REVER (AMA) SALON LTD. v. KUNG WAI FOR, DANNY AND OTHERS

HCA 10399/2000

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NO. 10399 OF 2000

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J U D G M E N T

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Introduction

1. The plaintiff is a company incorporated in Hong Kong whose business is to own and run two hairdressing salons under the named 'Hair by M2K' or 'M2K' for short. Only one of these features in these proceedings. It is situated in the shopping arcade of the Marco Polo Hotel, Harbour City, Canton Road, Tsim Sha Tsui, at Shop No. G113. Hereafter I shall refer to it as the "Marco Polo salon". The other is located in the Prince Hotel. I shall refer to that as the "Prince Hotel salon".

2. The 1st to 7th defendants all worked for the plaintiff as stylists in the Marco Polo salon until December 2000 when they left en masse. The 8th defendant was the salon's manageress. She left in November 2000. All of them were employed on terms contracted for in a document called 'Letter of Appointment'. In each case this contained clauses restricting the employee's activity during the course of the term of employment and afterwards.

3. The 9th defendant is a company that was incorporated in Hong Kong in July 2000. The 8th defendant is a shareholder. In December 2000 it opened for business as a hairdressing salon known as Il Colpo II, in premises in Harbour City opposite and approximately thirty feet from the doors of the Marco Polo salon. The 1st to 8th defendants were all employed by the 9th defendant; the 1st to 7th as stylists and the 8th as manageress. That employment continues.

4. By this action the plaintiff claims the 1st to 8th defendants by such conduct and related activity were and remain in breach of the restrictive clauses of their respective contracts with the plaintiff, and of the implied duty of fidelity owed by employee to employer. It further claims the 8th and 9th defendants procured or facilitated such breach.

5. As a result it suffered immediate and significant financial loss and that continues. It seeks an injunction against each of the 1st to 8th defendants restraining them from breaching the terms of their contracts and against the 8th and 9th defendants restraining them from inducing, procuring or facilitating such breach. It also seeks damages.

6. The defendants oppose that course denying that by their conduct they are in breach and otherwise put the plaintiff to proof; further, that the restrictive clauses are designed to restrain fair competition and are against public policy and are unenforceable.

7. The history is by and large not disputed and I come to that next.

History

8. There are about 3,000 hairstyling salons operating in Hong Kong. The trade categorizes them into grades A to C, which is determined by the charge of a basic shampoo and cut. If the salon charges more than $350 it is categorized A grade, B grade if the charge is between $250 and $350 and C grade if it is below $250. Hong Kong is said to have 70 A grade salons of which 20 are in the district of Tsim Sha Tsui.

9. The plaintiff's salons are categorized A grade. It came into existence in 1980 under the name of Rêver Hyatt Salon Limited, one of the number of companies part owned by Rêver Hairstyling Salons Limited (RHSL) and thus part of the Rêver group of companies. RHSL held 51% of the shares. The remainder were allotted to Murray Edward Malski (Mr Malski). He is an Australian who, with 5 years' experience as a hairstylist under his belt came to Hong Kong in 1975 to work for the Rêver group, first as a hairstylist and then as a manager.

10. The plaintiff opened for business in the shopping arcade of the Hyatt Regency Hotel in Nathan Road, Tsim Sha Tsui under the name of the Hyatt Regency Salon. The shareholders of RHSL, called shortly Messrs Walker and Frezouls, left management and day to day operating to Mr Malski.

11. In 1984 the Hyatt arcade was closed and the salon moved to its current address in the Marco Polo Hotel. At the same time it changed its name to Rêver AMA Salon Limited. In 1989 it opened a second salon which in 1995 came to be located in the Prince Hotel at its present address.

12. Meanwhile in 1987 Mr Malski met and married Valerie Kung (Mrs Malski). She joined the staff in the capacity of consultant in marketing strategies in 1992.

13. In December 1999 Mr Malski bought out RHSL's interest in the plaintiff, thereby assuming complete control. Mrs Malski was given one share and was appointed a director. A condition of the sale was that the operational name be changed to remove reference to Rêver; that is when it became Hair by M2K and M2K.

14. At all material times the staff at the Marco Polo salon has comprised junior hairdressers, stylists of various seniority, manicurists, receptionists and an amah, presided over by an assistant manageress; this last position necessitated by the need for Mr Malski to devote most of his time to the Prince Hotel salon.

15. Typically a hairdresser will begin his or her professional life employed as a junior, devoid of experience but willing to learn the trade from scratch. (Of course a hairdresser may be of either sex, but for simplicity I shall use the male pronoun only). He is paid a modest salary. He is assigned to a stylist whom he assists with menial tasks and from whom he learns through exposure, communication and imitation the arts of cutting, styling, perming, colouring and so on. In addition he is encouraged to attend demonstrations put on by the likes of L'Oreal and Wella provided to the plaintiff free of charge because of its loyalty in the use of their products. There is also in-house training. He is, in effect, undergoing an apprenticeship which may last for 2 to 3 years before he is considered ready for the next stage. If by then he is assessed by the management to have achieved a certain level of competence he may be offered the post of stylist. By this means he is entitled to a customer base, his own juniors and an enhanced income which includes commission on what he brings in for the plaintiff. This is on a sliding scale; the more he produces, the higher his percentage share. When after a passage of time the number of his regular customers exceeds a level determined by the management he may be promoted to the post of senior stylist, and after that to top stylist. And if and when he achieves a particular level of expertise, experience and leadership, he may get to become an artistic director. For each level the stylist has a fixed charge out rate for the service he provides; the more advanced his post the higher that is. Of course a stylist with training and experience achieved elsewhere may be hired at such level as is warranted by his ability and, if he has one, customer base.

16. All of the stylists are encouraged to keep abreast of current trends and developments in the trade by attending workshops and seminars. The plaintiff's management also provides on-going training and advice, and educational tapes and books.

17. At all material times, the Marco Polo salon has operated a card index of all its customers, opened when the customer first uses the salon. (Of course a customer can be of either sex, but for simplicity I shall use the female pronoun only). When she arrives for the first time she is allocated the stylist of her choice, but if she has no preference then that will be determined usually by roster. If she continues to patronize the salon she is designated a regular customer. In practice she is likely to be loyal to a particular stylist; by this means a stylist builds up his own customer base. Details of the service provided and by whom are noted on the customer's card and fed into the salon's computer. Thus the management at any given time can assess the value of its business and where it is coming from. The customers are categorized as regular, introduced, transient and first time. Analysis of the computer printouts reveals that regular customers comprise the largest group by far - more than 85% of the total. It is apparent that the lifeblood of the plaintiff's income, and that of the stylists, is generated from this category of clientele. For this reason when the plaintiff invites a junior to become a stylist and thereafter at each level of advancement, he is required to sign a contract the terms of which, inter alia, are designed to protect the plaintiff's customer base. The contract is a standard one and the restrictive clauses are the same in each case. They are clauses 5 and 6, and I now reproduce the relevant parts:

"5. The employee shall not during the continuance of this Agreement make otherwise than for the benefit of the Company any notes or memoranda relating the names and addresses of clients or business associates or to any matter within the scope of the business of the Company nor shall the Employee either during the continuance of this Agreement of afterwards use or permit to be used any such notes or memoranda otherwise than for the benefit of the Company.

6. (a) The Employee acknowledges that in the course of his employment with the Company the Employee will or may have dealings with Clients and fellow employees over whom the Employee may develop a degree of influence. The employee also acknowledges that the Company invests a considerable amount of time, energy and money in training its employees and that those employees and the general stability of the workforce form an important part of the goodwill of the Company as does the name of the Company. The Employee also acknowledges that in the course of his employment he may have access to and be entrusted with information in respect of the Company, its Clients and their respective business which may be of a confidential nature. In order to safeguard the Company's clientele, goodwill and name and to protect the Company's legitimate proprietary interests the Employee covenants that he will not without the prior written consent of the Company (such consent to be withheld only in so far as may be reasonably necessary to protect the legitimate interests of the Company) after the termination of his employment under this Agreement for whatever reason (other than by wrongful termination by the Company):-

i) for a period of one year, whether on his own account or as shareholder, partner, director, agent, servant or consultant or otherwise for any other Person canvass, solicit, approach or cause to be canvassed, solicited, approached any Client for whom the Employee provided Services during the [one] year period prior to the said termination with a view to providing Services to those Clients; and

ii) for a period of one year, whether on his own account or as shareholder, shareholder, partner, director, agent, servant or consultant or otherwise for any other Person provide Services or cause Services to be proved to any Client for whom the Employee provided Services during the [one] year period prior to the said termination; and

iii) for a period of one year, whether on his own account or as shareholder, partner, director, agent, servant or consultant or otherwise for any other Person, be engaged in the provision of the Services within a radius of 1 mile of the premises of the Company where the Employee habitually worked one year prior to the said termination where such premises were on Hong Kong Island and within a radius of 3/4 mile of the premises of the Company where the Employee habitually worked one year on Kowloon prior to the said termination; and where the such premises were on Kowloon; and

iv) for a period of one year solicit or entice away or do anything to solicit entice away from the Company any Person employed by the Company in the provision of the Services at the date of such termination or to engage appoint or enter into partnership with or cause to be engaged or appointed in any business which provides services similar to the Services any Person who the Employee so solicits or entices away from the company or any Person who is employed by the company in the provision of the Services within 3 months prior to or after the said termination; and

v) .........

