Singapore judge rules loyalty and fair dealing must remain at the core of business relationships despite client freedom of choice
A reinsurance broker brought claims against two former employees and their new employer, alleging they conspired to divert significant client business while still employed by the original company.
The case raised fundamental questions about employee loyalty and fair dealing in competitive industries where clients are free to choose their service providers.
The employer argued that the employees secretly assisted with establishing a competing business, retained confidential information, and orchestrated the transfer of a major client's insurance portfolio worth over one million dollars annually.
The employees denied any conspiracy and argued they only commenced employment with the new company on the dates stipulated in their contracts and that the client independently chose to move its business.
Senior broker and junior colleague resign within months
The senior broker commenced employment with the reinsurance company in mid-2018 as head of the Korean desk handling facultative reinsurance business.
The junior broker started several months later and worked directly under the senior broker's supervision as they had a close mentor-mentee relationship dating back to 2016.
The junior broker resigned in early August 2021, and his last day was early November 2021. He signed an employment contract with a Korean insurance services company later that month ostensibly to work on establishing reinsurance processes and operations.
The senior broker resigned in mid-November 2021 with a six-month notice period ending in mid-May 2022. She signed an employment contract with a Singapore subsidiary of the Korean company just days after her resignation, with a start date after her notice period ended.
Employer discovers business diverted to new company
The employer operated a semi-automatic facility for a major Korean insurance client covering both domestic and overseas warehouse insurance risks. This meant insurance risks offered by the client falling within defined parameters could be reinsured by markets on pre-agreed terms and conditions.
In mid-January 2022, a market informed the senior broker that another broker had issued a letter appointing itself as broker of record for all Korean policies written under the employer's facility. The market offered the employer an opportunity to have this rescinded but the senior broker did not pursue this internally.
The employer subsequently discovered the Singapore subsidiary had been appointed broker of record for the Korean client's domestic warehouse risks. The employer alleged that this business, representing over one million dollars in annual brokerage revenue, had been diverted through a conspiracy involving both former employees and the new companies.
Employer presents evidence of coordination and preparation
The employer argued the conspiracy began as early as January 2021 based on a virtual meeting between the senior broker and three senior representatives from the Korean company. All three representatives were members of a task force team responsible for setting up the Singapore subsidiary.
The employer pointed to emails the senior broker forwarded from her work account to her personal account between August and December 2021. These emails contained confidential information, including reinsurance terms, customer data, loss history, and survey reports, with subjects marked "Highly Confidential."
The employer also relied on reference letters that the senior broker provided for the junior broker's graduate school applications. These letters explicitly stated the senior broker "asked [the junior broker] to work on the initial preparations and agenda planning for the foundation of [the Singapore subsidiary]."
Court examines junior broker's employment arrangements
The court found significant evidence that the junior broker was actually working for the Singapore subsidiary despite his employment contract being with the Korean parent company. The junior broker used email signatures identifying himself as an assistant vice president of the Singapore subsidiary and signed off emails as its representative.
The court noted the junior broker requested a broker of record letter from the Korean client on behalf of the Singapore subsidiary in January 2022. The original letter appointed the Singapore subsidiary as broker of record despite the junior broker ostensibly being employed by the Korean parent company.
The court found the reference letters corroborated that the junior broker assisted with setting up the Singapore subsidiary before it was incorporated in April 2021. This meant he was assisting with the new company's affairs while still employed by the original employer.
Court analyses forwarded confidential information
The court examined the senior broker's explanation that she forwarded confidential emails to her personal account due to virtual private network connection problems. The court found this explanation "self-evidently tenuous" after examining the emails themselves.
The court noted one email was forwarded less than ten minutes after the senior broker had sent it to underwriters suggesting no connection issues existed. Another email contained only attachments the senior broker already had local copies of on her work computer.
The court stated "the timing of these emails occurring in close proximity to her quiet engagement with [the Singapore subsidiary's] matters, coupled with the fact that the documents would appear to be of utility to her work moving forward" suggested the emails were motivated by retaining access to sensitive information valuable at her next employment.
