MIDLAND BUSINESS MANAGEMENT LTD AND ANOTHER v. LO MAN KUI

HCA 1599/2010

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NO. 1599 OF 2010

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BETWEEN

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J U D G M E N T

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1.  The Defendant in this action is a former employee of the 1^st Plaintiff. He had been seconded to work for the 2^nd Plaintiff. He left his employment with the 1^st Plaintiff on 3 September 2010. Before he left, he was an assistant sales director of the 2^nd Plaintiff in charge of the following branches of the 2^nd Plaintiff’s estate agency: the Peak, Redhill, Repulse Bay, Deep Water Bay, South Bay Road, Shouson Hill, Stanley and Bel-Air. After the Defendant left the Plaintiffs, he joined another estate agency, Centaline Property Agency Limited [“Centaline”] and engaged in activities in competition with the Plaintiffs in respect of these branches. The Plaintiffs took the view that the Defendant acted in breach of certain restrictive covenants in the employment contract of 16 March 2009 which prohibited the Defendant from carrying on certain activities for a limited duration after the termination of his employment with the 1^st Plaintiff.

2.  The Plaintiffs further alleged that the Defendant had taken steps to solicit some of their employees to leave the Plaintiffs to join Centaline.  The Plaintiffs said this was in breach of another covenant in the employment contract.

3.  In the Statement of Claim, there are also pleas based on the tort of procuring breach of contract and breach of implied duty of fidelity.  However, Mr Fung SC confirmed at the hearing that these causes of action are not relied upon in the summons for interlocutory injunction.  The summons was taken out on 26 October 2010.  The Plaintiffs have re‑drafted the terms of the relief during the course of the application.  In the final form (as presented to the court by Mr Fung), the relief the Plaintiffs sought by way of interlocutory injunctions are as follows,

“Until further Order or 02^nd March 2011 whichever is the earlier, the Defendant be restrained from and shall not, whether by himself, his officers, servants, agents, nominees or howsoever otherwise and whether directly or indirectly:-

a) engage whether as director, partner, principal, owner, shareholder, consultant, agent, sub-agent, or servant or otherwise in respect of the sale and purchase or leasing of properties:-

i. in any part(s) of the areas or zones covered by those listed in Schedule A attached hereto (hereinafter “the Zones”); and/or

ii. that are set out by address in the list of properties in Schedule B attached hereto;

b) approach or solicit any estate agents or salespersons of the Plaintiffs and/or any member of the Midland Group who work within or are responsible for any part(s) of the areas or zones covered by the Zone, but excluding any employee who has only first commenced employment with the Plaintiffs and/or the Midland Group after 03^rd September 2010 and excluding any employee with whom the Defendant has never had any contact, to join him or other persons in any business undertaking of estate agency in which the Defendant is interested or concerned whether in the capacity as a director, partner, principal, owner, shareholder, consultant, agent, sub‑agent, servant, employee or otherwise howsoever;

….”

4.  At the hearing on 3 December 2010, the submissions of the parties revolved around the causes of action based on breach of the various provisions of the employment contract.  The relevant provisions in the employment contract of 16 March 2009 between the Defendant with the 1^st Plaintiff are set out below,

“11.3 For a period of six (6) months immediately following the termination of this Agreement for whatever reasons the Employee shall not, without the prior written consent of the Company, directly or indirectly be engaged as director, partner, principal, owner, shareholder, consultant, agent, sub-agent or servant or otherwise, or accept employment or otherwise, or be concerned with or interested in any business concern of estate agency in Hong Kong in respect of the sale and purchase or leasing of properties: -

(a) in any part of the area covered by thezone or zones which are divided for the sake of convenience and for the Company’s administration in relation to which the Employee had been assigned to work within the periodof six (6) months immediately preceding the date of such termination (the “Zone”); and/or

(b) which were contained in data files kept or lists of properties prepared by the Company, any member of the Midland Group and/or any partner company (together with such up-to-date supplement and amendments, if any) to which the Employee had obtained access within the period of six (6) months immediately preceding the date of such termination.