(b) Whilst the restrictions in this clause 6 are considered by the parties to be reasonable in all the circumstances as at the date hereof it is hereby agreed that if any of such restrictions shall be adjudged invalid as going beyond what is reasonable in all the circumstances for the protection of the legitimate interests of the Company but would be valid if part of the wording thereof were deleted or the period reduced or the range of activities or area covered reduced in scope such restrictions shall apply with such modifications as may be necessary to make them valid and effective. Each restriction shall be treated as separate and independent of the others."

18. Clause 17(m) defines "services" as "the services normally associated with hairdressing, hair styling and the perming, tinting, treating, cutting, colouring of hair and applying hair extensions".

19. For simplicity's sake clause 5 may be called the non-copying clause, 6(a)(i) the non-soliciting clause, 6(a)(ii) the non-dealing clause, 6(a)(iii) the non-competing clause and 6(a)(iv) the non-poaching clause.

20. A map attached reveals that the practical effect of the 3/4 mile restriction imposed in the case of a Kowloon based employer in clause 6(a)(iii) is the district of Tsim Sha Tsui.

21. The post of assistant manageress of the Marco Polo salon first came to be filled in July 1996 when Mr Malski found the need to delegate management there while he concentrated on the Prince Hotel salon. He promoted Cora Lau the 8th defendant to the post. She first joined the staff as a receptionist in August 1995. This was her first job in hairdressing, but she showed aptitude and leadership qualities, got on extremely well with staff and customers alike and proved to be an excellent link between the two. When she was promoted to manageress she continued to foster these relationships, as well as liaising with senior management on day to day issues. Given her position of authority and potential influence, when she was made up to her post she, too, was required to sign a contract of employment restricting her activity were she to leave the plaintiff. Clause 12 of the same is relevant and I repeat that verbatim:

"12. After the termination of employment, you will not associate or take up employment in a hairdressing salon with any former Rêver staff who has worked in the same branch within four months prior to your departure or work in a salon located within a radius of one mile of your place of work. This condition wil be valid for a period of 12 months."

22. Miss Lau was employed in her post of assistant manageress until she left of her own accord on 1 November 2000. On 1 December 2000 she joined the staff of the 9th defendant.

23. Of the 1st to 7th defendants all except the 5th defendant (Mike Leung) began their professional lives as junior hairdressers trained either by the plaintiff or elsewhere in the Rêver group. The 1st to 4th defendants (Danny Kung, Vince Pang, Eddie Lai and Oliver Chan) and 6th defendant (Tony Yeung) were promoted through the ranks of the plaintiff. The 5th defendant joined the staff after gaining his experience elsewhere as a senior stylist. The 7th defendant (Kenny Wong) left the Rêver group for a while but returned to be employed by the plaintiff as a senior stylist.

24. All were employed as stylists in the Marco Polo salon until December 2000 when they all left of their own accord. That same month they, too, joined the staff of the 9th defendant. Up to that time they had occupied the following ranks:

1st defendant (Danny) - artistic director

2nd defendant (Vince) - top stylist

3rd defendant (Eddie) - stylist

4th defendant (Oliver) - senior stylist

5th defendant (Mike) - top stylist

6th defendant (Tony) - stylist

7th defendant (Kenny) - senior stylist

25. All had been employed for a number of years, ranging from 17 (Danny) to 4 (Kenny).

26. In addition to their departure and that of Cora Lau 11 of the juniors working under them, 1 of the 2 manicurists, and both receptionists all left at the same time and joined the 9th defendant. They left behind 1 stylist, 3 juniors, 1 manicurist and the amah. It was, in effect, a mass exodus from the plaintiff's Marco Polo salon to a brand new salon, also A grade, which opened for business in December 2000 immediately across the way.

27. The plaintiff suffered an immediate reduction in business and financial loss.

The Action

28. The plaintiff issued these proceedings on 11 December 2000.

29. The claims against the 1st to 7th defendants are that by their conduct they were in breach of the restrictive covenants at clauses 5 to 6 of their contracts together with implied duties of fidelity owed the plaintiff, and in particular they have:

(a) taken employment in the hairdressing salon of the 9th defendant in breach of the non-competing clause;

(b) canvassed customers of the plaintiff for the purpose of providing hairstyling services to them, in breach of the non-soliciting clause and of an implied duty not to solicit customers of the plaintiff to transfer their allegiance;

(c) provided service to customers of the plaintiff in breach of the non-dealing clause;

(d) enjoined other employees of the plaintiff to terminate their employment, in breach of the non-poaching clause and of an implied duty not to poach or attempt to poach employees of the plaintiff;

(e) copied or had copied particulars of the plaintiff's customers for their own use, in breach of the non-copying clause and of an implied duty not to copy any list of the plaintiff's customers for use after termination of their employment.

30. The claims against the 8th defendant are that she is in breach of clause 12 of her letter of appointment and in particular she has:

(f) taken employment in the hairdressing salon of the 9th defendant in breach of clause 12; further, that she wrongfully:

(g) induced the 1st to 7th defendants to breach their restrictive clauses and implied duties owed the plaintiff.

31. Against the 9th defendant the claim is that in tort it wrongfully procured and facilitated the breaches by the 1st to 8th defendants already set out.

32. As against the 1st to 7th defendants the plaintiff seeks an injunction restraining each of them from conduct which amounts to a continuing breach of the non-soliciting, non-dealing, non-competing and non-poaching clauses of their contracts with the plaintiff and of the implied duties of fidelity owed the plaintiff and damages.

33. As against the 8th defendant the plaintiff seeks injunctions:

(i) restraining her from conduct which amounts to a continuing breach of clause 12 of her contract with the plaintiff; and

(ii) restraining her from inducing, procuring and facilitating the 1st to 7th defendants from breach of their restrictive clauses and damages.

34. As against the 9th defendant the plaintiff seeks an injunction restraining it from inducing, procuring or facilitating the 1st to 7th defendants' breach of their restrictive clauses and damages including exemplary damages.

35. The defence of the 1st to 7th defendants is that they deny conduct giving rise to breach of the non-copying, non-soliciting, non-dealing, non-competing and non-poaching clauses of their respective contracts with the plaintiff, and of any implied duty of fidelity owed the plaintiff; further, that such clauses are in unreasonable restraint of trade and or in the alternative are against public interest and are unenforceable.

36. The defence of the 8th defendant is that she, too, denies conduct giving rise to breach of clause 12 of her contract with the plaintiff; further, that such clause is also in unreasonable restraint of trade and, or in the alternative, is against the public interest and is unenforceable.

37. The defence of the 9th defendant is that it denies that in tort it wrongfully procured and facilitated the breaches by the 1st to 8th defendants as claimed.

38. Otherwise the plaintiff is put to strict proof and all its claims are denied.

39. The 1st to 8th defendants further counterclaim for declarations that the aforementioned clauses are in unreasonable restraint of trade and are unenforceable.

40. All defendants counterclaim for damages.

History after Filing of Proceedings

41. When it filed the writ the plaintiff applied for and was granted ex parte injunctions restraining the 1st to 8th defendants from activity in terms applied for in the writ. The same were granted on 9 December. This effectively prevented their being employed at the new salon from that date. On the return date, 15 December, the defendants collectively complained that the restraints asked for and granted were wider than those provided for in the various restrictive clauses. The injunctions were varied to reflect the terms of the restrictive clauses and extended to a revised return date.

42. Following hearing the parties on that date, being 19 December, the then presiding judge discharged the injunctions on the grounds of material non-disclosure and misrepresentation.

43. During the period when the injunctions were in force the 1st to 8th defendants were given temporary employment in a salon known as Il Colpo which operates in the foyer of the Grand Hyatt Hotel in Wanchai. When the injunctions were discharged they joined the staff of the 9th defendant and began their duties at its Harbour City salon. That employment continues today.

The Issues

(a) By their conduct, have the 1st to 8th defendants or any of them acted in breach of the various restrictive clauses set out in their contracts of employment with the plaintiff or any of those clauses; or of the implied duty of fidelity owed the plaintiff; if so, are those obligations enforceable? If so,

(b) did the 8th and 9th defendants or either of them induce any of the 1st to 7th defendants to breach their restrictive clauses or any of them or the implied duty of fidelity owed the plaintiff? Did the 9th defendant induce the 8th defendant's breach of her restrictive conduct?

44. This trial is for the purpose of establishing liability and, if need be, whether the injunctions sought should be granted. The question of damages will depend on the outcome of this trial and is a matter to be determined subsequently.

45. There are material disputes of fact and I come now to resolve these after reviewing the evidence adduced.

Evidence

46. For the plaintiff I shall deal with the evidence of Mr Malski first.

47. The decision to buy out the interest of RHSL in December 1999 was initiated by many of the stylists of the plaintiff including the 1st to 7th defendants, who variously complained that the management by RHSL and the 'Rêver' concept were outdated and 'old hat' and he should go it alone. The price he negotiated with Messrs Walker and Frezouls included a goodwill factor which was determined by the plaintiff's income and profits and these were in turn reflected by the customer base. Following completion he called an informal meeting of the staff to announce that he was now in sole charge and the new name that he and his wife had chosen, which recognised the new millennium. The news was received with acclamation; in short, the staff showed their unqualified approval. At no stage then or subsequently was he told of any misgivings about the change of name because it sounded 'cheap' or for any other reason.

