High Court · Decided 3 November 2014

Clearlab SG Pte Ltd v Ting Chong Chai and others

Feedback & support

[2014] SGHC 221Case no. Suit No 691 of 2011

What happened, in plain English

There is no plain-English summary of this judgment yet.

Ask about this judgment

Grounds of decision

Official text from eLitigation

Lee Seiu Kin J:
Introduction
[1] The plaintiff’s primary claims in this suit are that its four ex-employees (“the ex-employees”) had taken its confidential information and used it for the benefit of a rival company, which they subsequently joined. The plaintiff also had ancillary claims against the rival company and its owner as well as against an ex-contractor of the plaintiff. The plaintiff’s claims are for breach of confidence, conspiracy, breach of employment contract, breach of fiduciary duty, inducing breach of contract, dishonest assistance, knowing receipt, conversion and breach of supply agreement.
[2] The trial lasted 49 days. For the reasons given in this judgment, I allow, in part, the claims for breach of confidence, conspiracy, breach of employment contract, breach of fiduciary duty and conversion against the four ex-employees and the rival company and its owner. I dismiss the rest of the claims. The detailed orders are set out in [330]–[333] and [344]–[345] below.
The facts
The parties
[3] The plaintiff is Clearlab SG Pte Ltd (“Clearlab”). It is a company engaged in the manufacture and sale of contact lens.
[4] The first four defendants are the ex-employees. The first defendant is Ting Chong Chai (“Ting”), the former Head of Engineering and Technology Development at Clearlab. Whilst working at Clearlab, Ting oversaw the manufacturing process and the research and development (“R&D”) projects related to the manufacturing process. The second defendant is Rathinaraj David (“David”), previously an R&D engineer in Clearlab’s engineering department. David’s work at Clearlab included preparing lens formulations and developing new lens material. The third defendant is Goh Wee Hong (“Goh”). He was an assistant manager of the R&D department charged with designing inserts and directing the cutting of those inserts. Additionally, he is Ting’s nephew. The fourth defendant is Ng Chee Han (“Ng”), a former senior optical tooling technician in the Insert Manufacturing department. His work at Clearlab mainly comprised the cutting of inserts using a computer numerical control machine known as Optoform 80. In this capacity, he worked with Goh to produce the inserts designed by Goh. David, Goh and Ng were Ting’s subordinates in Clearlab and they reported to him.
[5] The fifth defendant, Aquilus Lens International Pte Ltd (“Aquilus”), is the company that the ex-employees joined after they left Clearlab. It was incorporated on 7 July 2010 by the ninth defendant, Ho Kar Kit (“Ho”).
[6] Ho is also the owner of the sixth defendant, Central Global Pte Ltd (formerly known as Cencorp Engineering Pte Ltd) (“Central Global”). Central Global’s main business is in fitting out factories. It had undertaken 49 remodelling and repair projects for Clearlab.
[7] The seventh and eighth defendants are a married couple, Ma Zhi (“Ma”) and Li Yuexin (“Li”). They have a partnership called OSC Automation Engineering (“OSC”), through which they undertake engineering projects. Ma is in charge of the technical aspect of the partnership whereas Li is in charge of the business aspect. From 2009 to 2010, OSC serviced Clearlab for various engineering matters. In 2011, Li registered a sole proprietorship, Optic Automation Engineering (“Optic”). Ma and Li undertook work for Aquilus through Optic instead of OSC.
[8] For the purposes of this suit, there are essentially two groups of defendants. The first is directly associated with Aquilus, ie, the first six defendants and the ninth defendant. In parts of this judgment, I have referred to them as “the defendants”. The second comprises Ma and Li, and reference to “the defendants” would not include them.
Key events leading up to the dispute
[9] As this dispute revolves around very extensive and detailed facts, it is useful to first set out the key events in a chronological order. Thereafter, as I analyse each cause of action, the relevant facts which bear on the issues will be repeated for convenience.
[10] The background facts are as follows.
[11] Clearlab was incorporated on 24 May 2007 as a wholly-owned subsidiary of Mi Gwang Contact Lens Co Ltd (“Mi Gwang”). Dr Park Jong-Gu (“Dr Park”) was appointed as its chairman, and his wife, Park Hae Kyeung (“Mrs Park”), was appointed as its managing director. Both Dr Park and Mrs Park are undisputedly the movers and shakers in Clearlab. On 25 May 2007, a sale and purchase agreement (“S&P Agreement”) was entered into by Clearlab, Mi Gwang, 1-800 Contacts Inc and Clearlab International Pte Ltd in respect of the “Acquired Assets”. Briefly, the “Acquired Assets” are a manufacturing facility in Singapore, all the tangible property, fixed assets and inventory at the manufacturing facility, intellectual property relating to the products produced at the manufacturing facility, existing rights relating to supply and distribution, know-how related to the manufacturing process, capital stock of Clearlab Europe Ltd and capital stock of Shayna Ltd. Importantly, one of the intended outcomes of the S&P Agreement was to obtain for Clearlab the right to use a spincast manufacturing technology to manufacture contact lens.
[12] In the second half of 2008, the ex-employees joined Clearlab one after another. Ting joined first, on 1 July 2008. His nephew, Goh, joined Clearlab next on 4 August 2008. Then Ng joined on 28 October 2008, and David joined on 3 December 2008. Prior to joining Clearlab, Ting, Goh and David had been working at another contact lens manufacturer, CIBA Vision.
[13] In 2010, three major events unfolded which set the stage for the ex-employees to leave Clearlab and join Aquilus. First, Aquilus came into existence. It was incorporated by Ho on 7 July 2010 with $200,000 as its start-up capital. Two weeks after its incorporation, on 28 July 2010, Ho made enquires with Clearlab about the possibility of Aquilus becoming a distributor of Clearlab’s products. This resulted in a meeting on 26 August 2010 between Ho and Mrs Park at Clearlab’s office on the very matter of distributorship, but the matter was not taken any further.
[14] Second, seeds of friction were sown by the various emails that Ting sent. His July 2010 emails claimed that Sim Kok Seng (“Simon”), who is the Head of Regulatory Affairs and Compliance, was hoarding Clearlab’s confidential documents, displayed “strange” behaviour, was “not a good team player”, and was perpetually late for work. Ting then insinuated that Simon “might be looking around for another job”. On 23 July 2010, Ting complained to Dr Park and Mrs Park that “[t]oday’s Clearlab is becoming too bureaucratic and inefficient” and that other people in Clearlab “really insulting my presence [sic]” by instructing his engineers to do work without his knowledge. Ting gave an ultimatum to Dr Park and Mrs Park to “[pay] attention before myself and my team decide for another career [sic]”. The unhappy emails continued all the way to March 2011, but it was clear by June 2010 that Ting’s relationship with his other colleagues was increasingly deteriorating.
[15] Third, Ho claimed to have steered Aquilus in a new business direction in October 2010: he decided that Aquilus would undertake the manufacturing of contacts lens instead of distribution. Consistent with this decision, he took the following preparatory steps. In February 2011, Ho engaged Tay Ah Teck John from Synergy Solutions Associates to provide consultancy services on the ISO certifications that Aquilus would require. In March 2011, Ho started on the construction of a clean room, increased Aquilus’ capital to $700,000 and got Ting to attend meetings at Aquilus. On 31 March 2011, Ho met Toh Boon Hou William (“Toh”) from TRAXonline Solutions LLP to discuss Aquilus’ mould base design.
[16] By the end of 2011, all the ex-employees had left Clearlab and joined Aquilus. It began with Ting, who was abruptly dismissed from Clearlab on 26 April 2011. Upon dismissal, Ting left Clearlab’s premises with his personal laptop which he was using for his work at Clearlab. Ting also attempted to leave with bags of documents and boxes but was stopped from doing so.
[17] On 3 May 2011, Ting commenced full-time work in Aquilus. He was the only technical personnel at Aquilus at that time; David, Goh and Ng were still employed at Clearlab, but this was soon to change. Ting approached David, Goh and Ng individually to offer them employment at Aquilus. All of them accepted the offer. David signed his letter of offer on 9 May 2011, and Goh and Ng signed theirs on 10 May 2011. Within the same month, David, Ng and Goh tendered their resignations to Clearlab. Ng resigned on 25 May 2011 and left on 24 July 2011, David resigned on 26 May 2011 and left on 25 July 2011 and, lastly, Goh resigned on 30 May 2011 and left on 29 July 2011. They did not disclose to Clearlab that they were leaving to join Aquilus. David said that he was going back to India to teach, whereas Goh and Ng said that they were joining an engineering company.
