WINTA INVESTMENT (HONG KONG) LTD v. NG KAM CHIT

DCCJ 1620/2012

[2018] HKDC 342

IN THE DISTRICT COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

CIVIL ACTION NO 1620 OF 2012

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JUDGMENT

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Introduction

1.  This is an action to enforce a non-solicitation clause in an employment contract.

2.  The plaintiff was the employer.  Its main business is the sale of edible ice cubes to restaurants, cafes, caterers and other end users under the brand of “Shiu Pong Ice”.  Its history can be traced back to the early 1970’s when the late Mr Shiu Pong founded “Shiu Pong Ice Company”. 

3.  The defendant was in the plaintiff’s employment for two periods, namely from October 2007 to November 2010 and then from January 2011 to January 2012.  He worked as a delivery worker (跟車送貨員).  His job duty was to deliver (mainly) edible ice cubes, packed in bags, to restaurants and cafes according to the daily delivery orders.  The plaintiff maintains its own fleet of delivery trucks.  The defendant would partner with a driver in his delivery rounds.  Hence the job description in Chinese “跟車”. 

4.  Before he resigned and left the plaintiff in January 2012, the defendant was earning a monthly income of about $12,000 to $15,000.

5.  The defendant joined Noble Gainer Ltd on 15 February 2012. His title was “Helper & Sales”.  Noble Gainer Ltd is an affiliate company of The Hong Kong Ice & Cold Storage Company Ltd (“HKICS”). 

6.  HKICS and its related companies are in the business of ice manufacturing and provision of cold storage.   From around April 2011 onwards, HKICS branched out into the retail market of edible ice cubes and began to sell directly to end customers.  It therefore became a competitor of Shiu Pong Ice in this area. The plaintiff says that high salaries were offered to “experienced’ drivers and delivery workers in the edible ice business.  Noble Gain recruited a number of employees from the plaintiff in early 2012.  The defendant was one of them.

7.  The plaintiff commenced the present action against the defendant in May 2012, claiming that the latter was in breach of Clause 9 of his employment contract. (In this action, we are concerned with the defendant’s second period of employment.)

8.  Clause 9 read:

“... 僱員願意及保證在本公司服務期間或離職後，拾個月內不得沿用本公司之商業客戶資料在本港地區相同類型之雪粒及製冰公司任職（包括：加盟、獨資經營、受僱、推銷、送貨等）；或做出損害、出賣、竊取、洩漏公司客戶名單資料等保密信息，干擾及兜攬本公司現有客戶取貨等，如違約並願賠償本公司一切損失，並負上違反雙方簽訂之僱傭合約之法律賠償責任。”

9.  Parties were not able to agree on the English translation.  However, nothing turns on the construction of the clause.  I adopt the defendant’s version:

“... employee is willing and guarantees that during the employment with the company or after leaving employment, within ten months he cannot use company’s commercial customers information within Hong Kong area for similar ice cube and manufacture company to engage (including joining others, sole trading, being employed, selling, and delivering goods etc.); or cause harm, betray, or steal or leak the company’s customer list etc. being confidential information, interfere and solicit the company’s existing customers from acquiring goods etc., if in breach of agreement agrees to compensate company all losses, and responsible for legal compensation responsibility under the employment agreement signed by both parties.” (italics added)

10.  In its amended statement of claim, the plaintiff alleges that the defendant had committed three breaches –  joining a competitor, making use of the plaintiff’s confidential information and soliciting the plaintiff’s customers.  Mr Francis Yip, who appeared for the plaintiff, confirmed in his opening submissions that the plaintiff now relies only on the breach of solicitation and not the others. Accordingly, we are here only concerned with the italicised part of clause 9 and whether the defendant was in breach of that provision on the facts.  Parties have agreed in opening that the provision should be construed to mean that the defendant should not solicit or interfere with the plaintiff’s existing customers within 10 months after his employment ceases, whether with or without the use of the plaintiff’s confidential information.

11.  In gist, the plaintiff’s factual case is that when employed by Noble Gainer, the defendant had been soliciting the plaintiff’s customers to purchase ice cubes at a reduced price from him and asking the customers not to buy from the plaintiff.  This had caused substantial loss of sales to the plaintiff.  It now claims damages of over $450,000.