11.4 For a period of six (6) months immediately following the termination of this Agreement for whatever reasons, the Employee shall not approach and solicit any real estate business or transaction from any of the persons who had been within the period of one (1) year immediately preceding the date of such termination customers of the Midland Group and/or the partner company; and for the purpose of this clause, a person is a customer of the Midland Group and/or the partner company if he is either a vendor or a purchaser or a landlord or a tenant of a premises located in the Zone the sale and/or purchase and/or leasing of which was successfully effected through the agency of a member of the Midland Group and/or a partner company or with its assistance and also for this purpose, the date on which such a person is to be treated as a customer of the Midland Group and/or the partner company is the date of the signing of the provisional agreement for sale and purchase and/or the tenancy agreement, as the case may be.

11.5 For a period of six (6) months immediately following the termination of this Agreement for whatever reasons, the Employee shall not approach and solicit any real estate business or transaction from any of the persons who had been within the period of one (1) year immediately preceding the date of such termination customers of the Midland Group and/or the partner company; and for the purpose of this clause, a person is a customer of the Midland Group and/or the partner company if he is either a vendor or a purchaser or a landlord or a tenant or a premises listed in the control lists and data files of the properties of the Midland Group and/or the partner company (together with such up-to-dale supplement and amendments, if any) and who had obtained assistance from the Midland Group and/or the partner company in the completion of any property transaction to which the Employee had obtained access within the period of six (6)months immediately preceding the dale of such termination.

11.6 For a period of six (6) months immediately following the termination of this Agreement for whatever reasons, the Employee shall not approach and solicit any other current employee of the Company and/or any member of the Midland Group to join him or other persons in any business undertaking or estate agency in which the Employee is interested or concerned whether in the capacity as a director, partner, principal, owner, shareholder, consultant, agent, sub-agent, servant, employee or otherwise.

11.7 The Employee hereby declares that he fully understands the various restraints imposed by Clauses 11.3 to 11.6 either through his own endeavour or through independent legal advice he sought and the Employee further acknowledges and agrees that Clauses 11.3 to 11.6 are necessary and reasonable for the legitimate protection of the interests of the Company and/or the Midland Group and/or the partner company.

11.8 Notwithstanding Clause 11.7 hereof, it is hereby agreed and declared that if any of the lime restrictions specified in Clauses 11.3 to 11.6 hereof shall be adjudged illegal, invalid and/or unenforceable as going beyond what is reasonable in all the circumstances for the protection of the legitimate interests of the Company and/or the Midland Group and/or the partner company, the said time restrictions shall be modified and reduced in the following manner so as to make them valid and enforceable:-

(a) in the case of a restriction of six (6) months, it shall be modified and reduced to three (3) months;

(b) in the case of a restriction of one (1) year, it shall be modified and reduced to six (6) months.

The parties hereto acknowledge that each of the said time restrictions shall be treated as separate and independent of the others and the illegality, invalidity and/or unenforceability of any of the time restrictions shall not in any way affect or impair the remaining restrictions.

11.9 Notwithstanding Clauses 11.7 and 11.8 hereof, it is hereby further agreed and declared that if any of the restrictions specified in Clauses 11.3 to 11.6 hereof other than the time restrictions contained therein shall be adjudged illegal, invalid and/or unenforceable as going beyond what is reasonable in all the circumstances for the protection of the legitimate interests of the Company and/or the Midland Group and/or the partner company but would be valid if part(s) of the wording thereof were deleted or the period(s) (if any) thereof were reduced or the range(s) of activities or area concerned therewith were reduced in scope, the said restrictions shall apply with such modifications as may be necessary to make them valid and enforceable. The parties hereto acknowledge that each restriction shall be treated as separate and independent of the others and the illegality, invalidity and/or unenforceability of any of the restrictions shall not in any way affect or impair the remaining restrictions.”

