & Zein Malaysia”) another management consultancy company. The 2nd Defendant holds 50% shares in Lim & Zein Malaysia and one of the director of Lim & Zein Malaysia. The other director and shareholder of Lim & Zein Malaysia is Karim; 8 Lim & Zein Singapore and Lim & Zein Malaysia will hereinafter be collectively referred to as “Lim & Zein Consulting”.

The 1st Defendant, whilst employed by the Plaintiff, had assisted the 2nd Defendant to look for clients, shared confidential information with the 2nd Defendant and Lim & Zein Consulting and had diverted clients and potential clients of the Plaintiff to Lim & Zein Consulting;

The 1st and the 2nd Defendants had breached the Employment Contracts and its implied terms of employment. [9] By a Notice of Suspension dated 13 February 2014, the 1st Defendant was suspended pursuant to an internal investigation by the Plaintiff contained in the Company Investigation Report dated 13 February 2015. [10] On 15 February 2015, during the second meeting, the 1st Defendant signed an admission (“Signed Admission”) admitting her involvement with Lim & Zein Consulting. Her Signed Admission was exhibited as AMS-17 in the Plaintiff’s Affidavit in Support. 9 [11] On 19 March 2015, the 1st Defendant was terminated following a disciplinary inquiry. [12] The Plaintiff then commenced –

An arbitration proceedings against both Defendants following the requirements in the Employment Contracts (the “Arbitration Proceedings”); and

A proceedings in the Kuala Lumpur’s High Court for interim relief, including a Mareva injunction against the 2nd Defendant pending the disposal of the arbitration proceedings (the “High Court Proceedings”). The High Court Proceedings [13] In the High Court Proceedings the Plaintiff had succeeded as follows –

The Plaintiff obtained an ex-parte injunction order on 17 March 2015 (see Plaintiff’s Affidavit in Support Exhibit AMS- 4); and 10

The Defendants’ application to set aside the ex-parte injunction order was dismissed and the High Court had allowed and granted injunction including a Mareva injunction against the 2nd Defendant on 7 April 2015 (see Plaintiff’s Affidavit in Support as Exhibit AMS-5) [14] The Defendants filed appeals to the Court of Appeal against the Order of the High Court. However, the appeals were dismissed by the Court of Appeal on 3 August 2015 with a variation to the High Court Order (see Plaintiff’s Affidavit in Support Exhibit AMS-7). The Arbitration Proceedings [15] Pursuant to Clause 35.2 and 34.2 of the Employment Contracts, the Plaintiff issued –

Notice of Dispute dated 13 February 2015 and Notice of Arbitration dated 19 Match 2015 to the 1st Defendant; and

Notice of Dispute dated 19 March 2015 and Notice of Arbitration dated 2 April 2015 to the 2nd Defendant. 11 [16] It was agreed between the parties that the arbitration proceedings shall be consolidated and the dispute be referred to a sole arbitration before Dato’ K.C. Vohrah (“the learned Arbitrator”). The Plaintiff’s claim against the 1st and 2nd Defendants as pleaded in paragraph 24 of its Statement of Claim dated 29 July 2015 is reproduced below –

The Claimant claims:

General Damages to be assessed;

Interest on the general damages awarded at the applicable rate;

An Order that the Respondents and/or each of them do account to the Claimant all profits made by each of them and/or Lim & Zein Consulting Pte Ltd and/or Lim & Zein Consulting Sdn Bhd as a result of their dealings with clients and/or targeted clients of the Claimant including but not limited to CLP Holdings Limited and/or Modern Terminals Limited and/or Deleum Group;

An Injunction to restrain the Respondents and/or each of them whether by themselves, their agents, servants, employees or otherwise howsoever from using and/or disclosing and/or divulging and/or publishing and/or dealing with all Confidential Information of the Claimant or any part thereof for any purpose whatsoever or otherwise exploiting the Confidential Information or any part thereof without the Claimant’s consent;

An Injunction to restrain the Respondents and/or each of them whether by themselves, their agents, servants, employees or otherwise howsoever, whether in their individual capacity or through their nominees, from removing from the jurisdiction of 12 this Arbitration, or in any way disposing of or dealing with or diminishing the value of any of their assets which are in the jurisdiction of this Arbitration, whether in the name of the Respondents or their nominees and whether solely or jointly owned, until the final settlement by the Respondents of any amounts due under any Award made herein;

Costs; and

Such further and/or other relief as the Arbitrator deems fit and proper. [17] On 14 October 2016, the learned Arbitrator handed down the arbitration award as per exhibit AMS-1 of the Plaintiff’s Affidavit in Support (“the Award”). The learned arbitrator’s order is reproduced below –

Having heard all the witness and having considered all the pleadings, the evidence and submission of the parties the tribunal ORDERS and DIRECTS in respect of – A. The 2nd Respondent,

all claims against the 2nd Respondent are dismissed;

the claimant shall pay to the 2nd Respondent the costs of the arbitration proceedings which the 2nd Respondent incurred in preparing, presenting and defending the claims against him including the fees of the arbitrator; 13 B. The 1st Respondent,

in regard to the remedies claimed under paragraph 24 of the Statement of Claims of the Claimant the claims for remedies prayed for in subparagraphs (c), (d), (e) & (g) of paragraph 24 are dismissed;

in regard to the claim for general damages under paragraph (a) of the paragraph 24, general damages in the sum of RM10,000.00;

in regard to costs, the Respondent shall pay to the Claimant the costs of this arbitration which the Claimant incurred in preparing, presenting and pursing the claims against the 1st Respondent including the fees of the arbitrator. [18] The Plaintiff’s pleaded claim against the Defendants may be summarised as follows:

1st Defendant

the 1st Defendant acted in the interest of Lim & Zein Consulting by secretly working as a telemarketer for Lim &

(ii) the 1st Defendant put herself in conflict between the interest of the 2nd Defendant, Lim & Zein Consulting and the Plaintiff; 14

(iii) the 1st Defendant assisted the 2nd Defendant to divert the business of the Plaintiff away for the benefit of Lim & Zein Consulting;

(iv) the 1st Defendant divulged confidential information of the Plaintiff to the 2nd Defendant and Lim & Zein Consulting;

the 1st Defendant breached the term of exclusivity of service and fidelity to the Plaintiff; and

(vi) the 1st Defendant breached the duty not to do anything that may harm or prejudice the interest of the Plaintiff.

the 2nd Defendant

the 2nd Defendant had taken active and consistent steps to divert the business and resources of the Plaintiff to make a profit for himself and/ or Lim & Zein Consulting;

(ii) approached Deleum Bhd (“Deleum”), a previous client of the Plaintiff;

(iii) approached Modern Terminals Ltd (“Modern Terminal”), a target client of the Plaintiff;

engaged with a company called CLP Holdings (“CLP”), a former client of the Plaintiff whom the 2nd Defendant had previously dealt with whilst working for the Plaintiff; 15

engaged and/or approached Karim while he was an employee of an affiliate of the Plaintiff for Lim & Zein Consulting within 6 months after leaving his employment with the Plaintiff; and

wrongly acquired confidential information of the Plaintiff through the 1st Defendant’s position in the Plaintiff with a view of soliciting clients and business of the Plaintiff to Lim & Zein Consulting. [19] The Plaintiff submits that both of the Defendants had breached various terms, express and implied, of the Defendants’ Employment Contracts. [20] As against the 1st Defendant, the Plaintiff submits that the 1st Defendant had breached the following express terms of her Employment

Clause 8.3

8.3 You agree to devote the whole of your time and attention during your employment to carrying out your duties under this agreement and to use your best endeavours to promote, protect and develop the Company and its Affiliates for whom you may be assigned to work. 16

Clause 11.1

11.1 During your tenure with the Company, you shall not directly or indirectly, for financial gain or otherwise, engage in or take steps to engage in or set up or take steps to set up any other business, occupation (including self-employment) or employment whatsoever even if you are in between projects, other than with the prior written approval of the Company.

Clause 11.2

11.2 Should you have any business interest or additional business or occupation which may be deemed to conflict with the interest of the Company or any of its Affiliates, you will be expected to declare this immediately even if such interest is carried out only in between projects or outside office hours. Time off for public duties will not be reasonably withheld. Non-disclosure and failure to obtain prior written approval for any outside interests may result in the termination of your employment by the Company in its sole discretion if, after an investigation, no alternate solution can be found to resolve the matter.