12.  At the trial, the plaintiff called two witnesses – Mr Shiu Wing Pan and Mr Tsang Chiu Wah.  Shiu is a director of the plaintiff.  His father was the late Mr Shiu Pong.  Tsang is a senior manager of the plaintiff.  The defendant testified at trial and Mr Lee Chun Kit was tendered by the defendant for cross-examination on two documents signed by him in his capacity as the deputy general manager of Noble Gainer.

The plaintiff’s case

13.  Shiu Pong Ice Company was initially carrying on the business of retail sale of ice. At that time, it purchased ice from HKICS (which until around 2004 was part of the Dairy Farm Group) and sold to its retail customers.  From the early 1980’s, it commenced manufacturing edible ice cubes on its own and selling them under the brand name of “Shiu Pong Ice”.  The manufacturing and retail sale business was taken over by Shiu Pong Ice (Cube Ice & Ice Carving) Ltd (“SPI”) in the late 1980’s.  In 2002, the plaintiff was formed to take over the retail sale business. 

14.  The plaintiff’s case is that before late 2011, HKICS’s main business was the supply of ice to various industries and the provision of cold storage facilities and services. 

15.  As far as the manufacture of edible ice cubes was concerned, HKICS had a market share of only about 10% whereas the main market players were SPI, Turbo Ice Company Ltd and Tsit On Ice Company Ltd.  The three companies together accounted for more than 85% of the edible ice cubes manufactured in Hong Kong.

16.  As far as the retail sale of edible ice cubes to end users (such as restaurants and cafes) was concerned, the three companies together accounted for more than 90% of the sales.  In cross-examination, Shiu said that by 2011, as the three companies had been in the retail market for 10 to 20 years, each had its own regular customer base and aggressive customer poaching between competitors was not common.  At that time, HKICS was not in the retail business.  It did not sell edible ice to retail customers directly.

17.  In about 2010, there was rumour in the market that HKICS would branch out into the retail business and would procure staff of the main market players, ie SPI, Turbo Ice and Tsit On, to join its business by offering high salary so as to acquire from the staff confidential customer information.

18.  In order to protect its interest, the plaintiff has since adopted a practice that every employee engaged in the sale of edible ice cubes would have to sign an employment contract on a yearly basis and in April each year.  The contract would include the restrictive provision as contained in clause 9, which each employee was to confirm every year.  The new contract would also contain the updated basic salary and commission structure for the coming year.

19.  That explains why there were two employment contracts in respect of the defendant’s second employment with the plaintiff.  The first was dated 21 January 2011 and was signed when the defendant re-joined the plaintiff.  Then there was the second employment contract signed on and dated 28 April 2011, in accordance with the plaintiff’s practice.

20.  It is the plaintiff’s case that when the employment contract was signed, it had been impressed upon the defendant of the confidentiality of the information of the company.  More specifically, Tsang explained clause 9 to the defendant, and gave him an original of the contract.

21.  The plaintiff says that it has a wide customer base.  Its existing and potential customers are located in all areas in Hong Kong Island, Kowloon and the New Territories.  The plaintiff has divided the areas into 24 routes.

22.  In line with industry practice, the plaintiff organises its delivery staff into working units.  A working unit comprises a driver and a delivery worker and each unit is assigned to serve customers located in one of the 24 areas or routes.  Each area is different in terms of its size and the number of customers or potential customers in the area.

23.  The plaintiff stresses that it operates in a competitive market.  It is therefore essential to provide a competitive pricing and an effective service to its customers.  At the same time, it is extremely important to increase market share by requiring its staff to regularly promote its business and solicit potential customers.

24.  The plaintiff gives a general account of how its business operates:

(a)   Some customers would place their orders by telephone in advance of the day of delivery.

(b)   Some other customers would simply ask the staff to fill up their ice cabinets when the delivery truck arrives, without specifying the number of bags required in advance.

(c)   The managers would pay visits to customers (newly opened and existing ones) to promote business.

(d)   The managers would supervise the delivery workers to make the initial delivery to new customers.

(e)   At the beginning of each day, the driver would be given an “order list” (referred to in the evidence as the “menu”) for that day which would set out the names of the customers who had placed an order for the day. 

(f)   For any given day, a working unit would be delivering ice cubes to many customers. In his closing submissions, Mr Yip accepted that the number is possibly “in the high tens”.