[18] Also in May 2011, certain steps were taken which would pave the way for Aquilus to obtain certifications. On 18 May 2011, Ting got himself engaged by TQCS International Pty Ltd (“TQCSI”), an audit firm. He signed a document entitled “Auditors & Technical Specialists Confidentiality Agreement” (“TQCSI Confidentiality Agreement”), which provided undertakings of confidentiality from Ting with regard to any audit work that he may partake in. Shortly afterwards, on 26 May 2011, Looi Peck Eng (“Nancy Looi”), who was Aquilus’ manager, enquired TQCSI about the certification of Aquilus for four standards: ISO 13485:2003, ISO 14001:2004, ISO 9001:2008 and OHSAS 18001:2007.
[19] Aquilus formally applied to TQCSI for the certification of the aforementioned standards on 1 June 2011.
[20] The workforce in Aquilus expanded when David, Goh and Ng started work at Aquilus on 1 August 2011. The capital of Aquilus was also expanded when Ho increased it to $1.8m. At the same time, Ho issued 360,000 shares (ie, 20% of the total number of shares in Aquilus) to Ting’s wife, Kerk Bong Chee, which she held as a nominee for Ting. That same month, some members of the staff of Clearlab spotted Ting and David at a seminar organised by the Health Sciences Authority of Singapore (“HSA”) and discovered that they were working for Aquilus. That discovery led Clearlab to investigate the computers used by the ex-employees.
[21] Meanwhile, unaware that Clearlab had formed suspicions about Aquilus, the defendants made progress with their goal of certifying Aquilus for the three ISOs and one OHSAS standards. In September 2011, TQCSI was invited to Aquilus’ premises to conduct an audit on Aquilus for the purpose of certification. Throughout the audit, which took place over a number of days, Ting was on record as TQCSI’s nominated technical specialist and as having accompanied the auditors from TQCSI to carry out the audit on Aquilus.
[22] On 3 October 2011, Clearlab filed a writ of summons in this suit. The next day, on 4 October 2011, Clearlab applied, by way of ex parte summons for a search order, against Ting, David and Aquilus, which it obtained on 6 October 2011. The search order was executed over nine non-consecutive days, starting from 17 October 2011.
[23] On the first day of the search, which is 17 October 2011, the plaintiff’s solicitors and the supervising solicitor entered Aquilus’ premises. The search order was served on Nancy Looi, David, Aquilus and Ng. Although it was not served on Ho, the order was explained to him. By the afternoon, the first to sixth defendants’ solicitor, Clearlab’s IT forensic expert (Darren Cerasi (“Cerasi”)) and Clearlab’s representatives (Dr Park, Simon and Wong Yun Hui) arrived at Aquilus’ premises. The physical search of Aquilus’ premises then commenced. The search was first conducted of the laboratory area, where Dr Park took photographs of the chemicals found in the fridge and the contents of storage cabinets. A set of plastic casts found therein were also tagged. The search moved on to the cleanroom and photographs of the cleanroom were also taken. Next, the search was done on the electronic devices at Aquilus’ premises. In particular, during the preview of the hard disk of David’s computer, the flashdrive found at David’s work station and the hard disk of Ting’s computer, Clearlab’s documents surfaced. This led Cerasi to image the three devices.
[24] Concurrently, on the same day, a search was conducted of David’s home by a different team of solicitors. The search order was served on David’s sister-in-law, who was the owner of the apartment. As part of the search, the computers and laptop at the apartment were previewed. It was then discovered that the hard disk of a Dell Inspiron laptop contained a document bearing Clearlab’s letter and the hard disk of a HP Compaq computer contained files and folders which were deleted earlier in the day. Both hard disks were imaged.
[25] The following day, 18 October 2011, the search of Aquilus’ premises and David’s home continued. At Aquilus’ premises, Ting and Goh were served with the search order. Thereafter, Cerasi resumed his search of the contents of the electronic devices at Aquilus. He found “SOP-ENG-02-01 Insert Manufacturing Inventory cvontol.docx” in Goh’s computer hard disk. He also found what Simon and one of the plaintiff’s solicitors believed to be Ting’s business card in Nancy Looi’s computer hard disk. Based on that, the two hard disks were imaged. Meanwhile, a second IT forensic expert (Pravin Pandey (“Pandey”)) who was brought onto Aquilus’ premises, extracted data from Ting’s Nokia phone and the Micro SD card contained within that phone.
[26] At David’s home, a physical search of the apartment took place but it revealed nothing that was within the search parameters. With that, the search at David’s home ended.
[27] The search at Aquilus, however, carried on the next day, which is 19 October 2011. Three plastics bags containing PET mould casts (“the PET casts”) were found in a room and placed in boxes, which were then sealed. In the afternoon, Pandey started the extraction of data from Goh’s Samsung phone, David’s Nokia phone and the SIM cards in each of their phones. Because Ho needed to leave Aquilus’ premises to attend to other matters, his phone was only visually inspected and the following features were noted down: there were two inbox messages, no outbox messages, two sent items, two missed calls, five received calls, five dialled numbers and more than a hundred contacts stored in Ho’s phone.
[28] On the fourth day, 20 October 2011, Pandey previewed Ting’s Gmail and Yahoo accounts. A keyword search for “Clearlab” produced a number of hits in both accounts. After accessing certain emails from the accounts, it was decided that all emails in both accounts would be imaged. Elsewhere in Aquilus’ premises, Cerasi examined Aquilus’ server. A file name search on “Clearlab” disclosed three hits, which files appeared to be deleted or overwritten. 11 sub-folders were also opened. The first was “Tech file 1 day lens”, which contained a pdf file Simon identified to be Clearlab’s document. The other ten sub-folders were named “SOP”. All 69 files contained within these 11 sub-folders appeared to be deleted or overwritten as well. As such, Cerasi initiated the imaging of the server data.
[29] The imaging process of the server was left running through 21 October 2011, the fifth day of the search, until 24 October 2011, the sixth day of the search. On 24 October 2011, due to the premature termination of the imaging process, it was restarted. It was restarted again on 25 October 2011, the seventh day of the search for the same reason. On 27 and 28 October 2011, the eighth and ninth days of the search, the imaging process hung at 99%, was restarted and terminated at 99%. The plaintiff settled for 99% of imaging and that essentially concluded the search at Aquilus.
[30] After the execution of the search order, there were two other noteworthy events. The first was the successful certification of Aquilus for the three ISOs and one OHSAS standards by TQCSI on 3 November 2011, and second was the departure of Ting and Goh from Aquilus in the midst of the trial, on 31 May 2013.
Ting’s misdemeanours
[31] Before leaving the facts, I set out my findings on the egregious manner in which Ting had conducted himself.
[32] Firstly, Ting had attended the meetings in Aquilus while he was employed at Clearlab. While he was helping Aquilus set up a competing business in this manner, Ting sent an email to Mrs Park on 24 March 2011, complaining about Simon and stating that “Many people in the company including me are hoping our bosses can trust the right person”.
[33] Secondly, Ting helped assemble the core team (comprising himself, David, Goh and Ng) at Aquilus by poaching Clearlab’s employees.
[34] Thirdly, he helped himself to Clearlab’s PET casts (even after being dismissed from Clearlab) by instructing Goh (who was still at Clearlab) to get those casts for Aquilus. Ting attempted to excuse his behaviour by claiming that the PET casts were to be discarded by Clearlab because the project had failed and that the PET casts were never used by Aquilus. None of these excuses have been corroborated by independent evidence. He did not satisfactorily explain how, even if the PET casts were to be discarded eventually, he was entitled to obtain them for Aquilus.