48. He said the need for a contract incorporating restrictive clauses was an essential feature once a staff member was promoted to stylist and higher rank. This was because traditionally a customer will be loyal to her stylist and may well transfer her business to him should he elect to go. The clauses he used originated in contracts used in the Rêver group, were professionally drawn and are common in the trade. To his knowledge the 9th defendant used clauses so close in wording that very likely they were copied from the plaintiff's. Before a stylist or potential stylist signed his contract his attention was always drawn to the restrictive clauses. The contract is drawn in English but a Chinese translation is supplied. It is not true that they are made to sign without being given the opportunity for considering the impact of these or any other terms. As an example 2 juniors, called for short Leo and Felix, had by July 2000 advanced to the stage of being offered the position of stylist. However they both declined the offer because both were unwilling to commit themselves to the restrictions in the contracts they were asked to sign. They left the staff of their own volition, without acrimony. As far as he is concerned all of the 1st to 8th defendants signed their contracts willingly, fully aware of the restrictive clauses and what they contained.

49. The 8th defendant was advanced to the position of assistant manangeress because of her having achieved and maintained an extremely good relationship with both colleagues and customers. He had need of her in this role because he was required to spend most of his time at the Prince Hotel salon, and she was effectively his eyes and ears at the Marco Polo salon and a conduit when it came to considering the stylists needs and the airing of complaints. He came to regard her as very influential with the staff and in particular the stylists. He is confident that by reason of her close association with them and having regard to the terms of her own contract that she was all along well aware of the restrictive clauses in the stylists' contracts. In particular he had involved her when Leo and Felix were considering and then declining to sign the contracts that would have promoted them to the post of stylist and she knew the reasons why.

50. In the summer months of 2000 he came to hear from more than one source rumours that Il Colpo was to open a salon opposite the Marco Polo salon. He already knew of the salon of the same name in the Grand Hyatt at Wanchai. He also came to hear that the Marco Polo salon stylists were to leave him and join the new salon.

51. To seek confirmation or otherwise lay this rumour to rest he called a meeting in late August and the 1st to 6th and 8th defendants all attended. The 7th was on leave. The stylists were asked their intentions. All denied they were leaving; all expressed loyalty to M2K and satisfaction with their present situation. Just in case they were all reminded of the terms of their contracts and, in particular, the non-competing clause.

52. On 27 October the 8th defendant tendered her resignation giving 3 weeks notice. She said that she was going to work for Il Colpo, the salon by then in the course of decoration and soon to open across the way, after a period of training on the Hong Kong side. She said she was going to be paid a higher salary and be titled manager. He asked her if any other of the plaintiff's staff would be leaving to join her but she declined to answer. In fact she did not serve out her time, leaving on 1 November.

53. Then 5 out of the 8 stylists at the Marco Polo salon tendered their resignations. The 5th ,6th and 7th's arrived on 22 November and the 3rd and 4th's on 23 November. He immediately arranged to meet the plaintiff's most senior stylist, his artistic director, the 1st defendant, and asked his intentions. Danny told him that he, too, was preparing to leave, to join Il Colpo, Harbour City. Asked his reasons he said he was looking for advancement. He said he was aware of the restrictive clauses in his contract and that he might be liable in legal proceedings. But he said Il Colpo had promised to take care of that. He revealed that Cora the 8th defendant was what he termed the biggest driving force of the staff at the Marco Polo salon and that they were following her. His resignation and that of the 2nd defendant, his second most senior stylist, were tendered on 28 November.

54. Meanwhile Mr Malski had called a meeting held at breakfast time at a Harbour City café on 24 November. It was attended by him and his wife and the 1st to 7th defendants. All said they were joining Il Colpo. All were reminded of the legal consequences but it made no difference. All worked out their 2 weeks' notice and left on 5, 6 and 11 December.

55. On 29 November he and his wife met two men called Herman Lo and Sunny Ng who professed to represent Il Colpo. They confirmed that staff of the plaintiff had signed up to work in their salon which was shortly to open in Harbour City. They were told of the restrictive clauses of their contracts with the plaintiff and that the move amounted to a material breach. The meeting ended inconclusively. Subsequently he, Mr Malski, came to hear that the 8th defendant was one of the shareholders of the 9th defendant.

56. Following the departure of the 1st to 8th defendants from the Marco Polo salon a substantial percentage of the salon's regular customers suddenly stopped patronizing the salon. Prior to November 2000 there had been more than 1,500 attended by the 1st to 7th defendants; thereafter only about 60 remained loyal to the plaintiff. This resulted in an immediate drop in the monthly gross profit by five times and a consequent loss in value of the salon's goodwill, for which he had paid a handsome price not 12 months before.

57. Moving forward in time to 29 September 2001 he set up a video camera in the window of the Marco Polo salon directed at the entrance of Il Colpo II. The purpose of this was to capture on film the identity of those patronizing the salon to see if any could be recognized as former customers of the Marco Polo salon. The camera ran for a total of 33 hours during which he positively recognized 20 former customers coming or going. There were others whom he recognized but could not name. Those he could were former customers of one or other of the 1st to 5th and 7th defendants.

58. During the course of his evidence one of the tapes was played and the characteristics of those being filmed were clearly visible. Shown a list of names that the 9th defendant had produced in compliance with discovery as its purported full list of customers, he noted that many of those captured on film were not named and thus he queried its accuracy.

59. In cross-examination various matters were put to him including:

(a) that Mrs Malski was, in her dealings with the staff, aggressive, arrogant and ill-tempered and there was bad blood between her and Danny, who refused to talk to her;

(b) that the staff found the name M2K was cheap and they were generally unhappy about that and the standard of services they were able to offer;

(c) that he had promised the stylists that they would be sent to top salons in the UK and elsewhere to work with and gain experience from expert stylists and then he reneged on that promise;

he denied any of these was true.

60. It was also put to him that the stylists at Marco Polo salon had a justifiable grievance in that they were treated unfairly when compared with those at the Prince Hotel salon. Amongst examples of this was that the management introduced a form of service called Hair Spa Treatment at the Prince Hotel salon whilst not doing so at the Marco Polo. Another was that the stylists at Marco Polo were at first excluded from participating in a form of promotion called e-coupon run by a telecommunications company which gave participants the right to treatment at M2K for a discounted price. He responded that there was no such unfair treatment. The Hair Spar Treatment was introduced at the instigation of L'Oreal, the suppliers and provider of the products used. It was a condition of supply to M2K that it be installed at the Prince Hotel salon which had the appropriate amount of spare space available whilst the Marco Polo salon did not. The plaintiff had no choice in the matter. And he disputed that the Marco Polo stylists were denied the right to participate in the e-coupon promotion. In fact all of the stylists were given an equal opportunity, but his manageress at Marco Polo, Cora, reported that the more senior of the stylists were resisting because of the discount factor. In the end only those at the level of stylist joined the scheme; the others did not out of choice.

61. Then it was put to him that 2 other stylists, called for short Ivy and Connie, left the plaintiff's employ some time after the January 2000 changes because they, too, were dissatisfied with those changes and Mrs Malskie's behaviour towards them. He denied that, saying Connie had said she wanted to retire from the trade as she was planning to marry. But he did concede that he was aware that both shortly afterwards started working in a salon opened in Granville Road by Connie's new husband, notwithstanding restrictive clauses in their contracts.

62. Shown name cards of one or other of the defendants printed for the purpose of distribution to customers he said he was aware that some included a chop of the particular stylist's mobile phone number. He knew of this practice but did not condone it; it was against company policy for the plaintiff's customers to have access to the stylists' private lines.

63. Significantly, he was not cross-examined or otherwise challenged on the authenticity of the videos or his identification of former customers of the plaintiff.

64. I come now to the evidence of Ryan Lee.

65. He said he came to join the salon he knew as M2K as a junior in May 1998. He was put to work under Danny, the 1st defendant, along with two other juniors. He remembered the meeting when the boss whom he knows as Mr Murray announced that he had bought all the shares in the company and the name change. The stylists were pleased that he was now in sole charge and were happy about the name change.

66. Several months prior to their eventual departure he got wind from salon chatter that the stylists were preparing to leave; all, that is, except one called Leo, who tended not to mix with the others. He was encouraged by Danny to follow him which he said was to a salon soon to open called Il Colpo. He was told it was a bigger company with a stronger reputation and he would have a better chance for promotion. From the witness box he told his reaction to the invitation: 'I had to follow him.' Shown a letter of resignation he recognized his signature. Danny had given it to him, told him what it was and told him to sign it, and he did so.

67. During the course of assisting Danny, he heard him tell a number of his regular customers that he was leaving M2K to go to the salon opposite, and he pointed it out. Some he took over to show them. He gave them his card with mobile phone details on it and told them to ring him. He said this to up to 90% of his customers.

68. During this lead up time Danny asked the other 2 juniors and him to copy from the plaintiff's index of customers the personal particulars of all those attended by Danny into an exercise book and to give him the book before they left M2K. They were told to do this when Mr Murray was away from the salon. He knew that the purpose of this was so that Danny would contact these people and get them to come to him at the new salon when it opened for business. He and the other 2 juniors did as they were asked.

69. As the day of the departure approached he heard various stylists telling their customers that the move was to take place just before Christmas and that they would be sent letters of confirmation. He and others of the juniors were told to go to an address in Mongkok to post such letters. In the event, he did not participate; others who left ahead of time did so.

