ILLEGALITY & VOID CONTRACTS

S 24 – unlawful consideration & unlawful object

S 27- restraint in marriage
S 28 – restraint of trade
S 31 – wagering contract
• S 10 - ……and that the consideration and
object of the agreement must be lawful and
are not expressly declared to be void.
• Contract is void because of unlawful/illegal
agreement.
• S 2(g) – a void agreement =not enforceable by
law.
• There are several grounds for a contract to be
declared void. Eg..mistake, no consideration,
term is uncertain, to perform impossible act,
consideration given but unlawful, purpose of
the contract is to do unlawful act, etc.
Unlawful consideration:
- The promise may be something that is unlawful to
perform (i.e the performance is forbidden either
by statute or by reason of public policy);
- Although there is nothing unlawful in performing
the promise, but the law does not recognize or
give legal effect to the promise (eg: wagering,
uncertain term, mistake of fact, mistake of law, to
do impossible act, etc)
- Illustration (f) – A promises to obtain for B and
employment in the public services, and B promises
to pay 1000 to A.
• Charles Ooi Kiah Inn v Kukuh Maju Industries
[1993]
- Held: Contract was void because one of the
considerations provided was that the P would
withdraw the charge against the Ds as detailed
in the police report. Consideration was against
public policy, thus caught by s 24(e) of CA 1950.
• Manang Lim Native Sdn Bhd v Manang
Selaman [1986] 1 MLJ 379.
- Supreme Ct: an agreement to transfer Native
Area Land in Sarawak to a non-native is
deemed under s 8 of the Sarawak Land Code to
have been entered into for an illegal
consideration. Void w/in the meaning of s 2(g)
of CA 1950.
- S 8- a person who is not a native of Sarawak
may not acquire any rights/privileges over any
Native Area Land.
• Unlawful object
• Illustrations (e) and (h) to s 24.
• Arumugam v Somasundram [1934] FMSLR 322- D employed P
to drive his motorcar for him for private use or for hire. Both
knew that the car was licensed for private use only. Hence, the
object was contrary to Motor Vehicles Enactment. When the D
failed to pay P’s wages, P claimed. Held: object was unlawful
• See also Aroomoogum Chitty v Lim Ah Hang (1894) 2 SSLR 80-
agreement to lend money for the purpose of running a
brothel. Held: object was immoral.
• See also Pearce v Brooks (1866) – an agreement to hire a
coach to the D, a prostitute, knowing that she shall use it for
her trade. Held: immoral object
Illegal Agreements under s 24
• Situations where consideration & object is
unlawful – s 24: if
(a) agreement forbidden by law;
(b) Agreement which, if permitted would defeat
any law;
(c) It is fraudulent;
(d) It involves/implies injury to the
person/property of another; or
(e) The court regards it is as immoral, or opposed
to public policy.
Agreement prohibited/forbidden by law

• S 24(a) - when either the consideration or the

object of the agreement is to do an act
forbidden by the law
• Eg: illegal gambling, assignment of rights
under a licence which is prohibited by the
statute
• Yango Pastoral Co Pte Ltd v First Chicago Australia Ltd
(1978)
Gibbs ACJ suggested there were four situations in which a
statute may render a contract illegal
i) The contract may require something which is forbidden by
the statute;
ii) The contract may be of a type that the statute expressly
and impliedly prohibits;
iii) The contract, though lawful prima facie, may have been
made in order to effect a purpose which the statute renders
unlawful, and
iv) The contract, although lawful according to its own terms,
may be performed in a manner which the statute prohibits.
• Thus, Test to determine if an agreement is forbidden
by law ------ If the statute prohibits the agreement
• Pet Far Eastern (M) Sdn Bhd v Tay Young Huat
[1999] – Msian law does not recognise a
gambling contract.
Any consideration paid for gambling activities
contravenes the Common Gaming Houses Act

1953 and Betting Act 1953.