[35] Fourthly, he acted as technical specialist in TQCSI’s audit of Aquilus. The TQCSI Confidentiality Agreement that he signed on 18 May 2011 not only provided undertakings of confidentiality, it also contained a term that Ting would ensure that he had not provided consultancy services to Aquilus in the preceding two years and did not have any personal interest in its affairs. It also required him to report to TQCSI any matter that may affect his role as technical specialist. These terms were blithely breached by Ting. Ting joined Aquilus on 3 May 2011, two weeks before he signed the TQCSI Confidentiality Agreement. Ting was so totally not independent that his attempts to explain this conflict beggars belief.
[36] This was not the end of the charade. In the course of the audit process, Ting, aided by the other Aquilus employees, hid the fact that he was an employee of Aquilus from the audit team. Thus, when Cheng Ying Nung (“Cheng”), the lead auditor, introduced Ting to the Aquilus employees as a member of his audit team, he did not recall anything unusual in their response to make him realise that Ting had any connection with Aquilus. Further, Ting’s name did not appear in the organisation charts reviewed by the audit team. I find that “fraudulent” would not be too extreme a word to describe his participation in this audit.
The key witnesses
[37] A large number of witnesses have been called by the parties to give evidence. In total, there were 17 witnesses from Clearlab and 11 witnesses from the nine defendants. The key witnesses of fact were the seven defendants who are natural persons: Ting, David, Goh, Ng, Ho, Ma and Li. Because the credibility of their accounts of what happened is crucial to my findings of fact, I will state my observations of their demeanour at the outset. I start with Ting and his evidence about the TQCSI audit.
[38] Under cross-examination, Ting denied that he was employed by TQCSI for the audit on the basis he did not receive any payment, despite the fact that the TQCSI Confidentiality Agreement stated that Ting was under the “employment” of TQCSI. Furthermore, Ting did not produce any evidence that TQCSI did not pay him, apart from his bare assertion. Ting also denied that there was a conflict of interest. In Ting’s opinion, his role as a technical specialist meant that he was there to benefit Aquilus (and presumably not for the purpose of TQCSI undertaking its role as auditor). This is despite the attendance sheets he signed which included his name under the category of “Other Auditor(s)”. Separately, he claimed that he did not participate in the audit because he only signed the attendance forms at end of the day, and implied that Cheng knew of it because he had given his Aquilus business card to Cheng when they met for the first time. But at another point in time, Ting said he was not involved in the audit because he only helped in the technical aspect of it. These were very audacious claims, made in the face of evidence totally inconsistent with what he earlier said.
[39] This is not the sole instance of Ting’s demonstrated unreliability as a witness. There were three other instances.
[40] Firstly, in relation to Ting’s recruitment of Goh for Aquilus, Ting first stated that it was Goh who approached him after Ting’s dismissal on 26 April 2011. According to Ting, Goh had problems working with Wong Sie Hung (“Wong”), the person who replaced Ting, because they had a falling out over a partnership they formed for a restaurant business. Ting also said that Goh told him that “when [Ting] was no longer in Clearlab [Goh] had to look for other job”. But when Ting was subsequently asked about an Aquilus meeting of 11 April 2011, he said that he proposed to have Goh join Aquilus by July because he knew Goh would come if he asked.
[41] Secondly, on the matter of Ho’s offer to join Aquilus, Ting said that he had not accepted the Aquilus job by 3 May 2011, and had in fact gone for interviews for other jobs. But in his affidavit of evidence-in-chief (“AEIC”), Ting said that he accepted Ho’s offer in early March 2011.
[42] Thirdly, with regard to the threat of his dismissal from Clearlab, Ting said in court that in October 2010, Mrs Park had told Simon that Ting would be dismissed very soon, and Simon had told this to Dr Yip Yuen Sing who then told Ting. But in his AEIC, Ting mentioned another period: February 2011. Ting said that he “found out that the MD [ie, Mrs Park] had been secretly talking to a few of my key subordinates to discuss about their ability to do without me in the company”. When confronted with the inconsistencies, Ting explained that these were two different events. I found this explanation to be spurious; if there were two different events, then it is odd that the October 2010 event was not mentioned in Ting’s AEIC, whereas the February 2011 event, which revolved around the same topic of Ting’s threatened dismissal, was considered to be the spark for Ting’s acceptance of Ho’s offer to join Aquilus.
[43] Having considered what Ting said on the stand and the contents of his AEIC, as well as the other documents put to him, I concluded that Ting was an entirely unreliable witness. He was quick with glib explanations (which sometimes led to inconsistent answers) to many questions posed to him. A particularly difficult area for him was the evidence of his conspiracy with the other defendants to take Clearlab’s confidential information. Ting was unable to give a coherent explanation to the evidence of conspiracy; he made up explanations for each piece of evidence, which did not gel in totality. Generally, throughout his testimony, Ting did not hesitate to give any answer that came conveniently to mind to explain away any inconsistency in his evidence. The common fall-back positions he adopted were that the statements in the various affidavits he made were mistakes, or he had been confused (eg, about whether he carried one or two bags to dispose of in the early morning of 18 October 2011). Ting had a tendency to willy-nilly shift his position as the situation demanded and I construed his evidence accordingly.
[44] The second defendant, David, went on the stand after Ting. He seemed to be somewhat embroiled in inner turmoil. His answers were tentative and he tended to change tack slightly when questioned for detail. He also manifested discomfort, such as hesitation or was slightly choked when pressed by Clearlab’s counsel. On some issues, David had selective memory lapses, some of which were exposed when his testimony was contradicted by other evidence. For example, he had instructed Yeoh Jia Yan Sara (“Sara”), a sales and marketing executive at Aquilus to prepare standard operating procedures (“SOPs”) for Aquilus, which she admitted she “copy-typed” from Clearlab’s SOPs. On the stand, David explained that he did not know Sara was not technically trained and assumed she was and able to draft the SOPs. But in her AEIC, Sara clearly stated that she told David that she was “not qualified and … may have problems understanding the technical issues”. Further, David’s own email to Sara instructed her that she “needed to change for Aquilus”, and in one of her email replies, she stated that she had “removed all mentioned [sic] of Clearlab”. The short time taken by Sara in drafting Aquilus’ SOPs clearly supports Clearlab’s case that she had relied on the Clearlab SOPs.
[45] Another example of David’s prevarication was his explanation of an email sent by Ting to him which stated as follows: “Dear David, Do take pre-caution when you tender they might ask you to [sic] immediately so be prepare[d]”. This was sent on 25 May 2011, a day before David tendered his resignation. David said that the email meant that Clearlab would ask David to stay on at Clearlab. But that is a strained interpretation of the words. It is far more likely that Ting thought that David would be asked to leave immediately as that was Ting’s experience at Clearlab. In the course of cross-examination on this point, David introduced the concepts of “not very confidential” to documents that he had removed from Clearlab which were marked as confidential. This was clearly a lame justification for his removal of those documents and he had to be taken to task on the lack of logic in his answer before he accepted that such documents were confidential.
[46] In other parts of his evidence, David made excuses for his behaviour which sounded thin. The two chief excuses he relied on for sending Clearlab’s documents to Ting and taking Clearlab’s documents were that: (a) he was, at the time, not thinking properly, and (b) the documents were taken for his own reference.
[47] In view of the foregoing, I found David to be an unreliable witness and treated his testimony with much circumspection.
[48] The third defendant, Goh, appeared to be cooperative, but his answers about his work in designing inserts turned out to be highly inconsistent.
