MARY NG t/a HONG KONG DOGGIE HOUSE v. LUK SIU FUN, MICHELLE

IN THE SUPREME COURT OF HONG KONG

HIGH COURT

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BETWEEN

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JUDGMENT

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1. In this action the plaintiff seeks an injunction to restrain the defendant from practising as a dog groomer in Hong Kong. She also claims three months salary in lieu of notice.

2. The defendant was employed by the plaintiff, who is the proprietor of 'Hong Kong Doggie House" - a pet shop and dog grooming firm in Kowloon - from December, 1983 to April, 1986.

3. She was employed for three months, on a temporary basis, on 1st December, 1983. On 23rd March, 1984, she signed an agreement, under which she became "permanent staff". Then, on 18th January, 1985, the defendant signed a further agreement, which, unlike its predecessors, has apparently been drafted by a lawyer.

4. Under this agreement the defendant was appointed an "assistant groomer" for three years, subject to a right to resign on giving three months notice in writing. She was liable to be dismissed only for breach of the agreement, incapacity or misconduct.

5. The clause in this agreement with which this Court is principally concerned is Clause 3(b), which states:-

"If the employment of the Employee is terminated pursuant to either Clause 5 or Clause 6 hereinbelow within the first 3 years of this Agreement, the Employee shall not, without the prior approval of the Company in writing either solely or jointly with or as agent for any other person, firm or company, directly or indirectly carry on or be engaged in any manner, concerned or interested in or howsoever associated with any other grooming work which is either in competition with or similar in nature to the business of the Company within 2 years after the termination thereof."

6. The defendant's only previous job was a hair stylist in a beauty parlour, where she had worked for two years after leaving school in 1981.

7. At the Hong Kong Doggie House, the defendant at first worked as a receptionist. At the same time the plaintiff taught her how to groom animals, particularly dogs. The plaintiff herself had attended overseas courses in the art of grooming and had obtained various American and British qualifications.

8. Also employed by the plaintiff at this time were three part-time and three full time staff, including one Tracy Cajilig, who was one of the two other girls engaged in grooming work, having been taught by the plaintiff since her employment in 1982.

9. By the end of 1984 there was increasing competition in the pet shop and dog grooming business. The plaintiff was concerned that, having trained her staff, she would lose them to rival establishments. This was her motive in drawing up new contracts containing Clause 3(b). She reckoned that it took two years to train a girl. If the agreement was for three years, she was assured of the girl's services in the third year. She already suspected that Tracy was passing customer information to competitors.

10. In January, 1985, the plaintiff asked her assistant groomers - the defendant, Tracy and another girl called Irene Chan - to take away and study these draft agreements and suggest amendments if they wished. The defendant wished to change '36 months' to '3 years' and that amendment was duly made. The defendant and Irene signed the agreement: Tracy did not.

11. The plaintiff says she would not have dismissed the defendant had she refused to sign. In fact Tracy remained until April or May, 1985, when she left after a disagreement with the plaintiff. Five months later she opened her own pet grooming shop.

12. By now the defendant had learnt the basic skills and was capable of grooming a dog on her own, although a final touch-up by Tracy or the plaintiff was still required. There was even some discussion about the defendant managing a new shop, which the plaintiff was considering opening in Repulse Bay.

13. In February, 1986, on the plaintiff's advice, the defendant went to England to attend a pet grooming course, for one month, during three months leave. She paid her own fare, but the plaintiff paid the fee for the course.

14. The defendant resumed work on 1st April. Unfortunately, at the end of this month, there were words between the plaintiff and defendant. The latter accused the former of complaining about her work behind her back. The plaintiff denied it and told her not to believe everything people told her. She pointed out that, if she did not like her work, she would not have let her go to England at a busy time of year and paid for her course.

15. The defendant said she wanted to leave. The plaintiff asked her to think about it, but she did hot return to work next day. She had already received her April salary.

16. A few days later the plaintiff telephoned the defendant's home and spoke to the defendant's father. She asked him to persuade the defendant to return to work. She also spoke to the defendant, who said she was helping her family and would not return to work.