• Sababumi (Sandakan) Sdn Bhd v Datuk Yap Pak Leong [1998]
3 MLJ 151 – agreement is only void for illegality if the statute
prohibits the act which the parties contracted to do and not
whether the statute prohibits the contract or the making of
the contract in question by the parties.
Issue: whether the agreement was void on ground of illegality.
F. Ct – the illegal/prohibited act was a breach of Condition 23
of the Federal licence, which prohibited the assignment of
rights. Thus, the agreement that assigned rights of the club
(granted by the federal licence) amounted to a contract to do
an act forbidden/prohibted by s 24(a). The agreement was
illegal and thus void.
* Agreement was not void ab initio. Issue of illegality came
only after the 1992 Federal licence was implied into the
agreement.
• Haji Hamid bin Ariffin v Ahmad bin Mahmud [1976] 2
MLJ 79 – sale of Malay Reservation Land to a Siamese
lady.
Held: the sale was void ab initio because s 6(1) of the
Kedah Malay Reservation Enactment (No 63) prohibits
sale to a non –Malay.
- The statute prohibits the act of selling the reserved land
to non-Malay.
- See also Tan Chee Hoe v Code Focus Sdn Bhd [2014] –
sale of total issued and paid up sharesof the company
contravened s 132C Companies Act 1965 which prohibits
the sale of co’s property without obtaining approval by
the company in a general meeting. (P – buyer, D –
vendor)
In Chung Khiaw Bank Ltd v Hotel Rasa Sayang
Sdn Bhd [1990]
• Saving clause – Although a statute may
expressly/impliedly prohibit the entering into
a contract in contravention of the statute, yet
the same statute may provide a ‘saving’ in that
despite the contravention, the contract will be
valid and enforceable.
 In short

• To decide whether s. 24(a) makes a contract illegal

and unenforceable in connection with a statute,
one must find out first if the statute prohibits or
forbids the act which the parties have contracted
to do and not whether the statute prohibits the
contract or the making of the contract in question
(Whether the contract is entered into with the
object of committing an illegal act i.e. the act is
forbidden by the statute)
 s 24(b) -Agreement, if permitted, it would defeat any law

- Agreement if permitted would defeat the

intention/purpose of the statute
- Qs must be answered: If the agreement was
‘designed’ to defeat any law?
- Must be a nexus between the contract and the
statute in question
- Need to construe and interpret the contract to
look at the intention of the parties.
• Hee Cheng v Krishnan [1955] MLJ 103
- by a sale and purchase agreement, the P sold his house
built upon a piece of land in respect of which he was the
holder of TOL to the D. The D refused to perform the
agreement and the P claimed SP, or damages for the D’s
breach of contract.
- Held: the agreement was an attempt to sell and to
purchase the P’s rights under the TOL. This is contrary to
rule 41 of the Land Rules 1930 which prohibits transfer of
license for the TOL.
- The agreement – void under s 24(b) as being of such a
nature that, if permitted, would defeat the provisions of
any law.
- Also void under s 24(a)
• Hopewell Construction Co Ltd v Eastern &
Oriental Hotel (1951) Sdn Bhd [1988] 2 MLJ 621

