CHARTER SENSE LTD v. NG KIN YAN also known as PATRICK NG KIN YAN

HCA 2082/2011

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NO. 2082 OF 2011

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REASONS FOR DECISION

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1.  This is an application by the plaintiff for leave to appeal against my decision on 13 March 2012, refusing the plaintiff’s application for the two remaining injunctions as follows:

(i)  injunction restraining the defendant from using or disclosing the clients’ contact list (“Clients’ Contact List”) of the plaintiff; and

(ii)  injunction restraining the defendant from soliciting clients of the plaintiff for a period of 1 year after the termination of the defendant’s employment with the plaintiff on 17 June 2011.

2.  In the hearing on 14 May 2012, I refused the plaintiff’s application for leave to appeal and I now give my reasons.

3.  The facts of the present case and the reasons for me in refusing the plaintiff’s application for the two injunctions have been fully set out in my decision on 13 March 2012 and I do not want to repeat the same here.

4.  As I see it, the plaintiff’s main grounds of appeal are as follows:

(i)  the court was wrong in holding that the Client’s Contact List is not confidential information;

(ii)  the balance of convenience test is not applied in the case of an application to restrain breach of an express negative covenant, and so the court was wrong to apply such test in making the decision; and

(iii)  even if the balance of convenience test is applicable, the court has applied the test incorrectly.

5.  Mr Remedios, counsel for the plaintiff in this appeal but not in the earlier hearing, has referred me to some new authorities and arguments which have not been mentioned or raised before.  Despite his very able submission, I do not find that there is any merit in the intended appeal.

6.  Firstly, Mr Remedios has referred me to a number of cases on clients’ lists.  Whilst I agree that clients’ lists are generally confidential information, the facts of the present case deserve separate consideration.  In many other cases, there are usually numerous customers in the market and the plaintiffs have to incur expenses and devote effort in the compilation of the clients’ lists which make them so valuable to the plaintiffs.  In the present case, there are only 2 suppliers and about 50 customers in the specialised market.  The clients of the plaintiff are reputable financial institutions in Hong Kong and there is nothing confidential about their identities and the compilation of the list.  There is also nothing confidential about the contact persons responsible for the printing of the financial research reports in these institutions.

7.  Further, even if the Clients’ Contact List were to contain confidential information, how can the plaintiff prove that the defendant had made use of the List in contacting these financial institutions? According to Mr Remedios, the defendant had a copy of the Clients’ Contact List and he had made contacts with some of the clients in the List, that would be sufficient to establish that the defendant had made use of the Clients’ Contact List.  However, if the argument of Mr Remedios is correct, it would virtually mean that the defendant cannot engage in the same business again. As the market is a restrictive one and all the financial institutions are probably in the List, the defendant cannot contact any of these institutions in the indefinite future.  This simply cannot be right.  Given the unique feature of this specialised market, one cannot say once the defendant makes contacts with some of these financial institutions, he must have done so with the benefit of the Clients’ Contact List.  To me, the plaintiff is only making the application with a view to stop the defendant from competing with it at all costs rather than to protect the legitimate business interest of the plaintiff.

8.  In respect of the non-solicitation of clients clause, Mr. Remedios submits that the balance of convenience test is not applicable in the case of an application to restrain breach of an express negative covenant, and so I was wrong in applying such test in the earlier hearing.  However in all of the cases relied on by Mr Remedios, it was beyond doubt that the defendants were subject to the negative covenants (in most of the cases the negative covenants were contained in the deeds of mutual covenants of the buildings), and so the effect of the injunctions was only to stop the defendants from doing something which they were not entitled to do in any event.  In such case, I can understand why the balance of convenience test is not applicable.

9.  However, the existence of the non-solicitation clause is a live issue in the present case.  According to the defendant’s contention, he had never agreed to the non-solicitation clause in the employment agreement.  There is also a chance that the court will refuse to enforce the non-solicitation clause as a restraint of trade.  If the plaintiff fails in his claim in this regard, the defendant may have to suffer the inconvenience resulting from the granting of the injunction.  In such circumstances, the court is entitled to take into account the balance of convenience principles in determining whether to grant the injunction.

10.  Furthermore, even in the case of a negative covenant, the court still retains a discretion whether to grant the injunction (see: Hong Kong Civil Procedure 2012, vol 1, §29/1/32).  In the present case, as the non-solicitation clause will expire in a month’s time and the damages of the plaintiff can be easily quantified, there are certainly strong reasons against the granting of the interlocutory injunction at this stage.

11.  Finally, Mr Remedios submits that, even if damages is an adequate remedy, the burden is on the defendant to show that he will be able to pay the damages which may be awarded against him.  As the defendant has failed to discharge such burden, the court should grant the injunction to protect the plaintiff’s interest.

12.  This is a bold submission made by Mr Remedios for the first time.  If the argument is a valid one, it would impose a duty on every defendant to adduce positive evidence about his financial position before he can successfully resist an application for interlocutory injunction. This simply cannot be right.  Obviously, the court is entitled to take into account the financial ability of the defendant in paying damages in considering the balance of convenience test.  However, if the plaintiff wants to rely on this particular issue in support of the application, it should adduce prima facie evidence in support of his concern that the defendant is not able to pay damages if he succeeds in his claim.  In such case, the defendant would then be expected to adduce some evidence to deal with such concern.  As the plaintiff has not raised such issue before, it would be too dangerous for the court to make any speculation about the financial ability of the defendant.  The fact that the defendant may experience difficulty with the reduction of his monthly income caused by the granting of the injunction does not necessarily mean that he has no other asset to satisfy the plaintiff’s claim if it succeeds.  Further, there is also no concrete evidence to show that the plaintiff has the financial ability to honour the undertaking as to damages under the proposed injunctions.  In such circumstances, whereas the plaintiff does not need to satisfy such burden, why should the court impose a duty on the defendant to satisfy the court that he has the means to pay the damages if the plaintiff succeeds in his claim?  This simply is not fair, and so there is no merit in the challenge in this regard. 

13.  By reason of the aforesaid, I do not find that there is any reasonable prospect of success in the intended appeal and I therefore dismissed the plaintiff’s application with costs.