EMPEROR RESORTS INTERNATIONAL LTD v. WONG CHI HANG AND ANOTHER

DCCJ4653/2002

IN THE DISTRICT COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

CIVIL ACTION NO. 4653 OF 2002

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(Transferred from HCA 4808 of 2002 and HCA 1826 of 2002 pursuant
to the order of Master AU-Yeung of High Court dated 18 July 2002)

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JUDGMENT

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Background

1. This action was brought by the plaintiff against two defendants who are husband and wife. The wife was the 2nd defendant and the claim against her had been settled. The trial was only on the claim against the 1st defendant and his counterclaim against the plaintiff.

2. The plaintiff company was a company selling memberships in time-sharing ownership of holiday resorts. It was formed by one Eddie Lim Toog Oon ("Lim") in March, 1999. Before setting up the plaintiff, Lim was working for one International Resorts ("International Resorts") as a sales manager. International Resorts was also in the business of selling such memberships. The defendants were then also working at International Resorts as sales executives. They were working under Lim. Lim left International Resorts in March, 1999 and the defendants also resigned from International Resorts on 1st April, 1999. The 1st defendant then assisted Lim to set up the plaintiff. After the plaintiff was set up, it employed the 1st defendant as a sales manager from 27th April, 1999 onwards. The 2nd defendant also joined the plaintiff on 27th April, 1999. She initially worked as a sales executive and was later promoted to a sales manager.

3. The 1st defendant entered into a contract of employment with the 1st defendant which was dated 29th April, 1999. This was replaced by another contract dated 1st August, 1999 ("the Contract"). The Contract contained two additional clauses numbered 19 and 20. They were as follows: -

"19. Non-Competition And Solicitation

The Sales Manager covenants with the Company that for the period of 6 months after termination of the agreement whereby effluxion of time or in any other way whatsoever he/she shall not on behalf of himself/herself or any other person, firm or company canvass or who shall at the time or such termination are the customers of the Company and shall not directly or indirectly be concerned, engaged or employed in employed in any business in Hong Kong of its similar nature to the business carried on by the company at the time of the termination.

20. Confidentiality

The Sales Manager covenants with the Company that he/she shall not either during your Employment or after the termination of this Agreement, except with the written consent of the Company, utilize for his/her own use or account or divulge to any person, firm or company (and shall at all times use his/her best endeavours to present the publication or disclosure of) any secret or confidential knowledge or information concerning the business, services provided, finances, dealing, transactions, affairs concerning the Company's business or any of the Company's suppliers, agents or customers and upon Termination of this Agreement, you shall forthwith surrender to the Company all original or copy document sample or any other items relating to any matters aforesaid."

4. For the sake of clarity, the two clauses can perhaps be slighted corrected as follows without changing their meaning: -

"19. Non-Competition And Solicitation

The Sales Manager covenants with the Company that for the period of 6 months after termination of the agreement whereby whether by effluxion of time or in any other way whatsoever he/she shall not on behalf of himself/herself or any other person, firm or company canvass or those who shall at the time or of such termination are be the customers of the Company and shall not directly or indirectly be concerned, engaged or employed in employed in any business in Hong Kong of a its similar nature to the business carried on by the company at the time of the termination.

20. Confidentiality

The Sales Manager covenants with the Company that he/she shall not either during your his/her Employment or after the termination of this Agreement, except with the written consent of the Company, utilize for his/her own use or account or divulge to any person, firm or company (and shall at all times use his/her best endeavours to present prevent the publication or disclosure of) any secret or confidential knowledge or information concerning the business, services provided, finances, dealing, transactions, affairs concerning the Company's business or any of the Company's suppliers, agents or customers and upon Termination of this Agreement, you shall forthwith surrender to the Company all original or copy document sample or any other items relating to any matters aforesaid."

5. The 1st defendant worked for the plaintiff until 31st January, 2000 and resigned. The 2nd defendant also resigned on 10th March, 2000. They both then joined one Grand Pacific Vacation (Hong Kong) Ltd. ("Grand Pacific"), a competitor of the plaintiff. After the defendants had left the plaintiff and joined Grand Pacific, the plaintiff on 15th May, 2000 instituted this action against the defendants and obtained an ex parte injunction enjoining them from working for Grand Pacific, from abusing certain alleged confidential information of the plaintiff for the benefit of Grand Pacific or any third party or from procuring and/or soliciting the plaintiff's employees to leave the plaintiff's employ and to join Grand Pacific or any third party. This order was varied on 19th May, 2000 upon the application of the defendants and the part of the injunction enjoining them from working for Grand Pacific was discharged.

6. The plaintiff then continued with the action against the defendants for the various relief originally granted in the ex parte order referred to above and for damages or account of profits. The defendants on the other hand also started an action against the plaintiff for payment of certain commissions allegedly due from the plaintiff and certain commissions allegedly due from International Resorts for which the plaintiff had allegedly assumed liability. They also asked for damages for having been prevented from working for Grand Pacific for four days because of the ex parte injunction which they say was wrongly granted. By an order of Master Au-Yeung made on 18th July, 2002, the actions two were consolidated into one action.

The pleadings

7. By the consolidated statement of claim, the plaintiff pleaded that the 1st defendant as its sales manager had the duties to promote and sell the plaintiff's time-sharing memberships for various holiday resorts, to lead and supervise the operation of a sales team of 10 odd sales executives, to implement and monitor sales programs by the sales executives, to arrange staff training and to contact customers for sales programs. The sales executives were called liners. By reason of these duties, the plaintiff further pleaded that the 1st defendant had come into contact with and obtained knowledge of confidential information of the plaintiff. Such information included the personal and employment particulars and the remuneration package of the liners, the portfolio and contacts of the customers/members, the policies for marketing products including pricing strategy and lists, catalogues and specifications of its products.

8. Apart from relying on the covenants in the Contract, the plaintiff also pleaded an implied term implied from the Contract that the 1st defendant owed the plaintiff a duty of good faith, fidelity and confidence not to abuse the confidential information and not to solicit the plaintiff's employees to leave the plaintiff and to work for its competitor. The plaintiff further pleaded that such duty was to continue after the termination of the employment.

9. The 1st defendant resigned and left the plaintiff on 31st January, 2000 and joined its competitor Grand Pacific on 13th March, 2000. The plaintiff pleaded that the 1st defendant had sometime in the latter half of March, 2000 in conjunction with his wife the 2nd defendant (who had by then also resigned from the plaintiff) tried to solicit two employees of the plaintiff to leave the plaintiff to join Grand Pacific. The employees who were mentioned were Maria Chan ("Maria") and Lam Man Sze ("Christie Lam"). The plaintiff therefore pleaded that the 1st defendant had breached the covenant in restraint of trade contained in clause 19 of the Contract which restrained him from working for a competitor of the plaintiff within 6 months from the termination of the Contract. The plaintiff further pleaded that the 1st defendant had breached the covenant in clause 20 and the implied duty not to misuse the plaintiff's confidential information in that the 1st defendant had abused the plaintiff's confidential information. The final allegation against the 1st defendant was his breach of the implied duty not to solicit the plaintiff's employees as he had solicited the plaintiff's employees to work for Grand Pacific. The plaintiff then prayed for the various reliefs originally granted in the ex parte order and damages or account of profits. Since the six months of prohibition in the covenant in restraint of trade had already expired by the time of the trial, the plaintiff then asked for damages in place of an injunction under clause 19 of the Contract. The plaintiff also expressly stated in its supplemental closing submissions that it would not be seeking any account of profit by the 1st defendant under this clause in case the plaintiff should succeed in this claim. It would be contented to have damages be it nominal damages.