Court examines appeal letter drafted for employment pass
The court found the senior broker drafted an appeal letter to the Ministry of Manpower for the junior broker's employment pass application while still serving her notice period. The appeal was technically to be lodged by the Singapore subsidiary as prospective employer.
The court found the senior broker's involvement was surprisingly extensive with minimal participation from the junior broker himself. The senior broker researched requirements, drafted the letter independently, and sent it directly to the Singapore subsidiary's chief executive without copying the junior broker.
The court stated the appeal letter contained information the senior broker would not have been privy to if she had not started work, including "reasons for why [the Singapore subsidiary] had hired [the junior broker] and increased his salary." The court found she was assisting in her capacity as a prospective employee rather than as a personal favour.
Conspiracy established through circumstantial evidence
The court opened its judgment emphasising that "loyalty, integrity and fair dealing are, and must be, at the core of any functioning business environment." The court stated that freedom of client choice "does not confer a parallel freedom on employees to quietly orchestrate transitions behind the scenes."
The court found the evidence painted "a troubling picture – a pattern of calculated circumvention by individuals who, while still formally employed by one company, were actively furthering the interests of another." The court described "a web of conduct in which future employers appeared complicit, knowingly engaging with prospective hires who were still bound by obligations elsewhere."
The court stated "what is at stake is not merely a question of client movement, but rather the manner in which the movement was facilitated – ostensibly through behind-the-scenes co-ordination, the premature misalignment of loyalties, and the apparent disregard of contractual obligations and restraint of trade covenants." The court found when circumstantial evidence pieces were assembled together "the composite picture that emerges is an obvious one."
Court enforces restrictive covenants against departing employees
The court examined restrictive covenants in the employment contracts prohibiting solicitation and dealing with clients for twelve months after termination. The court found these covenants were enforceable as they protected legitimate business interests and were reasonable in duration and scope.
The court noted the Singapore subsidiary's own employment contracts contained similar twelve-month post-employment restrictions, suggesting such terms were considered reasonable in the reinsurance industry. The court found both former employees breached these covenants by dealing with the Korean client within months of their departures.
The court stated "the right of the client to walk away does not absolve the employee of their duty to stand firm in their obligations, for these are not mutually exclusive."
The court emphasised that while "client autonomy is no defence to such conduct" and "client choice may be free, but employee conduct, and the conduct of those who seek to poach them for commercial reasons, are not."
Court dismisses claims against new employers for inducement
The court found insufficient evidence that the Korean company and Singapore subsidiary directly induced the contractual breaches.
The court stated that while the entities had knowledge of plans to divert business, there was "insufficient evidence to show that the plans were not originally devised by [the employees] but were rather induced by [the new companies]."
The court also dismissed claims that the junior broker breached covenants protecting relationships with reinsurance markets. The court found that requesting a broker of record letter was a typical business practice and did not constitute enticement or inducement of markets to transfer business.
The court dismissed the Korean company's counterclaim seeking the return of confidential client information. The court stated the company "cannot, on the one hand, allow [the senior broker], while she is an employee of [the original employer], to work on such documents, and then seek the court's intervention" citing the clean hands doctrine.
Ex-employees held liable for conspiracy
The court found all four defendants liable for unlawful means conspiracy to injure the employer by setting up a competing business and diverting the domestic warehouse risks portfolio. The court found the conspiracy involved breaches of employment duties, confidentiality obligations, and restrictive covenants.
The court found both former employees liable for breaching duties of good faith, prohibitions on secondary employment, and non-solicitation covenants. The court found the senior broker additionally liable for breaching confidentiality obligations by forwarding emails and for inducing the junior broker to breach his employment obligations.
The court concluded that "where reasonable limits are crossed, they ought to be sanctioned" and emphasised that "diligence is no defence to disloyalty" as an employee cannot justify breach of loyalty obligations by pointing to dedication in other work areas. The matter was bifurcated with damages and costs to be assessed separately following the liability findings.