Clause 22.2

22.2 You agree that during your employment and following its termination, you will keep confidential and not use or disclose to any third person or entity, any Confidential Information and shall use your best endeavours to prevent the publication or disclosure of such Confidential Information or any media including but not limited to social media unless such disclosure or use is specifically authorized in writing by the Company for the performance of your duties under 17 this agreement, is already in the public domain other than through your unauthorized disclosure or any protected disclosure or any disclosure authorized by law.

Clause 27.1

27.1 You shall not misuse any Company Property. [21] As against the 2nd Defendant, the Plaintiff submits that the 2nd Defendant had breached the following express terms of his Employment

21.2 You agree that during your employment and following its termination, you will keep confidential and not use or disclose to any third person or entity, any Confidential Information and shall use your best endeavours to prevent the publication or disclosure of such Confidential Information unless such disclosure or use is specifically authorized in writing by the Company for the performance of your duties under this agreement, is already in the public domain other than through your unauthorised disclosure or any protected disclosure or any disclosure authorised by law. Clause 25.2 (b) – (j)

25.2 In recognition of the provisions of clause 25.1 and the legitimate interests which the Company is seeking to protect, you covenant that for a period of (6) six months immediately following the termination of 18 your employment with the Company you will not either directly or indirectly and whether alone or in conjunction with any other person or entity, in competition with the Restricted Business of the Company or any Relevant Affiliate:

solicit or assist in or attempt to solicit or assist in any business or custom of any Relevant Client;

solicit or assist in or attempt to solicit or assist any business or custom of any Relevant Prospective Client;

enter into a formal relationship (whether as a consultant or otherwise) or accept employment with any Client with whom you were directly or indirectly involved with during 12 months prior to your termination;

enter into a relationship (whether as a consultant or otherwise) or accept any employment with any Prospective Client;

deal with any Relevant Client;

deal with any Relevant Prospective Client;

engage or solicit or attempt to engage or solicit any Key Person;

interfere with, disrupt or attempt to disrupt, the relationship, contractual or otherwise, between the Company and any Client of the Company and any Client of the Company and any Relevant Affiliate in respect of which you have obtained Confidential Information or with whom you have had substantial dealings whilst in the employment of the Company;

interfere with, disrupt or attempt to disrupt, the relationship, contractual or otherwise, between the Company and any Prospective Client in respect of which you have obtained Confidential Information or with whom you have had substantial dealings whilst in the employment of the Company. [22] The Plaintiff also plead in paragraph 12 of its Statement of Claim that by reason of the above express terms, there were also implied 19 terms to the effect that the Defendants and each of them owe duties of fidelity, fiduciary and trust to the Plaintiff. [23] Given the finding of facts made by the learned Arbitrator the Plaintiff submits that the learned arbitrator had erred in law in making the Award. It is the Plaintiff’s contentions that the Plaintiff’s claim against the Defendants ought to have been allowed given the findings of fact made by the learned Arbitrator if the learned Arbitrator had applied the correct tests and applicable principles of law. The Plaintiff’s case under s. 37(1)(a) of the Arbitration Act [24] The Plaintiff alleges that the learned Arbitrator had acted in excess of jurisdiction in the following circumstances –

The learned Arbitrator failed to consider the implied terms of the Contracts of Employment with regard to both the

With regard to the 2nd Defendant the learned Arbitrator failed to consider clause 21 of the 2nd Defendant’s Contract of Employment when evaluating and considering the issue 20 whether the 2nd Defendant has breached the contract provision in relation to Confidential Information

The learned Arbitrator failed to deal with or even consider the loss and damages claimed by the Plaintiff on the merits on the ground that it is special damages and therefore must be pleaded, which the Plaintiff failed to do so

The learned Arbitrator had imposed a further requirement to prove breach of clause 25.2(h) of the 2nd Defendant’s Contract of Employment, namely, that the Plaintiff had to prove “enticement” and held that the Plaintiff had failed to prove that Karim was enticed into joining the 2nd Defendant at the Lim & Zein Consulting. The law [25] S. 37 of the Arbitration Act reads as follows – 37 Application for setting aside

An award may be set aside by the High Court only if-

the party making the application provides proof that-

a party to the arbitration agreement was under any incapacity; 21

(ii) the arbitration agreement is not valid under the law to which the parties have subjected it, or, failing any indication thereon, under the laws of Malaysia;

(iii) the party making the application was not given proper notice of the appointment of an arbitrator or of the arbitral proceedings or was otherwise unable to present that party's case;

(iv) the award deals with a dispute not contemplated by or not falling within the terms of the submission to arbitration;

subject to subsection (3), the award contains decisions on matters beyond the scope of the submission to arbitration; or

(vi) the composition of the arbitral tribunal or the arbitral procedure was not in accordance with the agreement of the parties, unless such agreement was in conflict with a provision of this Act from which the parties cannot derogate, or, failing such agreement, was not in accordance with this Act; or … [26] The Court of Appeal in Petronas Penapisan (Melaka) Sdn Bhd v Ahmani Sdn Bhd [2016] 3 CLJ 403 held that an application to set aside an award under s. 37 of the Arbitration Act largely deals with issues relating to the award making process and has nothing to do with error of facts and/or law on the face of record unless the exception applies such as public policy. 22 [27] As regards to the underlying policy behind s. 37 of the Arbitration Act and the approach that ought to be taken by the court, recent authorities has held that court ought to take a minimalist intervention consistent with the policy underlying the UNCITRAL Model law (Kerajaan Malaysia v Perwira Bintang Holdings Sdn Bhd [2015] 1 CLJ 617). [28] In so far as court intervention is concerned it was held in SDA Architevts v Metrio Millenium Sdn Bhd [2014] 3 CLJ 632 by the Court of Appeal – [48] Judicial intervention under the old regime pursuant to Arbitration Act 1952 was quite common and threshold to satisfy was much low, as reflected in a number of case laws. The courts took the position that arbitrators must strictly fulfil the requirement of strict judicial and adjudicating process and any omission, misconduct or breach, etc., will entail judicial intervention. The more recent cases before AA 2005 came into force will demonstrate that courts have already taken cognisance of UNCITRAL model law which advocates minimum intervention and in consequence had increased the threshold for intervention. The court had ruled that the final award of the arbitrator must be viewed in its totality and, any error of law on the face of the award must be one that is patent and obvious as to render the award manifestly unlawful and unconscionable to subsist and, thereby justify it to be set aside. (See Crystal Realty Sdn Bhd v. Tenaga Insurance (Malaysia) Sdn Bhd [2008] 3 CLJ 791). 23 Findings of Court whether the learned arbitrator had acted in excess of jurisdiction when he failed to consider the implied terms of the Contract of Employment and only considered breaches of only specific provisions of the Contract of Employment [29] In its Statement of Claim at paragraph 12, the Plaintiff listed down the implied terms which the Plaintiff submits ought to be imputed into the Contracts of Employment (which the learned Arbitrator has failed to consider) are as follows -

duty of trust and confidence;

duty to act honestly and in good faith;

duty to avoid any conflict of interests;

duty to not act in any way that would bring benefit or advantage to themselves to the detriment of the Plaintiff;

duty not to entice any prospective clients of the Plaintiff during the course of employment and after the termination of the employment with the Plaintiff;

duty not to entice any person that the Defendants had worked closely with during the course of employment and following their termination of employment with the Plaintiff; 24

duty not to misuse or disclose to others confidential information belonging to the Plaintiff; and

duty not to cause harm or prejudice to the Plaintiff. 1st Defendant [30] The Plaintiff pleaded case against the 1st Defendant is that the 1st Defendant has breached the express provisions of her Contract of Employment in the following manner –

the 1st Defendant acted in the interest of Lim & Zein Consulting by, inter alia, secretly working as a telemarketer for the same

the 1st Defendant assisted the 2nd Defendant to divert the business of the Plaintiff away from the Plaintiff for the benefit of Lim & Zein Consulting