5.  The Defendant does not dispute that he has joined Centaline.  The primary argument of Mr Yan SC is that the clauses relied upon by the Plaintiffs are unenforceable.  There are also dispute of facts as to whether the Defendant had solicited the employees of the Plaintiffs.

6.  Since this is an interlocutory application, the court cannot resolve factual disputes.  Further, bearing in mind that the relevant covenants in the employment contract will expire on 2 March 2011 and it is unlikely that the trial of the action can take place before that date, Mr Fung quite properly accepted that the usual American Cyanamid test has to be applied with a rider that the court should have a greater regard to the Plaintiffs’ prospect of success.  In this connection, Mr Yan referred this court to Lansing Linde v Kerr [1991] 1 WLR 251 where Staughton LJ said as p. 258A to D,

“If it will not be possible to hold a trial before the period for which the plaintiff claims to be entitled to an injunction has expired, or substantially expired, it seems to me that justice requires some consideration as to whether the plaintiff would be likely to succeed at a trial. In those circumstances it is not enough to decide merely that there is a serious issue to be tried. The assertion of such an issue should not operate as a letter de cachet, by which the defendant is prevented from doing that which, as it later turns out, he has a perfect right to do, for the whole or substantially the whole of the period in question. On a wider view of the balance of convenience it may still be right to impose such a restraint, but not unless there has been some assessment of the plaintiff’s prospect of success. I would emphasize ‘some assessment’ because the courts constantly seek to discourage prolonged interlocutory battles on affidavit evidence. I do not doubt that Lord Diplock, in enunciating the American Cyanamid doctrine, had in mind what its effect would be in that respect. Where an assessment of the prospects of success is required, it is for the judge to control its extent.”

7.  Similar approach was adopted by Chu J in Fortune Realty Co Ltd v Chan Hiu Yeung Dick HCA 1582 of 2001, 24 May 2001 and Judge Ng in Midland Business Management Ltd v Ng Pe Lok DCCJ 6120 of 2005, 14 March 2006.

8.  I agree with Mr Yan that due to the inherent difficulties in the quantification of a loss that may be suffered by the Defendant if he were wrongly prevented from working for Centaline by an interlocutory injunction, the Plaintiffs have to demonstrate a good prospect of success for present purposes.

9.  I shall now address the prospect of success in respect of the first part of the application.  The Plaintiffs’ claim is based on Clause 11.3 of the employment contract.  Mr Yan took the relevant legal principles as to the enforceability of post-employment restraints from Natuzzi Spa v De Coro Ltd, HCA 4166 of 2003, 16 June 2006 Paras. 44 to 61

(a) No employer is entitled to make use of a restrictive covenant to protect himself against competition per se. A covenant against competition per se is not reasonable and accordingly void.

(b) An employer is not entitled to prevent his ex-employee from using the skill and knowledge in his trade or profession which he learnt in the course of his employment. Nor is he entitled to prevent his ex-employee for using in the service of some person other than the employer the general knowledge the employee has acquired of the employer’s scheme of organization and methods of business;

(c) An employer is entitled to make use of a restrictive covenant to protect his legitimate interests such as his trade secrets and his trade connections. However, the restrictive covenant, to be valid, must afford no more than adequate protection to the party in whose favour it is imposed. It must be reasonable not only in reference to the interests of the parties concerned, it must also be reasonable in reference to the interests of the public;

(d) The onus of proving the reasonableness of the restriction rests on the party who seeks to enforce the restriction. The more onerous the restriction, the heavier the weight of the onus.

10.  Mr Yan also highlighted the importance of the pleadings as to the legitimate interests to be protected.  In Natuzzi, the court said at para. 63,

“Since the burden of establishing the enforceability of a restrictive covenant rests on the Plaintiff, it should have pleaded the same with full particulars including all facts and matters relied upon by it to assert that the covenant is enforceable. A bare assertion that the clause is enforceable is not enough. It should plead the interests it relied upon and how such interests reasonably warrant a protection as wide as that embodied in the contract. If a plaintiff intends to put forward a case of severance, whether by way of alternative argument or primary argument, it should also be pleaded.”