10. The 1st defendant in his defence asserted that the covenant in restraint of trade was wider than was reasonably necessary for the protection of the plaintiff's interests. It was thus unenforceable. He further denied that the information of the plaintiff was confidential in nature or was capable of being protected as such by the court. He further denied of having solicited Maria or Christie Lam. He took further points in his witness statement. In paragraphs 7 and 8 of his statement, he said that he had signed the Contract incorporating the covenants in clauses 19 and 20 without receiving any consideration for them and he signed the Contract because of a fear that his refusal to do so would result in termination of employment and withholding of commission. On the second day of trial, I expressly invited Mr. Chan counsel for the 1st defendant to consider amending the defence to incorporating these grounds. However, Mr. Chan expressly advised me that no such amendment would be sought. I then told him that these points would not be considered. There was also no plea of non est factum or misrepresentation.

11. The 1st defendant's first claim in his counterclaim was for payment of arrears of commission in the sum of HK$194,295.40 due as at 31st January, 2000 when he resigned. For this claim, he relied on clauses 9 and 10 of the Contract which stated:

"9. Subject to the terms of payment hereinafter stated and subject to Clause 20, the overriding commission payable shall be 2 percent of the Purchase Price of each and every of the Company's products successfully sold by his/her team Sales Executive. For the avoidance of doubt, "Purchase Price" in this Agreement means the purchase price of a membership stated in the Company's "Membership Agreement" but shall not include the Legal, Administration and Trustee Fees or any other fees or charges.

10. In respect of any product sold by the Sales Manager, the Company's liability to pay the Sales Manager his commission is as follows: -

(a) Upon the Company's receipt of a sum of 25% of the Purchase Price from the purchaser(s), the company shall pay the Sales Manager a sum equivalent to 1% of the overriding commission; and

(b) The balance of the overriding commission shall be due and payable to the Sales Manager upon the company's receipt of payment of at least 50% of the Purchase Price by the purchaser(s)."

12. The next claim in the counterclaim related to the 1st defendant's employ by International Resorts. He pleaded that before he left International Resorts, he was owed arrears of commission at HK$27,000.00. In about January, 1999, Lim told him and his wife that he was planning to set up the plaintiff with some friends to sell memberships in time-sharing ownership of resorts. He told them that if they should leave International Resorts and join the plaintiff, the plaintiff would assume the liabilities of International Resorts and pay them the commission within 5 months after their joining the plaintiff. The plaintiff was not yet formed then. The plaintiff was then incorporated and this oral agreement was repeated by Lim on behalf of the plaintiff on 29th March, 1999 and also on divers occasions between 29th March, 1999 and 31st January, 2000. The 1st defendant further pleaded that he had left International Resorts pursuant to this agreement but the plaintiff failed to pay him the commission. He therefore counterclaimed such commission from the plaintiff.

13. The last item in the counterclaim was for damages for the four days from 16th May to 19th May, 2000 during which the 1st defendant was enjoined from working for Grand Pacific under the original ex parte order. He said the part of the injunction enjoining him from working for Grand Pacific was wrongly granted and the plaintiff should pay him damages for his loss of income during those four days.

14. The plaintiff filed a Re-Amended Reply and Defence to Counterclaim. On the claim for arrears of commission, the plaintiff pleaded that there was a term and/or an implied term of the Contract or a practice of the trade that commission would only be payable to the 1st defendant if he should still be in the plaintiff's employ when payment was received from the members in the manner described in clauses 9 and 10 of the Contract.

15. The plaintiff also pleaded a further alternative that by reason of the 1st defendant's breach of clauses 19 and 20 and the duty not to solicit the plaintiff's employee, the commission had been forfeited by the plaintiff under clause 22 of the Contract. Clause 22 provided:

"22. If the Sales Manager commits any act of gross misconduct or commits a breach of any of the terms and conditions of this Agreement or act in a manner detrimental to the interest of the Company, the Company shall be entitled to terminate this Agreement forthwith and forfeit all commission payable or to be payable to the Sales Manager."

16. Regarding the second claim, the plaintiff admitted that Lim had on its behalf agreed to assume the liability for the commission due from International Resorts to the 1st defendant, but the agreement was subject to several conditions precedent which were not fulfilled at all. The conditions alleged were:

(i) if the 1st defendant were dismissed by International Resorts when he tendered his resignation;

(ii) International Resorts refused to pay the 1st defendant his outstanding commissions; and

(iii) despite his diligence to recover the outstanding commission, International Resorts still refused to settle the same.

17. Regarding the third claim, the plaintiff pleaded that the 1st defendant had in fact breached the covenants in the Contract and the plaintiff was entitled to enjoin him from working for Grand Pacific.

Evidence

18. The plaintiff called Lim, who was one of its directors and one Winnie Lau, its office manager. It also subpoenaed Christie Lam who was a liner. The 1st defendant gave evidence. He also called his wife the 2nd defendant and subpoenaed three liners namely: Chu Wing Yin ("Chu"), Ho King Yee ("Christie Ho") and Tsang Chu Wing ("Benson Tsang"). None of these three liners had worked under the 1st or 2nd defendant.

PW1 Lim Tong Oon

19. Lim adopted his witness statement. He was from Singapore. He said in his statement that the 1st defendant had been employed by the plaintiff since 27th April, 1999 and he had signed an employment contract of the same date. In view of the 1st defendant's position which would inevitably involve the trade strategy and secret of the plaintiff, the plaintiff on 1st August, 1999 asked him to sign the Contract containing clauses 19 and 20 as set out above.

20. When the 1st defendant was employed by the plaintiff, he was the leader of a team of ten to twenty liners. He was responsible for supervising their work and monitoring their implementation of sales programmes. He was also responsible for arranging ongoing training for the liners, ensuring recruitment procedures were carried out properly and contacting customers for sales programmes. On confidential information, he particularly referred to the remuneration packages of the liners; the personal and employment particulars including those of the sales managers and sales consultants; the policy for marketing of products including pricing strategy; the lists, catalogues and specifications of products; and the customers' portfolio and contact information.

21. Lim said after the 1st defendant had left the plaintiff on 31st January, 2000, Marie and Christie Lam failed to turn up for work on 14th March, 2000. Marie was a top liner of the plaintiff. On or about 20th March, they telephoned him and said they were confused and asked to see him for a talk. He together with a venue manager of the plaintiff Lily Koung ("Lily") and a manager of the plaintiff Wai Siu Wing Christopher then met them in a coffee shop. They said that the 1st and 2nd defendants had urged them to leave to work for Grand Pacific which would give them a better income package. After discussion in the meeting, Marie and Christie Ho appeared to have changed their minds and promised to continue working for the plaintiff. They returned to the plaintiff a few days later, but left again after about two weeks. After this, two other liners Benson Tsang and Christie Ho were also being approached by Maria to leave the plaintiff for Grand Pacific. They were offered a better income package by Grand Pacific. After confirming that the 1st defendant was working for Grand Pacific, the plaintiff then considered that the 1st defendant had made use of his relationship with his former colleagues and the plaintiff's confidential information to solicit and procure the plaintiff's employees to work for Grand Pacific. The plaintiff thus considered that the 1st defendant had contravened clause 20 of the Contract by abusing the plaintiff's confidential information and breached the alleged implied duty of good faith, fidelity and confidence not to abuse the confidential information and not to solicit the plaintiff's employees to work for its competitor.