[49] Clearlab’s primary allegation against Goh is that he had used its confidential “spincastsphere6” computer program (“SCS6”) to design inserts in Aquilus. In response, Goh simply said that he had not used SCS6 but had instead used a commercially available software called SolidWorks. However, Goh met with considerable difficulty on 18 February 2014 when he tried to demonstrate in court that he was able to use SolidWorks to design inserts. When he drew a curve for a zero power lens, and inputted the values from SolidWorks into the Multi-Curve Generator program (“MCG”), he found that the Z values were different. He explained that, on the first cut, he had to use MCG to get the Z value. Then, on cross-examination, he said he switched between MCG and SolidWorks several times in order to get his first cut design. By contrast, in his earlier examination-in-chief, he had adhered to what he had said in his AEIC which was that the values from SolidWorks can be inputted into MCG,ie, MCG was not involved at all until the SolidWorks design was completed. Then on 19 February 2014, Goh said that there was no need to go to MCG, and that the description in his AEIC was correct. It would appear from the way Goh’s evidence evolved that he was making things up as he went along.
[50] Further, Goh’s explanations for the inconsistencies were weak. He said that he had not used SolidWorks for eight months and hence had made mistakes. However if SolidWorks was something that he used since 2009, it was difficult to understand how could he have forgotten whether MCG was involved in the design process.
[51] Goh also claimed in his AEIC that he abandoned SCS6 at Clearlab, and he clarified in cross-examination that this was by 2009. But this was contradicted by documents which showed that he had used SCS6 in Clearlab up to 2010. Goh attempted to explain it away by saying that the SCS6 description was false. He said he was afraid to put down SolidWorks as the actual software being used because he might be questioned on his method and be required to change all “related” documents, even those that were not submitted by him. Later on, Goh proffered another explanation and said that that the numbers in the working papers were generated using SCS6 but they are “for show” only, ie, cannot be used for production. In relation to a specific document with job reference number “DA1P06OT47”, Goh explained that “T47” in the job reference number means that the document was a record of the 47th test carried out by him. He said that it was not normal to have so many tests, but 47 tests took place because he had not yet figured out how to produce good lenses with SCS6. His evidence seemed to vacillate according to the documents put before him.
[52] In view of Goh’s frequent changes of evidence (in respect of the SolidWorks/MCG demonstration as well as the usage/non-usage of SCS6 in Clearlab), I found him to be an unreliable witness. I was unable to accept any of his evidence about his purported ability to design inserts using SolidWorks.
[53] The fourth defendant and the last of the ex-employees, Ng, was generally a cooperative witness. He was quite prepared to admit to wrongdoing in terms of his taking of documents belonging to Clearlab and to their confidentiality. His mode of taking these documents was to forward his office emails (containing the documents as attachments) to his personal email account. This occurred sporadically from May 2011 to July 2011. The reason for doing so, he claimed, was for “self-improvement”.
[54] Despite his overall candour, I cannot believe his explanation that he took Clearlab’s documents for “self-improvement”. This was simply too incredible, given (a) the volume of such documents, which contained technical details rather than scientific principles, and (b) the timing (ie, the documents were forwarded at a time when David was also sending Ting Clearlab’s documents and Aquilus was being set up in a hurry). The circumstances point very strongly to a deliberate decision to convert Clearlab’s documents for use at Aquilus. I had no doubt that Ng was taking the documents for the purpose of using them in Aquilus.
[55] The ninth defendant, Ho, is the principal owner of Aquilus. Much of his evidence was relevant on the question of Clearlab’s claim of the existence of a conspiracy involving him and the ex-employees.
[56] In terms of his demeanour, I observed that he was fast in giving his answers. At times, he was candid, eg, when he admitted that Ting was playing active role when he sat in the Aquilus meetings. But when things got awkward, he tended to shift his answers, which showed that he was making up evidence. An example would be the reasons he gave for deleting documents on the first day of the search. In cross-examination, Ho was referred to his AEIC which stated that the deletion was done in “a moment of panic”. Ho explained that, after Ting told him that he had deleted Clearlab’s documents from his desktop computer, Ho deleted the server data as well because he thought documents on desktop computers would be replicated in the server. When confronted with another paragraph of his AEIC, where Ho said he deleted the server data because he did not want Clearlab to get Aquilus’ confidential documents, he said that that was also the reason. This inconsistency casts doubt on the veracity of either explanation.
[57] As for the seventh and eighth defendants, Ma and Li, I find them to be generally frank and credible. During Ma’s cross-examination, he gave answers which clearly helped Clearlab, eg, he acknowledged that he used the design of a spin-cast machine (“Quad Spinner”) that he did for Clearlab to design the spin-cast machines (“Lens Forming Machines”) for Aquilus. Ma seemed to be more interested in giving an accurate answer than to protect his position. The only doubtful parts of his testimony concerned the setting up of Optic, and OSC’s and Optic’s bank account statements. When the questions involved OSC or Optic, Ma appeared reticent and uncomfortable and was eager to divert the questions to his wife, Li.
[58] Like Ma, Li was generally consistent in her answers. For example, in both cross-examination and re-examination, she explained that Optic was set up in order to retain work from Clearlab because she recognised that Clearlab would terminate their relationship if it learnt that OSC was supplying machines to Aquilus, a competitor. There was no guile in this answer. She said that she herself terminated work with a vendor who did work for her competitor. On this topic, I was inclined to believe that she was telling the truth.
Breach of confidence
[59] Clearlab’s primary case was that Ting, David, Goh, Ng, Aquilus, Ho, Ma and Li (ie, all the defendants, except Central Global) were in breach of confidence because they had wrongfully used its confidential information to set up a competing business in Aquilus.
The technology
[60] To set the claim of breach of confidence in context, it will be useful to describe the confidential information at the heart of this claim. It is about contact lens and manufacturing of contact lens.
[61] Contact lens correct vision in the same way as conventional spectacle lens: by refracting light entering the eye in such a manner as to enable the eye to focus the light on the retina. Refraction is achieved by the curvature of the lens. There are three methods of manufacturing contact lens: lathe cutting, cast moulding and spincasting. Clearlab uses both the cast mould method as well as the spin-cast method to manufacture contact lenses. But it is mainly in respect of spincasting that the defendants were alleged to have breached their obligations of confidence to Clearlab.
[62] In spincasting, a monomer (which is a liquid) is placed in a spherical indentation in a cast and rotated at a certain speed. This causes the monomer to spread outwards inside the indentation. The bottom of the monomer adopts the shape of the indentation and this is the convex surface of the lens that is eventually formed. During spinning, the monomer is cured by means of ultra-violet (“UV”) light. Curing causes the monomer to polymerise, turning it into a clear solid in the shape of the contact lens. While the principle is not difficult to understand, the first hurdle is to obtain the right design for the shape of the indentation, the monomer formula and the spin rate in order to produce lens that achieve the desired optical correction. The next hurdle is to get the right processes in place with the necessary regulatory certifications to be able to manufacture contact lenses on an industrial scale and with a satisfactory level of consistency and quality.