- D relied on s 24(b) to argue the contract was void

because the P (a foreign co) did not register itself with
the ROC prior to entering into the contract and thus
breach s 332(1) CA 1965.
- Held: CA 1965 did not prohibit the making of contract
in question. The Act did not say that companies must
register with the ROC first before entering into any
contracts.
- Contract was valid and enforceable.
• Lim Kar Bee v Duofortis Properties (M) Sdn Bhd [1992]
- An agreement was entered for the sale n purchase of a
land. A trust deed was made as a scheme to avoid paying
estate duty.
- Fed Ct –the real test to be applied was whether the
primary purpose of the transaction is to avoid tax. If it is, it
is illegal purpose and if permitted, such agreement would
defeat the tax law in question (Estate Duty Enactment
1941).
- From the evidence, the primary purpose of the transaction
was to avoid tax payable under the Enactment.
- The agreement and the trust deed were illegal.
• Maria Tunku Sabri v Datuk Wan Johani bin Wan Hussin [2011]
7 MLJ 419
- D entered into an agreement to marry the P. Breach of
promise by the D and both later entered into a settlement
agreement.
- Contract- void as s 14(1) Islamic Family Law (Federal
Territories) Act 1984 expressly prohibits a married woman,
during the subsistence of her marriage, to marry another man.
- The agreement to marry was illegal because to permit it, it
would defeat 1984 Act.
- The settlement agreement was also illegal because the
primary purpose was to grant a remedy to the P as a result of
D’s breach. To permit it would mean the court recognised the
act of parties to do an unlawful act and amounted to enforcing
a contract which is expressly prohibited by the law.
• See also Menaka v Lum Kum Chum [1977] –
contravened Moneylenders Ordinance 1951
• Nafsiah v Abdul Majid [1969] 2 MLJ 175
The D, a married man agreed to marry the P. Later
refused to marry her. The P sued him for breach of
promise to marry. D argued that the promise was
against the public policy as he was already married
and the P knew it.
Held: did not invalidate the contract as the D under
Muslim law can marry more than one wife
*** The word ‘law’ in s 24(a) and (b) may include
other law. Not limited to statutory law only.
 S 24(c) - Contracts involving fraud and
causing injury
• covers agreements that are fraudulent.
• Datuk Jaginder Singh v Tara Rajaratnam
[1983] 2 MLJ 196 – the appellants obtained
possession of the respondent’s property by
fraud.
• Contract was illegal and void under s 24(c)
• Amman Singh v Vasudevan [1973]
- P advanced $10,000 to a company where D was the Managing
Director, and in consideration for the loan, the D agreed to pay
the P, 20 cents on every ton of timber and other produce
extracted from certain forest lands (which the co were
sublicensees)
- A petition was presented for the winding up o the co. An
agreement was entered into between P and D where in
consideration for the P not to support the petition, D would
make payment of $10000 to P.
- D gave a cheque of $5000 as part payment of the sum $10000.
Cheque was dishonoured and P sued for breach of contract.
- Held: agreement was an attempt to defraud the other creditors
in the winding up petition. Consideration was unlawful.
S 24(d) – Agreement that involve or imply injury
to the person /property of another
• Injury – criminal or wrongful harm
• Syed Ahamed b Mohammed Alhabshee v
Puteh bte Sabtu (1922) – the sale of land
belonging to a minor was held to be void as it
was detrimental to the interests of the minor
as it would be an agreement which involved
injury to the property of another.
 S 24(e) - Agreements that are immoral &
against public policy
• S 24(e) – immoral or as opposed to public
policy.
• Aroomoogum Chitty v Lim Ah Hang (1894) 2
SSLR 80- agreement to lend money for the
purpose of running a brothel. Held: object was
immoral.
• See also Pearce v Brooks (1866).
• The scope of immoral is wide and is not
limited to sexual immorality.
• Position in Malaysia is different compared to
England. CL – immoral = sexual immorality.
• What is immoral = local context
• See Tengku Abdullah ibni Sultan Abu Bakar v
Mohd Latiff bin Shah Mohd [1996] 2 MLJ 265
Oppose Public Policy?
• Contracts that tend to bring about state of
affairs which is regarded by law as “harmful” to
society.
• Eg: statutes related to customs and excise, good
government, public health, morality or welfare,
safety, sexually immoral, contract to commit
crime, tort or fraud, injurious to family life, etc.
• Merong Mahawangsa Sdn Bhd v Dato’ Shazryl
Eskay bin Abdullah [2015] – Fed Ct : The scope
of public policy is not static.
Datuk Ong Kee Hui v Sinyium Anak Mutit (1983)
1 MLJ 36
- Agreement between the defendant and the party
SUPP whereby in consideration of the party chose
him as a candidate and bearing all expenses for his
election, he promised that in the event of his being
successfully elected, he would give all his
parliamentary remuneration to the party and to
forfeit his seat in the Dewan Rakyat should he do any
act which would be contrary to the interest of the
party.
• Held: agreement was illegal. Tendency to injure
the public service.
• Why: to forfeit his remuneration is against
public policy as it would be hard for him to
function effectively as a member w/o financial
worries.
• Seat in Dewan Rakyat – elected by the people.
The elected candidate must be free to act in
accordance with his independent judgment.
Any agreement to deprives him of his
independence is violating public policy.
• Other e.g agreement against public policy -
Agreement to defeat revenue laws of the country.
• Eg ; sale price of land was agreed, insertion of a false
figure in the SnP agreement (to avoid payment of
high stamp duty)
- Amalgamated Steel Mills Bhd v Ingeback (M) Sdn
Bhd (1990)
- Harun Bin Taib v Khor Peng Song (1991)
- Thong Foo Ching v Shigenori Ono [1998] 4 MLJ 585
 WAGERING CONTRACTS – s 31
• Wagering is void under common law position
• Section 31 Contract Act stated “Agreement by way of
wager void.
Pet Far Eastern (M) Sdn Bhd v Tay Young Huat & Ors