the 1st Defendant divulged confidential information and company property of the Plaintiff to Lim & Zein Consulting [31] At paragraph 30 of the Award the learned arbitrator set out the various terms of the 1st Defendant’s Contract of Employment, namely, 25 clauses 8.3, 11.1, 11.2, 22.2 and 22.3 (see paragraph 20 above for the said clauses). [32] As can be seen in the Award, the learned Arbitrator had made it very clear that he had considered the breaches alleged by the Plaintiff in the context of the provisions in the Contracts of Employment and within the parameters and language of the specified provisions of the Contracts of Employment (see paragraphs 5(2) and 8(2) of the Award). Although the learned Arbitrator appears not to have set out each of the various implied terms as set out by the Plaintiff in its pleadings, for the reasons stated below, this does not necessarily mean the implied terms were disregarded. [33] Fiduciary duties in essence relate to an obligation of a fiduciary to act in the best interest of the principal and not to obtain personal benefit at the expense of the principal. Having perused the express provisions identified by the Plaintiff which was said to have been breached by the 1st Defendant, I am of the view the underlying objective of the said provisions which are clauses 8.3, 11.1, 11.2, 22.2, 22.3 and 27.1 ultimately relate to the 1st Defendant’s obligation to act in the best interest of the Plaintiff and not to betray the Plaintiff’s trust for the 1st Defendant’s personal gain. 26 [34] The express provisions in the 1st Defendant’s Contract of Employment which corresponds or correlate to the provisions of the implied terms are tabulated below – Express provisions Implied provisions corresponds/correlate to the express provision Clause 8.3 You agree to devote the whole of your time and attention during your employment to carrying out your duties under this agreement and to use your best endeavours to promote, protect and develop the Company and its Affiliates for whom you may be assigned to work. duty of trust and confidence duty to act honestly and in good faith duty to avoid any conflict of interests duty to not act in any way that would bring benefit or advantage to themselves to the detriment of the Plaintiff duty not to cause harm or prejudice to the Plaintiff Clause 11 During your tenure with the Company, you shall not directly or indirectly, for financial gain or otherwise, engage in or take steps to engage in or set up or take steps to set up any other business, occupation (including self-employment) or employment whatsoever even if you are in between projects, other than with the prior written approval of the Company. duty of trust and confidence duty to act honestly and in good faith Clause 22.2 You agree that during your employment and following its termination, you will duty of trust and confidence duty to act honestly and in good faith 27 Express provisions Implied provisions corresponds/correlate to the express provision keep confidential and not use or disclose to any third person or entity, any Confidential Information and shall use your best endeavours to prevent the publication or disclosure of such Confidential Information or any media including but not limited to social media unless such disclosure or use is specifically authorized in writing by the Company for the performance of your duties under this agreement, is already in the public domain other than through your unauthorized disclosure or any protected disclosure or any disclosure authorized by law. duty not to misuse or disclose to others confidential information belonging to the Plaintiff duty not to cause harm or prejudice to the Plaintiff. Clause 22.3 If you are uncertain about whether any information is to be treated as confidential in terms of this clause, you shall be obliged to treat it as such until otherwise advised in writing by the Company. duty of trust and confidence duty to act honestly and in good faith duty not to cause harm or prejudice to the Plaintiff Clause 27.1 You shall not misuse any Company Property duty of trust and confidence duty to act honestly and in good faith duty not to cause harm or prejudice to the Plaintiff 28 2nd Defendant [35] With regard to the 2nd Defendant the express term of the 2nd Defendant’s Contract of Employment which was said to have been breached by him is set out in paragraph 21 above. Like in the case of the 1st Defendant, the express provisions in the 2nd Defendant’s Contract of Employment essentially relate to the prime duty of the 2nd Defendant to act, at all times, in the best interest of the Plaintiff and not to betray the Plaintiff’s trust for the 2nd Defendant’s personal gain at the expense of the Plaintiff. [36] The obligations (either commission or omission) as listed in clauses 8.3, 11.1, 11.2, 22.2, 22.3 of the 1st Defendant’s Contract of Employment and clauses 25.2 and 21.2 of the 2nd Defendant’s Contract of Employment are various instances and illustrations where fiduciary duties are imposed on both the Defendants. [37] With regards to the 1st Defendant, the learned arbitrator made the following finding of fact –

The 1st Defendant had made calls and booked appointments for Lim & Zein Consulting; 29

The 1st Defendant did telemarketing for Lim & Zein

The 1st Defendant did research work on companies at the request of the 2nd Defendant;

The 1st Defendant diverted and targeted clients away from the Plaintiff to Lim & Zein Consulting;

The 1st Defendant did not promote, protect or develop the

The 1st Defendant had betrayed the trust that was placed upon her by the Plaintiff;

The 1st Defendant, throughout the period of employment with the Plaintiff, had secretly worked for the 2nd Defendant and Lim & Zein Consulting. The 1st Defendant had breached Clause 8.3 of the 1st Defendant’s Contract of Employment;

The 1st Defendant had divulged some Confidential Information of the Plaintiff to the 2nd Defendant and Lim &

The 1st Defendant had abused the trust of the Plaintiff by using the Plaintiff’s password to obtain information & had sent the information to the 2nd Defendant. 30 [38] Having made the above finding of facts and premised on the terms of the 1st Defendant’s Contract of Employment the learned Arbitrator found there is no evidence that the 1st Defendant had breached clause 11.1 and consequentially clause 11.2. Be that as it may, the learned Arbitrator found the 1st Defendant to be in breach of clause 8.3 which impose an obligation on the 1st Defendant “… to devote the whole of your time and attention during your employment to carrying out your duties under this agreement and to use your best endeavours to promote, protect and develop the Company and its Affiliates for whom you may be assigned to work…” as the 1st Defendant was entirely working secretly for the 2nd Defendant and Lim & Zein Consulting. [39] With regards to Confidential Information relating to the Plaintiff’s SAGE CRM database, it is the learned Arbitrator’s finding of fact that such information falls within the definition of Confidential Information and held the 1st Defendant had breached clause 22.2 of the 1st Defendant’s Contract of Employment. For the breaches committed by the 1st Defendant, the learned Arbitrator ordered the 1st Defendant to pay general damages to the Plaintiff in the sum RM10,000.00. [40] In so far as the 2nd Defendant is concerned, the learned Arbitrator had considered the express provision and the evidence and ruled the 31 restriction under clause 25.2 (a) to (g) of the 2nd Defendant’s Contract of Employment are contractual provisions which restrict the 2nd Defendant from exercising a lawful business of any kind post termination of service and are therefore void under s. 28 of the Contracts Act 1950. With regard to clause 25.2(h), the learned Arbitrator found no evidence to show that the 2nd Defendant engaged or solicited Zein and the 1st Defendant to join his business. [41] In relation to clause 25.2(i) and (j), the learned Arbitrator held the restriction on the 2nd Defendant to use information obtained whilst during his employment with the Plaintiff to further his business after termination of employment with the Plaintiff are a fetter on the 2nd Defendant’s freedom which is a restraint of trade and is therefore void. [42] The ultimate intention of the relevant express terms in the Contracts of Employment is to protect the interest of the Plaintiff company in relation to its business/trade, client, prospective client, employee and confidential information. The relevant express terms carries with it the implied terms that premised on the trust and confidence placed by the Plaintiff company on the Defendants, the Defendants were obliged at all material times, must act honestly and in good faith so as to avoid any conflict of interest which would bring 32 advantage to the Plaintiff and cause harm/prejudice to the Plaintiff company. As such I am incline to agree with the Defendant’s position that when the learned Arbitrator dealt with the express terms of the Contract of Employment, the learned Arbitrator had also dealt with implied terms which correlates/corresponds with the express terms. [43] The Plaintiff submits the proposition advanced by the Defendant, namely, that the implied terms overlap with the express terms has no basis of law and cited authorities which the Plaintiff submits support a contrary position. Having considered the authorities cited I am of the view the said authorities did not actually ruled out the possibility of express term and implied term correlated and/or overlapping. Rather, the said authorities discuss the rationale of imputing implied terms to a written contract out of necessity for business efficacy in order to give the transaction the effect which parties to the contract must have intended it to have so as to make the contract workable and not futile (Lamb v Evans [1893] 1 Ch 218, MP-Bilt Pte Ltd v Oey Widarto [1999] 1 SLR(R) 908, Sababumi (Sandakan) Sdn Bhd v Datuk Yap Pak Leong [1998] 3 MLJ 151). [44] In Zaharen bin Hj Zakaria v Redmax Sdn Bhd and other Appeals [2016] 5 MLJ 91, while the Court of Appeal held that it is an implied term 33 in every contract of employment that an employee owes a duty of fidelity towards their employer it must be noted however, contrary to the Plaintiff’s contentions, the court did not ruled an implied term could not and/or do not overlap with express term. Learned Arbitrator failed to consider clause 21 when evaluating the issue of whether there was a breach of the contract provision in relation to Confidential Information [45] At paragraph 16 of the Award the learned Arbitrator reproduced the provisions in the 2nd Defendant’s Contract of Employment which the Plaintiff alleges to have breached. The relevant provisions reproduced are clauses 25.2 and 21.2. Admittedly the learned Arbitrator did not subsequently made specific reference to clause 21.2 which essentially prohibits the 2nd Defendant from using or disclosing Confidential Information to any third party either during the 2nd Defendant’s employment with the Plaintiff or after termination of employment. [46] However at paragraph 27 of Award, reference to paragraph 17 of the Plaintiff’s Statement of Claim was made in relation to clause 25.2, in particular clause 25.2 (i) and (j) with regards to the allegation that the 2nd Defendant had used the 1st Defendant’s position in the Plaintiff company 34 to acquire and utilise Confidential Information without the consent of the Plaintiff to solicit or entice or divert the Plaintiff’s client or business to Zein & Lim Consulting. Having considered the said provisions, the Arbitrator opined at paragraph 27(4) –

Both the provisions restrict his use of information obtained whilst during his employment with the Claimant and not after he left the employment. The restrictions are a fetter on his freedom to use any information he had acquired confidential or otherwise, even in regard to the experience he gained, during his employment to further his business. Clearly the fetters which have to do with his doing business are void. Similarly there can be no fetter in his doing business with former or prospective clients of the Claimant with whom he had substantial relations whilst employed on the companies.