70. After leaving M2K on 11 December, he joined Il Colpo II as a junior, working under Danny as before. He recognized most of the customers he attended to there as those he had looked after at M2K; in fact about 90%.

71. He knew that at M2K the stylists had contracts which restricted their working in the neighbourhood for a period of time. He knew this because it was generally known by the staff at M2K. He heard them discuss that if they joined Il Colpo they might be sued, and that Il Colpo might pay some of the fine.

72. After a month at Il Colpo he resigned, dissatisfied with his own prospects there.

73. In cross-examination it was put to him that in fact Danny did not ask him and the other juniors working under him to copy out the customers' particulars as he had described. He denied that. It was put to him that Danny did not given him his resignation letter to sign. He disagreed. It was put to him that he did not hear Danny telling customers that he would be leaving and going to work across the way. He denied that.

74. Next I heard from Alice Wu.

75. She is a customer of the plaintiff. She first went to its salon some 6 years ago when she was attended by Vince, the 2nd defendant. She went only two or three times however, before resuming in September 1999 when she came to be served by Tony, the 6th defendant. From then on she was a regular customer going every Sunday for a trim and manicure.

76. In early December 2000 Tony was doing her hair when he announced that the next day was to be his last. She had wanted to made an appointment for her sister but he said he would not be there to serve her. At or about this time she received through the mail two letters, one from Tony and the other from Vince giving notice of their departures from M2K. She kept them and produced them, and I reproduce them both below:

"Dear Sir/Madame,

Thank you for your continuous patronage and support throughout the past years, My assignment with M2K shall be ended by December 5th, 2000. I would like to take this opportunity to further my career to a higher platform, and I shall be looking forward to seeing you soon.

Regards,

Yours truly,

Tony Yeung

Contact No.: 93629262

Dear Sir/Madame,

Thank you for your continuous patronage and support throughout the past years, My assignment with M2K shall be ended by December 12th, 2000. I would like to take this opportunity to further my career to a higher platform, and I shall be looking forward to seeing you soon.

Regards,

Yours truly,

Vince Pang

Contact No.: 98118687"

77. Although she did not keep the envelopes, she noticed that her name was typed after her address on one and above her address, in the conventional way, on the other. Then, almost at the same time, she received two letters from Il Colpo, both with identical contents promoting the new Harbour City salon. But the envelopes were different from each other as to form. These she kept and produced and I reproduce them below:

" Flat 3C
Kaiser's Mansion
291 Prince Edward Rd, W
Kowloon Tong, Kln
Attn : Ms. Alice Wu

Alice Wu
Flat 3C, Kaiser's Mansion
291 Prince Edward Road West
Kowloon Tong
K.L.N.

78. She noted that they matched in form the envelopes enclosing the letters from Tony and Vince. She surmised they must have come from the same source, and sent them to Mrs Malski.

79. In cross-examination, she was asked if she had patronized Il Colpo at Wanchai, as a possible reason for her name being in their database. She said she had, but it was once only about ten years ago, when she walked in for a quick comb up.

80. The 4th witness was May Lee.

81. She is the manicurist employed at the Marco Polo salon who did not leave the salon to join the 9th defendant. She came to the plaintiff in 1991 and has been there ever since. She recalled the meeting when Murray announced that he had purchased all the shares in the plaintiff and the change of name of the salon. She remembered the staff applauded the news, expressing no reservation.

82. She said that on 4 to 5 occasions when she was attending to the nails of a customer Danny was serving she heard him telling the customer that he would be leaving the salon shortly. He told them he could be contacted on his mobile phone.

83. She remembered Cora, the 8th defendant, leaving in October. Before she did so Cora approached her and asked if she would go with her. She asked where to and got the response: 'Nearby'. She was told the salary would be higher than what she was getting paid at M2K. She said she would think about it and asked who else was leaving. She responded: 'Everybody.' She then talked to the other manicurist, Denise, who told her Cora had spoken to her as well and she was thinking about it. She said the role Cora was playing served to indicate that she was recruiting on behalf of the new employer.

84. In cross-examination it was put to her that there was bad blood between Danny and Mrs Malski. She denied that was so. It was put to her that in fact Cora never told her that she was leaving and invited her to follow her. She denied that. It was put to her that she did not hear Danny telling customers that he would be leaving the salon and to contact him on his mobile phone. She denied that.

85. In re-examination she said it had become usual practice for the stylists to chap their cards with their mobile phone numbers and that she herself had also done this. She conceded that this was against the company policy.

86. Next I heard from Ray Tong.

87. He joined the plaintiff's staff as a junior in January 2000 and was assigned to stylist Eddie, the 3rd defendant. One day during the course of their work Eddie asked him to step outside for a word. Eddie told him he was leaving the plaintiff's employ to join the salon across the way and asked if he, Ray, would follow him. He told him the whole of the work force at the Marco Polo salon were doing the same except for Leo, the stylist, and the amah. Ray said he would go too. When he gave this response Eddie told him that from then on he was to copy the personal particulars of each of his customers as they came in for treatment. He did so, making copies of somewhere between 10 and 20 cards, handing them to Eddie as instructed. He did not hear Eddie telling customers he was leaving and going to the salon across the way. But he formed the view that that was what he was doing when he saw him whispering something to them and then glancing across to the entrance of the salon that was to become Il Colpo II. Eddie told him that he would need to give the plaintiff formal notice and handed him his resignation letter already typed. He signed it.

88. In early December there was a meeting called, attended by all the staff of the Marco Polo salon who were going to join Il Colpo II. It was held at Il Colpo's premises. Present was the whole staff except Leo, the amah and the two receptionists. Cora, the 8th defendant, was the spokesperson. She said: 'Everybody present is leaving'. She spoke to them about remuneration. Then she showed them around the premises with the decoration not yet complete, explaining the layout.

89. In cross-examination, it was put to him that the relationship between Eddie and him was not too good; that this was because Eddie caught him in the act of borrowing some rollers for private use without having asked permission and told him to stop. He denied that, saying that it did not happen and that his relationship with Eddie was good.

90. It was put to him Eddie did not ask him to follow him to the new salon. He disagreed. It was put to him Eddie did not ask him to copy out customer details. He disagreed. It was put to him that he did not see Eddie whispering to his customers and giving eyes signals towards the entrance of the new salon. He disagreed.

91. I come now to the evidence of Gloria Lau.

92. She is a customer of M2K and has been since 1996. She attends about once per month. Until his departure she was served by Mike Leung, the 5th defendant. She first heard of his pending departure in October 2000. He told her then he was leaving. He repeated that the next time she came the following month, this time pointing out the location of the salon he was moving to across the way. He invited her: 'To come and try it out.' He said it would cost more but the service would be improved. He told her he was leaving because the pay would be better and because he had communication problems with the boss' wife and because there was inadequate training at M2K. When she remarked that perhaps he should let management know of his problems he responded: 'Too late. We are planning to go.' Next time that she heard from him was in early December when he telephoned her on her mobile phone. He invited her to come to the new salon for treatment.

93. In cross-examination she said she had included her mobile phone number when providing the plaintiff with her personal particulars but could not remember whether she had given that to Mike. When it was put to her that she had not she repeated she could not remember. It was put to her that Mike did not telephone her as she had attested. She repeated that he had. It was put to her that he never told her he was leaving and joining the new salon over the way. She repeated that he had.

94. The last witness called by the plaintiff was Connie Li.

95. She said she first came to know Mr Malski when she trained under him in 1977. Subsequently she came to be employed by the plaintiff as a stylist. At all material times she worked at the Prince Hotel salon. She left in August 2000 of her own accord. Prior to doing so she had not heard of or been aware of any grievance concerning the name change that had happened that January. She said she had known Mrs Malski for some time and had not experienced any difficulties with her or any one else in the management. She left because she was due to marry and had decided to retire. However she did concede that after marriage her husband opened a hairdressing salon in partnership in Granville Road and from time to time she worked there. She was aware there was a non-competing clause in her contract with the plaintiff and that by working there within the prescribed time period she was in breach.

96. In cross-examination she said when she signed the plaintiff's contract its terms were explained and there was a Chinese translation. She conceded that some of her customers at the plaintiff's salon did follow her to her new location, but there were not many. She said she was not aware of any grievance from others of the plaintiff's stylists concerning Mrs Malski's attitude towards the staff.

97. In re-examination she said she was aware that all the stylists' contracts had the same restrictove clauses as were in hers; this is common practice and there is common knowledge.

98. That was the evidence adduced for the plaintiff.

99. I come now to the defence. In fact there were only two witnesses called; these were the 8th and 7th defendants.

100. Cora Lau came first.

101. In January 2000 she had a meeting with Mrs Malski to discuss her pay package. It was at her instigation because for some time it had remained the same. She was then shown a revised format based on the income achieved by the Marco Polo salon. The consequence of that was that her income increased by $3,000.00 per month and she adjusted her spending patterns accordingly. Then without warning there was a significant reduction for the month of June. She complained that this jeopardized her ability to meet her bills. She was told it was because there had been no growth and her performance had been wanting. When she said it was unfair because she had no notice she was paid at the original revised rate but was then told that from now on the enhancement would depend on performance. Later she was to say in cross-examination that this was the primary reason for her deciding that she should leave.

