LANDSCOPE REAL ESTATE SERVICES LTD v. MING CHI HONG, STEVE

HCA 819/2006

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NO. 819 OF 2006

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R E A S O N S   F O R   D E C I S I O N

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Introduction

1.  This “Reasons for Decision” concerns an application for interlocutory injunction.  The plaintiff’s summons dated 21 April 2006 sought the following injunction orders (to continue until judgment in this action or further order):-

(a)    the defendant be enjoined from being employed by, or providing services to, Cushman & Wakefield or any other person, firm or company carrying on the same kind of business as the plaintiff (“the restraint of trade order”);

(b)    the defendant be enjoined from using any confidential information acquired by him during his employment with the plaintiff including in particular the source codes, data, ideas, concepts, methodology learnt, created or discussed regarding the plaintiff’s computer program or disclosing the same to Cushman & Wakefield or any other party (“the confidential information order”);

(c)     the defendant be enjoined from soliciting the plaintiff’s clients to engage the services of Cushman & Wakefield or other estate agents (“the non-solicitation order”).

This application was refused.  The reasons for the refusal are as follows.

Background Facts

2.  The plaintiff has been operating the business of an estate agent.  The defendant was its former corporate service officer from June 2003 to 4 March 2006.  The defendant admits that he joined Cushman & Wakefield since 13 March 2006.

3.  The following clauses in the written employment contract between the parties were referred to by the plaintiff:-

“Confidentiality :

All client, marketing, operating and office system information is highly sensitive and confidential and should not at any time or under any circumstances be divulged to any other party for any reason or be removed from this office without the Authority of the Board of Directors” (clause 9);

“Non-Solicitation :

[The defendant is] restricted not to solicit or canvas our clients or members of our staff or associates for a period of six (6) months after termination of [the defendant’s] employment” (clause 10).

The Restraint of Trade Order

4.  Despite clause 10 of the employment contract, this part of the plaintiff’s application is based mainly on an alleged oral term between the parties.  The alleged oral term was described by the plaintiff’s executive director in his affirmation as follows:-

“In about March 2005, the Defendant became more and more important for developing the Computer Program for the Plaintiff.  In the circumstance, the Defendant’s salary was adjusted to reflect his contribution to the Plaintiff whereas the Defendant agreed that he would not work as a marketing staff or a programmer or both for any other company carrying [on] the same kind of business as the Plaintiff within 1 year from his termination of employment … ” (para. 9).

The alleged one-year period will expire after 4 March 2007.

5.  The defendant opposed this part of the application on 3 grounds:-

(1)     the plaintiff’s case is factually incredible;

(2)     even if there was the alleged oral term, the restraint of trade is unreasonable and hence ought not be enforced by court;

(3)     there was no consideration for the alleged oral term.

6.  I agree with para. 5(1) above.  The employment contract was in writing.  No explanation has been given by the plaintiff why such change in a term which was important enough to warrant particular mention in March 2005 (out of many other terms in the contract) was not recorded in writing.

7.  I also agree with the defendant relating to para. 5(2) above having considered the authority cited by the parties (Fortune Realty Co. Ltd. v. Chan Hiu Yeung Dick, HCA 1582/2001).  No reasons have been put forth by the plaintiff to justify the length of the restraint period, the lack of geographical limits and the wide restraint provided for regarding estate agency business generally and the type of prohibited work.

8.  The point set out in para. 5(3) above is a complicated point of law and cannot be satisfactorily determined in an application of this kind.

9.  Further, the restraint period (and any interlocutory injunction order which gives effect to it) is highly likely to expire well before this action is tried.  In these circumstances, I agree with the defendant that the first hurdle for the plaintiff in seeking such an order is not simply whether there is a serious question to be tried: Hong Kong Civil Procedure 2006, para. 29/1/18 to 29/1/19.

10.  Bearing in mind the above matters, this part of the application should be refused.

The Confidential Information Order

11.  The plaintiff’s case regarding the precise scope and nature of the confidential information was very unclear.  The information concerned appears to cover both the computer software itself as well as some of the data collected and used in the plaintiff’s business, that is, the particulars concerning its clients and property transactions.

12.  As can be seen from para. 1(b) above, the scope of the order sought by the plaintiff was also very imprecise.

13.  This part of the application might well have been refused on the above two grounds, but the plaintiff’s main difficulties lied with the insufficiency of evidence regarding the following.

