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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DECISION

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1.  This is an application by the plaintiff for an injunction to restrain the defendant from:

(i)  using or disclosing the clients’ contact list (“Clients’ Contact List”) and price matrices (“Price Matrices”) of the plaintiff; and

(ii)  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.

Background

2.  The plaintiff has been carrying on the business in a specialised segment of printing industry, namely financial research report (“FRR”) printing, since it was founded in 1991.  It is a specialised industry.  There are only 2 FRR printers in Hong Kong: the plaintiff and a company known as “DG3” (“DG3”).  There are no more than 50 active clients within the industry. Quality demanded by their clients is extremely high, and the clients are reputable financial institutions and the readers of FRR are professional investors.  The work involves special technology, and time is of the essence as a client placing an order in late afternoon expects the products to be ready early next morning.

3.  The defendant is a Singaporean who joined the plaintiff in 2000 to work as a Sales Manager.

4.  It is the plaintiff’s case that the defendant had signed 2 contracts of employment with the plaintiff (“the Contracts”): the first one was undated and the second one was dated 1 June 2001.  The Contracts provide that:

(i)  the defendant shall keep confidential and shall not use or disclose any secrets or confidential information of the plaintiff (clause 9);

(ii)  the defendant shall not for a period of 1 year after the termination of his employment accept employment with any business in competition with the business carried on by the plaintiff (clause 13(b)); and

(iii) the defendant shall not for a period of 1 year after the termination of his employment canvass, solicit or approach for order for service in respect of which the defendant was engaged during the last 6 months of the defendant’s employment any person who was negotiating with the plaintiff for the supply of services or was the plaintiff’s customers or was in the habit of dealing with the plaintiff (clause 14(a)); and deal with any person who during the period of 1 year prior to termination of his employment has had dealing under contract with the plaintiff (clause 14(d)).

5.  The relationship between the parties started to deteriorate in 2008.   The employment of the defendant was eventually terminated on 17 June 2011.

6.  In or about October 2011, the plaintiff found out the defendant had joined its direct competitor, DG3, to work as Sales Director (Research Printing).

7.  It is the plaintiff’s case that in about November 2011, the defendant on behalf of DG3 solicited business from Standard Chartered Bank, one of the plaintiff’s clients, and offered a blanket discount on whatever prices charged by the plaintiff.  However, the defendant should not have the contact details of the said client because it had never been served by the defendant.  It was later found out that in about February 2011, the defendant got a copy of the Client’s Contact List, which included the contact details of Standard Chartered bank, from the plaintiff’s Customer Service Department.

8.  Further, one of the main clients of the plaintiff is CLSA which was used to be handled by the defendant.  DG3 has never been patronised by CLSA in the past 5 to 6 years.  However, as informed by CLSA, DG3 started its first FRR printing job for CLSA in November 2011 under the sales team led by the defendant and also got a few jobs from CLSA subsequently by outbidding the plaintiff by offering lower prices.  The plaintiff was told by CLSA that as the defendant had the plaintiff’s Price Matrices, DG3’s pricing was certainly more attractive.  Later, the plaintiff discovered that the defendant had deliberately forwarded the plaintiff’s Price Matrices quoted to different clients to his personal e-mail account on 2 occasions in January 2011.

9.  According to the plaintiff, it has a different price quotation for each client.  The price quotation is set in accordance with the different specifications of each client such as the binding format and the use of cover paper, etc.  The price quotation for each client is in the form of a matrix because it also depends on some other factors such as the number of pages of each report and the number of copies of each printing job.  Given the complexity of the Price Matrices, it is the plaintiff’s case that it is difficult, if not impossible, for a competitor to keep on outbidding the plaintiff without making use of the plaintiff’s Price Matrices.

10.  The plaintiff does not object for the defendant to work for DG3.  However, by reason of the alleged wrongful conduct on the part of the defendant, the plaintiff makes the present application for interlocutory injunction to restrain the defendant from making use of the confidential information obtained by him during the course of his employment with the plaintiff and to solicit business from the plaintiff’s clients for a period of 1 year after the termination of his employment.