102. She gave her notice to Mr Malski on 27 October 2000. She told him she was going to work at Il Colpo Wanchai for a higher salary. He asked her if she had plans to work at the Harbour City salon of the same name that was shortly to open. Saying she did not know she asked if there would be a problem; his response was: 'No problem.' He asked her if any others were leaving and she responded that she did not know.

103. Taken to staff relations she said that that between Mrs Malski and Danny was difficult and the acrimony had developed to the extent that they no longer spoke. She said Danny found her unreasonable and ill-tempered. She said there were problems generally caused by the Marco Polo stylists believing that those at the Prince Hotel were favoured. She cited two examples: that the Prince Hotel had the Hair Spar Treatment installed and that the stylists there were given the opportunity to participate in the e-coupon scheme ahead of those at Marco Polo. They were also aggrieved because Mr Malski had promised they would be sent to the UK or elsewhere for exposure to world-renowned stylists but nothing come of that.

104. Subsequent to January 2000 there was general dissatisfaction about the name change - many of the staff thought it sounded cheap. And there were complaints about Mrs Malski's temper. Her overall impression was that her colleagues had become unhappy to be working there. As was her duty she passed on these grievances to Mr Malski. He took them aboard, but nothing really changed.

105. Then came the cross-examination. She was asked how much legal fees she had been charged and had paid and she replied none at all, believing that these came to be charged and paid at the end. It was put to her that the 9th defendant was staking her and the others. She said she was not aware of such arrangement.

106. She said she was first approached by someone from Il Colpo who asked her to join in 1999. That was Tracy Wong. Then the approach was repeated in August 2000, by Tracy and someone else called Joseph Lo. By then she was not happy with her revised pay structure at the plaintiff and agreed to go. Over the month they discussed and agreed terms and a contract was signed in September. She was also given the right to buy 10,000 of the 450,000 shares of the company. She took this up, paying $40,000.00 for her parcel. When asked if she was aware the 9th defendant was scheduled to open for business in Habour City before the end of the year she said she was. When asked if she knew that she would be working there she said: 'I did not pay attention to that; ever since Tracy approached me to join them they always talked of Il Colpo Wanchai, because when the first request was made there was no such salon as this Il Colpo.' When it was pointed out to her that the contract she said she signed in September disclosed the working place to be Harbour City she said when she signed she had not paid attention to that. As far as she was aware the understanding was that she would be employed at Wanchai. Then when Mr Malski said there would be 'No problem' about her working at Harbour City it was decided she would work there.

107. She said that she did not know that stylists from the Marco Polo salon were also intending to leave until after she herself had left, although prior to that she had heard rumours; particularly as she knew they were not happy and Il Colpo was looking for stylists for their new salon. She said she did not follow this up; in particular she did not ask if the rumour was true.

108. Taken to the allotment of shares in the 9th defendant and the holding of someone called Jacky Kung of 50,000 she said she did not know him, or whether he was related to Danny. And she did not know if Pang Yuen who has 35,000 was related to Vince or whether the recorded address was his. However she did know that the management had said that key staff would be offered shares - hence her own allotment. She agreed Danny and Vince could be said to be key staff.

109. Taken to the employment contracts she and the 1st to 7th defendants had signed with the 9th defendant she agreed that the reference on them indicated that all, except Danny's, indicated the documents were created on 23 July 2000 and his came into being on 1 August 2000. It was put to her that by no later than these dates they were committed to join the 9th defendant and that she knew this. She said she had not and did not know about the others.

110. She denied saying to the manicurist May Lee that she would be leaving M2K and asking her to come too; May had lied in court about that. She denied that it was her primary job to recruit staff for the new salon so that it would have a workforce when it opened. When it was put to her that she was well aware that the 1st to 7th defendants had decided to leave M2K in July or August but had deferred until the new salon was ready to open she said she really did not know; furthermore their recruitment was nothing to do with her.

111. She agreed there was a meeting of 1 December as described by Ray Tong but went on to say he was not present and that he lied when he said in Court he was there. It comprised those of the juniors apart from Ray who had decided to leave M2K and work for the 9th defendant. She chaired it.

112. Taken to clause 12 of her contract with the plaintiff she said she only first became aware of the restriction when she was served with the plaintiff's injunction.

113. She admitted she was aware that the 9th defendant had been incorporated for the purpose of running a salon in Habour City. It was put to her that she recruited the 8 juniors who left M2K to join the 9th defendant. She denied that. It was put to her that she recruited the 2 receptionists formerly at M2K. She denied that. When she was asked was it a co-incidence that 7 stylists, 8 juniors and all the others joined the 9th defendant as well as herself as manageress she said that she had no other explanation. It was put to her that she poached them. She denied that. She said it was Tracy and Joseph who recruited staff but she did not know who had interviewed those who came from M2K.

114. Taken to the issue of the Hair Spa Treatment she agree that it needed more space than for hairstyling and that the Prince Hotel salon had more to spare. Taken to the e-coupon promotion it was put to her that she was asked to discuss this with the Marco Polo stylists. She did not disagree, but denied that she had reported back that only those at stylist grade were willing to participate.

115. She agreed that in or about July 2000 she received a warning letter from Mr Malski criticizing her performance. It was put to her that this was because she had already decided to swap her allegiance and no longer cared. She denied that. She said her main reason for leaving M2K for the 9th defendant was the enhanced pay.

116. She said she knew the 9th defendant came to write to the customers of M2K when they opened for business but professed not to know how they came by these particulars.

117. Prior to Leo and Felix leaving she denied discussing with them the contracts that they were asked to sign. She said that would have been the domain of Mr and Mrs Malski.

118. The remaining witness was Kenny Wong.

119. Taken to the time when he signed his contract with the plaintiff he said none of the terms were explained to him save for those dealing with his pay. Taken to the meeting of January 2000, he said that the stylists generally criticized the choice of new name because it sounded cheap and told Mr Malski so. But he paid no heed.

120. He felt aggrieved as the others when they came to learn that only the stylists at Prince Hotel would benefit from being able to provide Hair Spa Treatment for their customers. And he said it was not true that both salons were together invited to join the e-coupon scheme. He said it was only after they came to hear of it and got Cora to complain that the Marco Polo stylists were invited to participate, and then only at stylist level and no higher.

121. Taken to the meeting of 24 November held at breakfast time he said he came for only about 10 minutes and then left because he had a customer waiting. He did not know what was discussed as by then he had handed in his notice and was not interested.

122. He conceded that he had chopped his mobile phone number and e-mail address on his name card for the convenience of customers without obtaining permission. But he said when Mr Malski came by chance to learn of this and he explained the advantage, he was not reprimanded; in fact Mr Malski expressed his approval.

123. He said his decision to leave the plaintiff in December 2000 was because he was not happy with the change of name, with the fact that the Marco Polo salon was less favourably treated and because any suggestion that emanated from the Marco Polo generally fell on deaf ears.

124. Then came his cross-examination. At first he said he was fully unaware of the restrictive clauses in his contract and the consequences of a breach; then he conceded he did know about them but thought that the plaintiff would not enforce them.

125. He said it was toward the end of July 2000 when he started to look for a new job. He got to hear that Il Colpo was recruiting and spoke to someone called Tracy. This was around the end of August. But it was not until the end of September that he signed his contract with the 9th defendant, in the presence of Herman Lo, who explained the gist of the clauses. He said he did not discuss with him the terms of his contract with the plaintiff nor did he show him that contract. Shown the map exhibited to the contract that Mike Leung, the 5th defendant, had with the plaintiff and asked to compare it with the map exhibited to his contract with the 9th defendant, he agreed that matching imperfections indicated they were from the same source.

126. Asked how many regular customers he had had at the Marco Polo salon he said between 110 and 120. Asked how may of these are now his regular customers at Il Colpo II he said about 90. Asked if Il Colpo had sent letters to his regulars at M2K he said he did not know. If they did he had not invited them to do so and had played no part. He agreed that when he decided to leave and join Il Colpo II he hoped his customers would follow him. Asked how it was that 90 of them did so he said he believed it was because they liked his work. He said when he had decided to leave he told them he was planning to do so. When they asked where he was going he told them somewhere in Tsim Sha Tsui. When they asked where in Tsim Sha Tsui he declined to say. When asked why he said that he was not certain whether he would be based at Wanchai or Tsim Sha Tsui. It was put to him that his contract with the 9th defendant required him to work at the salon in Harbour City and that by this he knew all along that he would be working there, that he told his regular customers and that was why so many came to be his regulars at that salon. He denied that he had done so. He said when he contracted with the 9th defendant he did not know and had no interest in finding out. Asked whether he had notified any colleague of his intention to leave he said he spoke to Mike Leung, the 5th defendant, around mid-November. His wife composed and typed his letter of resignation.

127. He did not know others would also be leaving until after he had informed Mike Leung, who asked to copy his resignation letter. As for the others he only got to know of their departure after they had submitted their resignation letters.

128. It was put to him that Mr Malski had not approved his adding to his name card his mobile phone number and email address, and that he had lied about this. He denied that.

129. It was put to him that it was not true that there was a general disagreement about the name change of the company at and then after the same was announced at the meeting of January 2000, and that in fact at the time the staff applauded the news. He disagreed. It was put to him there was no promise that the stylists would be sent off to top salons in the UK and elsewhere. He disagreed. It was put to him that he did attend a meeting of 24 November, that he had no customer waiting as evidenced by a clear appointment sheet against his name that morning - that in fact he paid for the meal and was subsequently reimbursed and that he knew full well what was discussed. He did not deny this but said he could not remember.