11.  Mr Fung did not argue against these principles. Indeed, Mr Fung’s predecessor (Mr Chang SC who appeared for the Plaintiffs at the first hearing of the summons on 5 November 2010) indicated that the Plaintiffs would file a Statement of Claim and further evidence to set out the legitimate interest of the Plaintiffs.  Those documents were filed accordingly.

12.  In the Statement of Claim, in relation to Clause 11.3 the Plaintiffs pleaded their legitimate interest at paras. 14 to 22.  I will set them out below,

“The Plaintiffs’ legitimate interests in the Zone

14. Midland Realty’s business in respect of the Zone forms an important part of its business operation. This is because of the high-end and luxury properties therein.

15. Midland Realty had begun establishing its presence in the Zone since about 1991. Midland Realty originally only had one branch at the Zone with only 6-7 estate agents/salespersons. Midland Realty now has 8 branches in the Zone with about 70 estate agents/salespersons.

16. Midland Realty had invested much time and effort in developing its clientele and after years of accumulative efforts, it has successfully built its reputation in dealing with properties in this particularly niche market in the Zone.

17. Business in the Zone is special in that there is very rarely walk-in clients in respect of both the sale, purchase and leasing of the properties. Lay clients in the Zone are usually acquainted personally with particular estate agents/sales persons and would go to them as their immediate and direct contact with their real estate business.

18. Further, the Zone has a high percentage of second hand market properties as new developments are scarce in the Zone. This again means that business in the Zone depends greatly on personal contacts and existing connectionsbetween the estate agents/salespersons and lay clients.

19. A stable work force is thus even more important in the Zone than the other zones. With the departure of a particular staff, especially experienced ones, it means that the contact, connection, together with the business of the Zone would be greatly affected as he/she would take together with him/her the business of all the lay clients with whom he/she has regular contacts.

20. The requirements of the standards of estate agents/sales‑persons in the Zone are also higher, as the clients in the Zone are usually highly educated and/or sophisticated. The estate agents/salespersons therefore would need to have a good standard of English, and the relevant knowledge in the sale, purchase and leasing of properties. They are usually expected to have a driver’s licence so that they can drive the clients for the viewing of the properties.

21. Further, Midland Realty places great emphasis on the Zone as the transaction amounts are one of the greatest in the Hong Kong island and transactions in the Zone often generate the highest amount of commission. The number of transactions and consideration of properties within the Zone for year 2009 and 2010 are as follows :-

Number of Transactions	2009	2010 (up to 9 November)
HONG KONG PARKVIEW	62	35
REPULSE BAY	178	73
SHOUSON HILL	15	12
SOUTH	9	13
STANLEY	131	111
TAl TAM	60	29
THE PEAK	53	50
Bel-Air	573	268
Larvotto	0	667
Total	1,081	1,258

 

Consideration	2009	2010 (up to 9 November)
HONG KONG PARKVIEW	1,504,480,109	1,072,480,000
REPULSE BAY	6,368,145,530	3,617,819,099
SHOUSON HILL	530,360,000	786,600,000
SOUTH	351,523,814	616,128,000
STANLEY	3,900,918,888	2,813,253,100
TAl TAM	2,000,505,000	854,590,000
THE PEAK	4,017,470,000	3,564,672,820
Bel-Air	9,979,865,454	6,063,758,968
Larvotto	0	14,389,542,700
Total	28,653,268,795	33,778,844,687

22. These are the reasons why a restrictive covenant is necessary to protect Midland Realty’s business interest in the Zone.”

13.  The Zone was defined in Clause 11.3.  For the sake of clarity, the Plaintiffs identified the Zone in terms of locality by way of Schedule A in the draft order and in terms of buildings by way of Schedule B.

14.  From the pleadings (and also the evidence filed on behalf of the Plaintiffs), it is clear that the legitimate interest relied upon by the Plaintiffs is not any confidential process or system in the Plaintiffs’ operation.  Rather the relevant interest is the trade connection between each individual estate agent and the customers of the Plaintiffs.