22. Lim then dealt with the 1st defendant's counterclaim for commission due from International Resorts. He admitted that he had in late February, 1999 on behalf of the plaintiff promised the 1st defendant that the plaintiff would assume liability for the commission owed by International Resorts subject to the said conditions precedent. He further said that the conditions precedent were not fulfilled in that the 1st defendant had not been dismissed by International Resorts and the 1st defendant had failed to use his diligence to recover the commissions from International Resorts. On the arrears of commissions allegedly due from the plaintiff to the defendant, Lim referred to clause 22 on forfeiture of commission and said that the 1st defendant's commission had been forfeited because of his breach of Contract.

23. He further said in his oral evidence that the 1st defendant had tendered him a notice of resignation from International Resorts, but he did not accept it and instead asked him to remain in International Resorts but at the same time to help him set up the plaintiff. He admitted that when he set up the plaintiff, the 1st defendant had helped him. He said that if by any chance that International Resorts should find out what they were doing and dismiss the 1st defendant without paying him the commission, then the plaintiff would assume the liability of International Resorts and pay him the commission. He further said that before the 1st defendant could get the commission from the plaintiff, he had to go and ask International Resorts for payment first. The plaintiff would only pay should International Resorts refuse to do so. He then said that the 1st defendant had never asked him for payment of such commission until the making of the counterclaim. He also said that the 1st defendant had resigned from International Resorts instead of having been dismissed. The plaintiff was thus not liable to pay him the commission.

24. On confidential information, he said that the 1st defendant knew the confidential information like the remuneration packages of the liners, the plaintiff's way of recruiting liners, and the plaintiff's training manual and training method. He said the remuneration packages were important as they were the way to motivate the liners. He did not want his competitors to know the remuneration packages of the liners because he did not want them to be enticed away. He further said that the 1st defendant had the contacts of all the liners who used to work under him. By poaching the whole team, he could take away the income of the whole team.

25. He also said that the 1st defendant was in direct contact with customers and had access to their personal particulars like telephone numbers, addresses and e-mail addresses. He said such were confidential information and he did not want his competitor to know about them as that could result in his customers being touted by the competitors and the customers would trade-in their memberships with the plaintiff for memberships with the competitors. He also did not want his members to complain against the plaintiff for misrepresentation and ask for refund of payment.

26. He regarded the plaintiff's pricing as a secret. He had a standard pricing and a VIP pricing for different types of accommodation. He did not want the plaintiff to be undercut by its competitors. The plaintiff's lists, catalogues and brochures were only provided to its members after they had become members. They would not be released to the public or even to customers who have not become members. Though the liners could disclose to the customers the standard price in the course of negotiation, the VIP price could only be disclosed by the sales manager to the customers. He said he was selling intangible property and did not want the competitors to make their products more attractive. He also said that the plaintiff would change its marketing strategy once every six months.

27. On payment of commission, he had caused payments to be made to the 1st defendant for 3 months after he had left on 31st January, 2000, but that was just his discretion and the 1st defendant was not entitled to such payments after his departure. The payments were made to show his appreciation for the 1st defendant's help to him in setting up the plaintiff. Other managers would also receive such payments for a few months after they have left and that was a gratuity.

28. In cross-examination, he disagreed that the 1st defendant had performed well when he was with International Resorts. He said that the 1st defendant did not perform well as a liner because of his personality problem in sales and the problem of his knowledge, background and understanding of the business. He even said that the 1st defendant was the lousiest in International Resorts. However, despite the poor performance of the 1st defendant, he still caused the plaintiff to employ him, not just as a liner, but as a sales manager when the plaintiff commenced its business. The plaintiff also promised to pay him the commission owed by International Resorts (allegedly subject to the conditions precedent). He said he did this because the product and marketing strategy of the plaintiff were different from that of International Resorts. He also knew that International Resorts did not pay the 1st defendant his arrears of commission. He also did not pay the 1st defendant such commission because the 1st defendant had not taken diligent action like sending out a lawyer's demand letter to try to recover it from International Resorts.

29. On customers' information, he agreed that a liner would have to explain the products and pricing to the customer. For VIP pricing, it was only disclosed by the sales manager to the customer in the presence of the liner. The plaintiff had different products for different needs of different customers. Once a liner had convinced a customer to become a member, the liner would pass the customer to the customers' service department for registration and documentation. All particulars of the customer would also be passed to that department.

PW2 Winnie Lau

30. Miss Lau was the office manager of the plaintiff. She said that there was a known practice of the trade that a liner would not be entitled to any commission after the cessation of his appointment. She also referred to clause 22 of the Contract on forfeiture of commission and said that the 1st defendant's commission had been forfeited.

31. Miss Lau also referred to practice called "keep in view" or "KIV" in short. It dealt with payment of commissions to liners for cases where the members have not paid up to 25% or 50% of their fees or have claimed refund of the fees paid. Clauses 9 and 10 of the contract provided that commissions would be payable to the liners when the member has paid 25% or 50% of the requisite fees. If the member should have paid 25% of the fees, the 1st defendant would be paid 1% of the fees as his first half of the commission. If the member should fail to make further payment up to 50% of the fees, the second half of the commission would not be paid and the case would be marked KIV. The customers' service department would then contact the member and try to persuade the member to resume payment. If the member should resume payment up to 50% of the fees, the second half of the commission would become payable to the 1st defendant, otherwise, he would never be paid this portion of the commission. If the member should fail to pay even the first 25% of the fees, the 1st defendant would not be paid his first half of the commission. If the case should be an extreme one where the member has obtained refund of the fees paid, the commission paid would have to be refunded by the 1st defendant to the plaintiff.

32. Miss Lau also referred to the amount of commission claimed by the 1st defendant at HK$194,295.40. She clarified that this amount would only be payable to the 1st defendant if all the members recruited by him team should have paid up to 50% of their fees as referred to in the agreements listed in the schedule to the defence and counterclaim. Furthermore, by reason of the further payments of commissions for three months after the departure of the 1st defendant, the amount of commission that could become payable (if all members should pay up to 50% of the fees and not claim any refund) was reduced to HK$167,885.04 as at 25th January, 2003. Since only some members have paid up to 25% and 50% of the fees as at that date, the amount of commission payable to the 1st defendant then (less the amount of commission to be refunded due to refund to members and less the amounts already paid) was only HK$44,682.14.

33. In answer to questions from the court, Miss Lau also confirmed that there would not be any situation of forfeiture of accrued commission. The forfeiture only applied to commission that could mature and become payable in future after the termination.

PW3 Christie Lam

34. Miss Lam worked as a liner with the plaintiff from sometime in 1999 to the end of March, 2000. She worked under the 1st and 2nd defendants. There were about 10 liners in their team and Maria was also a liner in their team. She had been asked by the 2nd defendant to leave plaintiff and to join Grand Pacific. The 2nd defendant told her that she had to resign first. The 2nd defendant also said the pay of Grand Pacific might be better and the competition less keen. She was a close friend of the 2nd defendant and they appeared to have frequent communications. She and Maria then left the plaintiff from 14th March, 2000 without notice. Between this day and 20th March, 2000, they had gone to Grand Pacific to have a look. They were offered better terms of employment by Grand Pacific which also promised to pay them the commissions to be matured and payable by the plaintiff. They had also met and dined with the 1st and 2nd defendants, but they had already left the plaintiff by then. When asked why was it so urgent that she had to leave the plaintiff, she said she was told by the 1st and 2nd defendants that the new company had urgent need of manpower.