• Exceptions to the licensed gambling:

Lottery tickets eg Magnum 4D
Horse Racing (betting and punting)
Licensed Casino eg Genting Highland
 Remedy of Restitution – s 66
• S 66 – agreements that are discovered to be
void or when a contract becomes void, the
person who received any kind of advantage
when being under the agreement or contract
is compelled to the restoration or
compensation for it, to the person from whom
he received it.
• agreements that are discovered to be void?
Fed Ct in Yeep Mooi v Chu Chin Chua [1981]
- An agreement discovered to be void‟ does not mean
that the contract is void on discovery or void because of
discovery of illegality. It means what it says, in that the
contract was void ab initio without the parties at the
time being aware of the true legal position. It is only later
that the contract is found to be void
Ahmad bin Udoh v Ng Aik Chong [1970] - A person who
was not aware with the illegality at the time the contract
is entered has the right to be compensated or the parties
that received benefits have to restore it.
Thus if the party(ies) aware of the illegality when they
entered into a contract, s66 cannot be invoked.
Badiaddin case – s 66 cannot be invoked against TP.
S 27 - Restraint of marriage
agreement

• Every agreement in restraint of the marriage of

any person, other than a minor during his or her
minority, is void.
 s 28 - Restraint of trade, business
& employment agreements
Scenario A
• A will not use his/her expertise to carry on/
conduct/be interested in a similar business within
defined local limit
Scenario B
• In a partnership business (that is about to be
dissolved/terminated with official ending), Partner A
agrees with Partner B that Partner A will not carry
on a similar business within defined local limits.
Scenario C
• the partners agree with one another that each
of them will not carry on/be interested in
Where Partners A, B, and C have agreed to
form a partnership business and it is unlikely
for the partnership business to be dissolved/
terminated in the near future, each of a
similar business for the sake of flourishing the
former’s partnership business.
 What
• A contract in restraint of trade is one which a
party agrees with any other party to restrict
his liberty to carry on trade, business or
profession in such manner as he chooses……”.
Petrofina (Gt. Britain) Ltd v Martin And
Another [1966] 1 All ER 126
• Common issue: is whether a clause that (even though it was
agreed between the parties) restricts a trade/restricts a
person’s freewill from earning a livelihood he/she chooses
(a.k.a restrictive clause) can be enforced by the Malaysian
courts?
• Answer: Prima facie - No.
• Why?
• S28 - Every agreement by which anyone is restrained from
exercising a lawful profession, trade or business of any kind,
is to that extent void.
* Not void in toto – severable!