15.  That being the case, the interest of the Plaintiffs is already protected by Clauses 11.4 and 11.5.  In the present action, there is no suggestion by the Plaintiffs that the Defendant has acted in breach of Clauses 11.4 or 11.5.  No cause of action based on those clauses was pleaded in the Statement of Claim.  Mr Fung submitted that the Plaintiffs can protect the same interest by more than one clause.  I have no quarrel with that. But there is a rider: each clause cannot be wider than what is reasonably necessary for the protection of such interest.  Further, as submitted by Mr Yan, the existence of Clauses 11.4 and 11.5 means that the need for further protection by way of Clause 11.3 has been diminished, see Stenhouse Australia Ltd v Phillips [1974] 1 All ER 117 at p. 124 f to g.

16.  Clause 11.3 is a blanket prohibition against the participation by the Defendant in the business of estate agency in respect of sale and purchase or leasing of properties in the Zone for a period of 6 months, whether as employee or director or other form of business involvement. It extends beyond dealing with existing customers of the Plaintiffs with whom the Defendant had had business when he was employed by the 1^st Plaintiff. Actually, it extends beyond dealing with the customers of the Plaintiffs.  If Clause 11.3 were enforceable, the Defendant would be prohibited from serving new customers within the Zone in any form of estate agency business even though the Plaintiffs have no connection with such customers whatsoever.

17.  What is the Plaintiffs’ justification for such a wide ranging clause? I cannot find the answer in the Statement of Claim or the evidence of the Plaintiffs.  At the hearing, Mr Fung suggested that such extensive protection is necessary on account of the difficulty in policing compliance with Clauses 11.4 and 11.5.  He submitted that the solicitation could be done by a subordinate agent instead the Defendant himself.

18.  Counsel cited Thomas v Farr [2007] IRLR 419 in support of his contention.  The Court of Appeal in that case dismissed an appeal in which one of the grounds relied upon by the appellant was that the ex‑employer was adequately protected by a non-solicitation clause and there was no need to have additional protection by way of non-competition clause.  But that case was decided on a very different factual scenario.  The employee in that case was the managing director of an insurance broker in a highly specialist field and the market was small.  In that position, the employee had been privy to all major and strategic operational decisions of the employer and had had overall responsibility for its business.  The court found that the employee acquired information in several categories which the employer had legitimate interest in protecting: (i) business development through the use of a captive insurer; (ii) exploitation of new areas of business within social housing; (iii) exploitation of new geographical markets; (iv) business development through acquisition of other businesses; and (v) pricing and financial information relating to clients and insurers.  Given the nature of the information in question, the court accepted that it might be difficult to draw the line between what is confidential and what is not and this was held to be the classic type of situation where protection by a non-competition clause was justified.

19.  The court also addressed the question of difficulty in policing at para. 48 of the judgment.  But it is clear from what was said in that paragraph that the main difficulty stemmed from the nature of the information and the position of the employee.

20.  Plainly the decision of the Court of Appeal depends very much on the facts of that case.  It would be wrong to regard that judgment as laying down the proposition that whenever difficulty in policing is asserted a non-competition clause can be justified.

21.  In the present case, as I have observed above, the only kind of interest relied upon by the Plaintiffs is trade connections. And there is no suggestion that these connections are exclusive to the Plaintiffs.  As discussed during the course of hearing, in Hong Kong most customers who have interest in real estate transactions would approach more than one estate agency.

22.  Though I accept one may take into account difficulty in policing in assessing the reasonableness of the protective measures in an employment contract, the weight to be attached to it must depend on the facts of the case.

23.  It is also pertinent to note what the Court of Appeal in Thomas v Farr said as regards a non-competition restraint insofar as the interest to be protected is trade connections at para. 49 of the judgment.