[63] The process of manufacturing spin-cast lens at Clearlab begins with the design of the lens. A trial design of the shape of the lens is carried out with SCS6. This program computes the dimensions of the dry lens when it is fed with certain parameters such as optical correction, lens diameter, etc. The dimensions obtained from SCS6 are fed into the MCG, which generates a job cutting file that is loaded into an Optoform 80 machine. The Optoform 80 machine reads the file and grinds one end of an aluminium rod into the shape of the convex surface of the lens. This is the insert; it is used to form the indentation of the cast mould. The exact amount of monomer is placed in the mould and it is spun in an inert environment of nitrogen gas and cured with UV light. At this stage, the lens is dry. The dry lens is hydrated by addition of a saline solution, becoming the wet lens that is worn by the user. This wet lens is tested for optical properties. If it does not achieve the desired optical power, corrections to the lens design are made manually, using SolidWorks software to visualise the lens shape and make adjustments. Another insert is made based on this new lens shape and the process is repeated until a lens design that achieves the desired optical properties is produced. The process is repeated for the various levels of optical correction to be manufactured. These designs are then used for large scale manufacturing of the lens for sale. The production process is essentially the same with the addition of the packaging process wherein the lens are sealed in the mould cast which is also used as the packaging for the lens.
The applicable law
[64] To succeed in an action for breach of confidence where no contract is involved, three elements have to be proven. They are set out by Megarry J in the seminal case of Coco v A N Clark (Engineers) Ltd [1969] RPC 41 (“Coco”) at 47 and have since been cited with approval in a number of Singapore cases: see X Pte Ltd and another v CDE [1992] 2 SLR(R) 575 at [27] and PH Hydraulics & Engineering Pte Ltd v Intrepid Offshore Construction Pte Ltd and another [2012] 4 SLR 36 at [55]:
(a) First, the information must possess the necessary quality of confidentiality.
(b) Second, the information must have been imparted in circumstances importing an obligation of confidence.
(c) Third, there must be an unauthorised use of that information to the detriment of the party communicating it.
[65] Where there is a contract expressly or impliedly imposing an obligation of confidence, as is the case for the ex-employees as well as Ma and Li, the second element may be satisfied simply by reference to the contract.
Distinction between mere confidential information and trade secrets
[66] A preliminary issue arose in respect of the character of the information sought to be protected. As mentioned above, the first element requires the information to have the necessary quality of confidentiality. It is trite that the confidentiality requirement is satisfied if the information is relatively inaccessible to the public, ie, it has not become public knowledge. It is not necessary to differentiate amongst the different degrees of confidentiality.
[67] However, if the breach of confidence claim is made against an ex-employee, the law has taken care to distinguish between “skill and knowledge” belonging to an ex-employee and “confidential information” belonging to the ex-employer. The law recognises that in the post-employment situation, while an ex-employer’s confidential information should be protected, the scope of protection should not unreasonably encroach upon the ex-employee’s ability to utilise his skill and knowledge to compete with the ex-employer or to seek alternative employment in the same field. Thus, in Ocular Sciences Ltd & anr v Aspect Vision Care Ltd & ors [1997] RPC 289, Laddie J observed at 370–371 that, a matter of public policy, an employee should be entitled to use his skill and knowledge, whether or not it is confidential to the employer at time of acquisition, and that if the ex-employee’s right to restrain misuse of his confidential information collides with the public policy of allowing an ex-employee to freely use his acquired skill and knowledge, it is the latter which prevails. For completeness, it should also be stated that the usage of such skill and knowledge by the ex-employee may be restrained where the ex-employee is bound by a restraint of trade clause. But the claim in such an action arises from contract and not from any duty of confidentiality.
[68] Apart from the category of information under “skill and knowledge”, there is some indication that a further distinction should be drawn between “trade secrets” and “mere confidential information” (ie, confidential information of a lesser degree of confidentiality than trade secrets). In Faccenda Chicken Ltd v Fowler and others [1987] 1 Ch 117 (“Faccenda Chicken (CA)”), there is a suggestion that an express covenant is not capable of restraining an ex-employee from using confidential information which falls short of a trade secret. This has significant implications for the parties as it means that Clearlab cannot protect its mere confidential information (as opposed to trade secrets) from further use or disclosure by the ex-employees.
[69] Before addressing the parties’ submissions on this issue, it is apposite to examine the decision in Faccenda Chicken (CA). The brief facts are as follows. A number of employees left the plaintiff company and served a competing business in selling fresh chickens. None of them were subject to an express restrictive stipulation. The case put forward by the plaintiff there was that the defendants had wrongfully used its confidential sales information, which consisted of the names and addresses of customers, the most convenient routes to be taken to reach the individual customers, the usual requirements of individual customers, the days of the week and times of day when deliveries were made to individual customers, and the prices charged to individual customers. At first instance, Goulding J treated the sales information as falling within the second category of information, described as “which once learned necessarily remains in the servant’s head and becomes part of his skill and knowledge applied in the course of his master’s business”; the first category, in comparison, relates to non-confidential information and, the third category relates to “trade secrets so confidential that … they cannot lawfully be used for anyone’s benefit but the masters’s”: Faccenda Chicken Ltd v Fowler and others [1984] ICR 589 (“Faccenda Chicken (Ch)”) at 599C and 600D. In respect of the second category of information, Goulding J also held that it was not protectable after termination of employment unless it was the subject of a valid restraint of trade clause.
[70] On appeal, Neill LJ disagreed with the view that an express restrictive covenant may prevent an ex-employee from using the second category of information, stating (at 137F):
This is strictly obiter, as the ratio decidendi in the case was that the implied post-employment obligation of confidence owed by the former employees was restricted to information that is invested with a sufficient degree of confidentiality to render it a trade secret or its equivalent; accordingly, the appeal was dismissed because neither the sales information as a whole nor the information about the prices by itself fell within that class of information.
[71] What is of key concern in the present proceedings is the obiter dictum, which seems to suggest that only trade secrets can justifiably be restrained from use post-employment. It was briefly considered by the Court of Appeal in Man Financial (S) Pte Ltd (formerly known as E D & F Man International (S) Pte Ltd) v Wong Bark Chuan David [2008] 1 SLR(R) 663 at [86]:
[72] I will add that the answer may also well lie in the notion of trade secret as applied in Faccenda Chicken (CA). It was observed by Campbell JA in Del Casale & ors v Artedomus (Aust) Pty Limited [2007] NSWCA 172 at [108] and [128] that the expression “trade secret” has been used in different contexts with different imports. It is therefore necessary to decipher the purpose for which it is being used, on the particular occasion when it is being used.
[73] In the ratio decidendi of Faccenda Chicken (CA), the notion of trade secret was used as an indicator of whether a term of contract can be implied to restrain an ex-employee from using the information at the end of the employment. The holding is that an ex-employee’s implied obligation only goes as far as to protect trade secrets, so while there is a broad range of information which is confidential to the ex-employer, only a narrow range of information which has the requisite high degree of confidentiality as to constitute trade secrets will in fact be protected in contract.