35. However, they found that the working environment at Grand Pacific was smaller and did not know if it would be good for them in their work. They therefore asked to meet Lim in the evening of 20th March, 2000. They told Lim at the meeting that their salaries at Grand Pacific were better. As a result of the meeting, they agreed to go back to work for the plaintiff and Lim promised that they would get their accrued commissions.

36. In cross-examination, she agreed that the 2nd defendant had told her to go back to the plaintiff as the 2nd defendant did not want Lim to think that they had poached his staff. She also said in re-examination that the 1st and 2nd defendants had told her that they wished the two of them would leave the plaintiff's employ by giving proper notice of termination as they did not want them to leave without a proper hand over of tasks to others. She further said that the 1st and 2nd defendants had told her that they were worried about the clause in their employment contracts with the plaintiff which prohibited them from working for the plaintiff's competitors for six months.

DW1 Wong Chi Hang

37. The 1st defendant adopted his witness statement. He said in his statement that when he was working as a liner in International Resorts, Lim was his sales manager. In March, 1999, Lim told him that he was setting up the plaintiff and asked him and his wife to join the plaintiff. Before Lim had set up the plaintiff, International Resorts had sensed something wrong about Lim and dismissed him. Lim then asked him and his wife to leave International Resorts urgently and Lim promised to pay them their to be matured commissions which would otherwise be payable by International Resorts. At that time, he said that he had HK$27,000 commission in the course of being matured and payable and his wife had HK$25,000. Lim promised them that if they would immediately resign from International Resorts, the plaintiff would pay them such commissions within six months after their joining the plaintiff. My understanding of this evidence was that the plaintiff would pay the defendants these commissions regardless whether they would become mature and payable by International Resorts. Otherwise, there would have been no way to ascertain the amount payable or there would have to be payments to be made from time to time rather than a payment as envisaged by the promise. On this promise, the defendants immediately resigned from International Resorts on 1st April, 1999 and subsequently joined the plaintiff. Lim had repeated this promise both before and after the incorporation of the plaintiff. The plaintiff's operation was set up in late April, 1999 and he assisted Lim in this process. However, Lim did not honour his promise and did not pay them those commissions. He denied that there was any condition precedent as alleged by Lim.

38. He also said in his oral evidence that his performance in International Resorts was satisfactory. He was earning about HK$10,000 commission every month and that was an average performance. Regarding the actual amount of commission that Lim had promised to pay him in place of International Resorts, he said it was HK$26,000 odd and Lim was aware of the amount as the commission list was distributed to him by Lim. He also said in cross-examination that after he had joined the plaintiff, he had repeatedly asked Lim to pay him this commission, but Lim just procrastinated.

39. He also said in cross-examination that he had assisted Lim in looking for an office for the plaintiff, introduced a decorator to decorate the office and assisted in the moving in. He added in re-examination without objection that he had also assisted Lim in interviewing job applicants and telephoning them on when to report for duty. He was at the plaintiff's office almost everyday. He did all these without pay.

40. On his departure from the plaintiff, he said he was dissatisfied with the style of management of the plaintiff and resigned on 31st January, 2000. He then looked for a job. He joined Grand Pacific on about 13th March. He said the only thing he knew how to do was to sell time-sharing holiday resorts which he had done for four years. He thus had no alternative but to work for Grand Pacific.

41. He then described his job with the plaintiff. He said customers were contacted and obtained by the plaintiff's tele-marketing department. They would then be invited to go to the plaintiff's office for a presentation of the plaintiff's products. The liners would conduct the presentation and personally explain the products to the customers. This would take two to three hours. They would befriend the customers. They did this under the supervision of Lim and the 1st defendant. A liner would explain to his/her customers the different types of standard pricing for a standard membership with the plaintiff. For a VIP membership and the types of pricing associated with it, they would only be explained by the 1st defendant though in the presence of the liner. The 1st defendant might know about the names of some customers, but he would not have their particulars like telephone numbers. If a customer should decide to join the plaintiff as a member, he/she would be asked to fill in an application form. The form would then be passed to and kept by the administrative department. The 1st defendant would not have possession of any such form or the information contained therein. He would also cease to have anything to do with the customers. He would thus not be in a position to disclose the details of the members to anyone as he did not have such information.

42. Regarding the presentation, the liners would have to show and distribute to the customers the prices, lists and details of the plaintiff's products. The plaintiff's competitors had comparable materials for distribution during their presentations to customers. The plaintiff had sent its senior staff to pretend as customers and attended the competitor's presentation to obtain such materials. He denied the trade secrets as alleged by the plaintiff as secrets as they could be obtained from public consultations or from the resort operator directly or were well known to others. He also denied of having abused such information.

43. He denied any knowledge about the plaintiff's pricing policy as he said that was the job of the marketing department whilst he was in the sales department. But he admitted in cross-examination that he had attended meetings on pricing. He denied that pricing was confidential though he had not seen the plaintiff or Grand Pacific advertising their pricings. He then admitted that if the pricing was disclosed to Grand Pacific, it could have affected the plaintiff though he denied of having made any disclosure.

44. He also denied that he had procured Maria or Christie Lam to leave the plaintiff and join Grand Pacific. He also said that Grand Pacific could have asked Maria and Christie Lam directly their remuneration package. He admitted in cross-examination that the package of remuneration could be different for different liner and it was performance related.

45. Regarding payment of the to be matured commissions by the plaintiff to its sales staff after termination of employment, he said the plaintiff had paid lump sums by way of settlements to demands of the former staff. Such lump sums were at about 70% to 80% of the not yet matured commissions.

DW2 Chan Wing Ka

46. She is the wife of DW1. She adopted DW1's witness statement as well as her own Chinese witness statement dated 20th August, 2003 as her evidence in chief.

47. She said that there was no secret about the individual remuneration package of the sales staff. Every month when Lim distributed the commission lists to the liners, he would read out the income or exhibit the income lists of those who performed well. He did this to encourage the others. In those meetings, the staff would also openly exchange their lists for reference. Thus the income of the particular month and the salary package of individual liner would be made known amongst the liners.

48. She also said that there was no secret about the plaintiff's pricing as it was known to all sales staff. But she admitted in cross-examination that she would only disclose the appropriate pricing to the potential members and would not disclose all pricing regardless of need of the customer.

49. On payment of commissions to the sales staff after termination of employment, she disagreed that such were only paid as settlement of claims made in the Labour Tribunal. She said normally 60% to 70% of the customers would pay up their membership fees. Thus the plaintiff would pay a lump sum equivalent to 60% to 70% of the not yet matured commissions to the staff after termination of employment to settle the not yet matured commission. He also added in oral evidence that Lim had told her, her husband and all sales staff that clause 23, which was the entire agreement clause, was inserted to avoid any argument on whether the commissions would continue to be paid after termination of employment. But Lim was never cross-examined on this clause and what he had told the staff about it. This point was also not pleaded in any rejoinder.

50. Regarding Lim's promise to pay the defendants the not yet matured commissions of International Resorts, she said that Lim in April, 1999 was in urgent need of their help in setting up the plaintiff. He did not want them to spare any attention to claim International Resorts for the not yet matured commissions. He therefore promised them that if they should immediately leave International Resorts, he guaranteed that the plaintiff would pay them all the not yet matured commissions.