14.  The evidence relating to whether the defendant in fact possesses the confidential information is extremely unsatisfactory.  The plaintiff’s executive director deposed as follows:-

“… I … suspect that the Defendant is still in possession of the Said Confidential Information [the term is defined as covering the plaintiff’s data].  I recall that sometime in the middle of 2004, the whole computer system of the Plaintiff had turned down.  I was afraid that all the customers’ information might be lost and once asked the Defendant if the computer system could be recovered in full.  I recall that the Defendant assured me that even if the whole computer system turned down, there was nothing to be [worried] about because he had a backed-up file at home … ” (para. 14).

The allegation was denied by the defendant, who said the back-up files were kept by the plaintiff’s executive director.  The defendant also deposed that he was only responsible for the computer software but data input and processing was the job of the other staff.  The plaintiff contended the defendant could have access to the data nevertheless.

15.  In his second affirmation, the plaintiff’s executive director appeared to have shifted his position as regards the confidential information in question and the reason for the salary change of the defendant.  He deposed:-

“… the Plaintiff’s listing information web page, the idea, concepts and methodologies are unique in nature. … In fact, the uniqueness of the Plaintiff’s system can be demonstrated at least in 2 aspects : Prism and Internal System. …

To summarize, the computer system of the Plaintiff is unique and was developed by the Plaintiff over the years” (para. 7 and 10);

“The real reason for the adjustment of salary in April 2005 had already been particularized in paragraph 9 of My First Affirmation.  Besides, the Defendant’s indication of leaving the Plaintiff to Colliers Jardine [another estate agent, in February 2005] also [triggered] the salary adjustment at that point of time.  I recall that when the Defendant told me [that] … I tried to retain him … At that time, I also warned him that if he disclosed the data, source codes, concepts and/or methodologies adopted by the Plaintiff’s computer system to Collier Jardine, I would sue him …” (para. 14).

16.  The evidence adduced by the plaintiff falls far short of establishing whether the alleged confidential information belonged to the third category of confidential information referred to in Toto Toys Ltd. v. Lee Man Shu and Others, HCA 2600/2004.

17.  Even less was said of the defendant’s alleged disclosure or use of the alleged confidential information.  The plaintiff has frankly admitted it had no evidence of the same but argued that a quia timet type of order should be made.

18.  I disagree with the plaintiff.  The evidence in support of this part of the application is simply insufficient to justify the grant of any order.

The Non-Solicitation Order

19.  This part of the application was put forth on the basis that it was part of the defendant’s job to solicit business, and that there is a risk he would do so in the course of his new employment.

20.  Again, the evidence adduced by the plaintiff as regards both of the above is inadequate.  The defendant denied that he was (or is) involved with the solicitation of customers.  The defendant’s post with the new employer was that of a system development manager.

21.  In relation to the defendant’s work while employed by the plaintiff, the plaintiff’s executive director said:-

“One of the job duties of the Defendant was to accompany other corporate service officers to visit potential human resources executive … to solicit business” (para. 6, first affirmation).

The defendant denied the above and deposed he only performed demonstration work after the customers had been approached by his colleagues.  In reply, the plaintiff’s executive director repeated the allegation that the defendant was also responsible for soliciting business and continued:-

“… system demonstration to clients is a critical and integral part of impressing clients … ” (para. 1, second affirmation).

I do not consider the plaintiff to have sufficiently refuted the defendant’s denial in this reply.  Besides the feeble way in which the plaintiff replied to the defendant’s denial, there was also no documentary record to support the allegation that the defendant was involved in soliciting for business.

22.  The plaintiff has again frankly admitted it knew practically nothing about the defendant’s new job.  The plaintiff has asked one of its staff to make telephone calls to the defendant’s new office without disclosing her identity.  The fact that those telephone calls were never put through by the telephone operator indicated that it was unusual for outsiders to call up the defendant at work.  This militates against any inference that the defendant’s new work involved soliciting for business.

23.  This part of the application must be refused as well.

Costs Order

24.  After hearing the parties, I ordered costs of the application to be paid by the plaintiff, having considered Super Trend Lighting Ltd. v. Hi-Light Lighting Ltd. and Another, HCA 1896/2002.