11.  The defendant has agreed to provide an undertaking not to use or disclose the Price Matrices of the plaintiff, and so it is not necessary for me to deal with the injunction about the use of such alleged confidential information.  I therefore proceed to deal with the application relating to the remaining 2 injunctions.

Serious questions to be tried

12.  The defendant disputes that he had ever been shown, signed or agreed to the terms as contained in the Contracts.  According to Ms Tjia, counsel for the defendant, the terms in the Contracts did not reflect the true arrangement between the parties.  Further, the defendant was not in Hong Kong on 1 June 2001 which was the date of the second employment contract.  Given the small industry of FRR printing, it is also quite incredible that the defendant would have agreed to the restrictive covenants contained in the Contracts.  It is the defendant’s case that the employment contract was made orally between the parties without reference to any written documents.

13.  On the other hand, Mr Yuen, counsel for the plaintiff, submits that it is quite inconceivable that the defendant had not signed a written employment contract with the plaintiff for the purpose of applying a visa to work in Hong Kong.  Further, other employees of the plaintiff had also signed employment contracts with similar terms with the plaintiff, and so the defendant’s denial is factually untenable.

14.  I do not propose to deal with each and every argument advanced by the parties.  The factual disputes need to be canvassed at the trial and it is very difficult for the court to form any provisional view on these matters.  As the plaintiff is able to produce the Contracts that apparently contained the signatures of the defendant, I am satisfied that, for the purpose of the present application, the plaintiff has established a serious question to be tried that the defendant had entered into the employment relationship with the plaintiff on the terms contained in the Contracts.

15.  It is the plaintiff’s case that the defendant had misused the Client’s Contact List of the plaintiff.  It is common ground that FRR printing is a small and confined industry with no more than 50 active clients who are all reputable financial institutions, and so the identities of the clients are not something confidential in nature.

16.  The plaintiff seeks to argue that the contact details are confidential.  However, given the previous experience of the defendant in the trade prior to working for the plaintiff, the defendant should have had no difficulty in identifying the contact persons of each individual institution and to obtain the contact details.  Further, as these institutions have no reason to withhold information about the contact persons responsible for FRR printing jobs, I would imagine even someone who is not in the trade can obtain the contact details with a few telephone calls.  In such case, the court should not grant an injunction to cover the use of such contact information.

Balance of convenience

17.  As I refuse to grant an interlocutory injunction relating to the use of the Clients’ Contact List, the only remaining question is whether the court should grant an interlocutory injunction to enforce the non-solicitation of business clause in the Contracts for the remaining period of about 3 months from now.

18.  In my judgment, the court should not grant such an injunction because the plaintiff has failed to show that damages would not be an adequate remedy if it succeeds in its claim.  Given that FRR printing is a small and confined industry and there are not many active clients, the plaintiff should have no difficulty in quantifying its damages if the defendant had wrongfully solicited business from the plaintiff’s clients. One must bear in mind that the effect of the non-solicitation of business clause would expire in 3 months’ time and so, even if the plaintiff succeeds in its claim, the defendant would be free to solicit business from the plaintiff’s clients by that time.  It is quite different from a case that the defendant’s continuing wrongful act would dilute the goodwill or the reputation of the plaintiff, in which case the quantification of the plaintiff’s loss would be difficult.  Assuming that the defendant has wrongfully solicited business in the period of 1 year after the termination of his employment, it would be quite easy for the plaintiff to ascertain the number of transactions lost as a result of such wrongful solicitation on the part of the defendant, and so balance of convenience does not favour the granting of the injunction.

19.  On the other hand, the prejudicial effect of the proposed injunction would have far greater impact on the defendant.  The defendant is now 59 years old and, practicably, it would be quite impossible for him to obtain a job in another industry.  What is most important is that the defendant would be free to solicit business in 3 months’ time, and so in my judgment, the disturbance of the status quo is quite unjustified at this stage.

20.  By reason of the aforesaid, I refuse the plaintiff’s application for the remaining 2 injunctions.