- The intention of section 28 is to promote free trade, anti

competition, and free movement of labour. 
• Wrigglesworth v Wilson Anthony [1964] 30 MLJ 269
: except in respect of the three exceptions as
provided in section 28 of the Act, every agreement
by which anyone is restrained from exercising a
lawful profession is to that extent void.
• Polygram Records Sdn Bhd v The Search & 5 Ors
[1994]: “any clause which seeks to prohibits the
defendants from making any recordings after the
expiry of the contract becomes an unlawful restrain
of trade and is void under section 28.
• See also  Stamford College Group Sdn Bhd v Raja
Abdullah bin Raja Othman (1991)
Wrigglesworth

• The defendant, an advocate and solicitor, entered into an agreement

of service with the plaintiff’s legal firm. Clause 8 of the said
agreement stipulated that the defendant would not for a period of
two years after the termination of his engagement by the plaintiff
practise as or carry on the business or profession of an advocate and
solicitor within a radius of five miles from Kota Bharu town without
first obtaining the written consent of the plaintiff. Such written
consent was not given by plaintiff. On 7 December 1963 the plaintiff
agreed to discharge the defendant from the terms and obligations of
the said agreement with effect from 31 December 1963. The plaintiff
claimed an injunction to restrain the defendant from practicing or
carrying business or profession of an advocate and solicitor within a
radius of five miles from Kota Bharu, Kelantan until 31 December
1965.
• Held - that the agreement was void under Section 28 of the Contract
Act and the distance and place of the restraint are irrelevant.
CF : Exclusive service contract (Solus Agreement)

Polygram Records Sdn Bhd v The Search & 5 others

• Operates during the period of the employment contract, ie
when the employee is bound to serve the employer
exclusively.
• Such covenants are not regarded as restraint of trade, hence
not caught by S.28.

The covenant whereby the Defendant undertook to provide

exclusive recording rights to the plaintiff during the currency
of their recording record is not a covenant in ROT and is
therefore not rendered be void under S.28 of the CA. 
The Court has stated
“An analysis of these cases indicates that the
English courts have considered the doctrine of
restraint of trade in two different circumstances:
(a) restrictions which are imposed to apply after
the expiration of the contract; and (b) restriction
imposed during the currency of the contract …”.
Not all clauses / agreements restricting the exercise of a trade will be deemed a restraint of trade clause.

• 1 QS: Does the clause therein is restraining a party’s trade OR merely restricting the
manner of the exercise of said trade. 

• Thorne J in The Hua Khiow Steamship Co. Ltd v Chop Guan Hin [1930] 1 MC
175 held in the event a clause / agreement is merely restricting the manner of the
exercise of a trade, such clause would not be rendered void under section 28.
“…He may trade even though by contract he has bound
himself to trade in a particular manner.”

- a provision imposing a penalty on traders using the plaintiff’s services if they also
shipped their goods with a competitor, was held not to be in restraint of trade because
the court held that a restriction per se is not void if its prevents a party exercising his
business, provided the restriction merely stipulates that he should exercise it in a
particular manner.

See also Polygram Record v The Search – solus agreement.

2qs: does the clause falls under one of the Exceptions (under s 28)?