25.  The plaintiff says that its delivery staff are therefore given commercially sensitive information relating to the plaintiff’s customers, such as names, addresses, nature of business, consumption patterns, ordering patterns, unit price, the commission rates of the driver and the delivery worker on each bag of ice delivered.  Such information, the plaintiff says, is confidential information and is a valuable asset of the plaintiff’s business.  The intention behind clause 9 is to protect the use and handling of such information.

26.  In Shiu’s witness statement, he claimed that the defendant was employed as delivery worker and salesperson (跟車/送貨推銷員).  In addition to making deliveries, his main responsibility was to promote the sale of edible ice cubes to customers.  The responsibility to sell was also reflected in the salary structure.  Like other delivery workers, the defendant’s monthly salary comprised three parts, one of which was called “commission for promotion of sale of ice cubes or basic commission guarantee” (“雪粒推銷佣金或基本佣金收入保障”).  The defendant was encouraged to market to potential customers.

27.  Tsang said in his witness statement that when the defendant re-joined the plaintiff in January 2011, the defendant worked under his supervision and was assigned mainly to work on the Jordan route in Kowloon.  Sometimes when other delivery workers were on leave, the defendant might be assigned to work as substitute on those routes.  This is slightly different from Shiu’s evidence in re-examination, which is to the effect that the defendant was initially working on a fixed route but later worked as a substitute worker as he was more familiar with the work. 

28.  This is to be further contrasted with Tsang’s own evidence in cross-examination. Contrary to his written statement, he said that the defendant was assigned to work on the Jordan route for about three to four months.  For the rest of his (second) employment, ie since about May 2011, he worked as a substitute delivery worker. And he would work on any of the 24 routes when required.  In fact, it was the defendant who made the application to him to switch to a substitute role as he would earn more income being a substitute worker.

29.  In about late 2011, HKICS commenced its new business for the retail sale of edible ice cubes.  It contacted some of the employees of the plaintiff and its associate companies and asked them to join HKICS.  A number of them did so. The defendant was one of them.

30.  The plaintiff’s case is that after the defendant joined Noble Gainer, he solicited business from, and interfered with, at least 13 of its customers. 

31.  The material evidence in support of this is in Shiu’s and Tsang’s witness statements.

32.  Shiu said that around one or two weeks after the defendant resigned, he “received reports from existing customers and other employees stating that the Defendant was seen soliciting the customers of the Plaintiff in the Designated Area”, the “Designated Area” being the areas previously designated to the defendant.  Shiu “further understood from the other employees that the Defendant had … solicited and marketed the edible cube ice bearing the mark of “香港製冰及冷藏 Hong Kong Ice & Cold Store” to the customers of the Plaintiff”.  What the defendant had done was in breach of clause 9.  And he had done so by using commercially sensitive information obtained whilst he was employed by the plaintiff.  Shiu then instructed Tsang to go to the “Designated Area” and keep an eye on the activities of the defendant.

33.  Tsang said in his witness statement:

“20. Soon after the Defendant left on 10^th January 2012 and in breach of the said Protection Clause as evidenced by the said Clause (9), I saw the Defendant interfering and soliciting the customers of the Plaintiff to purchase the edible ice from HKICS by offering package of edible cube ice at the price varied from HK$3.00 to HK$8.00 per package. I also saw the Defendant delivering edible cube ice of HKICS to the customers of the Plaintiff in the cold storage lorries with the logo of HKICS to the customer of the Plaintiff including but not limited to 班馬線, 新華源, 七喜, 泰樂廚, 新良友, 樂滿, 大富, 金多寶, 潮豐, 禾喜, 英記, 瀛本, 客棧.

21. The Defendant had interfered and solicited most of the existing customers of the Plaintiff who confidential information had been given to the Defendant before 10^th January 2012. In particular, I saw the Defendant visiting the existing customers of the Plaintiff, namely, 班馬線, 新華源, 七喜, 泰樂廚, 新良友, 樂滿, 大富, 金多寶, 潮豐, 禾喜, 英記, 瀛本, 客棧 and other existing customers of the Plaintiff at an earlier time than the Plaintiff’s scheduled time known to the Defendant, offered a much reduced price varied from $3.00 to $8.00 per package of ice and fully filled up the ice cabinet of the customers with HKISC’s ice. Photos showing the activities of the Defendant after termination of the employment with the Plaintiff taken in about late February 2012 and/or March 2012 are annexed herewith as “Annex 4”.” (emphasis added)

34.  In his oral testimony, however, Tsang admitted that he had never seen the defendant walk into any of the 13 restaurants.  He only received complaints from customers. Instead, he revealed for the first time in cross-examination that he personally saw the defendant visit two restaurants called “泰式” and “同心” in Kowloon City (which are not amongst the 13 identified customers).  After the defendant left, Tsang immediately went inside and was told that the defendant had distributed some promotional pamphlets to these two restaurants.