17. There were several further calls in May. During these conversations the defendant said she would not return to work, but was willing to pay the plaintiff three months salary in lieu of notice. The plaintiff told her that, provided she did not engage in dog grooming, she was prepared to waive notice or salary in lieu. She still considered the defendant a friend. During one conversation the defendant said she had found an office job and would start work next day.

18. Then, at the end of June, the defendant telephoned the plaintiff. She said she was to start work on 1st July at a new pet shop in Happy Valley called Pet Shop Girls; if the plaintiff wanted to claim three months salary, she should approach the boss of this shop. The plaintiff was very angry and put down the receiver. She drove at once to Happy Valley to check that there was such a shop. She found it and saw the defendant there, but she did not go in.

19. In brief those are the facts. There was a great deal of other evidence, much of it in my view superfluous.

20. Where the evidence of the plaintiff conflicts with that of the defendant on the relevant issues, I prefer that of the former. Indeed, except as to one minor matter, I have no doubt that the plaintiff is a witness of truth. She gave her evidence with confidence and clarity and was totally unshaken by searching cross-examination.

21. The defendant, on the other hand, told a stroy that was intrinsically improbable. In spite of her tears, I was not impressed by her demeanour, and her answers in cross-examination were unconvincing. There were areas in which her evidence and that of the plaintiff were not in conflict but, on the disputed issues, I am satisfied her evidence is untrue.

22. The part of the plaintiff's evidence that I find to be untrue is her answer, right at the end of her evidence, that dogs were not kept overnight at her shop. I thought this was surprising at the time. However there was subsequent evidence that, for overnight boarding, a kennel licence is required, which the plaintiff did not possess. In these circumstances it is perhaps understandable that she chose not to invite prosecution by admitting in the witness box that she had committed an offence.

23. I am satisfied that this does not affect her credibility as to the remainder of her evidence. The only relevance of that evidence was the purpose of a bonus that had been paid to the defendant. It is not germane to the issues before the Court.

24. While this may be music to the plaintiff's ears, in fact it helps her not at all on the main issue. The principles of law to be applied here are set out in Susan Buchanan v. Janesville Ltd. (1981) HKLR 700.

25. In that case the appellant was a hair stylist employed by the respondent in its salon in Hong Kong, Central. Clause 7 of a contract of employment between the parties read as follows:-

"At the termination of employment the employee agrees not to work in the Colony of Hong Kong as a hairdresser or in any capacity connected with hairdressing in competition with La Coupe Salon for a period of one year."

26. Within the relevant time the appellant left the employment of the respondent and started work with another hairdressing firm in Tsim Sha Tsui. The respondent obtained an injunction restraining her from engaging in such employment.

27. On appeal it was held that this particular covenant, though reasonable as to time, was too wide in respect of geographical area and much too wide in the ambit of restraint imposed on the employee in respect of her activities. It was therefore bad as being in unreasonable restraint of trade.

 

Barker, J. A. delivering the judgment of the Court said at p.702:-

 

"It is well settled that a clause in a contract as between employer and employee cannot stand if its object is merely to prevent the employee from competing per se with his previous employer. Mr. Bunting argues that that is not the purpose of this clause. What the respondents are seeking to do, he says, is to prevent competition purely to protect their own business. They are not seeking to prevent the appellant merely from engaging in a rival business. We disagree. We think this is a clause in a contract which is designed to prevent mere competition and we are strengthened in that view by the very broadness of the geographical area which is sought to be brought within the ambit of the clause and the rest of the occupations which the appellant is prevented from engaging in."

28. There are obvious similarities between that case and the present one. Mr  Ramanathan would distinguish Buchanan on several grounds.

29. He points out that Miss Buchanan was already trained: her reputation was established. The defendant was taught everything she knew whilst in the plaintiff's employment. That is certainly true, but in my judgment it makes no difference. It matters not what advantages accrued to the defendant under her contract. In Herbert Morris, Limited v. Saxelby (1916) AC 688, Lord Parker said at p.707:-

"It was at one time thought that, in order to ascertain whether a restraint were reasonable in the interests of the covenantor, the Court ought to weigh the advantages accruing to the covenantor under the contract against the disadvantages imposed upon him by the restraint, but any such process has long since been rejected as impracticable."

30. It is submitted also that the restraint in Buchanan was greater because it came into operation on termination of the contract, whereas this restraint did so only if the termination was within the first three years of employment. That cannot be denied.