130. It was put to him that he decided to leave when he heard Danny and Vince and the others were going and he decided to follow them. He denied that. He was asked if he knew whether Danny or Vince had been allotted shares in the 9th defendant. He said he did not know.

131. He said when he signed the contract with the 9th defendant he was aware of the restrictive clauses and the nature of them. But when he signed with the plaintiff he did not, though he was given a Chinese translation and had signed the contract and initialed the map.

132. That concluded the live evidence adduced for the defence. But at this point the plaintiff's counsel Mr Yu S C sought and obtained an order for discovery requiring the 9th defendant to disclose its records of its customers and appointment book, because Mr Malski's video revealed the original list of customers produced might not be complete. These records were analysed. The appointment book for the last 6 weeks disclosed that a significant percentage of the plaintiff's former customers attended by the 1st to 7th defendants were now customers of the 9th defendant, more particularly calculated as follows:

Danny (1st defendant)	90%
Vince (2nd defendant)	80%
Eddie (3rd defendant	70%
Oliver (4th defendant)	60%
Mike (5th defendant)	80%
Tony (6th defendant)	70%
Kenny (7th defendant)	90%

133. Before closing his case Mr Ng for the defendants said that all 7 of the 1st to 7th defendants admitted serving customers who were formerly those of the plaintiff.

Assessment of Evidence

134. My first observation is that although all made witness statements and were, presumably, available to give evidence, only 2 of the 8 individual defendants chose to do so, and no one was called for the corporate defendant. Of course their silence does not amount to an admission of liability, it being for the plaintiff to prove its case. But it resulted in their respective cases put in cross-examination not being backed by testimony or tested in cross-examination, and the evidence of the plaintiff's witnesses adverse to them has not been countered by their own.

135. The second is that having regard to the evidence overall and the demeanour of those who adduced it, the 2 for the defence were singularly unimpressive as witnesses of the truth. On many occasions the response with explanation given was quite obviously a fabrication. For instance, Cora Lau's insistence that she had not discussed or had any knowledge of the pending departure of the 7 stylists with whom she had been closely associated within the salon of which she was the assistant manageress is quite obviously not believable. Furthermore, her response that it was entirely coincidental that they chose to join the 9th defendant of which she is a shareholder and then did so when it opened for business under her stewardship as manageress was absurd in the extreme. And Kenny Wong's testimony that having told his customers that he was leaving M2K he did not say where he was going because he thought that might be to Il Colpo Wanchai flew in the face of his having contracted to work at Harbour City, and his admission that he disclosed to them it was somewhere in Tsim Sha Tsui. How else would 90% of those loyal to him at M2K have followed him to Il Colpo II?

136. In essence I find I am unable to rely on anything these 2 adduced save as to those matters adverse to their interests.

137. Conversely I was impressed by the witnesses called by the plaintiff, no less Mr Malski, whose accounts were, I am satisfied, truthful and more often than not backed by other evidence or common sense.

138. In essence, and at this stage speaking generally, I am satisfied that there was a well-laid plan, orchestrated by the 8th defendant on behalf of the 9th , for the staff of the Marco Polo salon to transfer their allegiance to the salon of the 9th defendant when it came to be opened in December. Furthermore, the 7 out of 8 stylists who agreed to make the move secretly took steps to ensure that as many of those of the plaintiff's regular customers they were serving as possible followed them to the new salon. That being the plan it was singularly successful, and no doubt had a favourable impact on the 9th defendant's finances from the time it opened its doors. Of course the effect on the plaintiff was a drastic reversal with its income unexpectedly plunging to a fifth of usual levels.

139. I now come to make specific findings of fact.

Findings of Fact

140. The 1st to 7th defendants all knew of the restrictive clauses in their contracts with the plaintiff. They had signed the same and initialed the attached map. They are all experienced in the trade in which the practice is well-known and wide-spread. When they signed the terms were explained. They were not put under pressure. They were given Chinese translations. The most recent recruit, the 7th defendant, admitted that he was aware of the restrictions, but assumed they would not be enforced. All except the 1st defendant signed contracts with the 9th defendant which repeated the restrictive clauses almost verbatim.

141. The 8th defendant knew of the restrictive clause in her contract with the plaintiff. She signed the contract. The clause was brought to her attention. It is simply worded.

142. The 9th defendant was at all material times aware of the restrictive clauses in the contracts with the plaintiff. It cribbed the map attached to one or other of the stylists' contract for use in its own. That and the similarity of the wording of the restrictive clauses in its own with that of the plaintiff's indicated it had access to those. Its shareholder and representative was the 8th defendant and she knew of the restrictive clauses, their intent and effect.

143. Encouraged by the 8th defendant, representing the 9th, all of the 1st to 8th defendants committed themselves to joining the 9th defendant in late July and early August 2000. The documents which became their contracts all came into being at this time. The rumour then heard by Mr Malski was in fact true, and they lied to him to keep it secret, and kept it so whilst the salon was being decorated until it was time to move.

144. There were no valid reasons for the 1st to 8th defendants to be aggrieved by decisions made or not made by the management of the plaintiff as to warrant their departure on those grounds. Mr Malski said as much, Connie Li supported his account and I believe them both. Those so-called complaints raised in evidence and cross-examination were a fabrication designed to cloud the real reasons; the promise of advancement and more pay.

145. The 1st and 3rd defendants did during their employment with the plaintiff instruct their juniors to copy from the plaintiff's record of customers for the express purpose of making use of them in a manner otherwise than for the benefit of the plaintiff. I accept as the truth what Ryan Lee and Ray Tong said they were asked to do, and given the circumstances it is quite apparent why.

146. All 7 of the stylist defendants before leaving the employ of the plaintiff actively solicited those of its customers they were then serving for the express purpose of securing their patronage with the 9th defendant. The 1st defendant was heard to be telling his customers by Ryan lee and May Lee. I am satisfied that what Ray Tong said he saw the 3rd defendant doing amounted to the same thing. Gloria Lau, herself a customer of the 5th defendant, was actively solicited by him. The 7th defendant admitted that he told his customers that he was leaving to work for somewhere in Tsim Sha Tsui. I am satisfied he told them the salon. The evidence adduced by Alice Wu satisfies me that the 2nd and 6th defendants were also soliciting customers. And as far as all 7 of them are concerned, the only explanation for why so many of the plaintiff's customers withdrew their patronage in December last year and transferred to the 9th defendant must be that they were solicited, as I have found.

147. Since December 2000 to date all of the 1st to 7th defendants have provided hairdressing services to former customers of the plaintiff. Ryan Lee spoke not only of the 1st defendant doing so but others of the defendants as well. The 7th defendant admitted to serving 90 percentage of his former customers, as it happens corroborated by the 9th defendant's appointment book. And that same book together with the admissions made on behalf of the 1st to 7th defendants at the close of the defence case is proof positive of this finding of fact.

148. All of the 1st to 7th defendants are and have been providing hairdressing services within a 3/4 mile radius of the Marco Polo Salon.

149. All 8 of the 1st to 8th defendants prior to leaving the plaintiff's employ solicited other staff of the plaintiff to leave the plaintiff and join the 9th defendant. There is direct evidence from Ryan Lee that implicates the 1st defendant, from Ray Tong that does the same to the 3rd defendant and from May Lee concerning the 8th defendant. But given the relationship of junior hairdressers to their masters, the stylists, given the high percentage of them who left the plaintiff to join the 9th defendant and given that the whole protracted exercise was jointly orchestrated and undertaken, I am satisfied that all 8 of the 1st to 8th defendants played a material part.

The Law

Implied Duty of Fidelity

150. There is an implied duty that an employee shall not whilst so employed poach his employer's customers or other employee.

151. Authority for this proposition is Sanders v Parry [1967] 1 WLR 753. In that case the defendant, an assistant solicitor in a one-man firm planning to practice on his own account, accepted the offer of an important client of the firm called Mr Tully that he transfer all his legal work to him. When he left he also took a secretary, called Mrs Stanford, a longstanding staff member of the firm with him. His former employer sued him. Havers J. found him liable in damages. He said:

"Now in my view there was a duty on the defendant at all times during the substance of the (employment) agreement to protect his master's interests, especially to do his best to retain Mr Tully as a client for his master .... I am satisfied that in accepting the offer, by such conduct the defendant was guilty of breach of duty in regard to the agreement implied therein by law that the defendant would serve the plaintiff with good faith and fidelity."

152. On the issue of Mrs Stanford, noting that she had told the defendant she had been dissatisfied with the firm, he said:

"In my view it was the duty of the defendant to have reported this dissatisfaction of the secretary to his principal to give him an opportunity, as far as he could, to satisfy her. Instead of forwarding his principal's interests he was concerned only in promoting his own. He made this alternative offer to Mrs Stanford which she accepted and the result of it and the result of that alone was that she left Mr Sanders and joined the defendant. That was in my view a breach of contract....."