“Mr Nicholls submitted that it was unreasonable to prevent Mr Thomas from engaging in competition with Farr in any place where it had conducted business in the 12 months prior to termination. The clause would, for example, prevent him from competing with Farr for business not only from its existing clients, but also from those who used another broker or none. That would be a good point if, but only if, the confidential information which it was reasonably foreseeable that Mr Thomas would acquire during the course of his employment would be relevant only to existing clients.” (My emphasis)

24.  Thus, in my view, the case of Thomas v Farr does not assist the Plaintiffs.  Having regard to the nature of the interest which the Plaintiffs could legitimately demand protection by way of post‑employment restraints and the position of the Defendant whilst he was employed by the Plaintiff, and bearing in mind that the Plaintiffs already have protection under Clauses 11.4 and 11.5, I do not think the Plaintiffs have a good prospect of success in upholding the validity of Clause 11.3.

25.  Turning next to the claim based on Clause 11.6, in addition to the parts I have already alluded to, the following averments in the Statement of Claim are relevant in identifying the interests of the Plaintiffs to be protected by that clause.

“32. In breach of Clause 11.6 of the Employment Contract, the Defendant had made attempts to deliberately solicit a number of employees of members of the Midland Group to leave their employment and join him at Centaline under the Team.

Particulars

33. Within less than 2 months since the resignation of the Defendant, a total of 7 estate agents/salespersons of Midland Realty, all responsible for handling properties in the Zone had resigned from Midland Realty and joined Centaline under the Defendant and/or in the Team. Particulars of these estate agents/salespersons include: -

(a) Fong Fu Yi (“John Fong”), senior sales manager of Midland Realty’s South Bay Road Branch, who used to work directly under the Defendant, and was also responsible for Midland Realty’s operation for some of the districts within the Zone had resigned.

(b) 6 former estate agents/salespersons who were formerly with Midland Realty, i.e. Janette Lau, Joe Chong Kai Yeung, Patrick Chan Yu Fat, Vincent Cheung Man San, James Li Tai Kwok, and Annie Lai Man Ping, all of them together with John Fong, had joined the Team. All of them used to work under the supervision of the Defendant before the Defendant’s resignation. John Fong and Vincent Cheung Man San have since rejoined Midland Realty on 8 October 2010.

(c) The Defendant also instructed Janette Lau, to contact Tommy Yu Tung Shing, another salesperson of Midland Realty’s Red Hill Branch and offer him a post at Centaline.

34. By reason of the Defendant’s breach of Clause 11.6, the Plaintiffs have suffered loss and damage.

Particulars

(a) After the resignation of the Defendant who was a top salesperson, the intactness and constituency of Midland Realty’s sales teams responsible for the Zone’s operation became ever more important.

(b) Full replacement of the loss of manpower as a result of the resignation of the estate agents/salespersons responsible for the Zone takes time, not least a lot of efforts to counter the Defendant’s continuing concerted efforts to poach the Midland Group’s personnel in breach of the Employment Contract.

(c) The business of the Zone mainly comes from established personal connections between the estate agents/salespersons and clients. Thus, it is very difficult to recruit new staff to replace such loss of personnel who had proven track record and considerable experience in dealing with this particular luxurious sector of real estate.

(d) With the constant leaving of experienced staff in the Zone and the poaching of the Midland Group’s personnel by the Defendant and/or under the instruction of the Defendant, the morale of the remaining staff in the team within the Zone and the team integrity are greatly affected.

(e) Midland Realty’s business and operation in the Zone has been adversely affected by reason of such solicitation.

(f) Such solicitation by the Defendant has caused irreparable damage to the Plaintiffs.”

26.  Mr Yan accepted that the Plaintiffs were entitled to have protection in respect of the stability of their sales staff. However, counsel submitted that Clause 11.6 goes beyond that.  The words “any other current employee”, counsel said, were too wide as they may cover employees who are not estate agents or sales persons.  They encompass all current employees regardless of their importance, including even junior or janitorial staff.  Further, they would cover staff working outside the Zone and those who joined the Plaintiffs after the Defendant had left.  As such, clause 11.6 is too wide and therefore unenforceable.