[74] In the obiter dictum, the notion of trade secret was used as a guide to ascertain the validity of a restrictive covenant. In this separate context, it seems to have a different meaning. Just before disagreeing with Goulding J, Neill LJ in Faccenda Chicken (CA) cited Herbert Morris, Limited v Saxelby [1916] 1 AC 688 (“Herbert Morris”) for an example that a restrictive covenant will not be upheld on the basis of the status of the information, unless it can be regarded as a trade secret or its equivalent. Importantly, Lord Parker of Waddington in Herbert Morris, when considering the validity of a restrictive covenant, said at 709:
It seems to me that that “trade secrets”, as understood in the second context, is used as a juxtaposition to “skill and knowledge”. Restraint of the latter was unjustifiable because it unduly constrains competition and interferes with an ex-employee’s right to depend on it to earn a living. In balancing between the interests of the ex-employer in protecting confidential information and the interests of the ex-employee to use his skill and knowledge, the law has come down on the side of the ex-employee. This is less of a question on the degree of confidentiality necessary to grant protection and more of a question whether a restraint of trade is reasonable and therefore justified.
[75] Understood in this way, Faccenda Chicken (CA) is silent on whether an express restrictive covenant may legitimately cover confidential information which is not a trade secret. In my view, parties should be free to agree to protect the confidential information of the ex-employer, subject always to the restraint of trade doctrine. It seems to me implausible that the agreement should collapse at some point along the spectrum of confidentiality, in spite of parties taking the trouble to define and agree what confidential information they would protect. On the other hand, it is important to recognise that confidential information could form part of an ex-employee’s general skill or knowledge during the course of employment. To the extent that the restraint against the use of such knowledge and skill is unreasonable, it could be struck down. This could depend on the nature of the information and how it is being exploited in particular circumstances. Thus, all things considered, there is an interplay between the freedom of contract and the status of the information. While the status of confidential information generally does not prevent it from being protected as a matter of agreement, it might, in the appropriate cases, affect the assessment of the reasonableness of the restraint.
[76] I turn, then, to the parties’ submissions on whether there is a distinction between mere confidential information and trade secrets. Clearlab contended there need not be one, because mere confidential information is protectable by an express confidentiality clause. On the facts of the case, an express confidentiality clause is imposed against the ex-employees in their employment contracts. Accordingly, it is said that all of Clearlab’s confidential information is protected.
[77] The defendants’ response, in most parts, did not disagree with Clearlab’s submission. Their sole objection was to the possible restraint against the use of the ex-employees’ skill and knowledge as part of the confidentiality clause. The defendants submitted that the skill and knowledge acquired by the ex-employees did not constitute a legitimate proprietary interest that Clearlab could protect and furthermore, there is a strong policy reason that an ex-employee should be free to put his skill and knowledge to use in the most market-efficient manner. This proposition is echoed in the case of Ixora Trading Incorporated and another v Jones and another [1990] 1 FSR 251. At 258–259, Mummery J held that an express covenant may protect against post-employment use of confidential information other than trade secrets, but it would be unenforceable insofar as the restraint is against information that has become part of the ex-employee’s skill and knowledge or is otherwise too wide.
[78] In my view, both parties’ submissions are consistent with what I had set out above: that a line needs to be drawn between confidential information protected by contract and skill and knowledge gained in the course of employment. Where they are coterminous, the courts have been disinclined to enforce the agreement. But if it is merely a question of the degree of confidentiality of the information, there is no bar against parties agreeing to protect their confidential information. So long as the information sought to be protected is confidential to one party, I do not see how any policy reason why the agreement that such information shall remain confidential should not be enforced.
[79] Upon a reading of the express confidentiality clause that bound the ex-employees in this case, I agree with Clearlab that all of its confidential information is protected. The clause covers:
[80] As such, for the purposes of this suit, there is no need to distinguish between Clearlab’s trade secrets and mere confidential information. It is an entirely separate question whether any such information should be regarded as part of the ex-employees’ skill and knowledge which they are entitled to use and which Clearlab may not protect for its own. This question has to be addressed in relation to each specific information that is alleged to have been incorporated as part of any skill and knowledge acquired in the course of employment.
Standing
[81] There is one final preliminary issue to be dealt with: that of Clearlab’s standing to bring the action. The general assertion made by all the defendants is that Clearlab lacked standing to sue for breach of confidence because it had not acquired the proprietary information upon which it is suing.
Spincasting technology, design of the original Dual Spinner and SCS6
[82] I will first deal with the issue of standing in relation to the breach of confidence claims made against Ting, David, Goh, Ng, Ho and Aquilus. There were three main arguments:
(a) It was unclear if confidential information in the spincasting technology was ever purchased from Clearlab International Pte Ltd by Clearlab because there was no express term for it in the S&P Agreement.
(b) The original Dual Spinners were supplied by Barr & Paatz to Clearlab International Pte Ltd prior to their being purchased by Clearlab, and there is no evidence that the IP rights in the Dual Spinners were ever transferred to Clearlab International Pte Ltd.
(c) The SCS6 program was written by a Don Noack from Capriconia Contact Lens as a favour or on an ex gratia basis and the copyright in SCS6 was never assigned to Clearlab, therefore, Clearlab does not legally own SCS6.
[83] These arguments seem to say that Clearlab lacked the requisite property rights (whether in copyright or patent) to sue the defendants. For example, the defendants argued that copyright in the SCS6 program could not have been assigned to Clearlab because the transfer of the SCS6 program was not evidenced in writing in accordance with s 194 of the Copyright Act (Cap 63, Rev Ed 2006). Insofar as arguments of this nature are being made, they are irrelevant because Clearlab was not asserting a right in copyright or patent. What it claimed was a breach of confidence by the defendants.
[84] That said, if the arguments are that Clearlab lacked standing to sue upon the confidential information because “ownership” of the requisite confidential information was not transferred to Clearlab, then these arguments, if made out, are a defence against Clearlab’s claim of breach of confidence.
(1) “Ownership” of confidential information
[85] I preface the discussion by stating that information, in itself, is not property. It does not give rise to property rights or rights in rem that can be owned or said to belong to a person. Rather, confidential information is protectable if there is a basis for importing an obligation upon a person not to use or disclose it. The basis could lie in equity (which was once described as “the notion of an obligation of conscience arising from the circumstances in or through which the information was communicated or obtained”: Moorgate Tobacco Co Limited v Philip Morris Limited and another (No 2) (1984) 156 CLR 414 (“Moorgate”) at 438). It could also arise in contract (see, eg, the confidentiality clauses in the ex-employees’ contract with Clearlab).
[86] Language relating to “ownership”, such as “own”, “property” and “belong” is sometimes used metaphorically to denote that a person has an interest in protecting the confidential information that is enforceable by an action for breach of confidence. I have noticed that the parties have used words like “own”, “property” and “belong” in the metaphorical sense, and thus any reference to their submissions using these words will also be in that sense.
(2) Circumstances of the transfer of information