51. She was cross-examined on the addition of clauses 19 and 20 on restraint of trade and confidentiality in her contract of 1st August, 1999. She could read English. But she said when Lim asked her to sign the 1st August contract, Lim told her that there was no difference between this contract and the earlier one of 29th April, 1999. Since she was busily working then, she just signed it. But that was not the evidence of the 1st defendant on his signing the Contract. Regarding the evidence of Christie Lam that she and the 1st defendant had told Christie Lam that they were worried about the covenant in restraint of trade, she said Christie Lam was only referring to her. She further said that she was in fact not worried as she had to work in the reception area of Grand Pacific. But she did not make it clear if Christie Lam was telling the truth or otherwise.

DW3 Chu Wing Yin

52. She was added as the 1st defendant's third witness after the conclusion of the 2nd defendant's evidence. No witness statement had been supplied. She was not working under the defendant but was under Lily. She knew about the plaintiff's pricing for different products and did not consider such as confidential. On remuneration packages for other liners, she said she was aware of the same as any deal clinched would be made known to the sale staff on the next day. Sometimes the amount of commission that would be payable upon maturity would also be disclosed. She was thus aware of the rate of commission. She said it was 8% for all liners. For payment of commission after termination of contract, she said she got her lump sum as a settlement at the Labour Tribunal. The same applied to other colleagues who got such lump sum after termination.

53. She agreed that if her remuneration package was known to the plaintiff's competitor, that could enhance poaching. She also agreed in cross-examination that she would reveal the appropriate pricing to the potential member depending on the latter's need and that the plaintiff would not want its competitors to know about its pricing as pricing was the selling point.

DW4 Ho King Yee (Christie Ho)

54. She was also an additional witness who had also not made any witness statement. She was also a liner who did not worked under the defendants. She did not regard the plaintiff's pricing and brochure as confidential information. She would disclose the pricing to customers in accordance with their needs, but occasionally she would provide such information at the customers' request. The remuneration packages of the liners were not treated as confidential amongst the liners themselves. The percentage of membership fees that would go to commission varied for different liners and it ranged from 8% to 10%. It may go up to 11% for senior liners. She learnt about her colleagues' packages from discussions amongst themselves. On post-termination commission from the plaintiff, she said she was interviewed by Lily for the job, Lily told her that the commission would continue to be payable after termination. She also said that she had never been to Grand Pacific and did not know any colleague who had worked there.

55. In cross-examination, she said she was not familiar with the defendants and never even had meal together with them. She firmly denied that she had been poached by either the 2nd defendant or Maria. She had only heard from gossip that the defendants were working for another time-sharing company but did not even know the name of the company.

56. On the remuneration package of the liners, she agreed that it was not information that was made known in the office of the plaintiff and she only knew about the packages of her close friends. She also agreed that the plaintiff's pricing was something confidential and she would not disclose it to the plaintiff's competitor. After she had left the plaintiff's employ, she had received some payment from the plaintiff by way of settlement in the Labour Tribunal for her to be matured commission.

DW5 Tsang Chu Wing ( Benson Tsang)

57. Mr. Tsang was also an additional witness who had not provided a witness statement. He was also a liner under Lily and not the defendants. He did not treat the plaintiff's pricing and products as confidential as nobody had so advised him. Any customer could have asked him for such information and he would have disclosed it. Different customer would have different need and he would reveal the appropriate pricing to suit the need. Though he did not regard such information as confidential, he would not have divulged it to a competitor without reason. The standard pricing was for the liner to disclose to the customers, but experienced liners could also disclose the VIUP pricing upon instructions of Lim.

58. On remuneration, he said he knew about the packages of his former colleagues as they had discussed them amongst themselves. The remuneration was also discussed by the managers when somebody had clinched many deals. The manager would calculate the commission that could accrue from such deals so as to encourage the others. He was getting 10% of the membership fees as his commission and he was able to recount the rates for a number of former colleagues.

59. On post-termination commission, he said when he was interviewed for the job by the 1st defendant, he was told that such commission would continue to be payable after termination of employment. He made a claim for this together with some other colleagues after he had left the plaintiff. The claim was settled after trial at the Labor Tribunal.

60. He denied that he had been poached by Maria or the defendants. He also denied that he had been to Grand Pacific.

Analyses and conclusions

Commission due from International Resorts

61. I would deal with the second item in the counterclaim first. It was the commission to be matured and payable by International Resorts. The plaintiff's defence was not that there was no such promise; the defence was that there were several conditions precedent all of which had to be fulfilled but the 1st defendant had not fulfilled them at all.

62. There was no dispute that the promise was made at a time when Lim was setting up the plaintiff. I do not accept Lim's evidence that he recruited the 1st defendant just incidentally when the 1st defendant handed him the notice of resignation from International Resorts. This story was never mentioned in his witness statement. This story would have shown that Lim was not deliberately recruiting the 1st defendant, but just recruited him incidentally. It would have made it clear that there was no need for Lim to offer any inducement to the 1st defendant for him to resign from International Resorts. If there was such an important event, I cannot imagine why Lim would have omitted it from his statement.

63. I also do not accept Lim's evidence that the 1st defendant had performed poorly and he resigned because of his poor performance and dissatisfaction over the change of commission policy. If the 1st defendant was really performing so badly or was the lousiest of the liners as Lim had tried to portrait, I cannot imagine why Lim would have recruited him to assist in the setting up of the plaintiff and even made him a sales manager upon the commencement of the plaintiff's operation. This is simply contrary to common sense and business sense. I therefore reject Lim's evidence and accept the evidence of the 1st defendant that Lim had asked him to resign from International Resorts to help him to set up the plaintiff. I also find that if the 1st defendant should accept Lim's request to resign from International Resorts, he ran the risk of losing his not yet matured commissions from International Resorts. Lim's promise should thus protect and indemnify him from such loss. Otherwise, it would not have operated as an inducement for him to leave International Resorts. I note that the plaintiff in its final submissions also accepted that this promise was an enticement for the 1st defendant to leave International Resorts.

64. However, the first condition precedent as alleged by Lim was that the 1st defendant had to be dismissed by International Resorts when he tendered his resignation. If his resignation was accepted and he was not dismissed, the plaintiff would not pay him such commission. He would have to run after International Resorts for the same. Even if he should have been dismissed, he still had to demand International Resorts for the commission. The demand was not a casual one but would have to be something like a lawyer's demand letter. The plaintiff would only pay him the commissions should International Resorts refuse to pay despite the demand. In my view, the alleged conditions precedent would have made the promise an illusory one and it would not amount to any inducement or indemnity for the potential loss of the 1st defendant. I do not think Lim would have qualified the promise with these conditions. It would have been unreasonable for him to have attached such conditions to the promise as he was seeking the help of the 1st defendant. The promise should have depended only on the 1st defendant resigning from International Resorts. Furthermore, if there were such conditions, I see no reason why the 1st defendant would not have demanded International Resorts for payment of his commissions. After all, he had not been dismissed by International Resorts and the plaintiff would not pay him those commissions. The only way to recover the commission was to demand it from International Resorts. I find that he did not do so because he had the promise of the plaintiff that it would pay him such commissions in place of International Resorts.

