In the recent case of Info Salons Technology Services (HK) Limited v Feng Wenguo & Ors (there are two related decisions in [2025] HKCFI 1663 and [2025] HKCFI 1769 respectively), the Hong Kong High Court considered the Plaintiff’s application to enforce the restrictive covenants in its employment contract with the 2nd Defendant, a former senior management. The restrictive covenants seek to restrain the 2nd Defendant from (i) soliciting business from the Plaintiff’s clients; (ii) poaching the Plaintiff’s employees; and (iii) engaging in any competing business.
Material Background
The dispute arose between Info Salons Technology Services (HK) Limited (“Info Salons”), an IT service provider specialising in event and exhibition support, and its former Deputy General Manager, Mr Li Tung Yat (“D2”). After leaving his employment on 7 June 2024, D2 set up a competing company, Eventlyte Limited (“D3”), which operates a similar line of business as Info Salons.
Info Salons has been providing services to Informa Markets Asia Ltd (“IMA”) for over 18 years. IMA regularly engaged Info Salons for IT services for multiple and annual shows and exhibitions. One such line of shows and exhibitions is the Jewellery Fairs held in Hong Kong in March, June and September every year. There is no dispute that D3 handled the March Jewellery Fair 2025 for IMA and D2 also asserted that IMA had chosen D3 as the service provider for the June Jewellery Fair 2025 (this assertion was however disputed by Info Salons).
D2’s employment contract with Info Salons contained a number of restrictive covenants, including (i) non-disclosure of information; (ii) non-solicitation of business; (iii) non-enticing away of Info Salons’ employees and officers; and (iv) non-competing covenant, the effective periods for the latter three restrictive covenants are 12 months after the end of D2’s employment and therefore due to expire in early June 2025.
There are two related decisions on Info Salons’s application, one made at the summons hearing on 11 April 2025 and one at the substantial hearing on 25 April 2025 which the judges made different rulings.
Decision at summons hearing on 11 April 2025
Info Salons sought an interim-interim injunction order against D2 to restrain D2 from breaching the above restrictive covenants. For the following reasons (among others), the Court refused to grant the injunction :-
- The facts are not clear as to whether it was IMA which sought D2’s help, or whether it was D2 who solicited IMA’s patronage. In the former, there may not have been any breach of the non-solicitation covenant;
- The evidence at the stage suggested that D3 had in fact been chosen to handle the June Jewellery Fair 2025. If the interim-interim injunction was granted, D2 would be abruptly stopped from continuing with his work on the June Jewellery Fair 2025 and suffer irreparable damage to his professional reputation. IMA’s organisation of the June Jewellery Fair 2025 will also be disturbed.
- The loss that Info Salons may suffer or may have suffered via loss of IMA’s patronage on the June Jewellery Fair 2025 may be compensated by damages.
Decision at substantial hearing on 25 April 2025
The case returned to court two weeks later, on 25 April 2025, for a substantive hearing where Deputy High Court Judge Alan Kwong granted an interlocutory injunction against the Defendants.
In arriving at his decision, the learned judge considered the following (among others) :-
- Despite repeated requests, D2 had failed to produce any contractual document showing that there had been binding arrangement with IMA regarding June Jewellery Fair 2025.
- D2 voluntarily accepted the restrictive covenants. These contractual provisions formed part of the contractual bargain between Info Salons and D2. Justice requires the parties be held to their contractual bargain as far as possible.
- As regards D2’s assertion that he was approached by IMA, the Court affirmed an English case Croesus Financial Services Ltd v. Bradshaw & Anor [2013] EWHC 3685 (QB) where Simler J stated :-
“It is often assumed there is no solicitation where it is the customer who first contact the ex-employee…However, this is not necessarily the case and although the question who made the first contact is relevant, all the circumstances surrounding the contact must be considered, each case depending on its own facts. There is no general rule that whenever a customer initiates contact, an individual can respond and even go so far as making a presentation without breaching a prohibition on solicitation…Rather, there are question of facts and degree”.
- The Court also considered other factors such as the expiry date of the restrictive covenants and the length of the injunction sought. IMA is an important client to Info Salons and D3 is a new set-up, and it could be difficult to quantify Info Salons’s loss and damages.
Conclusion and take away
This case together with a line of judgements show that the Hong Kong courts are prepared to uphold restrictive covenants contained in employment contracts. The Court’s comment that contractual provisions formed part of the contractual bargain between the parties and therefore justice requires the parties to be held to the bargain as far as possible is note worthy.
The decision on 25 April 2025 is also particularly notable for its adoption of the reasoning from the English case of Croesus Financial Services Ltd. Even if the customer takes the initiative and approach the ex-employee, it does not necessarily mean that there is no breach of the restrictive covenants, and the ex-employee is likely to be considered to have breached the non-restrictive covenants if he makes a presentation or a pitch to the customer.
Cases relating to enforcement of restrictive covenants are facts sensitive. Employers are reminded of the importance of drafting robust restructure covenants whilst maintain reasonableness and must act swiftly and decisively when they suspect breaches.
If you have any questions on the above eNews or relating to employment law, experienced employment lawyers in our firm would be happy to assist you.
