The recent decision in [2024] HKCFI 989 underscores the robust approach taken by the Court in examining the enforceability of non-compete clauses, even at the interim-interim stage.
At the heart of the dispute is a 12-month, worldwide non-compete clause (“NCC”) which purports to restrain a former CFO Asia of a financial services company (“Employee”) from being employed in a “similar capacity” by a “competitor” within 12 months following a voluntary termination of his employment with his former employer (“Former Employer”).
Some 6 months after the NCC came into operation, the Employee notified his Former Employer that he intended to join an alleged competitor. The Former Employer then applied for injunctive relief to restrain him from doing so on the basis of the NCC, arguing inter alia that there is a risk that the Employee, if allowed to join a competitor before the NCC expires, would leak confidential information he obtained in the course of his former employment to the material detriment of the Former Employer’s interest.
The Court refused to accept assertions of such kind at face value — it is “incumbent upon the employer to identify with precision and clarify the items of protectable confidential information which it fears to be incapable of proper segregation from one’s stock in trade and which would require a restrictive covenant to assist”. Reliance on grand business jargons and ‘catchwords’ to justify the alleged existence of “confidential information” would not suffice. In addition, where an employer already has the protection of an express confidentiality covenant, the need for any NCC is further diminished.
The Court also found the worldwide nature of the NCC itself a “remarkable feature” which warrants proper justification. On the facts, the Former Employer failed to show why a global restraint is reasonable or necessary to protect its alleged legitimate business interests.
The Court was, therefore, not satisfied that the Former Employer has reasonably good prospects of success in demonstrating that the NCC is enforceable at trial. As the balance of convenience also lies against a grant (and taking into account the Former Employer’s delay in making its application), the Court refused to grant any interim-interim injunction against the Employee.
The takeaway is that “less is sometimes more” — NCCs which go further than is reasonably necessary to protect an employer’s legitimate business interest risk being struck down in their entirety, and the Court would not salvage the enforceability of such clauses by re-writing the parties’ bargain.
The full judgment is available at https://legalref.judiciary.hk/lrs/common/ju/ju_frame.jsp?DIS=159254&currpage=T
Jose-Antonio Maurellet SC and Clara Wong acted for the 1st Defendant (the Employee).
Kevin Lau is involved in an earlier stage of the matter.
