MoneySmart sued its ex-employee to stop him from working for a "rival company", citing non-compete and confidentiality clauses in his employment contract.
While MoneySmart had successfully obtained interim injunctions to stop Russian national Artem Musienko from working for CAG Singapore Regional (CAGSR), a subsidiary of MoneyHero, a High Court judge set them aside after hearing their case.
MoneyHero and MoneySmart are competitors in providing comparison services for financial products.
Senior Judge Tan Siong Thye explained in his judgment dated Apr. 2, 2024, why he ruled against MoneySmart.
Background
Musienko joined MoneySmart on May 26, 2022, as the Head of Technology to run its Bubblegum mobile app platform.
A year later, on Nov. 23, 2023, Musienko handed in his resignation, and his last day was Jan. 12, 2024.
Three days later, Musienko was employed by CAGSR as Head of Engineering for its insurance arm.
More than a week later, on Jan. 25, 2024, MoneySmart applied for a 12-month injunction to stop Musienko from "acting in breach of the non-compete clause".
A few days later, the senior judge granted interim injunctions, with the caveat that MoneySmart would not enforce them until he heard from Musienko, who had eventually filed for dismissal and compensation from MoneySmart due to its actions.
The non-compete clause
According to the judgment, the judge believed that one of the core issues of the case was whether the non-compete and confidentiality clauses were valid and enforceable.
The non-compete clause reads:
"The Employee covenants and agrees that during the term of the Employee's employment with the Company and for the following Restraint Period, the Employee shall not directly or indirectly engage with any business or organisation in South-East Asia or any other country where MoneySmart (or associated companies) operates which provides online financial product comparison services (the “Business”) and thereby engages in competition with the Company or the Company’s holding companies or subsidiaries (if any)."
The judge explained that for a non-compete clause to be enforceable, it must protect the "legitimate proprietary interest" of the company.
Not only that, it would also have to be "reasonable".
There's no "legitimate proprietary interest"
MoneySmart described its "legitimate proprietary interest" as protecting its confidential information and its "legitimate interest of maintaining a stable and trained workforce".
However, Tan rejected both arguments, explaining that as the protection of confidential information had been covered by the "confidentiality clause", there was no reason to use it again for the non-compete clause.
On the manpower argument, Tan found the digital insurance industry is not considered "small and specialised", citing that there are many other market participants.
Tan said that MoneySmart had also not demonstrated that it had "invested much time and resources" in providing Musienko with "specialised training".
The judge further explained that even if there was a "legitimate proprietary interest," the non-compete clause in the case was not enforceable as it was not "reasonable".
The clause is unreasonable
He said its scope was unreasonable on various fronts — geographical area, type of activity and enforcement period.
Tan found that it was unreasonable that the clause tried to bar Musienko from employment in the whole of Southeast Asia when MoneySmart only had operations in Singapore, "a presence" in the Philippines, and "plans" to expand within Southeast Asia.
He also pointed out that the products Musienko worked on were only available in Singapore.
On the scope of activity, Tan said it was "far too wide" to stop him from working for any business that provides "online financial product comparison services" when he was only employed for "digital insurance-related matters".
The unjust "Restraint Period"
The judge also reproduced the "Restraint Period" referred to by the clause:
(a) a period of twelve (12) months from the date of termination of your Employment; but if a court of competent jurisdiction determines that any restriction in this clause 8 is unenforceable for such a period, then
(b) a period of six (6) months from the date of termination of your Employment; but if a court of competent jurisdiction determines that any restriction in this clause 8 is unenforceable for such a period, then
(c) a period of three (3) months from the date of termination of your Employment.
He found that it was "plainly unjust" for the "reasonable employee" as it was drafted to "arrive at the longest permissible restraint period" by using cascading clauses to take "multiple bites of the cherry".
He found that it "leaves the vulnerable employee uncertain as to which cascading restriction binds him in law until the issue is actually determined by a court".
The "confidentiality clause" that is "incredibly wide" in scope
The judge summarised the "confidentiality clause" as prohibiting Musienko from using and disclosing information without consent,
“including information relating to the business, operations (financial or otherwise), capital and operating budgets, business plans, research and development activities, product designs and operating characteristics, products, manufacturing and production costs for materials and labour, field labour costs, product pricing and gross margins, product inventories, properties or employees or the [MoneySmart's] relationships with its representatives, customers, subcontractors and suppliers, including information relating to the business, operations and properties of such, representatives, customers and suppliers to the extent known to [Musienko]”.
He noted that it was "incredibly wide", and the information to be protected appeared not even to have to be "confidential".
The judge found that due to its "extremely wide coverage," the clause imposes "unfair and inequitable obligations that are extremely onerous on the defendant," casting the validity and enforceability of the clause into "serious doubt".
He added that even if the scope of the clause was reasonable, MoneySmart didn't show that Musienko had access to actual "confidential information" and proved that he would disclose such "confidential information" beyond "bare assertions".
He further noted that Musienko had been placed on paid garden leave for a period of 12 months after starting work, causing the risk of disclosure to become "highly speculative".
"Disconcerting" that the company tried not disclosing the "actual scope" of the clauses
Towards the end of the judgment, the judge also noted that it was "disconcerting" that MoneySmart had tried not to disclose the "actual scope" of the non-compete clause when seeking to enforce only part of it in the application for the interim injunctions.
He said that the injunctions would be vulnerable to be discharged due to this non-disclosure.
However, he accepted that Musienko was not prejudiced as MoneySmart had undertaken not to enforce them before the hearing.
The judge orders MoneySmart to pay for Musienko's legal costs, the exact amount of which will be determined later.
Top photo from MoneySmart & SG Courtsg