Contractual clauses restricting employment of third parties, such as spouses, are void under Section 28 of the Contracts Act 1950.

(Preliminary Issue Before Trial)

A. Introduction

[1] This is the decision of this Court on the issue of law that appears in the pleaded case of the parties that should be determined before this matter proceeds to be heard at trial on 8 December 2025 to 10 December 2025.

[2] I have exercised the powers reposed in O 33 r 2 of the Rules of Court 2012. I believe the first issue that must be determined is whether the clause relied on by the Defendant is valid in law and whether it is contrary to ss 28 and 24 of the Contracts Act 1950 .

B. Decision Of Court

[3] The clause that is in question that allegedly appears in the Agency Compensation Handbook Version 7.4 and forms part of the Contract between the Plaintiff and the Defendant, is as follows:

"2.2.6. In the event that the Life Planner's spouse is an agent of another insurance company/Takaful operator, this will result in termination of the Life Planner's contract unless the Life Planner's spouse has terminated the contract with the other insurance company/Takaful operator."

[4] Essentially, this term restricts the right of the spouse of an agent of the insurance company from taking any form of employment with another insurance company or takaful operator at any material time. If the spouse of an agent takes up such employment, then the agent contract with the Defendant will be automatically terminated.

[5] This therefore restrains the right of the spouse of any agent of the Defendant from acting as agents of any other insurance company or takaful operator in Malaysia.

[6] I find that this restriction is contrary to s 28 of the Contracts Act 1950 which states:

"Every agreement by which anyone is restrained from exercising a lawful profession, trade, or business of any kind, is to that extent void."

[7] The Defendants argue that the above clause does not fall foul of s 28 of the Contracts Act 1950 and relies on the following excerpts from the leading case on this area of Visu Sinnadurai J in Polygram Records Sdn Bhd v. Hillary Ang & 4 Ors (Collectively Known As The Search ) & Anor 1994 MarsdenLR 146 ; 1994 MarsdenLR 2001 ; 1994 MarsdenLR 1638 ; :

"....To otherwise hold that every contract which contains a covenant restricting a party from practising his trade or profession, both during the currency of the employment, and the post-employment period, as a contract in restraint of trade under s 28, would have far-reaching consequences on normal commercial contracts, such as the present one.

...

Section 28 is only applicable in cases where a person is restrained from carrying on his trade or profession in the traditional sense of the doctrine, that is, in the post-contract period and not during the currency of the contract. In this regard, I hold that the English cases which have held such covenants to be in restraint of trade are distinguishable, as the law applied by the English courts differs to that which is applicable under the Act in Malaysia."

[8] The Defendant suggests that s 28 of the Contracts Act 1950 is only applicable where the restriction arises after the end of the contract and that the restriction is imposed against the former employer from taking a post or employment in a competing company or from undertaking his trade thereafter.

[9] I agree with the Defendant's argument on the above issue that during the course of the employment contract or partnership surely the restriction of taking up another employment is a valid clause. That is not prohibited by s 28 of the Contracts Act 1950 . As explained by Visu Sinnadurai J, an employer is entitle