Suffice it to say the activity or conduct of Brian in relation to the Confidential Information which he had acquired whilst in the employment of the Claimant cannot be conflated with the activity or conduct of Alison whilst he was outside the employment of the Claimant having regard to the specific language of the sub-clauses. [47] Clause 21.2 (see paragraph 21 above) relate to the restriction imposed on the 2nd Defendant to keep confidential and not to disclose all Confidential Information to any third party not only during the 2nd Defendant’s employment with the Plaintiff but also following termination of the same. It is clear the restriction imposed on the 2nd Defendant is indefinite without any limit. Going by the learned Arbitrator’s decision 35 that clauses 25.2 (i) and (j) which restrict the 2nd Defendant to use information obtained whilst during his employment with the Plaintiff to further his business after termination a restraint of trade and is therefore void, I am of the view although clause 21.2 was not expressly referred to when discussing the effect of clauses 25.2 (i) and (j), the elements of clause 21.2 in particular the indefinite restriction was indirectly considered by the learned Arbitrator. As such I am of the view failure by the learned Arbitrator to expressly considered clause 21.2 does not materially changed the nature and substance of the dispute submitted to arbitration. [48] The Plaintiff cited the Federal Court case Dynacast (Melaka) Sdn Bhd v Vision Cast Sdn Bhd & Anor [2016] 3 MLJ 417 and submit the Federal Court recognised contractual provisions which prohibits employee to utilise confidential information even after the employee has ceased its employment as valid and enforceable. However it must be noted that the employer’s appeal against the Court of Appeal decision which held clause 2.1(d) of the employee’s contract of employment was an attempt to restrain the employee from pursuing a lawful trade or business and as such clause 2.1(d) was void and unenforceable was dismissed. 36 [49] Clause 2.1(d) of the employee’s term of contract states that the employee – will not (except in the proper performance of his duties as an employee of the Group or as required by law) during the period of his employment with the Group or at any time thereafter divulge to any person whomsoever or otherwise make use of (whether for his own or another's benefit), take away, conceal, or destroy or retain and shall use all reasonable endeavours to prevent publication or disclosure or any trade secret or other confidential information concerning the businesses, finances, dealings, transactions or affairs of the Group or any of its customers or clients entrusted to him or arising or coming to his knowledge during the course of his employment with the Group; The above clause 2.1(d) is similar to clause 21.2 in the 2nd Defendant’s Contract of Employment in that the restriction imposed on the prohibition of using confidential information is indefinite. [50] The Plaintiff also submits that the learned Arbitrator ought to have examined the sensitivity of the information in OneSource and that had the learned Arbitrator done so, he would have concluded the said information was confidential in nature. It is to be noted the issue in respect of confidentiality of OneSource information was dealt by the learned Arbitrator at paragraph 43 onwards in the context of the definition of “Confidential Information” as assigned to it in the 1st Defendant’s Contract of Employment. Except for paragraph (e) the said 37 definition, the definition of Confidential Information in both the Contracts of Employment is identical with the definition of Confidential Information” in the 2nd Defendant’s Contract of Employment. Having examined the definition and the evidence from the witnesses, the learned Arbitrator opined –

The information she passed was open to anyone with a subscription and a password and the information in OneSource was information not only on the Claimant but also other entities and certainly the information did not belong to the Claimant nor was it specifically developed by and for the Claimant.

Thus, the information derived from OneSource certainly does not fall within the above definition of “Confidential Information”. She had abused the trust of the Claimant by using the Claimant’s password to obtain information and had sent such information to the 2nd Respondent but that does not make such information “Confidential Information”. [51] It is evident from the Award that the learned Arbitrator made a finding of fact that the information in OneSource is not confidential information under the definition of the Contracts of Employment which binds both the parties. It is trite that in arbitration proceedings, the arbitral tribunal is the sole determiners of questions of facts and evidence (Kerajaan Malaysia v Perwira Bintang Holdings Sdn Bhd [2015] 6 MLJ 126 (CA) ). It appears in so far as the Plaintiff is concerned the learned Arbitrator would be right had he decided it in the 38 manner the Plaintiff wanted it to be. In this respect reference is made to The Government of India v Cairn Energy India Ltd & Anor [2012] 3 CLJ 423 where the Federal court held where the construction of a clause in an agreement could be given two interpretations the fact that the arbitrator took one approach of interpretation over the other cannot be a ground for challenge. Arbitrator failed to deal with or even consider the loss and damages claimed by the Plaintiff on the merits on the premise that it was special damages and therefore must be pleaded [52] The Plaintiff submits the learned Arbitrator acted in excess of jurisdiction by conducting an overly technical analysis when he ought to have considered the heads of damages on their merits and in summarily dismissing the Plaintiff’s claims for loss of opportunity and account of profits primarily on the basis they were not pleaded or wrongly categorised as “general damages”. [53] As stated above the learned Arbitrator found the Plaintiff has not made out all its claims against the 2nd Defendant as the contractual provisions which the Plaintiff sought to enforce against the 2nd Defendant void and unenforceable for violating s. 28 of the Contracts Act. 39 Consequentially the learned Arbitrator found it unnecessary to examine the reliefs sought by the Plaintiff against the 2nd Defendant. In this respect I agree with the Defendant’s contentions that whether the damages were pleaded as general or special damages would not be relevant. [54] The fact that the learned Arbitrator had interpreted the claims for loss of opportunity and account of profits as special damages which is required to be pleaded does not tantamount to acting in excess of jurisdiction. In respect of damages, the agreed issues which both parties submit for the learned Arbitrator’s consideration and determination is as stated in the Statement of Agreed Issues which reads –

Whether the Claimant [Plaintiff] has suffered loss and damage, as a result of the breaches committed by the Respondents [Defendants], as set out in the Statement of Claim and the Reply to Defence. [55] As such, the determination of whether the losses suffered are “special damages” or “general damages” is within the terms of the submissions and agreed issues. The learned Arbitrator may have erred when he made such ruling but it was not beyond the terms of the submissions referred to him. 40 [56] With regard to the 1st Defendant, whilst it was noted by the learned Arbitrator in his Award at paragraph 57(3)(i) that the items claimed by the Plaintiff (loss of opportunity, wasted expenditure and loss of morale and confidence) were not pleaded, the learned Arbitrator did not ruled all the claims were not entitled to be considered. The learned Arbitrator actually deliberated on the claims made by the Plaintiff by examining the evidence adduced for wasted expenditure (which includes shelving of the expansion of the telemarketing department, rental of the premises, dismissal of the Plaintiff’s employee) and loss of morale and confidence and eventually concluded that the losses were too remote to be attributed to the 1st Defendant’s breach of her Contract of Employment. This can be seen at paragraphs 57 (5) and (6) of the Award –

The measure of general damages has to be first viewed in the context of Alison having used the Plaintiff’s time during her employment to send emails and other messages to Brian and LZC. Although the Claimant asserted she used 50% of her time in the Plaintiff employment communicating or working for LZC this is not borne by the evidence in regard to the days during her employment with the Claimant where she used the Claimant’s time for such activities. In fact the (I)Analysis reports show that some days, not everyday, were involved and on each day a mere few minutes per communication and transmission are shown. In any event in regard to telemarketing it is not clear that she did all such work for Brian and LZC during office hours as there is the evidence to shows she would do it from “outside”. 41