35.  It is worth pointing out here that Tsang was cross-examined on those “Annex 4” photographs and where they had been taken.  I shall have to return to this later.

36.  The plaintiff keeps records of all working units for business purpose and also for the calculation of commissions.  The records would show the number of bags sold and amounts received from the customers on a monthly basis.  Shiu said in his witness statement that the 2011 monthly records show that the 13 customers, as identified in Tsang’s witness statement, were covered by the defendant.  Those records as annexed to his witness statement are in tabular form and show the number of bags sold to the 13 customers by the defendant and the amounts received from each of them on each day of the month, with one page showing one month’s record.  I shall return to these records below and shall refer to them as “the monthly tables relating to the defendant”.

37.  Because of the defendant’s solicitation of its customers, the plaintiff “had no alternative but to reduce price to the relevant customers”: see re-amended reply at para 6.

38.  At that time, the plaintiff’s costs for manufacturing and selling one bag of edible ice cubes was $3.  The price per bag would vary from customer to customer.  (It was not explored at trial how the price for any individual customer would be fixed and why the price would differ from one customer to another.)  In respect of the 13 customers, the average price per bag was $15.4 in 2011.  The plaintiff alleges that for these customers there was a significant drop both in the total number of bags sold and the price per bag during the period from February to November 2012, when compared to the same 10-month period in 2011.   The number of bags sold dropped from around 40,000 bags to around 22,000 bags and the average price per bag was reduced from around $15.4 to around $7.4. 

39.  The plaintiff contends that in 2012 the defendant was offering a very low pricing ranging from $3 to $8 per bag to its customers in order to solicit business from them and that such act has caused the plaintiff to suffer loss.

The defendant’s case

40.  The defendant denies that he had ever been informed of the content of clause 9.  In fact, Tsang stopped him from reading the contract.  At that time, Tsang simply said that if the defendant wanted to carry on working with the plaintiff, he should just sign the contract.  Until these proceedings, he had no knowledge that such clause formed part of his employment contract.

41.  The defendant’s understanding was that generally speaking, a customer would place an order by telephone with the plaintiff’s service team.  Each day, the plaintiff would issue an orders list to the driver and the delivery worker, setting out the names of customers and quantities of ice required.  Apart from such orders list, the defendant was not given any other customer information. 

42.  According to the defendant’s experience and knowledge, the plaintiff did not sign any contract with its customers.  They would place orders when required.  Their demands would fluctuate a lot and would depend on the weather.  He did not consider that there was any special or regular ordering pattern.

43.  During his first employment, the defendant was assigned to work on the airport route, Kwun Tong route and the Hong Kong No 2 route, but not the Jordan route.  During his second employment, he all along worked as a substitute delivery worker.  According to the plaintiff’s instructions, he would stand in for those delivery workers who took leave.  This means that he did not partner with any particular driver, or work on any designated route on a regular basis.  As a full-time substitute worker, he had worked on all the 24 routes, including the Jordan route. 

44.  The defendant describes his daily work routine as follows.  He would make deliveries to the customers’ premises in accordance with the orders list, collect payments and issue handwritten receipts.  His contacts with the customers would be limited to the frontline staff of the customers, such as the cashiers, when he confirmed the number of bags ordered or actually delivered. Apart from that, he would not normally assist customers in taking orders. Occasionally, the customers might contact the driver directly to order ice. 

45.  Being a full-time substitute delivery worker, the defendant did not come into contact with customers in any designated area on a long-term basis and did not have any influence over any customer in respect of placing of orders.  As far as he can recall, he had worked on all the plaintiff’s routes and he estimated that he might have delivered to more than 1,000 customers during his second employment.