27.  In this connection, counsel cited TSC Europe (UK) Ltd v Massey [1999] IRLR 22 and Hanover Insurance Brokers Ltd v Schapiro [1994] IRLR 82.  In the former case, after reviewing several English authorities, the court held that whilst an ex-employer had an interest in maintaining a stable, trained workforce which he could properly protect by means of a covenant against solicitation of employees within the limit of reasonableness, the protection in that case was more than reasonably necessary as it prohibited solicitation without regard to an employee’s importance in the business or technical knowledge or experience and it applied to any employee who joined the company during the prohibited period, including those joined after the defendant had left.

28.  Mr Yan invited this court to have regard to a draft order submitted on behalf of the Plaintiffs on 5 November 2010 re-formulating the terms of the injunction in a manner which narrows down its scope as compared with the wordings of clause 11.6.  Counsel submitted that this was in substance an acknowledgment by the Plaintiffs that clause 11.6 is too wide.  That version was the same as para. 1(b) in the draft order submitted by Mr Fung for this court’s consideration.

29.  For my part, I would not place too much significance on the re-formulation of the relief by the Plaintiffs.  Rather I would focus on the proper construction of clause 11.6.

30.  Mr Fung submitted that the restriction in the clause is qualified by the expression “current employee” to employees working for the Plaintiffs during the period when the Defendant was employed by the 1^st Plaintiff. Further, Mr Fung submitted that the reference to “business undertaking of estate agency” in the clause has the effect of confining the operation of the restriction to estate agents or sales staff.

31.  With respect, I cannot accept Mr Fung’s construction of clause 11.6.  The natural meaning of “current employee” in the context of the clause refers to employees of the Plaintiffs when the Defendant approaches or solicits them.  Bearing in mind the purpose of the clause (viz. protecting the staff stability of the Plaintiffs) it is unlikely to refer to employees who have left the Plaintiffs when approached or solicited.  Yet Mr Fung’s construction would encompass such employees so long as they had been employed by the Plaintiffs during the currency of the Defendant’s own employment.

32.  As regards the kind of employee identified under clause 11.6, there was no express qualification as to the subject of approach or solicitation other than he or she being a current employee.  Those who join in any business undertaking of estate agency can serve different functions and the evidence before this court suggests that there are administrative staff working for the Plaintiffs who are neither estate agents nor sales persons. I do not see any justification for excluding such staff from the scope of clause 11.6 as a matter of construction.

33.  Mr Fung then referred to SBJ Stephenson Ltd v Mandy [2000] FSR 286 and submitted that the Plaintiffs were entitled to prevent poaching of their non-sales staff as well.  Again one must read that case together with its facts.  The clause in question in that case (clause 14(iii) as seen at p. 291 of the report) is materially different from our clause 11.6.  First there is an express provision in that clause 14(iii) that permission shall not be unreasonably withheld and that such permission would not be withheld if the ex-employer considered that the employee concerned has neither a personal influence with clients nor is possession of confidential information.  Second, that the subject of that clause is confined to employee with whom the defendant had dealings.  Hence, the judge held that clause 14(iii) was not indiscriminant in its range.

34.  The case involved an insurance brokerage company with there were 30 or 40 staff working at the office with the defendant as a close team.  The ex-employer provided training to all the staff and it supported those employees who wished to obtain further qualifications in insurance.  The judge found that the support staff were trained and became experienced in the company’s procedures and computer system.  The judge also found that all the staff would be in possession of some confidential information.  It is against such background that the court held that clause 14(iii) did not go further than what is necessary to protect the stability of the ex‑employer’s workforce.  Thus, the judge did not find it necessary to address the earlier authorities including TSC Europe (UK) Ltd v Massey [1999] IRLR 22 and Hanover Insurance Brokers Ltd v Schapiro [1994] IRLR 82.