The Claimant also claims that there was “wasted expenditure” in that money which had been set aside for expanding the telemarketing department had to be shelved and some of the employees were made redundant. But two of the trainee telemarketers in any event had to be dismissed because of their poor quality of work and I fail to see how that can be directly attributed to Alison’s breach of contract. As for the rental for the two year lease of the premises where the telemarketing team was housed which the Claimant say had to be wasted that is too remote a loss to be attributed to Alison’s breaches; some of the trainees were not up to the mark and were dismissed. Yet a new staff member Almira Maniquiz Reyes was recruited as late as June 15, 2015 (see (BD(1), pp466) and the Tenancy Agreement was valid from 15 May 2014 to 14 May 2015 (see Tenancy Agreement 467 to 476). In any event under Clause 3(g) of the Tenancy Agreement the tenancy could be determined with a 3 months’ notice in writing for the Claimant to the landlord. [57] As such, the dismissal of the Plaintiff’s claims for damages were on the basis that the Plaintiff failed to prove its case in accordance with the provision under s. 74 of the Contracts Act. However in so far as the 1st Defendant’s breach of clause 8.3 of the said contract (where the 1st Defendant was obliged to devote her entire time and attention to carrying out her duties to the best of her endeavours to promote protect and develop the Plaintiff company), it is evident that the learned Arbitrator found the Plaintiff suffered damage as a result of the said breach and awarded RM10,000.00 as general damages to the Plaintiff. 42 The learned Arbitrator had imposed a further requirement to prove breach of clause 25.2(h) of the 2nd Defendant’s Contract of Employment, namely, that the Plaintiff had to prove “enticement” and held that the Plaintiff had failed to prove that Karim was enticed into joining the 2nd Defendant at the Lim & Zein Consulting [58] At paragraph 26(1) of the Award, the learned Arbitrator analysed the evidence adduced in relation to clause 25.2(h) where the 2nd Defendant is prohibited from engaging or soliciting any Key Person. It is undisputed that Karim falls within the definition of Key Person. Based on the evidence the learned Arbitrator made a finding of fact that it was not clear whether Karim joined on his own volition without being enticed. The Plaintiff submits by imposing the above requirement the learned Arbitrator dealt with a dispute not contemplated by or falling within the terms of the submission to arbitration. This is because clause 25.2 (h) provides that the 2nd Defendant had agreed that for a period of six (6) months after the termination of his employment he will not – “(h) engage or solicit or attempt to engage or solicit any Key Person” [59] Since clause 25.2(h) contains no reference to the word “enticement”, it is the Plaintiff’s position that by increasing the onus on the Plaintiff to prove “enticement” the learned Arbitrator had unilaterally changed the dispute he had to consider and this goes beyond the terms 43 that were submitted to arbitration. The Plaintiff submits it is sufficient for the Plaintiff to show the 2nd Defendant had engaged a Key Person. [60] It must be noted the learned Arbitrator did not in the Award specified that “enticement” is an additional element which the Plaintiff must prove under the said clause 25.2(h). At the same time, nothing in the Award which can be inferred as imposing additional burden on the Plaintiff. It would appear this additional burden alleged by the Plaintiff is premised on the fact that, in so far as the 2nd Defendant is concerned, the learned Arbitrator had used the word “entice” and not “engage” or “solicit” which was specifically stated in clause 25.2(h) of the 2nd Defendant’s Contract of Employment. This was what the learned Arbitrator said –

(1) The Claimant says the evidence shows Brian approached Alison while she was employed with the Respondent for information and had enticed Karim El Zein to join him to establish his Singapore Company. Karim El Zein worked as an employee with a different entity within the Renoir Group and fell within the definition of “Key Person” in Clause 25(2)(h). The Claimant argues that Brian had enticed Zein away and had approached Alison in breach of sub-Clause (h). The evidence is not clear whether Zein joined on his own volition without being enticed. Clearly too, in regard to Alison, there is no evidence that Brian engaged or solicited to engage Alison to join his business. 44 [61] In respect of this issue, it must be noted that at paragraph 5 (e) and (f) of the Notice of Arbitration dated 2 April 2015 in respect of the 2nd Defendant (which is referred to as the “Respondent” in the said Notice), one of the implied duties which the Plaintiff claim as owing by the 2nd Defendant to the Plaintiff (which is referred to as the “Claimant” in the said Notice) was the duty not to entice clients and employee of the Plaintiff company. The said paragraph 5 (e) and (f) reads as follows –

Under the Respondent’s Contract of Employment, there were also implied terms to the effect that the Respondent owes duties of fidelity and/or fiduciary and/or of trust to the Claimant which are, inter alia, as follows:

a duty not to entice or attempt to entice existing and/or prospective clients of the Claimant away from the Claimant during his employment with the Claimant and thereafter for a period of six (6) months following his termination from employment with the Claimant;

a duty not to entice or attempt to entice any person with whom the Respondent had worked closely with in the Claimant’s company or any of its affiliates away from the Claimant during his employment with the Claimant and thereafter for a period of six (6) months following his termination from employment with the Claimant; (emphasis added) 45 The above statement was repeated by the Plaintiff in its Statement of Claim at paragraph 12(v) and (vi). [62] In this respect it must be noted that at paragraph 7(b) of the Notice of Arbitration, the Plaintiff stated that the 2nd Defendant had breached the restraints imposed under clause 25 of his Contract of Employment and the implied terms by poaching the Plaintiff’s employee “to further his own interest against the interests of the Claimant [Plaintiff] with an aim to solicit and/or entice and/or divert the clients and/or the business of the Claimant [Plaintiff] to himself and/or Lim & Zein Consulting Pte Ltd.”. [63] It is evident that the Plaintiff had used the term “entice”, “poach”, “solicit” and “engage” interchangeably. It is also evident the ultimate and crucial point which the Plaintiff intends to drive home is that the Plaintiff’s Key Person, namely, Karim was persuaded by the 2nd Defendant to join him and/or Lim & Zein Consulting. The fact that the Plaintiff has used the term “entice”, “poach”, “solicit” and “engage” interchangeably shows that the Plaintiff acknowledges in essence the said terms carries the same meaning. As such when, having considered the evidence and thereafter made a finding of fact that “The evidence is not clear whether Zein [Karim] joined on his own volition without being enticed” the learned 46 Arbitrator could not be possibly said to have acted beyond the terms that were submitted for arbitration because one of the issue submitted for arbitration is the Plaintiff’s case that the 2nd Defendant had enticed Karim away from the Plaintiff to join the 2nd Defendant in Lim & Zein Consulting. The learned Arbitrator did not change the dispute he has to consider because it was the Plaintiff who had in the first place advanced the issue of “enticement”. Conclusion [64] In so far as the grounds raised by the Plaintiff to set aside the Award under s. 37(1)(a)(iv) of the Arbitration Act, it is my considered opinion that the Plaintiff has failed to show that the Award deals with a dispute not contemplated by or not falling within the terms of the submission to arbitration. Based on the Award, the learned Arbitrator had duly considered and analysed the evidence before him and the relevant provisions of the Contracts of Employment and the applicable law and made finding of facts. The learned Arbitrator may have erred in law and/or in fact but such error does not fall within the scope of s. 37 of the AA (Petronas Penapisan (Melaka) Sdn Bhd v Ahmani Sdn Bhd [2016] 3 CLJ 403). Looking at the Award in its totality I am of the view that the error of law, if any, is not one that is patent and obvious as to 47 render the Award manifestly unlawful and unconscionable to subsist as to justify the setting aside of the Award (SDA Architects v Metro Millenium Sdn Bhd [2014] 3 CLJ 632). The Plaintiff’s case under s. 42 of the Arbitration Act [65] The Plaintiff raised three questions of law in relation to the 1st Defendant which relate to the enforceability of implied terms in a contract of employment in particular duty not to act in conflict and to act in the best interest of the employer. In relation to the 2nd Defendant seven questions were raised which relate to the restrictive covenant imposed on the 2nd Defendant not to solicit the Plaintiff’s client and employee post termination and not to use Confidential Information obtained by the 2nd Defendant as a restraint in trade. The law [66] S. 42 of the AA reads as follows –

Any party may refer to the High Court any question of law arising out of an award. 48

The High Court shall dismiss a reference made under subsection (1) unless the question of law substantially affects the rights of one or more of the parties.

A reference shall be filed within forty-two days of the publication and receipt of the award, and shall identify the question of law to be determined and state the grounds on which the reference is sought.

The High Court may order the arbitral tribunal to state the reasons for its award where the award –

does not contain the arbitral tribunal’s reasons; or

does not set out the arbitral tribunal’s reasons in sufficient detail.