46.  In short, the responsibility of the defendant was solely to make deliveries as directed and to collect payment and issue receipts to customers.  Although his monthly salary would include a commission based on the number of bags sold, that did not form the main part of his salary as the commission per bag was very small.  In any event, the plaintiff did not specifically encourage or put pressure on the delivery staff to promote the sale of ice cubes.  The defendant did not feel the need to put in any efforts to promote the plaintiff’s business.

47.  The defendant therefore denies that it was part of his job to promote the business of, or procure orders, for the plaintiff.  The plaintiff had hired other staff for doing this.

48.  When he joined Noble Gainer, he was assigned to be responsible for the Mongkok and Jordan route.  As far as the defendant knows, this route had been set up well before he joined.

49.  As to the 13 customers, the defendant cannot now recall whether they were indeed the plaintiff’s customers or whether he had made deliveries to any of them whilst in the plaintiff’s employment.  The defendant denies that he had ever asked any of these customers not to purchase from the plaintiff or told them that HKICS’s products were much cheaper than the plaintiff’s.  In cross-examination, he said that when employed by Noble Gainer, he did not serve the 13 customers.

50.  The defendant was told by Noble Gainer to distribute business card of HKICS on the way in his delivery rounds.  But this was only a general promotional gesture. Apart from that, the defendant did not have to promote the business of Noble Gainer or HKICS.  If the customers are interested, they could telephone the company.  Apart from handing out business cards, the defendant did not do anything to procure business from customers.

51.  The defendant adduced two letters signed by Lee.  Lee confirmed in the letters that whilst under the employment of Noble Gainer, the main responsibility of the defendant was to distribute edible ice cubes for HKICS.  Lee also confirmed that out of the 13 customers:

(a)   Four of them (七喜, 潮豐, 新良友, 金多寶) had been regular customers of Noble Gainer before the defendant joined Noble Gainer;

(b)   According to computer records, four of them (班馬線, 樂滿, 大富, 瀛本) were never recorded to be customers of Noble Gainer during the defendant’s employment;

(c)   The remaining five became Noble Gainer’s customers after the defendant joined. Three were regular customers (新華源, 泰樂廚, 英記) and two only purchased from Noble Gainer for brief periods (禾喜, 客棧).  But these five customers were not handled by the defendant.

52.  Attached to Lee’s letters were Noble Gainer’s daily order lists at that time and sales records in support of the matters stated above.

53.  In cross-examination, Lee confirmed that HKICS commenced its retail sale business in April 2011.  He frankly said that in order to gain market share and attract customers from other competitors, Noble Gainer was prepared to sell ice cubes at a price which was even lower than the production costs.  Around that time, its production cost was about $5 per bag and Noble Gainer was selling to retail customers at $2 to $3 per bag.  Lee also accepted that at that time Noble Gainer was recruiting experienced delivery staff as they would be better than those who had no experience in delivering ice cubes.  Lee denied that the defendant was instructed to solicit business from the plaintiff’s customers.

54.  In any event, the defendant denies that he would be liable to compensate the plaintiff for its loss of sales in the 10-month period in 2012, when compared to 2011.  There were potentially many factors which would affect the sales volume of the plaintiff, including but not limited to the plaintiff’s own business management and the competition prevailing at that time.  The defendant says that the plaintiff cannot simply blame him for the drop in its sales.

The issues

55.  There are a number of factual disputes.  First, was the defendant made aware of clause 9 when signing the contract in April 2011?  This is not a material matter since the defendant does not take issue with the clause being part of his employment contract.  Secondly, and more importantly, during his second employment, was he working all along as a substitute worker and was it part of his job to promote sale, in addition to making deliveries?  The factual dispute will affect whether the defendant had built up any customer loyalty or connection and this will have a bearing on the enforceability of clause 9.  Thirdly, did the defendant in fact solicit business from the 13 customers, as alleged by the plaintiff, after he joined Noble Gainer? 

56.  The burden is on the plaintiff to establish that such solicitation in fact took place.  If it fails, that would be the end of the matter.  This is because even if the plaintiff had suffered loss of business from the 13 customers, that would have nothing to do with the defendant.

57.  On the other hand, if the plaintiff succeeds on the facts on the issue of solicitation, I shall have to determine the enforceability of the non-solicitation provision in clause 9.  Only if the provision is enforceable can the plaintiff claim loss flowing from such breach.