[87] In my view, each of the three arguments fails because the requisite confidential information was transferred to Clearlab with the understanding that the confidential information could not be further used or disclosed to a third party without Clearlab’s consent. In those circumstances, I find that Clearlab has standing to sue for breach of confidence. Let me explain.
[88] In relation to argument (a) at [82(a)] above, the critical facts are cl 1(3) and Exhibit A-5 of the S&P Agreement. Clause 1(3) provides that Clearlab acquires a 50% undivided tenancy in common interest in the “Dual-Use Know-How” as described in Exhibit A-5. The other 50% was bought by Menicon Co Ltd. Specifics of “Dual-Use Know-How” are listed in Exhibit A-5. Briefly, they are “the know-how, information, data and proprietary rights … which is commercially used to manufacture spin-cast daily lenses”. On a plain reading, the agreement contemplates that Clearlab and Menicon Co Ltd will exclusively possess confidential information about spincasting technology transferred from Clearlab International Pte Ltd. Subsequent to the purchase, the information was validly in the custody of Clearlab and had been treated by Clearlab as confidential. I do not see why it would not fall within the range of protection accorded by the law of confidence.
[89] Argument (b) at [82(b)] above, which concerned Clearlab’s interest in the confidential information in the original Dual Spinner, is more nuanced. It appears to be this: even if the S&P Agreement purported to transfer the confidential information in the original Dual Spinner to Clearlab, the information could not have been transferred from Clearlab International Pte Ltd to Clearlab, because Barr & Paatz, the maker of the Dual Spinners, had not transferred the information to Clearlab International Pte Ltd. This presumes that the confidential information in the Dual Spinner resides with the maker and not the party which commissioned it. However, given the gap in evidence on the transaction for the supply of the original Dual Spinners, this appeared to be an unfounded presumption. The fact that Barr & Paatz had made the Dual Spinners does not suffice to show that it, and not Clearlab International Pte Ltd, had designed the Dual Spinners, or that (if it had designed the Dual Spinners) it had not sold the design to Clearlab International Pte Ltd. On the contrary, the words of the S&P Agreement suggest that Clearlab International Pte Ltd owned the rights to the design of Dual Spinner because the design of the Dual Spinner is included in the list of confidential information in Exhibit A-5 to be sold to Clearlab and Menicon Co Ltd.
[90] Since there was insufficient factual basis for the defendants to contradict the S&P Agreement, I find that Clearlab had acquired the confidential information in the Dual Spinner.
[91] As will be seen shortly, the same question arose as to the confidential information in Ma’s work on the Dual Spinner and the Quad Spinner. Again, it is a fact-centric enquiry. Whether Clearlab has come to own the rights in the confidential information arising from Ma’s work will be determined by the particular facts of the case.
[92] As for argument (c) at [82(c)] above, there is clearly shared interest between Clearlab and Don Noack to protect the confidential information in SCS6. The program was given to Clearlab for its use. It has hence been kept confidential by Clearlab. There is no basis to hold that Clearlab was not entitled to protect the program which had been improperly taken by one of the defendants, in concert with some of the others, who had access to the program by virtue of his trusted position in Clearlab.
[93] In summary, Clearlab was entitled to enforce its contractual right of confidentiality in respect of the spincasting technology, the original Dual Spinner and the SCS6 program. There is therefore no issue of standing as against Ting, David, Goh, Ng, Ho and Aquilus.
Design of the Quad Spinner and modifications to the Dual Spinner
[94] I will now consider the issue of standing in relation to the breach of confidence claim made against Ma and Li. This issue arises because they asserted that OSC retained the rights over the information in the work that Ma did for Clearlab. I will first outline the extent of Ma’s work for Clearlab.
[95] In July 2008, Ting had just joined Clearlab as its Head of Engineering and Technology Development and he had discovered that the spin-cast machines (also known as “Dual Spinners”) in Clearlab required repair or modification. At that time, Ma was employed as a senior electrical control engineer in Sys-mac Automation Engineering Pte Ltd (“Sysmac”). Ma received the assignment to work on the Dual Spinners. But Ma soon left Sysmac, so his ongoing work with the Dual Spinners was transferred to a new partnership called SC-Tech Automation and Engineering that he had set up with Wu Zhigang in late 2008. This partnership did not last long. In 2009, Ma set up another partnership called OSC with his wife, Li. His work with the Dual Spinners was transferred once more, this time to OSC.
[96] After Ma’s work on Dual Spinners was completed, he was approached by Ting in late 2009 to design and fabricate a new spin-cast machine. The original proposal was that the machine should have eight to ten spin tubes to maximise output. After Ma’s initial studies and research, Ma recommended that each machine should only house a maximum of four spin tubes. The recommendation was accepted by Clearlab. Ma proceeded to construct the Quad Spinner, which he completed and delivered to Clearlab in December 2010.
[97] Sometime in March 2011, Ho contacted Ma for a quotation for six units of spin-cast machines. These machines were named “Lens Forming Machines”. All six units were delivered to Aquilus’ premises in August 2011. Now, Clearlab claimed that the Lens Forming Machines supplied to Aquilus were essentially the same as the Quad Spinner that Clearlab had commissioned OSC to build for Clearlab. The features of the Quad Spinner were allegedly replicated in the Lens Forming Machine in breach of Ma’s duty not to use Clearlab’s confidential information acquired by Ma.
[98] There is some logical basis for Clearlab to suppose that Ma had used what he learned from working on Clearlab’s spin-cast machines in his work for Aquilus. Between 2008 to 2010, Ma was privy to information about Clearlab’s Dual Spinners (that he was charged with repairing and modifying) and Clearlab’s Quad Spinner (that he was commissioned to construct). Therefore, in 2011, it was possible that he had misused such information to make the Aquilus’ Lens Forming Machines.
[99] But to determine if there is a breach of confidence, one must first determine if Clearlab had standing to sue upon the information allegedly used to make the Lens Forming Machine. There are two types of information here. The first type consists of information that originated from Ma. This relates to Ma’s design of Quad Spinner and the modifications he made to Dual Spinner. There is an issue with standing with this type of information because the parties disputed its ownership: Clearlab submitted that the information residing in Ma’s work belonged to Clearlab, whereas Ma submitted that it belonged to Ma and/or OSC. If Ma was correct, this would eliminate Clearlab’s claim because only the person who is entitled to the confidence had the standing to sue for breach of confidence: Fraser v Evans and others [1969] 1 QB 349 at 361 per Lord Denning MR. In other words, if Clearlab cannot establish that it was owed a duty of confidence from Ma and Li in respect of such information, it would not have standing to assert a claim of confidentiality over it. The second type consists of information that originated from Clearlab. This includes information from the unmodified Dual Spinner that was used or incorporated in the Lens Forming Machine as well as any other information that was communicated by Clearlab to Ma. As held earlier at [89]–[90], the confidential information in the unmodified Dual Spinner did reside with Clearlab. Thus, unlike the first type, there is no issue with standing here. The main issue with this second type of information is instead about its unauthorised use. This will be addressed in a separate section.
[100] Turning now to the issue regarding the ownership of the information relating to the design of Quad Spinner and the modifications to the Dual Spinner, Clearlab’s fundamental submission was that the party which had commissioned and paid for a bespoke machine owned the confidential information to the exclusion to the other party which made the bespoke machine. Ma and Li, on the other hand, submitted that the commissioned party retained the confidential information in the commissioned work that was generated by him, unless it was transferred by way of an agreement (which they submitted was not the case here). In short, the parties have approached the issue from diametrically opposing positions.