The High Court may, on the determination of a reference—

confirm the award;

vary the award;

remit the award in whole or in part, together with the High Court’s determination on the question of law to the arbitral tribunal for reconsideration; or

set aside the award, in whole or in part

Where the award is varied by the High Court, the variation shall have effect as part of the arbitral tribunal’s award.

Where the award is remitted in whole or in part for reconsideration, the arbitral tribunal shall make a fresh award in respect of the matters remitted within ninety days of the date of the order for remission or such other period as the High Court may direct.

Where the High Court makes an order under subsection (3), it may make such further order as it thinks fit with respect to any additional costs of the arbitration resulting from that order. 49

On a reference under subsection (1) the High Court may -

order the applicant to provide security for costs; or

order that any money payable under the award shall be brought into the High Court or otherwise secured pending the determination of the reference. [67] Some of the governing principles applicable under s. 42 of the Arbitration Act was set out in the case of Kerajaan Malaysia v Perwira Bintang Holdings Sdn Bhd [2015] 6 MLJ 126 (CA) – [57] On the present case authorities, a number of propositions can be stated as guidelines. We enumerate these below, without intending them to be exhaustive, since clearly the law has to be developed further:

the question of law must be identified with sufficient precision (Taman Bandar Baru Masai Sdn Bhd v Dinding Corporation Sdn Bhd [2009] MLJU 0793; [2010] 5 CLJ 83; Maimunah Deraman v Majlis Perbandaran Kemaman);

the grounds in support must also be stated on the same basis;

the question of law must arise from the award, not the arbitration proceeding generally (Majlis Amanah Rakyat v Kausar Corporation, Exceljade Sdn Bhd v Bauer (Malaysia) Sdn Bhd;

the party referring the question of law must satisfy the court that a determination of the question of law will substantially affect his rights; 50

the question of law must be a legitimate question of law, and not a question of fact ‘dressed up’ as a question of law (Georges SA v Trammo Gas Ltd (The Belarus) [1993] 1

the court must dismiss the reference if a determination of the question of law will not have a substantial effect on the rights of parties (Exceljade Sdn Bhd v Bauer (Malaysia)

this jurisdiction under s 42 is not to be lightly exercised, and should be exercised only in clear and exceptional cases (Lembaga Kemajuan Ikan Malaysia v WJ

nevertheless, the court should intervene if the award is manifestly unlawful and unconscionable;

the arbitral tribunal remains the sole determiners of questions of fact and evidence (Gold and Resource Development (NZ) Ltd v Doug Hood Limited [2000] 3 NZLR 318); and

while the findings of facts and the application of legal principles by the arbitral tribunal may be wrong (in instances of findings of mixed fact and law), the court should not intervene unless the decision is perverse. [68] With regards to what tantamount to question of law, the court in Magna Prima Construction Sdn Bhd v Bina BMK Sdn Bhd [2015] 11 MLJ 841 said – 51 [55] … a question of law refers to ‘a point of law in controversy’ which requires the opinion or determination of this court. Such question will include one where there is an incorrect interpretation of the applicable law. It, however, will not include any question as to whether the award or any part of the award was supported by any evidence or any sufficient or substantial evidence; or whether the arbitral tribunal drew the correct factual inferences from the relevant primary facts. [56] Most important, the identified question of law must be a real and legitimate question of law and not a question of fact ‘dressed up’ as a question of law. There have been frequent enough reminders that the court should restrain from interfering and substituting for the arbitrator’s findings, its own views and findings. This reminder comes from the recognition of party autonomy and choices in their dispute resolution mechanisms regardless how obviously wrong findings of facts may be (except of course where the findings are truly irrational or bizarre) or even the scale of the financial consequences of the mistake of fact might be. The court should always be vigilant to guard against challenges of findings of facts dressed up as questions of law. [69] As stipulated in s. 42 (1A) of the Arbitration Act, not only the question referred to must be a question of law but it must be demonstrated that the question of law substantially affects the rights of the parties. In MMC Engineering Group Bhd & Anor v Wayss & Freytag

(M) Sdn Bhd [2015] 10 MLJ 689 (HC) the court applied the interpretation adopted by Singapore Court of Appeal decision where ‘substantially affect the rights’ was interpreted to mean that it refers to ‘a point of practical importance – not an academic point – nor a minor point’ (Hong 52 Huat Development Co (Pte) Ltd v Hiap Hong & Co Pte Ltd [2000] 2 SLR 609). The court in MMC Engineering Group Bhd case further said that there must be evidence presented or at the very least a claim or an assertion in the cause papers including the affidavits filed in support to the effect that the applicant’s rights have been affected substantially by the arbitration award; and an explanation as to how those rights are affected substantially. Findings of the court [70] As clearly stated in 42 (1A) of the Arbitration Act and the authorities cited above, it is incumbent upon the Plaintiff to demonstrate how and in what manner the various questions of law referred to this court substantially affects the rights of the Plaintiff. In Magna Prima Construction Sdn Bhd v Bina BMK Sdn Bhd & Another (2015) 11 MLJ 841 the High Court set out in unequivocal terms such mandatory requirement in the following words – Sub-section 42(1A) is couched in very strong mandatory and directory terms; the court shall or is obliged to dismiss the reference unless the plaintiff can show that ‘the question of law substantially affects the rights of one or more of the parties’. There is no discretion given to the court if there is no proof of how such rights are said to be affected. It is the view of this court that this provision must be strictly complied with before the 53 reference under s 42 and the reliefs sought are available to the plaintiff applicant. In order that the court may evaluate whether the plaintiff’s rights are indeed affected, there must first and foremost be a claim that there is such a condition. Then, there must be an explanation as to how and in what manner or extent that identified right be affected, substantially. All this can only be done by way of averments in an affidavit, with explanations from the deponent as to which party’s right is affected; how that right is affected; and the extent to which that right is affected such that a claim of being affected substantially may be said to have been fulfilled. [71] It is to be noted in the affidavit is support (Enclosure 2) of the Plaintiff’s OS, the Plaintiff totally fail to aver what and how the Plaintiff’s right was affected as to enable this court to evaluate whether the Plaintiff’s rights are indeed substantially affected. In fact the Plaintiff did not at all assert or claim their rights are affected, what more substantially affected. When this was pointed out by the Defendants in its affidavit in reply (Enclosure 3), the Plaintiff did not provide the necessary explanation when replying to the Defendant’s Enclosure 3. In its affidavit Enclosure 4, the averment made was as follows –

…I am also advised by the solicitors for the Plaintiff and verily believe that if the questions are answered in favour of the Plaintiff herein, it would result in the overturning of the Award in favour of the Plaintiff, in terms of liability and the quantum of damages. 54 [72] I am of the view such averment is not sufficient to demonstrate which of Plaintiff’s right and how such right was substantially affected. Given the strong mandatory and directory terms of the said s. 41(1A) and the high threshold to satisfy the requirements of the same, non-compliance with s. 41(1A) of the AA inevitably means this court is obliged to dismiss the Plaintiff’s application for reference and the reliefs sought under the same. [73] For completeness, this court will attempt to discuss the various questions purportedly to be question of law raised by the Plaintiff. 1st Defendant [74] In respect of the 1st Defendant, the three questions of law referred are as follows – Question 1 Can the learned Arbitrator’s decision that there was “no conflict of interest” be deemed to be right in law merely on the basis that if it does not offend a specific provision of the Contract of Employment whilst ignoring accepted implied terms of employment such as the 55 duty to act in good faith, the duty not to act in conflict and the duty to always act in the best interest of the employer? Question 2 Can the fact that the 1st Defendant had acted to assist the 2nd Defendant and Lim & Zein Consulting motivated by a “close relationship” with the 2nd Defendant and not financial gain amount to justification in law for her actions? In this regard, could this even be considered in law as mitigation of any wrong committed by the 1st Defendant in performance of her duties owed to the Plaintiff or provisions of her Contract of Employment? Question 3 Was the learned Arbitrator correct in law to hold that he was only obliged and confined to consider the fact against whether there was a breach of the “specific provisions of the Contract of Employment” only and was entitled to disregard accepted principles of the common law with regard to implied terms of employment considering whether there was a breach by the 1st Defendant of her duties to the Plaintiff? The implied terms are such as the “the duty to act in the best interest of the employer”, 56 “the duty not to act in conflict of interest” and “a duty to act honestly and in good faith”. [75] The Plaintiff pointed out, the above three questions relate to the enforceability of implied terms in a contract of employment in particular duty not to act in conflict and to act in the best interest of the employer. [76] Having examined the above three questions I am of the view the above questions are not question of law (at best it is a question of law mixed with facts) within the context of s. 42(1A) of the Arbitration Act for the following reasons –

the issue relating to conflict of interest with regard to the 1st Defendant was referred to arbitration for determination as it falls within the terms of submission to arbitration.