Factual disputes

58.  The resolution of the factual disputes primarily turns on the credibility of Tsang and the defendant, who have given conflicting accounts of the same events.  My task is to evaluate the competing evidence against the backdrop of undisputed and indisputable facts.  I am to weigh the inherent probabilities of the parties’ cases.  Contemporaneous documents should be given due weight in the assessment exercise.  Most relevant in this case, however, is the internal consistency of the parties’ evidence, especially when the written statements and the oral testimony are reviewed side by side.

59.  What is most striking in this case are the glaring internal inconsistencies within the plaintiff’s evidence.  This has seriously undermined the credibility of its factual case. On the other hand, the evidence of the defendant and Lee is straightforward, consistent and coherent and Lee’s evidence is well supported by contemporaneous documents. I have no hesitation in preferring the defendant’s factual case to the plaintiff’s, where they are in conflict.

60.  There are material discrepancies within Tsang’s evidence, when his witness statements are read in conjunction with his oral testimony.  Some of these discrepancies have been highlighted above. 

61.  First, on the important issue of whether the defendant all along was a full-time substitute worker during his second employment, Tsang had changed his evidence materially – see para 28 above.  In his oral testimony, Tsang volunteered the information that it was the defendant himself who requested to switch to a substitute role three to four months after he re-joined the plaintiff.  Given that Tsang was able to recollect this detail, there is no plausible reason why he would mistakenly state in his witness statement that the defendant was all along working on the Jordan route, only occasionally working as a substitute.  The change of evidence in this regard also casts some doubt on the veracity of the monthly tables relating to the defendant.  There is no noticeable drop in the number of bags of ice delivered to the 13 customers after the defendant became a substitute delivery worker in around May 2011.  This is strange as such drop would have been expected, given that the defendant would be making deliveries on other routes and presumably would be delivering much less ice cubes to the 13 customers.  Mr Yip could not offer any explanation for that in his closing submissions.

62.  Secondly, it is for the plaintiff to adduce evidence to show that the defendant had indeed solicited business from the 13 customers.  This forms the crux of the plaintiff’s case. Yet, as set out in para 34 above, there is a significant contradiction in Tsang’s evidence on this issue.  He said in his written evidence that he personally saw the defendant visiting the 13 customers after he joined Noble Gainer.  However, his oral evidence took a U-turn and he confessed that he had never seen the defendant do so.  The credibility and reliability of Tsang’s evidence is heavily, if not fatally, undermined by such contradiction.

63.  In the same vein, Tsang’s new revelation that he personally saw the defendant walk into two restaurants in Kowloon City ought to be treated with great scepticism.  This evidence was revealed when Tsang was cross-examined on the “Annex 4” photographs.  Tsang initially testified that as instructed by Shiu, he tried to keep an eye on the defendant after he resigned and he saw the defendant only once in Kowloon City in late March 2012.  He then changed his evidence and said that he also saw the defendant working in To Kwa Wan too.  Tsang then confirmed that he took photographs of the defendant in Kowloon City, but not in To Kwa Wan, and that the “Annex 4” photographs were taken by him in Kowloon City.  However, when Mr Lee Tung Ming, counsel for the defendant, pointed out to him that those “Annex 4” photographs in fact show areas in Quarry Bay, Tsang sought to disown the photographs by saying that those photographs were not taken by him.

64.  Tsang’s account of where he had seen the defendant working and the photographs he had taken (or not taken) is so incoherent and inconsistent as to be incomprehensible and thus unreliable.

65.  On the same issue of solicitation, Shiu said he had heard reports from his staff that customers had reported that the defendant had solicited the plaintiff’s customers.  Mr Lee submitted that this is multiple hearsay evidence.  The identity of the customers who made the report to Shiu’s staff is not known.  The identity of the staff who relayed the report to him is also not known.  In the circumstances, very little, if any at all, weight can be attached to the hearsay evidence.  I accept that submission.

66.  In sum, there is no proper evidence at all in support of the plaintiff’s contention that the defendant had solicited business from the 13 customers or other customers of the plaintiff.