153. The learned judge went on to award damages, albeit nominal damages, to the plaintiff.

154. There is an implied duty that an employee will observe good faith toward his master during the existence of the confidential relationship between them: Robb v Green [1895] 2 QB 315. In that case the defendant, planning to leave his master's business and set up on his own account, surreptitiously copied from his master's order book a list of customers for the express purpose of using it when he opened his own business. And that is what happened. The master sued. At first instance the defendant was found liable. On appeal, Lord Esher M R said:

"I think the judge was perfectly justified in holding that such conduct was a breach of the trust reposed in the defendant as the servant of the plaintiff in his business. The question arises whether such conduct is a breach of contract. ...... I think the learned judge in the Court below was quite right in making the implication he did, and holding that there was a breach of that implied contract which entitled him to award damages to the plaintiff."

Restraint in Trade - Non-Dealing and Non-Competing Clauses

155. The following are general propositions:

(a) notwithstanding the term of the contract of employment, an employer is not entitled to protection from mere competition by a former employee;

(b) an employee is entitled to benefit from any personal skill or experience acquired whilst in the services of a former employer;

(c) clauses which restrict the employee from taking employment of his choice after he has left his employer will be struck down unless the employer can show that they :

(i) protect his legitimate interests;

(ii) are reasonable in all the circumstances.

156. Thereafter if the former employer satisfies that criteria the restriction will be enforced, unless the former employee can establish that to do so is against the public interest.

157. In Herbert Morris Ltd v Saxelby [1916] 1 AC 688 at 709, Lord Parker stated:

"wherever such covenants have been upheld it has been on the ground, not that the servant or apprentice would, by reason of his employment or training, obtain the skill and knowledge necessary to equip him as a possible competitor in the trade, but that he might obtain such personal knowledge of an influence over the customers of his employer, or such an acquaintance with his employer's trade secrets as would enable him, if competition were allowed, to take advantage of his employer's trade connection or utilize information confidentially obtained."

158. In Nordenfelt v Maxim Nordenfelt Guns and Ammunition [1894] AC 535 at 565, Lord Macnaghten stated:

"the true view at the present time I think, is this: The public have an interest in every person's carrying on his trade freely: so has the individual. All interference with individual liberty of action in trade, and all restraints of trade of themselves, if there is nothing more, are contrary to public policy, and therefore void. That is the general rule. But there are exceptions: restraints of trade and interference with individual liberty of action may be justified by the special circumstances of a particular case. It is a sufficient justification, and indeed it is the only justification, if the restriction is reasonable - reasonable, that is, in reference to the interests of the parties concerned and reasonable in reference to the interests of the public, so framed and so guarded as to afford adequate protection to the party in whose favour it is imposed, while at the same time it is in no way injurious to the public."

159. More recently, Lord Denning M.R. said in Petrofina (Great Britain) Ltd v Martin [1966] Ch. 146 at 169:-

"Every member of the community is entitled to carry on any trade or business he chooses and in such manner as he thinks most desirable in his own interests, so long as he does nothing unlawful: with the consequence that any contract which interferes with the free exercise of his trade or business, by restricting him in the work he may do for others, or the arrangements which he may make with others, is a contract in restraint of trade. It is invalid unless it is reasonable as between the parties and not injurious to the public interest."

160. I come now to a series of authorities in which these criteria were put to the test.

161. In Home Counties Dairies v Skilton [1970] 1 WLR 526, the employee was a milkman. Harman LJ said at p.530:

"Nowadays he rides round in what is called a float and delivers his milk... in bottles; but he has been throughout the years, one way or the other, a familiar and probably influential character well known to every householder in the road. It is natural in the circumstances that he acquires, usually on behalf of a master, a clientele along his round who, if he is an agreeable and competent man, will tend to rely on him for his arrival and to follow his departure to serve another employer. In these circumstances, it is natural that employers should make great efforts to retain the goodwill so acquired and to restrain, so far as they can, the employee who leaves their service from taking his clients with him. This is very much a part of the employer's goodwill which he is entitled to protect, for it is his most saleable asset."

162. In Stenhouse Australia v Philips [1974] AC 391 - the employee was an insurance broker. Lord Wilberforce observed:

"In the business of insurance and insurance broking, as the evidence in this case shows, a successful enterprise depends upon a number of factors which vary according to the nature of the customer, or client, with whom business is done. The more varied or diversified the business of the client, and the larger the amount of insurance to be placed, the more likely is it that he will look around the market for himself in order to obtain the best terms. With a less diversified business, the likelihood grows that, while he is satisfied with the service he gets, he will keep his business, at least for a period, with the same insurer, and place it through the same broker. The advice and guidance, based on collation of information, by the broker, will be more valuable in such a case, to both broker and customer. In either case, in order to obtain and to retain business it is necessary to cultivate and accumulate knowledge of the client's requirements and of his record, so as to be able to offer him attractive terms. To develop this may be a fairly long term affair: even if it has been developed there is always the risk that the client may decide to go elsewhere if better prospects offer. It is clear from this that the connection between an insurer or insurance broker and his client is not nearly so firm as, for example, that between a solicitor and his client. On the other hand its comparative fragility makes the risk of solicitation of clients by a former employee the more serious. A client is not easily detached from a solicitor who has been handling his affairs over a period of years: but a comparatively mild solicitation may deprive an insurance broker of valuable business which otherwise, assuming attention to and knowledge of his clients' affairs, might safely be reckoned on for a period.

These considerations make it appear that, in principle, a covenant against solicitation of clients may be entirely reasonable and necessary for the protection of the employer..."

163. Marion White Ltd v Francis [1972] 1 WLR 1423 was a case concerning a hairdresser with a restrictive covenant for 1 year after termination and a radius of 1/2 mile and the defendant joined a rival hairdresser about 150 yards from the plaintiff's premises, Buckley LJ remarked at p.1428A:

"The conduct of the employee ethically is really quite inexcusable."

and observed at p.1429C:

"It is obvious that in an establishment such as ladies' hairdresser's establishment the assistants who actually deal with the customers, who dress their hair, wash their hair, and do whatever else they do for the customers, provide a very important part of the personal contact between those engaged in the business and the customers of the business. That constitutes an important element of the goodwill of the business; and that is an interest which the employer is entitled to have protected."

and, after quoting the judgment of Harman LJ in Home Counties Dairies v Skilton (supra), stated at p.1429G

"And, just as the milk roundsman may endear himself to the housewives on his round, so an assistant in a ladies' hairdressing establishment may very well endear herself, either by her personality or her skill, to the customers of the establishment who came there for services, and that constitutes part of the goodwill of the employer's business which the employer is fully entitled to protect. It is that aspect of the matter to which this covenant is directed."

164. In Steiner (UK) v Spray (unreported) Court of Appeal 1 December 1993), also a case concerning hairdressers, Hoffman LJ observed:

"It is a matter of common knowledge that people are loyal to their hairdressers and that that loyalty which, in law, is part of the goodwill of the employer, induces them to leave and thereby cause damage to the employer's goodwill."

165. In Dawnay, Day & Co Ltd v D'Alphen [1988] ICR 1068 at 1081, Robert Walker J made reference to the hairdressing business and stated:

"It is common knowledge that people are loyal to their hairdressers. That loyalty is founded primarily on the individual hairdresser's skill in cutting and setting hair, and on his or her pleasant and sympathetic personality. Nevertheless, the customer's loyalty is, in law, as Hoffman LJ says, part of the employer's goodwill. It is the employer who has provided the employee with the opportunity to improve his or her skills and to establish and develop a personal relationship with the customer, and it is the employer who has borne the cost of providing attractive premises and facilities which may help to cement the personal relationship."

166. In determining whether a non-dealing or non-competing clause is reasonable the Court is obliged to pay heed to other restrictions imposed on the employee.

167. But the Court must be practical in this regard. In Ng Kam Chun v Chan Wai Hing, Janet HCA 3036 of 1992, where a former employee was restrained by a non-soliciting clause as well as a non-competing clause, Keith J said:

"... To the extent that it was necessary to protect confidential information, Mr. Ng had already protected himself from her profiting from his confidential information or disclosing it to anyone else by clauses 11 and 12 of the written contract of employment. However, such covenants are difficult, if not impossible, to police. If Miss Chan dealt with his clients or accepted instructions in relation to properties which had been on his books contrary to a covenant to that effect, there is a good chance that Mr. Ng would not have been any the wiser. The same is true if she profited from his confidential information or disclosed it to anyone. I am satisfied that the only real way to ensure that she would not deal with his clients or accept instructions for properties on his books, or profit from or disclose his confidential information, was to take her out of the market in Happy Valley completely for a short time."

And Hoffman LJ said in Steiner (UK) Ltd (supra):

"In my judgment, the learned judge was right to treat such a covenant (i.e. a non-solicitation covenant) as inadequate in the circumstances of this particular trade (i.e. hairdresser). A covenant against solicitation would be of very little use because it is well known that the customers will, in many cases, voluntarily follow their chosen hairdresser to the new establishment without there having to be any solicitation at all. A covenant against dealing would I think, in practice, be almost impossible to enforce without mounting guard outside the new establishment to see if former customers were entering and seeing if their hair was going to be done by the Defendant rather than by some other hairdresser on the premises."

168. The extent to which the former employee may be restrained geographically and in terms of time is a matter to be determined having regard to all the circumstances of the case.

169. In Ng Kam Chun (supra) the real estate case, Keith J found that the area covering the district of Happy Valley was reasonable, but the period of two years was two long by a year.

170. In Seawave Hair Design v Choy Kwong Yiu and others unreported A2743 of 1992, which concerned a stylist, DJ Tong Q C found one year and the district of Tsim Sha Tsui to be not unreasonable restraints.