the issue of conflicting interest essentially relate to question of fact and this involves examination of the 1st Defendant’s conduct (commission and omission) with regards to her duties and obligations under her Contract of Employment in particular her duty to act in the best interest of the Plaintiff company at all times. As such the above questions are 57 questions of facts where the learned Arbitrator is the sole determiner of question of fact and evidence.

the question regarding express and implied terms of the 1st Defendant’s Contract of Employment are specific questions referred to by the Plaintiff in its Notice of Arbitration and Statement of Claim.

ultimately via the three questions posed, the Plaintiff is asking this court to reconsider, which in actual fact is the Plaintiff’s appeal against –

the learned Arbitrator’s finding that the 1st Defendant did not breach clause 11.1 (prohibition to engage directly or indirectly any other business or occupation or employment without prior written approval of the Plaintiff) and clause 11.2 (to declare such business interest, occupation or employment) of the 1st Defendant Contract of Employment. Such finding was made based on the facts and evidence at the arbitration proceedings where the learned Arbitrator is the sole determiner of question of facts; and 58

(ii) the learned Arbitrator’s failure to take into account accepted implied terms (duty to act in the best interest of the employer, duty not to act in conflict of interest and duty to act honestly and in good faith) of contract of employment. In this respect, as stated earlier I am of the view such failure cannot be construed as a total failure of the learned Arbitrator to consider the implied terms as elements of the implied terms are actually correlated/overlapped with the express terms of the 1st Defendant’s Contract of Employment. Failure of the learned Arbitrator is a mere error of law which does not entitle the Plaintiff to appeal (Northern Elevator Manufacturing Sdn Bhd v United Engineers (Singapore) Pte Ltd (No 2) [2004] 2 SLR 494. Also such failure does not render the Award manifestly unlawful and unconscionable which warrant this court to interfere under s. 41(1A) of the AA (Petronas Penapisan Melaka’s case). 59 2nd Defendant [77] The questions of law raised in respect of the 2nd Defendant are the following – Question 4 Was the learned Arbitrator correct in law to hold that the clauses in the Contract of Employment of the 2nd Defendant which restrained the 2nd Defendant from soliciting clients or prospective clients of the Plaintiff for 6 months post termination was unenforceable for being in breach of Section 28 of the Contracts Act 1950? Question 5 Was the learned Arbitrator correct in law to hold that clauses in the Contract of Employment that restricted or restrained the 2nd Defendant from soliciting or engaging or dealing with clients of prospective clients of the Plaintiff for a period of 6 months post termination was tantamount to “contractual provisions which restrict the 2nd Defendant from exercising a lawful business of any kind post termination of service and are void under Section 28 of the Contract Act”? 60 Question 6 Was the learned Arbitrator correct in law to hold that “there can be no fetter in his (the 2nd Defendant) doing business with former or prospective clients of the Plaintiff with whom he had substantial relations whilst employed on the companies” in light of the fact that there are decided cases that allow covenants restricting employees’ rights to solicit or deal with customers of the employer? [78] Questions 4 – 6 essentially deals with provisions in the 2nd Defendant’s Contract of Employment that restrained the 2nd Defendant from soliciting, engaging or dealing with clients of the Plaintiff. The said questions essentially requires this court to reconsider whether the decision of the learned Arbitrator that the restrictive covenants imposed on the 2nd Defendant is a restriction in trade and therefore unenforceable as it violates s. 28 of the Contracts Act is correct. In other words, the Plaintiff is appealing against the decision of the learned Arbitrator which is not the function of this court. The learned Arbitrator examined the relevant evidence and made the following finding of facts – 61

within 6 months of his last date of employment the 2nd Defendant together with Karim set up Lim & Zein Consulting which are in the same business as the Plaintiff (paragraph 18(1) of the Award).

Karim was an employee of an affiliate in the Renoir Group and considered a “Key Person” within the terms of the Contract of Employment (paragraphs 18(2) and 26(1) of the Award).

the 2nd Defendant solicited and serviced the business of CLP Holdings Ltd (CLP) during the 6-month period, which was a previous client of the Plaintiff (paragraph 19 of the Award).

Lim & Zein targeted CLP and Modern Terminal Ltd, which were clients or prospective clients of the Plaintiff (paragraph 21 of the Award).

the 2nd Defendant received Confidential Information of the Plaintiff from the 1st Defendant (paragraphs 49(4) and 51(2) of the Award). 62

the 2nd Defendant had requested the 1st Defendant to do “research work on companies” (paragraph 40(2) of the Award). [79] Having made the above findings, the learned Arbitrator deliberated on the validity of clause 25 vis-à-vis s. 28 of the Contracts Act by analysing the applicable law and cases decided by Malaysian courts and also English cases which, the learned Arbitrator noted, use the reasonable test which is not applicable in Malaysia. An Indian case (Wipro Limited v Beckham Coulter International (3) ARBLR 118 Delhi 2000) cited by the Plaintiff was also considered by the learned Arbitrator who noted that the case cited was not an employer-employee case like in the instant case but it was a service contract between a principal and distributor and the non-solicitation clause which prohibits the parties from soliciting each others employee was held not to be in violation of s. 27 of the Indian Contracts Act 1872 (equivalent to s. 28 of the Malaysian Contracts Act). The learned Arbitrator then concluded at paragraphs 24 and 25 that the provisions in clause 25.2(a) – (g) – are clearly contractual provisions which restrict the 2nd Defendant from also exercising lawful business of any kind post termination of service and are void under section 28 of the Contracts Act; the restrictions interfered with his choice to do whatever business he wanted to and with whomever he wanted 63 after leaving the Claimant’s service and the issue of whether the restrictions are reasonable or not, as stated earlier, cannot arise in the context of s 28 of the Contract Act. [80] The Plaintiff submits (relying on Polygram Records Sdn Bhd v The Search [1994] 3 MLJ 127) that the learned Arbitrator failed to consider that clauses 25.2(b) – (g) are provisions which are merely restrictive of trade, namely, it merely regulate commercial relations between parties as opposed to provisions which are a restriction of trade where party will not be allowed to carry out a trade or business. It is obvious the Plaintiff is insisting the learned Arbitrator should have interpreted the provisions in clauses 25.2(b) to (g) in the manner they have interpreted it (the clauses are restrictive of trade and not restriction of trade). In this respect reference is made to the Federal Court case in The Government of India v Cairn Emergy India Pty Lt & Anor [2012] 3 CLJ 423 where it was held – [52] We note that the Arbitrators were faced with a question on the construction of a clause in an agreement. From the reading of it, no doubt it could be given two interpretations - one in favour of the appellant and one in favour of the respondents. For that very reason, the matter was sent for arbitration. The fact that the learned Majority Arbitrators took one approach in interpretation (which was in favour of the respondents) over the other cannot be a ground for challenge. 64 [53] And as Scrutton LJ put it "... if you refer a matter expressly to the arbitrator and he makes an error of law you must take the consequences; you have gone to an arbitrator and if the arbitrator whom you choose makes a mistake in law that is your look-out for choosing the wrong arbitrator; if you choose to go to Caesar you must take Caesar's judgment." (See African & Eastern (Malaya) Ltd v. White Palmer & Co Ltd [1930] 36 Lloyd's LR 113; cited with approval by the Court of Appeal in Dato' Teong Teck Kim v. Dato' Teong Teck Leng [1996] 2 CLJ 249). [81] Premised on the learned Arbitrator’s finding of facts and in light of the decision of the authorities cited in respect of restrictive covenant the learned Arbitrator’s decision in holding that clauses 25.2 (b) to (g) are restraint of trade and unenforceable for violating s. 28 of the Contracts Act is not a perverse or manifestly unlawful decision. Question 7 Was the learned Arbitrator correct in law to hold that any provision in the Contract of Employment that would restrict the use of any information acquired, whether confidential or not, would be considered a fetter on the 2nd Defendant’s right to do business and hence a restraint of trade that is void pursuant to Section 28, Contracts Act 1950? This particularly in view of the provisions of clause 25.1 of the 2nd Defendants Contract of Employment 65 Question 8 Is the position taken by the learned Arbitrator that there cannot be any restrictions imposed on the use of any information obtained by the 2nd Defendant, even with regards to Confidential Information, whilst being employed by the Plaintiff be considered to be too wide in law in light of decided cases in this area? [82] Questions 7 and 8 essentially dealt with enforceability of the provisions in the Contracts of Employment in relation to restriction imposed on the Defendants from using Confidential Information belonging to the Plaintiff. In respect of the 2nd Defendant’s Contract of Employment the relevant provisions in respect of Confidential Information can be found in clauses 21, 25.1, 25.2 (i) and (j) and clause 4 where the term “Confidential Information” was defined. [83] Pursuant to the said provisions, the 2nd Defendant was prohibited, for 6 months after his termination, to compete with the Plaintiff and prohibits the 2nd Defendant from interfering and disrupting the relationship between the Plaintiff and its client or prospective client where the 2nd Defendant had obtained Confidential Information. [84] The said provisions were interpreted by the learned Arbitrator to be a restraint in trade. The Plaintiff cited Svenson Hair Centre Sdn Bhd v 66 Irene Chin Zee Ling [2008] 7 MLJ 903 which was followed by the Federal Court in Dynacast (Melaka) Sdn Bhd v Vision Cast Sdn Bhd & Anor [2016] 3 MLJ 417. According to the Plaintiff the cases recognised the operation of confidential information clause post termination and therefore the learned Arbitrator was wrong in holding the post termination clause violates s. 28 of the Contracts Act. However for reasons stated at paragraphs 48 - 49 above, the learned Arbitrator’s conclusion that restrictive covenants in clause 25.2 (i) and (j) were a restraint of trade cannot be said to be manifestly perverse. Question 9 Was the learned Arbitrator correct in law to refer to the cases of Hanover Insurance Brokers Ltd v Shapiro [1994] IRLR 82 (Hanover Insurance Brokers’ case), CEF Holdings v Mundey [2012] IRLR 912 and Cactus Imaging Pty Limited v Glenn Peters [2006] IVSWSC 719 to hold that the “anti-poaching” of employees of the Plaintiff (for a period of 6 months post termination) in the Contract of Employment was a “restriction in trade” and was therefore void under Section 28 of the Contracts Act 1950? Question 10 Was the learned Arbitrator entitled in law to introduce a further requirement or criteria that the Plaintiff was required to prove “enticement” of an employee before a clause prohibiting “engaging” or 67 “soliciting” of an employee could be enforced? In this regard, was the learned Arbitrator correct in law to hold that the Plaintiff was obliged to prove “enticement” before clause 25.2(h) could become enforceable? [85] Questions 9 and 10 essentially deals with the enforceability of clauses in the 2nd Defendant’s Contract of Employment which prohibited the 2nd Defendant from engaging or soliciting employee of the Plaintiff. [86] The Plaintiff submits the learned Arbitrator had erred in holding clause 25.2(h) of the 2nd Defendant’s Contract of Employment void by relying on Hanover Insurance Brokers’ case because the agreement in the said case was an agreement between employers unlike in the instant case which concerned an agreement between an employer and an employee. In the said case it was held that the agreement was a restraint of trade as the employer has no legitimate interest in preventing an employee after leaving service from joining a competitor merely because the new employer was in competition with them. Whereas in the instant case the Plaintiff/employer would have a legitimate interest to protect its workforce. [87] The relevant passage of the Award where the learned Arbitrator considered Hanover Insurance Brokers case is reproduced below – 68