67.  Thirdly, in his witness statement, Shiu referred to the defendant’s title as “delivery salesperson” (“跟車/送貨推銷員”) three times.  But this is in fact not the title used in the actual employment documents.  In the defendant’s application form for the job, the title of his position was handwritten to be “delivery worker” (“跟車”).  In a document which was entitled “2011 staff benefit and compensation calculation” and dated the same date of his employment contract, the title of the defendant’s position was typed as “delivery worker” (“跟車送貨員”).  When the discrepancy was put to Shiu, he said that although it was not so written, the staff would have been told during job interviews since the structure of their income was based on basic salary and commission.  Mr Lee submitted that it is futile for the plaintiff to now “crown the delivery helper with the grander and possibly misleading title/job nature of” “delivery salesperson”.  I agree.  The plaintiff’s assertion that one major responsibility of the defendant was to sell ice is not borne out by contemporaneous documents.

68.  In this regard, I accept the defendant’s evidence on the issue of commission.  Objectively speaking, the defendant’s monthly earnings would comprise a commission element. However, he stressed that the commission simply reflected the number of bags actually delivered by him.  (In cross-examination, he described it as “delivered through my hands”.)  And that in turn depended on what had been ordered by the customers.  I accept that the presence of the commission element does not go to support the plaintiff’s contention that one of the main duties of the defendant was to promote business and procure new customers.

69.  In contrast with the plaintiff’s evidence, there is no material inconsistency detected in either the defendant’s or Lee’s evidence.  The contemporaneous documents produced by Lee are objective proof in rebuttal of the plaintiff’s claim of solicitation. There is no reason for me to doubt the veracity of those documents and Lee’s testimony.

70.  For the above reasons, I hold that the defendant’s factual account is a truthful account.  Specifically, I hold that during his second employment, the defendant had all along worked as a substitute delivery worker and it was not part of his duty to promote sale of edible ice cubes to customers.  After he joined Noble Gainer, he did not serve, let alone solicit business from, the 13 customers as alleged by the plaintiff. As the plaintiff fails to prove the act of solicitation, its claim must fail.

Enforceability of the non-solicitation provision

71.  It is therefore not necessary to determine the enforceability of the non-solicitation provision in clause 9.  But as submissions have been made by counsel, I shall address some of the key issues raised.

72.  An employer has no right to be protected against competition per se in his trade or business and an employer must be prepared to encounter competition even at the hands of a former employee.  A covenant in restraint of trade between an employer and an employee is prima facie unenforceable unless the employer seeking to rely on it can show that the clause is reasonable with reference to the interest to be protected and to the public interest.  The burden of demonstrating reasonableness is on the party seeking to enforce it. Furthermore, to be enforceable, the protection must not be excessive whether in terms of duration, scope or geographical restriction: PCCW-HKT Telephone Ltd v Aitken (2009) 12 HKCFAR 114 at para 21; Degreeasia Ltd v Paules Lee Siu Yuk HCA 1686/2006, 25 June 2010 at paras 32-33.  The validity of a restraint covenant is assessed at the time when the contract was made: Chitty on Contracts (32^nd ed) at paras 16-086 and 16-098.

73.  It is generally recognised that the only legitimate interests which, as against a former employee, an employer is entitled to protect are his trade secrets and customer connections to the extent that the employee may have gained influence over the customers so they would be likely to follow the employee to his new employment: Steiner (UK) Ltd v Spray (1 December 1993, unreported); cited in Degreeasia at para 35.  The rationale is that trade secrets and customer connections may properly be regarded as, in a general sense, assets of the business and hence form part of the employer’s property.  It would therefore be unjust to allow the employee to appropriate these assets for his own purposes, even though he might have contributed to its creation.  It is in this sense that trade secrets and customer connections are considered to be “protectable” by way of restraint of trade clauses: Stenhouse Australia Ltd v Phillips [1974] WLR 391 at 400E-F.

74.  The plaintiff’s position, as confirmed in opening, is that it will rely solely on the breach of solicitation and it is Mr Yip’s submission that the fact of solicitation is enough to constitute breach, even without any use of the plaintiff’s confidential information by the defendant: Degreeasia at para 127(2). Accordingly, the focus of parties’ submissions in closing have been the evidential basis of solicitation and the existence of customer connections on the facts of the case.  No detailed analysis has been undertaken on whether, as a matter of law, the plaintiff’s customer information, in particular, the prices paid by its customers per bag of ice, qualify as “trade secrets” or confidential information having the same status.  As I have found against the plaintiff on the facts and its claim must fail accordingly, there is no need for me to make a ruling on this issue.   I shall only deal with the question of whether, on the facts as found, there can be said to be any customer connection which the defendant might possibly have built in his capacity as a delivery worker.  If so, even where the pricing information do not qualify as trade secrets, there would be justification for the plaintiff to rely on the provision, namely for the protection of the customer connection, which was part of its business assets.