31. Mr Ramanathan points out that Miss Buchanan was restrained from working in a salon in any capacity, whereas the defendant is free to work as a receptionist, or selling equipment in a pet shop. This is reasonable, he says, in order to protect the plaintiff's legitimate interest, which is, in any case, only for a limited period.

32. That argument is all very well, but it fails to take into account that the defendant is now a dog groomer, not merely a receptionist. Her main interest and talent lie in grooming dogs. Is it reasonable to block her progress at this critical stage of her career? I would say not, unless it is necessary to protect a legitimate interest of the plaintiff.

33. It is not sufficient to say that, because the plaintiff has trained her, she has a legitimate interest in preventing her working elsewhere as a competitor. Lord Atkinson put it thus in Morris v. Saxelby at p.703:-

"The respondent cannot, however, get rid of the impressions left upon his mind by his experience on the appellants' works; they are part of himself; and in my view he violates no obligation express or implied arising from the relation in which he stood to the appellants by using in the service of some persons other than them the general knowledge he has acquired of their scheme of organization and methods of business.

 

It is moreover, in my view, perfectly clear upon the evidence of their managing director that the danger against which the appellants desired to be protected is neither the enticing away of customers, nor the divulgence or use and employment of any trade secret.

 

It is this, that the respondent would carry away and might put to use in the establishment of their trade rivals the superior skill and knowledge he, the respondent, has by his talent acquired in their works, raise the character of the output of those rivals, improve their methods, and thereby make them more formidable competitors of the appellants in their trade.

 

That, I think, is plain, and every word of the able and convincing judgment of Farwell L.J. in Sir W.C. Leng & Co. v. Andrews (1) applies. After quoting the passage from the judgment of Lord Macnaghten which I have already quoted, the Lord Justice said: "The argument which has been addressed to us on behalf of the respondents does not bring the case within that doctrine. That doctrine does not mean that an employer can prevent his employee from using the skill and knowledge in his trade or profession which he has learnt in the course of his employment by means of directions or instructions from the employer. That information and that additional skill he is entitled to use for the benefit of himself and the benefit of the public who gain the advantage of his having had such admirable instruction. The case in which the Court interferes for the purpose of protection is where use is made, not of the skill which the man may have acquired, but of the secrets of the trade or profession which he had no right to reveal to any one else - matters which depend to some extent on good faith.""

34. There is no allegation here that the defendant is stealing trade secrets from the plaintiff, or that she is profiting from her knowledge of the plaintiff's customers gained during her employment with the plaintiff.

35. Mr  Ramanathan points out that another difference from Buchanan's case is that the plaintiff was restricted in the manner in which she might terminate the contract. I do not see how this can affect the issue.

36. Finally, he submits that in this case the geographical restriction is reasonable, since there are many more hairdressing salons than dog grooming establishments. In support he cites Isiff & Jenks v. Gordon, reported in the Solicitors Journal (1899) at p.749. In that case Cozens-Herdy, J. pointed out that the profession of an accountant depended on a much wider district than that of a dentist and that it was notorious that the business of an accountant was not confined to any particular part of England. He held that there had been a breach of covenant and granted an injunction.

37. There is a world of difference between England and Hong Kong and indeed between accountants and dog groomers. If it is unreasonable to limit a hairdresser's right to operate anywhere in Hong Kong, it is equally unreasonable in the case of a dog groomer.

38. For these reasons I conclude that Buchanan's case cannot be distinguished and that the plaintiff's claim for an injunction must fail. It is therefore unnecessary to consider Mr   Swaine's argument that the defendant is not in breach of Clause 5 or Clause 6 and that therefore Clause 3 is not triggered.

39. It will be cold comfort for the plaintiff to learn that she succeeds on the subsidiary issue. As I have indicated, I accept the plaintiff's version of what took place when the defendant left the job. The defendant clearly resigned because she was upset by what she had heard. The plaintiff waived her right to notice conditionally, on the defendant's undertaking not to continue in the dog grooming business. This undertaking was breached and the plaintiff is therefore entitled to three months salary in lieu of notice, that is to say $7,730. There will be judgment for the plaintiff in this sum.