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In regard to Clause 25(2)(h) the Respondent cited several English and Australian cases, Hanover Insurance Brokers Ltd v Schapiro [1994] IRLR 82 at 84, CEF Holdings v Mundey [2012] IRLR 912 at 918 to 919, Cactus Imaging v Pty Limited v Glenn Peters [2006] IVSWSC 719 at paragraph 52 to show that the provision has in the case of Brian, restricted Brian’s ability after the cessation of his employment with the Claimant to practice his trade and business and that would be a restraint of trade. It was argued that true, the cases did go into the question of reasonableness to restrict in the context of the facts of each case. But the first issue before the courts was whether there was a restriction against poaching an employee which is in restriction of trade. The court in each case held the restriction to be in restraint of trade. However in the context of English law the courts went further to consider if the fetter was reasonableness. The issue of reasonableness, however, does not arise under section 28 of the Contracts Act; the restriction is a restriction in trade and is therefore void under the said section 28 (see also Millennium Medical Services v Nagadevan Mahalingam [2016] 2 CLJ 36). [88] Based on the facts of the case as gathered from the judgment of the court, the issue in question was a restrictive clause in the contract of service between the plaintiff/employer and each of the four defendants/employees. Pursuant to the restrictive clause the defendants were prohibited, during twelve months after termination of their employment with the plaintiff/employer, from soliciting any of the plaintiff/employer’s customer or client and also from soliciting or enticing 69 any employees of the plaintiff to the intent or effect that such employee terminates the employment. The plaintiff obtained interlocutory injunction to enforce the restrictive covenants against all the defendants/employee. [89] On appeal, it was held that the covenants preventing solicitation or enticement of the plaintiff/employer’s customers were not unreasonably wide and the injunction in respect of the said covenant was upheld. However, the court refused to uphold the injunction restraining the former employees (defendant) from soliciting or enticing any employees of the plaintiff/employer as it was held the restriction, which would prohibit the poaching of any employee regardless of his expertise or his position in the organisation and including those who had entered employment after the four defendants/employees had left, was too wide to be rendered enforceable. [90] Clearly the issue before the court in Hanover Insurance Brokers case is a non-solicitation clause in a service agreement between an employer and an employee, like in the instant case. It did not concern a non-poaching agreement between two employers as contended by the Plaintiff. It was noted by the learned Arbitrator that the said English case had applied the “reasonableness and fairness test” which, as held in 70 Millenium Medicare Service case is not applicable to agreements of trade in Malaysia. The issue, as correctly put by the learned Arbitrator, is whether the restrictive provisions impose restraint of trade (see paragrpahs 22(2) - (4) ). [91] Besides referring to the case of Hanover Insurance Brokers and the other two cases mentioned in Question 6, the learned Arbitrator also referred to Millennium Medicare Service v Nagadevan Mahalingam [2016] 2 CLJ 36 which examined Malaysian cases decided under s. of the Contracts Act. In the Millenium Medicare Service case it was held by the Court of Appeal that the said s. 28 lays down a very rigid rule invalidating general as well as partial restraints. Another case referred to was a case cited by the Plaintiff, Wipro Limited v Beckham Coulter International (3) ARBLR 118 Delhi 2000 where it was held non-solicitation clause did not amount to a restraint of trade under s. 27 of the Indian Contracts Act 1872. In so far as the case Wipro Limited is concerned the learned Arbitrator noted that, unlike the instant case, it involves a service agreement between a principal and distributor where it prohibited parties from poaching each other’s employees from their respective employer. 71 [92] Thus it can be seen from the Award the learned Arbitrator had, as he is obliged, consider the cases that both parties had put forward to support their respective position. With regard to Questions 9 and 10, the related issue which both parties has agreed to be referred for the determination of the learned Arbitrator is the first question in the Statement of Agreed Issues which is as follows –

Whether the clause that was being enforced by the Claimant [Plaintiff] against the 2nd Respondent [2nd Defendant] in his Contract of Employment with the Claimant [Plaintiff] is valid and enforceable. [93] For the purpose of adjudicating the issue the learned Arbitrator is perfectly entitled to decide on the issues submitted to him by making reference to authorities which dealt with identical issues (prohibiting engaging or soliciting employees) and the relevant law (s. 28 of the Contracts Act). In so far as s. 28 of the Contracts Act is concerned, the position is clear and settled. Thus I am of the view both Questions 9 and 10 are not pure question of law in the context of s. 42 of the Arbitration Act, in particular such questions does not require the opinion and determination of this court. 72 Conclusions [94] The Plaintiff raised ten questions of law to be referred under s. 42(1A) of the Arbitration Act. However the Plaintiff failed to satisfy this court what rights of theirs which would be substantially affected by the determination of the ten questions of law. As such on this ground alone, the Plaintiff’s reference under the said s. 42(1A) is dismissed. In any event, it is my considered view, based on the reasons stated above the ten questions of law identified by the Plaintiff did not satisfy the requirements under s. 42(1A) of the Arbitration Act. As such there is no valid grounds for this court to intervene with the Award. ( KHADIJAH BINTI IDRIS ) JUDICIAL COMMISSIONER HIGH COURT (COMMERCIAL DIVISION) DATED 31 AUGUST 2018 Counsel: Plaintiff/Applicant : Alex Nandaseri De Silva of Messrs Bodipalar Ponnudurai De Silva Defendants/Respondents :