35.  In the Statement of Claim, there is no plea in relation to the legitimate interest of the Plaintiffs in having protection against the poaching of their non-sales staff.  Though there were references to non-sales staff in the Plaintiffs’ evidence (para. 33 of the first affirmation of William Lau and the affirmation of Lam Pui Sze), the evidence only addressed the alleged approaches by the Defendant to such non-sales staff and did not explain what legitimate interest the Plaintiffs had in preventing such staff from being solicited.

36.  In Dawnay, Day & Co v D’Alphen [1998] ICR 1968 at p. 1096 to 1097, the Court of Appeal drew a distinction between an indiscriminant anti-poaching clause (held to be unenforceable) and a clause confining to senior employee (held to be enforceable on account of the legitimate interest in the maintenance of a stable trained workforce).

37.  Given the stance adopted by the Plaintiffs in the Statement of Claim and the absence of any evidence demonstrating any legitimate interest on their part which requires the protection of an indiscriminant anti-poaching restraint, I hold that the Plaintiffs do not have a good prospect of success in enforcing clause 11.6 in its current form.

38.  Mr Fung referred to clause 11.9 of the employment contract and invited the court to apply the blue-pencil test to render clauses 11.3 and 11.6 enforceable.  Counsel has put forward an attempt in blue-penciling clause 11.3 but no attempt has been made regarding clause 11.6.  Mr Fung’s attempt on clause 11.3 is as follows,

“11.3 For a period of six (6) months immediately following the termination of this Agreement for whatever reasons the Employee shall not, without the prior written consent of the Company, directly or indirectly be engaged as director, partner, principal, owner, shareholder, consultant, agent, sub-agent, or servant or otherwise, or accept employment or otherwise, or be concerned with or interested in any business concern of estate agency in Hong Kong in respect of the sale and purchase or leasing of properties :-

(a) in any part of the area covered by the zone or zones which are divided for the sake of convenience and for the Company’s administration in relation to which the Employee had been assigned to work within the period of six (6) months immediately preceding the date of such termination (the “Zone”); and/or

(b) which were contained in date files kept or lists of properties prepared by the Company, any member of the Midland Group and/or any partner company (together with such up-to-date supplement and amendments, if any) to which the Employee had obtained access within the period of six(6) months immediately preceding the date of such termination.”

39.  With respect this attempt on clause 11.3 fails to address what I regard as the problem in respect of the non-competition clause.  In my judgment, the revised clause is still an unreasonable restraint and as such unenforceable.

40.  Mr Fung adopted the approach on blue pencil test in Sadler v Imperial Life Assurance [1988] IRLR 388 at p. 391-2 (approved by the Court of Appeal in Beckett Investment Group v Hall [2007] ICR 1539 at para. 43).  In Sadler, the judge said,

“In my judgment, the combined effect of those authorities is that a contract which contains an unenforceable provision nevertheless remains effective after the removal or severance of that provision if the following conditions are satisfied,

1. The unenforceable provision is capable of being removed without the necessary of adding to or modifying the wording of what remains.

2. The remaining terms continue to be supported by adequate consideration.

3. The removal of the unenforceable provision does not so change the character of the contract that it becomes ‘not the sort of contract that the parties entered into at all’.”

41.  Given my conclusion on the problems associated with clause 11.6, I cannot see how they could be addressed without adding or modifying the wordings in the clause.  As I said, Mr Fung has not even begun to attempt to do so.  Paragraph 1(b) of the draft order was obviously not an attempt in blue penciling and I do not understand Mr Fung to contend that it can satisfy the first element in the Sadler formulation.

42.  It is not the function of the court to re-draft restrictive covenants for the parties.  As it is said in Chitty on Contracts 30^th Edn Vol. 1 para. 16-105,

“The court will not imply a term in order to save a covenant restraining an employee’s post-employment conduct. Nor will the court re-write a covenant in restraint of trade where the contract provides that the covenant, if unenforceable, should be rewritten with such minimum amendment as renders it enforceable.”

43.  For these reasons, I dismiss the Plaintiffs’ summons.  I shall also make a costs order nisi that the Plaintiffs shall pay the Defendant’s costs of the summons in any event.