BGC CAPITAL MARKETS (HONG KONG) LTD v. JAMES PRIEST AND ANOTHER

HCA 2214/2006

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NO. 2214 OF 2006

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D E C I S I O N

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1.  Today is Thursday 9 November 2006.  On Friday last, that is 3 November, I was asked to grant in favour of the plaintiff BGC HK interim injunctions pending trial against two former employees.  These are the defendants Messrs Priest and Yu.  The injunctions sought were to prevent them from breaching, post-contract, covenants of restraint that they had committed to in their contracts of employment.  The rationale for the action filed and the interim injunctions being asked for was that Messrs Priest and Yu, hitherto key brokers and senior employees of BGC HK, had given notice to leave BGC HK and had done so, thence to join a competitor, or rather prospective competitor, called Nittan Capital Asia Limited.  They then ignored or otherwise did not accept an invitation to give an undertaking in terms that they would obey the covenants of restraint; thus the action.

2.  In a nutshell BGC HK sought interim three injunctions in line with three restraining covenants; that is for a period of six months from their departure from BGC HK that they would not solicit any client or counterparty with whom they had been dealing, that they would not deal with any client or counterparty with whom they had been dealing, and that they would not compete with that part of the business of BGC HK with which they had been involved.

3.  I granted the first two injunctions pending trial but declined to grant the third; that is the non-competing injunction.

4.  The matter before me today derives from the stated intention by BGC HK to appeal the refusal to grant the third interim injunction sought.  There is a summons before me whereby BGC HK asks me to grant a non-competing injunction pending the hearing of the appeal, upon an undertaking that notice of the appeal will be filed by this coming Monday, that is 13 November.

5.  The application as originally composed was not in terms of the interim injunction application, in fact it was in terms wider.  But at the outset of the hearing before me today Mr Coleman SC, representing for the first time BGC HK, accepted that it could, indeed should, be in the same form, and the matter proceeded on that basis.  He further enhanced the undertaking to file notice of the appeal to the effect that once it was filed an expedited hearing would be asked for. 

6.  The application is contested, Mr Harris SC representing Messrs Priest and Yu as he had at the previous hearing. 

7.  My first thought was to query my jurisdiction.  Having already refused the interim injunction, I am now being invited to reverse my decision pending an appeal from that decision.  However Mr Harris, whilst opposing the application, accepted that there is English authority in support of the proposition that I can do what is asked of me; I am thus proceeding on the basis that I have jurisdiction.

8.  In my judgment handed down I dealt with the three injunctions asked for in two parts; the non-soliciting and non-dealing restraints in the first and the non-competing in the second.

9.  I was, as is apparent from the result, satisfied that BGC HK was entitled to the interim protection sought in the injunctions to prevent soliciting and dealing.

10.  Mr Sussex SC then representing BGC HK accepted that a restraint preventing competition is prima facie against public policy and void.  The thrust of his argument in pursuit of this the third injunction was that it was a necessary restraint because of the difficulty of policing obedience to the non-soliciting and non-dealing restraints asked for.  However, I found against the need to bolster the two injunctions that I did grant, by this means.

11.  Mr Coleman’s primary argument in favour of my granting the injunction at this stage is that the appeal would be nugatory if in the event it were to succeed; that for the period between my judgment of 3 November and such time as the appeal is heard Messrs Priest and Yu would be competing with impunity.  Of course conversely is the argument that to grant the injunction would be effectively to give BGC HK the protection that I had already declined to give it for all or at least the lion’s share of the six months’ restraint period; thus to the prejudice of Messrs Priest and Yu.

12.  It is, as usual, a balancing exercise.  First the question, would the appeal be rendered nugatory, in the event of success?

13.  BGC HK was not sent away on 3 November last without protection.  In essence it was applying for non-solicitation and non-dealing injunctions and got them.  The third injunction was sought purely for the purpose of policing those injunctions, not for enhanced or additional protection.  So, arguably, the nugatory point does not lie; BGC HK got what it came for.  Conversely, to grant the injunction would be severely to restrict Messrs Priest and Yu from pursuing lawful broking activity.

14.  As for the so-called need to police compliance; at the first hearing there was no evidence to warrant an assumption that Messrs Priest and Yu would flout the injunctions if they were to be granted; this remains the case. 

15.  But further, I do not see that a granting of this the third injunction will assist the policing of obedience to the first two.  Messrs Priest and Yu will not be barred from going to the office and, if they were bent on breaching the orders, doing so behind closed doors.  Policing obedience will not be made any easier. And as before, I do not assume that they are or will be bent on disobedience.

16.  In the circumstances, I am not prepared to grant the application sought and accordingly dismiss it.

(After submissions on costs)

17.  Costs are to the defendants taxed if not agreed on a party and party basis in any event.