65. I therefore reject Lim's evidence on these conditions and find as a matter of fact that there was a promise by Lim on behalf of the plaintiff to pay the 1st defendant the commission then to be matured and payable by International Resorts and the plaintiff would pay those commissions regardless if they would become mature with International Resorts. I also accept the evidence of the 1st defendant that Lim had repeated this promise before and after the incorporation of the plaintiff. Mr. Lam for the plaintiff has also made the point that the 1st defendant had not demanded payment by the plaintiff of such commission until he filed the defence and counterclaim. But I accept the 1st defendant's evidence that he had asked Lim for it after the commencement of the plaintiff's business, but then Lim had told him not to give Lim so much pressure and deferred the promised payment. I do not think it unreasonable for the 1st defendant to have put this matter aside as he and his wife were then working for the plaintiff. To pester Lim with this matter could jeopardize their relationship. After all, it was not a huge sum and he and his wife together were earning quite handsome incomes from the plaintiff. I also find that Lim has lied through his teeth in order to protect the plaintiff from this relatively small counterclaim and I find him an unreliable witness.

66. Mr. Lam has also made the point of pre-incorporation contract which did not bind the plaintiff. The plaintiff was incorporated on 3rd March, 1999. I accept the 1st defendant's evidence that the promise to pay commission if he should resign was repeated by Lim on behalf of the plaintiff to him on 29th March, 1999. He then accepted the promise resigned from International Resorts on 1st April, 1999. There was thus nothing in the pre-incorporation point.

67. Regarding the amount of such commission, I accept the 1st defendant's evidence that it was around HK$27,000 and that Lim knew the exact figure as he was the sales manager in International Resorts who distributed the commission list to him. The figure of HK$26,800 has been used in cross-examination and he did not object to this figure being used. He has also tried to produce a list showing his commission to mature was at HK$26,828. I agree that Lim was aware the amount of such commissions as he was the responsible sales manager. I also accept the 1st defendant's evidence on the amount. I therefore award him HK$26,828 for this counterclaim.

Solicitation of employees of the plaintiff

68. The claim against poaching as made against the 1st defendant only related to Maria and Christie Lam. It had nothing to do with the poaching of Benson Tsang and Christie Ho. The poaching of Tsang and Ho was thus irrelevant to the claim of poaching. But Lim still alleged that Maria was acting under the influence of the 1st defendant when he had no evidence to support such allegation. He would not let go of any opportunity to smear the 1st defendant. In fact, both Tsang and Ho gave evidence that they had not been poached by either of the defendants. I accept their evidence as I see no reason why they should have lied for the 1st defendant. They were also not working under either of the defendants when they were with the plaintiff. Lim's unfounded allegation against the 1st defendant in relation to the poaching of Tsang and Ho discredited him further and made him look more unreliable. On the poaching of Maria and Christie Lam, there is the direct evidence of Lam which I would consider. I would not accept the evidence of Lim as I have found that he had lied to the court through his teeth and was an unreliable witness.

69. Christie Lam's evidence was that she had left the plaintiff on 14th March, 2000. She was a close friend of the 2nd defendant and they had frequent communication. When she found that the 2nd defendant had disappeared from the plaintiff, she phoned the 2nd defendant and asked her why. Her evidence was that it was the 2nd defendant who had asked her to leave plaintiff and to join Grand Pacific. She also said that the 2nd defendant had told her to resign first. Between 14th March and 20th March, she and Maria had gone to Grand Pacific to have a look. They had also met and dined with the 1st and 2nd defendants, but they had already left the plaintiff by then. When asked why was it so urgent that she had to leave the plaintiff, she said she was told by the 1st and 2nd defendants that the new company had urgent need of manpower. But it was not clear whether the 1st defendant had told her this before or after she had left the plaintiff on 14th March, 2000 because she only referred to the 2nd defendant as the one who had asked to leave the plaintiff to join Grand Pacific. In fact, she did not join Grand Pacific immediately after her departure from the plaintiff on 14th March. It was more likely that the 1st defendant only referred to the urgent need of manpower in the dinner so as to induce her to start working for Grand Pacific as soon as possible rather than to induce her to leave the plaintiff. It was unlikely that either of the defendants would have asked her to immediately leave the plaintiff because of Grand Pacific's urgent need of manpower as it was her evidence that the 2nd defendant had asked her to resign from the plaintiff first. The thrust of Lam's evidence was that she was a close friend of the 2nd defendant and was asked by her to leave the plaintiff. I do not think her evidence is clear enough for me to find on a balanced of probabilities that she had been poached by the 1st defendant.

70. Mr. Lam for the plaintiff has made the point that the 2nd defendant was the front or was working together with the 1st defendant in this poaching exercise. Though they were working together in Grand Pacific and had together dined with Maria and Lam, I do not think there is enough evidence to show that the 2nd defendant was not working independently on the poaching. She was a sales manager with the plaintiff. When cross-examining the 1st defendant, Mr. Lam also made an effort to show that the 2nd defendant was more successful in her work than the 1st defendant. I therefore do not accept Mr. Lam's submission on this point.

71. Even if I should be wrong on the above finding of fact, I am also inclined to accept the proposition of law by Mr. Chan for the 1st defendant that the law does not regard the staff as an asset of the employer and hence there is no implied duty not to poach former colleagues. I also note that Mr. Lam for the plaintiff has made no submissions on this point of law despite my early indication that there might not be such implied duty in law. If need be, I would prefer the decision of the English Court of Appeal in Hanover Insurance Brokers Ltd. v. Schapiro [1994] IRLR 82 and not the decision by the same court in Ingham v. ABC Contract Services Ltd. (English Court of Appeal 12th November, 1993 unreported). I would hold that there was no implied term or duty on the part of the 1st defendant not to solicit the plaintiff's employees to leave the plaintiff and to work for its competitor. I therefore dismiss the plaintiff's claim for an injunction against the 1st defendant for poaching any employee of the plaintiff. I also dismiss the claim for any damages or account of profit arising therefrom.

Confidentiality

72. The plaintiff pleaded that the 1st defendant had breached clause 20 of the Contract and abused its confidential information. The types of information that the plaintiff pleaded as confidential were the personal and employment particulars and the remuneration packages of the sales staff, the portfolio and contacts of the customers/members, the policies for marketing products including pricing strategy and lists, catalogues and specifications of its products.

73. The plaintiff was in the business of selling memberships in exchangeable time-sharing holiday resorts. It employed a very personal sales technique. Its presentation of products to the customers would last for a few hours during which its liners would befriend the customers and build up a temporary personal relationship. The liners hoped that after a few hours of discussion and persuasion, the customers would agree to purchase memberships from the plaintiff. The success of the plaintiff's business thus depended very much on the technique and ability of the liners to exercise personal influence over the customers. The remuneration of the liners also depended on their success in selling the memberships. The plaintiff also did not make public its pricing. The disclosure of different classes of pricing to customers was done by employees of different ranks. Whilst liners could disclose to customers its standard pricing, the VIP pricing was only disclosed by the sales managers or, as suggested by Benson Tsang, by experienced liners upon specific instructions of Lim. The plaintiff's lists, catalogues and brochures were not given to the public and were only distributed to customers after they had agreed to become members. Time-sharing companies, unlike travel agents, do not make public their pricing.

Personal and employment particulars of the liners

74. This type of information was pleaded as one of the different types of confidential information. Lim's evidence on this was unclear as well as exaggerated. He even said that the telephone numbers of the liners were the plaintiff's confidential information. I cannot imagine how the plaintiff could have any property in such information. In the end, this category of information was not pursued in the plaintiff's closing submissions. I say no more about it.