75.  In my view, it is clear that there could have been no such customer connection built up by the defendant, as argued by the plaintiff.  The defendant, or any delivery worker in his position, was simply not in a position to gain any meaningful influence over customers or cultivate loyalty among them.

76.  First, edible ice cubes are a commodity.  As far as the evidence reveals, there is no real differentiation between the products themselves, as offered by the competitors.  It would seem that for customers deciding where to source their ice cubes, price would be a key factor.  Shiu stressed in his oral testimony that price is not the only factor but that service (eg, timely delivery) is also important in the customers’ choice.  In any event, there is nothing in the evidence to suggest that any individual delivery worker, such as the defendant, would in any material way influence the customers in their choice of ice cube suppliers such that the customers would follow any individual delivery worker should he leave to work for a new employer.

77.  Secondly, as far as the defendant is concerned, he was a full-time substitute delivery worker. And this was a circumstance existing as at the date of the employment contract signed in April 2011.  On Shiu’s own estimate, the plaintiff had around 2,000 to 3,000 customers in the whole of Hong Kong in about 2011.  During his second employment, the defendant would serve on all 24 routes of the plaintiff.  He said he would have made deliveries to over 1,000 customers of the plaintiff. On any given day, he would be making deliveries to many cafes, restaurants or other outlets, perhaps nearing one hundred.  (Mr Yip accepted in closing that it could be “in the high tens”.)

78.  In the circumstances, it is far-fetched and unrealistic to contend that the defendant could conceivably have built any “relationship” with any of the plaintiff’s customers or cultivated any “loyalty” amongst the plaintiff’s customer base.  At most, he would only have made deliveries to any one customer once in a while.  In short, there would have been only very brief and limited contact between the defendant and the customers.  In the circumstances, there is clearly no “protectable” interest in the form of customer connections which can legitimately form the subject-matter of an enforceable non-solicitation clause.

79.  Mr Yip relied on the English Court of Appeal’s decision in Home Counties Dairies Ltd v Skilton [1970] 1 WLR 526.  But the reliance is misplaced.  The facts of that case are clearly distinguishable from the present one.  This is what Harman LJ said in the first paragraph of his speech:

“The milkman is a familiar figure to all town dwellers. … Nowadays he rides round in what is called a float and delivers his milk …; but he has been throughout the years, one way or the other, a familiar and probably influential character well known to every householder in the road. It is natural in the circumstances that he acquires, usually on behalf of a master, a clientele along his round who, if he is agreeable and competent man, will tend to rely on him for his arrival and to follow his departure to serve another employer. In these circumstances it is natural that employers should make great efforts to retain the goodwill so acquired and to restrain, so far as they can, the employee who leaves their service from taking his clients with him. This is very much a part of the employer’s goodwill which he is entitled to protect, for it is his most saleable asset.” (at 530D-F) (emphasis added)

80.  It was expressly recognised in that case that the customer connection built up by the employee milkman in the course of his employment was a valuable asset of the employer dairyman, it being part of the latter’s goodwill and was a “protectable” interest.  The issue before the Court of Appeal was the construction of the restraint clause in question and whether it was too wide to be unreasonable to protect the employer’s legitimate interest: see also 534D, G-H.

81.  The present case is indeed to be contrasted with Home Counties.  Anyone who lives in Hong Kong and frequents a local style café would from time to time come across delivery workers delivering various items to the café, such as ice and food ingredients.  The delivery worker would not stay long as he is likely to be in a hurry not only to finish off the numerous deliveries for the day but also possibly to rush back to the delivery truck which is parked somewhere close by temporarily (and possibly illegally).  It is a far cry from Home Counties where the milkman was recognised as a character “well known to every householder in the road” in a town in Surrey in the early 1970’s.

Conclusion

82.  The plaintiff has failed to substantiate its claim on the facts.  For that reason, I dismiss the plaintiff’s claim.

83.  I also make an order nisi that the plaintiff do pay the defendant’s costs of the action, to be taxed if not agreed, with certificate for counsel and that the defendant’s own costs be taxed in accordance with the Legal Aid Regulations.