• Exception 1 – One who sells the goodwill of a business may agree

with the buyer to refrain carrying on a similar business, within
specified local limits, so long as the buyer, or any person deriving title
to the goodwill from him, carries on a like business therein: Provided
that such limits appear to the court reasonable, regard being had to
the nature of the business.
• Exception 2 – Partners may, upon or in anticipation of a dissolution of
the partnership, agree that some or all of them will not carry on a
business similar to that of the partnership within such local limits as
are referred to in exception 1.
• Exception 3 – Partners may agree that some one or all of them will
not carry on any business, other than that of the partnership, during
the continuance of the partnership.
 whether the exception applies
• Exception 1
- Contract between seller/buyer of a business (the value of
the business’ goodwill is generally be included in the sale
price)
- Goodwill is the intangible value of a business such as its
reputation, branding, and customer loyalty, and other value
that makes the business. It is what makes the purchase price
of business higher than just the fair market value.
- Eg ; if a business has an asking price of RM200,000, has
assets of RM100,000 and liabilities of RM50,000.
Goodwill = Price – (Assets + Liabilities)
Goodwill = RM200,000 – (100,000 + 50,000)
In this case, the goodwill is valued at RM50,000.
• Exception 2
Nagadevan a/l Mahalingam v Millennium Medicare
Services [2007]
i) Whether the partnership in question existed before
the execution of the clause / agreement; 
ii) Whether the clause / agreement was executed in
anticipation of the dissolution of said partnership; and
iii) Whether the party involved was a partner at the
time of the execution of the dissolution of said
partnership.
• Nagadevan a/l Mahalingam v Millennium Medicare
Services [2007]
• “No partner shall without the consent of Managing
Partner set up any medical practice within three (3) years
after ceasing to be a partner within a radius of 15 KM
from any partnership clinic as medical practitioner either
by himself or as a partner or employee of any person or
company.”
• The appellant resigned with 3 months notice. Before the
expiry of the 3 months, he left the Respondent and
practiced as a medical practitioner at Klinik Medic Care
which was within the fifteen-kilometers radius from one
of the respondent’s clinic.
• Exception 3 :
- Unlike Exception 1 and 2, Exception 3 provides
that a non-compete clause / agreement shall be
enforceable during the contractual period
 The principle of Reasonableness
• CL
• QS: Apply in Msia?
• See exception 1- it is applicable to the sale of a
goodwill of business enters into covenant with
the buyer not to carry on similar business.
• Nordenfelt v Maxim Nordenfelt Guns & Ammunition Company; HL 1894

- Nordenfelt, a swedish who was in the business of making and inventing guns and
ammunition, sold his business to Maxim (company in England) for almost
£300,000. The contract of sale contained a covenant that Nordenfelt would not, for
a quarter of a century,
'engage … either directly or indirectly in the trade or business of a manufacture
of guns, gun mountings or carriages, gun powder explosives or ammunition, or 
in any business competing or liable to compete in any way with that for the time
being carried on by the company ‘.
- The contract, however, permitted Nordenfelt to deal in explosives other than
gunpowder, in torpedoes or submarine boats and in metal castings or forgings.
- After some years, Nordenfelt entered into a business with a competitor dealing in
guns and ammunition. Maxim sought to stop him from doing this.
HL held: the 1st ROT clause – valid
2nd ROT clause - void
Reasonable if:
• the party imposing the restraint has a
legitimate interest to protect;
• and the restraint is reasonable in the context
of protecting that interest; and
• the restraint is not otherwise contrary to the
public interest.
RoT is justified if it is reasonable having
regards of the interest of party and public.
Held:
The court severed the restraint of trade covenant. It held that the italicised
words (in any business competing or liable to compete in any way with that for
the time being carried on by the company’)were unreasonable (thus void)
therefore, unenforceable because they extended protection to the company for
its future business activities and were not confined to the company's business
as it was at the time of its sale.
The remainder of the covenant in restraint of trade (Nordenfelt would not, for a
quarter of a century, 'engage … either directly or indirectly in the trade or
business of a manufacture of guns, gun mountings or carriages, gun powder
explosives or ammunition), the court held, was reasonable between the
parties, although it covered a wide area, i) firstly, because Nordenfelt received a
large sum of money,
ii) secondly, because Nordenfelt reserved for himself his inventive and
manufacturing skills. (ie Maxim have legitimate interest that must be
protected),
Finally, it was not contrary to public policy since Maxim was an English company
who would be making guns and ammunition for foreign territories, thus
benefitted/contributed to England’s economy.
• The court needs to consider:
i) the length of time for which it will operate;
ii) the geographical area which it will cover;
iii) the scope of the restraint (that is, the range
of activities covered)
• Eg: if a business is sold in one town, a
restriction preventing the opening of a similar
business anywhere in the country would be
unlikely to be regarded as unreasonable. – too
wide
• In Mason v Provident Clothing Co, a canvasser
who had been employed to sell clothes in
Islington was restrained from entering into
similar business within 25 miles of London.
This was held to be too wide
• The type of activity (scope of business) restrained must
also be related to the interest being protected.
• A clause restraining someone who had been employed as
a chiropodist from working as a hairdresser would be
unlikely to be regarded as reasonable.
• A baker cannot restrain his employee, who was engaged to
sell bread, from starting a restaurant business, even
though the baker himself presently runs one or may do so
in the future (Bromley v Smith [1909] 2 KB 235).
• The covenant restraining the employee from selling 'milk
or dairy produce' not to include his employment with a
grocer who sold butter and cheese (Home Counties Dairies
Ltd v Skilton [1970] 1 WLR 526)
• Qs: what is the legitimate interest that party
must protect? Whether the party has one?
• Eg : Sale of goodwill – Buyer – legitimate
interest? Money invested?
• Partnership – existing customer? Confidential
info? Business connection? Trade secret?
Interest of Buyer?
• The seller’s ‘know how’, client base and reputation in the market
area collectively form part of the business goodwill, which is a
very important intangible asset as it represents a portion of the
business’ value that can’t be attributed to any of its other assets.
• In other words, it’s a commercial reality that a business’
goodwill represents an immaterial property right that’s worthy
of protection. Which leads us to the key purpose of a restraint of
trade provision in the sale of a business: to protect its so-
called goodwill.
• Also, any new purchaser of a business requires the security of
knowing that the seller (who is equipped with the experience,
contacts and ‘reputation’) won’t initially go on to compete with
his or her former business. This initial time period will be
determined so as to allow the new owner to (re-)establish the
business in the market.
Interest of the Public?
• relation to a restraint on the work of a leading
artist, playwright, doctor or scientist, whose
work might well be for the public benefit.
• So does for type of business. Whether to
restraint the D from engaging into that type of
business affects the public choice/option?
Lead to monopoly?
• See Thomas Cowan Co Ltd v Orme [1961]
• In Smile Inc Dental Surgeons Pte Ltd v Lui Andrew Stewart
[2011] SGHC 241, the clause in question was also found to be
too wide and, hence, unreasonable.
• The Singapore High Court noted that the restraint was not
limited to the clinic at which the employee worked, but
included all other clinics set up by the company. It would cover
all of the company’s patients even if the employee had not
been involved in their treatment.
• There was also no time-limit on the period of restriction. All
these suggested that, over and above protecting the company’s
customer base, the clause was intended to prevent the
employee from ever competing with the company. This went
further than what could be legitimately protected and the court
held the clause to be void as being in restraint of trade.
Thomas Cowan Co Ltd v Orme [1961]