Employees' remuneration packages

75. The evidence was that each sales manager would supervise a team of ten to twenty liners. Their commissions ranged from 8% to 10% of the membership fees paid by the members recruited by them. The remuneration packages were to motivate the liners to perform better. There could be changes to the percentages and the change was performance related. The percentages for different liners were known amongst some of the liners. But it appeared that not all liners knew about the packages of the others. Lim regarded the remuneration packages as confidential as he thought that competitors could offer better terms to entice away his liners and thus take away his profits. None of the four liners who gave evidence said that they had been told that the remuneration packages of liners were confidential. But for those liners who had been asked of whether such information would facilitate poaching or whether it should be withheld from the plaintiff's competitors, they gave affirmative answers.

76. Mr. Chan for the 1st defendant argued that a liner, when interviewed by a competitor for a job, would disclose his/her remuneration package upon being asked. But that was not in the course of poaching. If the competitor should know about the package of a particular liner, the competitor could well provide a better package to poach that liner. The fact that Grand Pacific was recruiting liners publicly did not mean that it had only a standard package for all new liners. If it was trying to poach the plaintiff's good performers, it could always devise special packages to entice them away. The fact that this information was known amongst the liners also did not mean that it was not treated as confidential information vis-à-vis competitors or outsiders.

The data of the plaintiff's members contained in their application forms

77. It appeared that the real dispute over this information was not on whether it was confidential. The real battle ground was whether the 1st defendant had such information in his possession when he left the plaintiff's employ and whether he had misused such information. The plaintiff's customers were not obtained by the 1st defendant or his liners, they were obtained by the obtained by the plaintiff's tele-marketing department over the telephone. The 1st defendant and his liners would only come into contact with them at the presentation of products. If at the end of the presentation, any customer would like to join the plaintiff as its member, an application would be filled in. It would contain the personal and credit card particulars of the customer. The form together with all the particulars would be passed to the plaintiff's administration department or customers' service department for preparation of contract. The 1st defendant or his liners would not keep such information. Any further contact with the customer would be by the customers' service department and not by the 1st defendant or his liners. There was thus no evidence that the 1st defendant had possession of any particulars of the customers which was obtained by him in the course of his employment with the plaintiff.

78. Mr. Lam referred to a customer's application which was produced by the 1st defendant at the trial and argued that the 1st defendant was in possession of such information. I would however accept the 1st defendant's evidence that he obtained this application through his friends and not by virtue of his employment with the plaintiff. I also do not think that the possession of one application form obtained through such means would be sufficient to show that the 1st defendant was in possession of the particulars of other customers. Lim also confirmed in cross-examination that the customers' service department had a list of the particulars of its members, but the list had not been lost or stolen.

79. Since I have found that the 1st defendant did not have in his possession the particulars of the members save one application form which was not obtained in the course of employment, I do not think it necessary for me to consider whether he had misused or abused such information. However, I would still consider Lim's evidence that the disclosure of such information to its competitors could result in the plaintiff's members trading in their memberships for memberships of the competitors. I do not quite understand why the plaintiff's members would do so or what advantage they would gain by so doing. But in any event, Lim did not say that there had been any such case that had happened to the plaintiff. Therefore, even if the 1st defendant had indeed taken such information with him when he left the plaintiff, there was also no evidence of misuse or abuse of such information.

The Marketing policies, pricing strategy and particulars of products offered by the plaintiff and the plaintiff's training manual

80. Lim said that the plaintiff's pricing of products, its catalogues, list and specifications on products were confidential information as their leakage could result in undercutting of prices by competitors. There was no dispute that the catalogues, list and specifications were only given to those customers who had agreed to become members. Regarding disclosure of pricing, the liners could disclose to customers the standard pricing. For the VIP pricing, it was only disclosed by the sales managers. DW5 Benson Tsang did say that for experienced liners, Lim would sometimes authorize them to disclose the VIP pricing. This showed that the plaintiff did treat its pricing, catalogues, list and specifications on products as confidential information and their disclosure was closely regulated and guarded. Though pricing was disclosed to customers before they had agreed to be members, it was only disclosed in the presentation of products and on a person to person basis. It was not disclosed to the general public.

81. Mr. Chan for the 1st defendant also argued that the information on pricing and catalogues could be obtained by investigators who could attend the presentation by pretending to be customers. This in fact supported the plaintiff's argument that such information was treated by the plaintiff as confidential as was not disclosed to the general public but only to those who had been invited to attend the presentation. Otherwise, it would not have been necessary to engage private investigators to obtain them. I also do not agreed with Mr. Chan's other point that it was the business of the plaintiff and Grand Pacific to make known its pricing to the public. The business of the plaintiff and Grand Pacific was to sell time-sharing memberships and they only disclose their pricing in the course of their negotiation with and persuasion of their customers.

Conclusion on confidential information

82. In the premises, I hold that the liners remuneration packages, the pricing of products, the catalogues and specifications of products were confidential information and its trade secret and have been treated as such by the plaintiff. I also hold that the plaintiff did believe that the disclosure of such information to its competitors would harm its interest. I also think it reasonable for the plaintiff to believe that such information was confidential and its disclosure to competitors could harm its interest. I think my view is fortified by the fact that time-sharing companies did not publicize their pricing. It was not disputed that the 1st defendant had received such information in the course of his employment. I also hold that he was aware that such was confidential information. He was aware that the disclosure of such information could facilitate poaching of liners and result in competition on and undercutting of prices.

83. I further hold that even if the information had not been imparted to the 1st defendant in confidence as none of the liners said that it was so imparted, the information was nonetheless confidential as it was the plaintiff's property and the plaintiff was entitled to have it protected by the court from misuse. On this point, I would refer to the case of Linda Chih Ling Koo and Another v. Lam Tai Hing (1992) 23 IPR 606 at 632 to 634.

84. I also hold that this confidential information had been obtained by the 1st defendant in the course and as a result of his employment and he owed the plaintiff an implied duty of good faith not to disclose it. The duty was implied from the Contract (see Bents Brewery Co. Ltd. and Others v. Luke Hogan [1945] 2 All ER 570 at 576F to H).

85. However, there was no evidence that the 1st defendant had misused the confidential information that he had obtained in the course of employment. On the issue of poaching of Maria and Christie Lam, that was done by the 2nd defendant. The 2nd defendant knew about their remuneration packages and was capable poaching them by herself. The 2nd defendant was also a close friend of Christie Lam. There was simply no evidence that the 1st defendant was or had to be involved in it. I also do not infer that the 1st defendant had collaborated with the 2nd defendant on this by the mere fact that they were very close to each other at that time and were working together. That was not enough for such an inference to be drawn given the knowledge and ability of the 2nd defendant and her relationship at least with Lam. Regarding the pricing, catalogues and so on, there was again no evidence of any disclosure. There was also no evidence of any loss suffered by the plaintiff like trading in of membership that could support an inference of disclosure. I therefore reject the plaintiff's claim against the 1st defendant for an injunction to prevent him from disclosing to others confidential information or to make use of such information for the benefit of others. I also dismiss the claim for damages or account of profit by reason of such alleged disclosure.