(1) The legal principles
[101] It is useful to examine the authorities cited by the parties.
[102] Clearlab cited Deta Nominees Pty Ltd v Viscount Plastic Products Pty Ltd [1979] VR 167 which concerned, inter alia, with a breach of confidence by the defendants who were commissioned by the plaintiff to supply specially designed injection-moulded plastic drawers but had reneged on their agreement. The plaintiff was a company in the business of making and selling furniture. The managing director of the plaintiff, a Mr Felfernig, had been looking for a considerable time for a plastic drawer suitable for his business and, having found none, was seeking to make a tool for producing the drawer. That was how the first defendant, a tooling company, came into the picture. During the discussions between Mr Felfernig and the representatives of the first defendant company, who were Mr Flood and Mr Stoffregen, Mr Felfernig referred to the drawers that he had considered but rejected: the Elmaco drawer was said to be too flimsy and the Nylex drawer too expensive. It then occurred to Mr Felfernig that features from the Nylex drawer and Elmaco drawer could be adapted to create a new drawer. Thus, at a meeting between Mr Felfernig and Mr Stoffregen, Mr Felfernig drew and described to Mr Stoffregen the drawer he envisaged and Mr Stoffregen provided some feedback, including an idea to hinge the sides of the drawer. This was followed by negotiations on the price and, in the midst of negotiations, Mr Felfernig stated the precise metric dimensions he wished for the drawer.
[103] It is readily apparent that the plaintiff contributed most of the information required to make the drawer and the defendants were only responsible for the idea to use a hinge. The court held that all information relating to the drawer resided with the plaintiff. Fullagar J said (at 194):
[104] Another case that was cited in support of Clearlab’s claim was Vestergaard Frandsen A/S and others v Bestnet Europe Limited and others [2009] EWHC 657 (Ch) (“Vestergaard”). It also involved the question of whether work created for the benefit of the plaintiffs was confidential to the plaintiffs. The plaintiffs in that case were manufacturers of insecticidal mosquito nets. Dr Skovmand was a consultant whom they have engaged to develop a new kind of polyethylene net. Although there was no written agreement between the plaintiffs and Dr Skovmand, it was accepted that there was an oral contract. In 2004, two employees of the plaintiffs left to set up a competing business. In 2005, Dr Skovmand followed suit and resigned from his consultancy to assist the two former employees with their development of polyethylene net. There was a finding of fact that Dr Skovmand devised the initial recipes for the polyethylene net for the competing business based on information that he had recorded in a database whilst working for the plaintiffs. This led Arnold J to consider whether Dr Skovmand owed an obligation of confidence to the plaintiffs in respect of the information in the database. He answered it in the affirmative. There are three separate grounds for holding that information arising out of the work that the plaintiffs gave Dr Skovmand would be confidential to the plaintiff. First, it was an express term of Dr Skovmand’s contract. Second, even if there was no express term, it was also an implied term of the contract. Third, even if there was no contract, Dr Skovmand was subject to an equitable obligation on the same terms.
[105] The court’s reasoning is largely contained in [631]–[640]. It is illustrative of the factors that the court will take into account when deciding to whom an obligation of confidence would be due. On first blush, however, I would say that there are substantial divergences in the factual matrix of Vestergaard and the present case which would make the reasoning in Vestergaard not entirely applicable to the present case. Let me first state the similarities, which are that both Dr Skovmand and Ma were paid to develop a new product, and that the payment would cover raw materials and the tests required to obtain the final product. The chief dissimilarities are:
(a) The relationship between the plaintiff(s) and the person commissioned to do the work. In Vestergaard, it was decided that Dr Skovmand’s status was close to that of a senior employee: at [632]. This might partly have to do with the fact that Dr Skovmand was engaged for a relatively long period of time, from 1998 to 2005. In contrast, Ma was always viewed as an independent contractor. This is implicit in para 134 of the Statement of Claim (Amendment No 2) (“SOC”) where Clearlab complained about Ting outsourcing the work on the Quad Spinner to OSC even though Clearlab had (or so it asserted) the resources to do some of the work internally.
(b) Input from other sources. There was an observation that Dr Skovmand had not carried out all of the development work or given all the advice for the development of the products. In fact, much of the work in that case was done by the plaintiff’s employees or other contractors and some advice was obtained from third party sources: at [633]–[634]. The dynamics were different in the present case because Ma worked independently. From the evidence before me, Clearlab would inform Ma of its requirements or the problems it required fixing, and Ma would work at creating the solution. As elaborated at [213] below, there was some communication of information, in that Clearlab allowed Ma to access its Dual Spinners and Ting highlighted to Ma some features of the Quad Spinner that Clearlab wanted to have, but otherwise, Ma was left on his own to do the work.
(c) Payment for the resultant information. In Vestergaard, the plaintiffs paid for the compilation of the database itself: at [637]. It is not so clear, in the present case, that Ma was paid for the information relating to the design of the Quad Spinner or the modifications to the Dual Spinners, in addition to the physical work that he had done for Clearlab. The dispute as to the terms of their supply agreement will be addressed later at [121]–[123].
(d) The understanding struck between parties as to whom the information “belonged” to. The intention of parties as regards the information created during Dr Skovmand’s course of work for the plaintiffs was made manifest in a number of instances. Before Dr Skovmand left, he handed over the database to the plaintiffs. He also recognised in his goodbye letter that he should only use the information in the copy he retained for a limited purpose: at [638]. Further, throughout his consultancy with the plaintiffs, it was clearly understood that the inventions made by Dr Skovmand belonged to the plaintiffs, in the sense that the plaintiffs had the right to patent his inventions and own those patents: at [639]. Thus, either during or after the termination of his relationship with the plaintiffs, it could not have been intended by the parties that Dr Skovmand would be able to exploit the information he created for the plaintiffs: at [640]. Conversely, in the present case, Ma had not delivered his drawings of the Quad Spinner and the Dual Spinner to Clearlab. Neither were there words or conduct that indicated that Ma could not himself use the information that he generated in making the Quad Spinner or modifying the Dual Spinners. Thus, it was not so clear that parties intended for Clearlab to “own” the information arising out of Ma’s work (as opposed to the physical machines). This will be addressed in fuller detail, also at [121]–[123].
[106] There is one other authority relevant to the issue of whom confidential information in a commissioned work resided with. It is the case of Invenpro (M) Sdn Bhd v JCS Automation Pte Ltd and another [2014] 2 SLR 1045 (“Invenpro”). Ma and Li cited this case for its holding that the commissioned party retained the confidential information in the commissioned work. It bucked the trend in the earlier two cases which decided that the confidential information in the commissioned work resided with commissioning party. The differences in the holding, however, appear to arise from different facts than from a controversy in the legal principles.

The judgment continues past this page. Read the rest at eLitigation.

Clearlab SG Pte Ltd v Ting Chong Chai and others

Grounds of decision

Introduction

The facts

The parties

Key events leading up to the dispute

Ting’s misdemeanours

The key witnesses

Breach of confidence

The technology

The applicable law

Distinction between mere confidential information and trade secrets

Standing

Spincasting technology, design of the original Dual Spinner and SCS6

(2) Circumstances of the transfer of information

Design of the Quad Spinner and modifications to the Dual Spinner

(1) The legal principles