D entered into a contract of service with the P
who were carrying on business as White Ant and General Pest Exterminators &Fumiga
tors. He covenanted that, on leaving the P’s employment, he would not "carry on the 
business of White Ant Exterminator or Fumigator anywhere in the Island of Singapore 
either by himself or in partnership with others nor shall he take employment with any 
person, firm or corporation carrying on the business of White Ant Exterminators or Fu
migators or any such similar business until the period of three years has expired". 
After leaving the plaintiffs` employment, the defendant became a director in the Fumi
gation & Pest Control Co Ltd, a company carrying on business as White Ant and Gener
al Pest Exterminators and Fumigators. The P brought action to restrain the D
from being in breach of the above covenant.
Held:
Though the covenant was reasonably necessary for the protection of the Ps` business 
with regard to space and time as well as the nature of the defendant`s employment, it
 was against public policy since to prevent the defendant from operating as a fumigato
r in Singapore would give the P a virtual monopoly of the business. 
Hence the covenant was void and could not be enforced.
• Burden of proof
i) Covenantee must prove the restraint is
reasonable to protect his interest (legitimacy
of interest)
ii) The party challenging the covenant must
prove the restraint tends to injure the public.
In summary:
- If the clause is ROT clause, s 28 applies - VOID
- If one of the exceptions applies OR the clause
merely restricts the manner of which the trade is
to be carried on, the ROT is valid.
- How to prove the exception applies?
i) Must prove the clause is in either sale of
goodwill contract, or in partnership agreement.
ii) If yes, the restraint must be reasonable .

- Advise accordingly