171. In Marion White (supra) Buckley LJ considered what distinction there might be if a stylist came to be employed as a receptionist, a point raised by the judge at first instance. He said at p. 1430B:

"If that was what he had in his mind, I would myself think that that would be likely to be just as damaging or almost as damaging to the goodwill of the employers as employment in the actual processes of attending to people's hair; for if a customer of the employers became aware that the employee, who used to serve her at the employers' shop and with whom she had become friendly, had moved to a nearby competitor hairdresser as receptionist or as manageress of the business in that shop, I think that there would be almost as great a risk of custom being lost by the employers as if the employee had merely entered the employment of the competitor as an assistant carrying out the operations of dressing hair."

The Tort of Procurring a Third Party to Breach his Contract

172. Knowingly procuring or inducing a third party to break his contract to the damage of the other contracting party without reasonable justification or excuse is a tort; see Clerk v Lindsell on Torts, 18th Edition, paragraphs 24-20.

173. Bingham LJ considered the position of an employer who induces an employee to work for him knowing that he was caught by a restrictive covenant with his former employer in Rickless v United Artists Corporation [1988] QB 40. At p. 58 he said:

"Take the case of an employment contract containing a valid covenant against competition for 12 months after termination. The contract comes lawfully to an end. The employee has performed all the service required of him and has received all the pay he is entitled. The only contractual term remaining in force is the employee's negative covenant not to compete. A third party, knowing of the covenant, induces the employee to work for him during the period of the covenant and in obvious breach of it. It is accepted that an action would lie (and an injunction in all probability be granted) against the employee. But if the defendants are right, no action would lie against the third party. They contend that it would not. I can find no basis in principle for such an anomalous result, which conflicts with both the law and the practice as I have long believed them to be."

Liability

174. I come now to apply the law to the facts of the case and thus the issue of liability.

Implied Duty of Fidelity not to Copy, Poach or Solicit, and Non-Copying

175. For the part they played whilst in the employ of the plaintiff in ordering the copying of the plaintiff's record of customers for the express purpose of making use of them in a manner otherwise than for the benefit of the plaintiff, the 1st and 3rd defendants are liable for breach of the implied duty of fidelity they each owed the plaintiff, and for breach of the non-copying clauses in their respective contracts with the plaintiff.

176. For the part they played whilst in the employ of the plaintiff in actively soliciting those of the plaintiff's customers for the express purpose of securing their patronage with the 9th defendant, the 1st to 7th defendants are liable for breach of the implied duty of fidelity they each owed the plaintiff.

177. For the part they played whilst in the employ of the plaintiff in soliciting other staff of the plaintiff to leave the plaintiff and join the 9th defendant, the 1st to 8th defendants are liable for breach of the implied duty of fidelity they each owed the plaintiff.

Non-Dealing and Non-Competing

178. It having been established on the facts that the 1st to 8th defendants were and remain in breach of these restrictive clauses, the test now is as to whether the plaintiff has proved they were necessary to protect its legitimate interests and are reasonable in all the circumstances.

179. Having regard to:

(a) the dependence of a hair salon on its regular customers and in particular the plaintiff on its regular customers;

(b) the ease with which a customer may be persuaded to follow an employee who leaves;

(c) the difficulty in policing and enforcing a non-soliciting provision;

I am satisfied that these restrictive clauses were necessary to protect the plaintiff's interests.

180. Having regard to:

(a) the number of salons and number of A grade salons in Hong Kong;

(b) the number of A grade salons in Tsim Sha Tsui;

I am satisfied that the restrictions as to area and time imposed in these restrictive clauses were reasonable.

181. Furthermore, the defendants or any of them have failed to establish that they are contrary to public policy.

182. Accordingly the 1st to 7th defendants are liable for breach of the non-dealing and non-competing clauses and the 8th defendant is liable for breach of clause 12 in their respective contracts with the plaintiff.

Inducing and Procuring

183. For the part they each played in the history of events now established the 8th and 9th defendants are jointly and severally liable in tort for knowingly procuring and inducing the 1st to 7th defendants to breach the express and implied terms of their contracts with the plaintiff. The 9th defendant is further liable in tort for knowingly procuring and inducing the 8th defendant to breach the express and implied terms of her contract.

Conclusion

184. Save to order injunctions to enforce the non-soliciting, non-competing and non-dealing restrictions imposed on the defendants for the remainder of the terms which I shall come to, that completes my adjudication. There remains the issue of damages to be assessed.

185. But I wish to add a rider.

186. Whilst it is not within the province of a court to pass moral judgement, I find it hard to perceive in a body of employees a more blatant disregard for the contractual obligations of fidelity owed by them individually and collectively to their employer and for the consequences of their breaching those obligations. This was, as I find, an extraordinary way to behave towards their employer of many years who, in all but one of their cases, had trained them from scratch to becoming experts in their field.

187. Equally, it is hard to imagine, in the role played by a company newly incorporated to run a salon, a more gross and obvious disregard for the rights of a competitor in its pursuit of staff and customers for financial advantage.

188. The orders follow next. The costs order is nisi at first instance.

Orders

189. It is ordered that:

1. For the period from the date hereof to 11th December 2001, the 1st and 2nd defendants be restrained from:-

(a) whether on their own account or as shareholder, partner, director, agent, servant or consultant or otherwise for any other individual, firm or corporation ("Person"), canvassing, soliciting, approaching or causing to be canvassed, solicited, approached any clients ("the Clients") for whom the 1st and 2nd defendants had provided services ("the Services") in hairdressing, hair styling and perming, tinting, treating, cutting, colouring of hair and applying hair extensions during the one year period prior to their termination of employment with the plaintiff (i.e., 11th December 2000) with a view to providing the Services to the Clients;

(b) whether on their own account or as shareholder, shareholder, partner, director, agent, servant or consultant or otherwise for any other Person, providing Services or causing Services to be provided to any of the Clients;

(c) whether on their own account or as shareholder, partner, director, agent, servant or consultant or otherwise for any other Person, being engaged in the provision of the Services within a radius of 3/4 mile of the plaintiff's salon at G113 Marco Polo Hotel, Harbour City, Canton Road, Tsimshatsui, Kowloon;

2. For a period from the date hereof to 6th December 2001, the 3rd and 4th defendants be restrained from:-

(a) whether on their own account or as shareholder, partner, director, agent, servant or consultant or otherwise for any other individual, firm or corporation ("Person"), canvassing, soliciting, approaching or causing to be canvassed, solicited, approached any clients ("the Clients") for whom the 3rd and 4th defendants had provided services ("the Services") in hairdressing, hair styling and perming, tinting, treating, cutting, colouring of hair and applying hair extensions during the one year period prior to their termination of employment with the plaintiff (i.e., 6th December 2000) with a view to providing the Services to the Clients;

(b) whether on their own account or as shareholder, shareholder, partner, director, agent, servant or consultant or otherwise for any other Person, providing Services or causing Services to be provided to any of the Clients;

(c) whether on their own account or as shareholder, partner, director, agent, servant or consultant or otherwise for any other Person, being engaged in the provision of the Services within a radius of 3/4 mile of the Plaintiff's salon at G113 Marco Polo Hotel, Harbour City, Canton Road, Tsimshatsui, Kowloon;

3. For the period from the date hereof to 5th December 2001, the 5th, 6th and 7th defendants be restrained from:-

(a) whether on their own account or as shareholder, partner, director, agent, servant or consultant or otherwise for any other individual, firm or corporation ("Person"), canvassing, soliciting, approaching or causing to be canvassed, solicited, approached any clients ("the Clients") for whom the 5th , 6th and 7th defendants had provided services ("the Services") in hairdressing, hair styling and perming, tinting, treating, cutting, colouring of hair and applying hair extensions during the one year period prior to their termination of employment with the plaintiff (i.e., 5 December 2000) with a view to providing the Services to the Clients;

(b) whether on their own account or as shareholder, shareholder, partner, director, agent, servant or consultant or otherwise for any other Person, providing Services or causing Services to be provided to any of the Clients;

(c) whether on their own account or as shareholder, partner, director, agent, servant or consultant or otherwise for any other Person, being engaged in the provision of the Services within a radius of 3/4 mile of the plaintiff's salon at G113 Marco Polo Hotel, Harbour City, Canton Road, Tsimhsatsui, Kowloon;

4. For the period from the date hereof to 1 November 2001, the 8th defendant be restrained from:-

(a) associating or taking up employment in a hairdressing salon with any former staff of the plaintiff who had worked in the plaintiff's Salon within four months prior to her departure from the plaintiff (i.e., 1 November 2000);

(b) working in a salon located within a radius of one mile of the plaintiff's salon at G113 Marco Polo Hotel, Harbour City, Canton Road, Tsimshatsui, Kowloon;

5. The 8th and 9th defendants, either by themselves or through their agent, servant or employee, be restrained from continuing to induce, procure or facilitate the 1st to 7th defendants' breach of the 1st to 7th defendants' respective injunctive orders made hereinabove.

6. The 9th defendant either by itself or through its agent, servant or employee, be restrained from continuing to induce, procure or facilitate the 8th defendant's breach of the 8th defendant's respective injunctive orders made hereinabove.

7. The 1st to 9th defendants are liable in damages to the plaintiff to be assessed.

8. Costs taxed if not agreed are to the plaintiff with certificate for two counsel.