Covenant in restraint of trade

86. In deciding whether clause 19 was enforceable, it is necessary to determine whether the plaintiff had any proprietary interest in what it sough to protect by the covenant. It is undisputed that if what the employer is seeking to protect is sheer competition by the employee by utilizing his additional skills and knowledge that he has acquired in the course of employment, the covenant would not be enforced. It would however be enforceable if the additional skills and knowledge amount to confidential information or trade secret (see Littlewoods Organisation Limited v. Harris [1977] 1 WLR 1472 per Lord Denning at 1479A to E and Candia Shipping (HK) Ltd. v. Wong Chiu Wai and Anor unreported HCA No. 629 of 1986).

87. Mr. Chan agreed that if I should hold that the plaintiff did have an interest to be protected, he agreed that the duration and geographical restraints were reasonable but not the nature of the prohibition. If the nature of the prohibition should be excessive, the covenant as a whole would not be enforceable. He argued that clause 19 would prevent the 1st defendant from working in any position for competitors even though such position would have nothing to do with sales. He said it could have prevented the 1st defendant from working even as a receptionist for a competitor. He therefore submitted that it was too wide to be enforceable. I do not agree. We are not dealing with a case of contacts with customers which would result in development of friendship with and influence over the customers. In such case, if the job to be restrained would have nothing to do with contacting and/or serving customers, it may be argued that the scope of the covenant is be too wide. However, we are dealing with a case of protection of confidential information. To require the covenant to be precisely aiming at a particular job would be unrealistic and would defeat the purpose of the covenant.

88. I understand that the ex parte injunction granted pursuant to clause 19 was discharged at the inter partes hearing, but neither party has been able to advise me of the reasoning for that. The basis for discharging an ex parte injunction may or may not have anything to do with the merits. In this case, it also depended on whether the plaintiff had properly and adequately presented its case on confidentiality, without which clause 19 would not be enforceable. Since I am not aware of the reason for the discharge, I would pay no regard to the discharge.

89. In the premises, I would hold that clause 19 was enforceable against the 1st defendant. I would also hold that the 1st defendant had breached it as he left the plaintiff on 31st January, 2000 and could not have worked for a competitor until after 31st July, 2000. But, he started working for Grand Pacific on or about 13th March, 2000. However, there is no evidence on what loss the plaintiff had suffered by reason of this breach. I therefore award the plaintiff nominal damages at HK$1.00.

Post-termination commission due from the plaintiff

90. There is no dispute that commission would only become payable upon payment of 25% and 50% of the membership fees by the plaintiff's members. The plaintiff has put forward two defences to this counterclaim. The first defence was that there was an express term and/or an implied term of the Contract or a practice of the trade that commission would only be payable if the liner/manager was still in the company's employ when the commission actually accrued and became payable. If the employee was no longer in the company's employ, it would not be payable.

91. On trade practice, I note that one of the conditions precedent for the payment of the commission of International Resorts as pleaded by the plaintiff was that before the plaintiff would be liable to pay the 1st defendant such commission, he would have to demand International Resorts for payment of the same after his dismissal by International Resorts. If there could have been such a condition precedent, that means there would not have been the trade practice as alleged. So the plaintiff was lying on at least one of the two matters. In any case, I do not find the plaintiff's evidence of trade practice convincing. There was simply no evidence of what other time-sharing company would do regarding post-termination commission. What have been adduced in evidence were mere assertions by the plaintiff's witnesses without any particulars. I also do not see any need or wisdom for the trade to have such a practice to govern the relationship between companies in this trade and their employees. Such employment issue could and normally would be dealt with in the employment contract. I therefore do not accept that there was such a trade practice as alleged.

92. On express/implied term, I would refer to clause 23 of the Contract. It stated:

"23. Subject to clause 20, in the event of termination of this Agreement, the Company shall pay the Sales Manager his or her commission for any product sold by the Sales Manager during the period of his or her appointment but in the manner set out in Clauses 9, 10 and 11 of this Agreement."

93. I am of the view that this clause should be interpreted to mean that upon termination of the Contract, all the commission that had become matured and payable then should be paid to the outgoing employee. It impliedly meant that there would be no further payment after termination even if further payment should be made by the plaintiff's members. I do not agree with Mr. Chan's submission that this clause should be interpreted to mean that commission would continue to be payable after the termination of employment. If that were the intent of the drafter, it would not have been difficult to express it in clear words.

94. There is some evidence by the liners that they had been told at the interview for the job that such commission would be payable after termination. But their contracts of employment were not before the court and I cannot accept their evidence to qualify the meaning of the 1st defendant's Contract. I also do not accept the evidence of the 2nd defendant that Lim had assured her that such payment would be made after termination. Even if there were such promise made by Lim after the making of the Contract, it was not embodied in writing as required by clause 25 which stated that the agreement was an entire agreement and variation required something in writing signed by the parties. In any event, the 1st defendant had not said that Lim had made such promise to him. I therefore reject the 1st defendant's counterclaim for such commission.

95. I also accept that there was the KIV practice and it was known to the defendants. They admitted that there was such practice in International Resorts as well. The 2nd defendant further admitted that there was such practice in Grand Pacific. But it has little bearing in my coming to the conclusion. There was some evidence on claims by former liners against the plaintiff for payment of post-termination commission. I accept that these claims were settled at the Labour Tribunal as all three liners who gave evidence for the 1st defendant confirmed that they only got lump sum payments by way of such settlements. I do not think such evidence can assist me either way and I do not take it into account in coming to my conclusion. There was also some evidence that the plaintiff had continued to pay some commissions to employees who have left. That in fact included the 1st defendant who had been paid such commissions up to the end of March, 2000. Lim said that they were gratuities. The 1st defendant disagreed. However, such payments were conduct after the making of the Contract and cannot be taken to assist the interpretation of the Contract. In any case, there were also many cases where the plaintiff had refused to pay and only entered into settlements at the Labour Tribunal. I therefore do not rely on such evidence in arriving at my conclusion.

96. I also find for the plaintiff on this counterclaim by reason of forfeiture under clause 22 of the Contract. This finding is a consequence of my finding that the 1st defendant had breach the covenant in restraint of trade in clause 19 of the Contract of employment. Though I have raised the question in the course of trial of whether this clause was enforceable or was it a penalty clause. Mr. Chan did not pursue this point in his closing submissions. I also find that it was not a penalty as the amount subject to forfeiture that was within the contemplation of the parties was the commission yet to be matured and such would not be out of proportion to the damage that could be inflicted on the plaintiff in the event of breach of the Contract. I therefore dismiss this counterclaim on this ground as well.

Damages for wrongful injunction

97. The last item of the counterclaim was for damages for the 4 days during which the 1st defendant was enjoined from working for Grand Pacific under the ex parte injunction. I would dismiss it as I have found for the plaintiff on the enforceability of clause 19.

Costs order nisi

98. I also make an order nisi on costs as follows. The plaintiff has succeeded in just one of its three claims against the 1st defendant. However, the success of the claim on the covenant in restraint of trade depended on its success in proving that some of its information was confidential. All in all, I think it is fair to order the 1st defendant to pay the plaintiff half of the costs of the action. Regarding the counterclaim, the 1st defendant only succeeded in one of its three claims. But the counterclaim for damages for having been wrongfully enjoined was not much more than his defence to the enforcement of the covenant. Very little time was spent on it. I would therefore order that the plaintiff do pay the 1st defendant half of the costs of the counterclaim. I finally order that the 1st defendant's own costs be taxed in accordance with the legal aid regulations.