Contract – Whether the restraint of trade clause in partnersheep agreement contravened s.28 Contracts Act 1950 (“the CA 1950”).

Millennium Medicare Services v Nagadevan Mahalingam [2016] 2 CLJ 36

• The appellant (“MMS”) was running a business of healthcare centres (“the said business”) with the principal place of business at Bandar Baru Permas Jaya, Johor.
• MMS was also running the said business at the branches of Taman Johor Jaya, Ulu Tiram and Jalan Mawar.
• The respondent (“Nagadevan”) was a registered medical practitioner.
• Nagadevan had agreed to join MMS as a partner vide an agreement dated 1.11.2006 (“the said agreement”).
• The partnership was deemed to have commenced on the date of the said agreement.
• Under the said agreement, there was an express term restraining Nagadevan as a partner from practicing as a medical practitioner within the radius of 15km from any of MMS’s branches.
• The restraint would apply to Nagadevan if he practices as a medical practitioner regardless by him setting up any medical practice by himself or as a partner or as an employee.
• The express term also stated that the restraint would be effective for three years from the date Nagadevan had ceased to be a partner of MMS.
• Subsequently, Nagadevan gave a three-month notice to resign and withdrew as a partner of MMS.
• As of April 2007, Nagadevan practised as a medical practitioner at a clinic which was within the radius of 15km from one of the MMS’s branches.
• In consequence, MMS sought from the High Court, inter alia, for an injunction to restrain Nagadevan from practicing within 15km radius from MMS’s branches, and for damages.
• The High Court dismissed MMS’s application, hence the present appeal.

• Section 28 of the CA 1950 is general in its terms and unequivocally declares all agreements in restraint of trade void pro tanto (i.e. as far as it can go), except in the specified exceptions.
• Under the exceptions to s28 of the CA 1950, an agreement in restraint of trade could only be imposed: –
  1. upon the dissolution of a partnership; and
  2. in anticipation of a dissolution of a partnership.
• However, the said agreement did not contain a specific clause which dealt with the dissolution of the partnership practice.
• The said agreement only governed the termination of the partnership agreement between MMS and Nagadevan but not the dissolution of the partnership as a whole.
• Furthermore, there was no evidence to show that the partnership agreement was made in anticipation of the dissolution of the partnership practice then or in the near future.
• As such, the trial judge was correct to hold that MMS had no authority to restraint Nagadevan from practising within 15km radius from MMS’s branches.