Bfam Partners (Hong Kong) Ltd v. Gareth John Mills and Another

HCA 1128/2021

[2021] HKCFI 2904

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NO 1128 OF 2021

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Before:  Mr Recorder Eugene Fung SC in Chambers (Open to Public)

Date of Hearing:  6 September 2021

Date of Decision:  6 September 2021

Date of Plaintiff’s written submissions on costs:  13 September 2021

Date of 2nd Defendant’s written submissions on costs: 23 September 2021

Date of Reasons for Decision and Decision on Costs:  30 September 2021

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REASONS FOR DECISION

& DECISION ON COSTS

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1.The plaintiff has made an interlocutory injunction application against the 1st defendant (its former employee) to enforce a non-competition covenant in an employment contract for the duration from 1 May 2021 to 31 October 2021. At the conclusion of the substantive hearing on 6 September 2021, I granted the injunction as sought by the plaintiff and indicated that my reasons would be handed down in due course. These are my reasons why I acceded to the plaintiff’s injunction application.

A.   THE FACTUAL BACKGROUND

2.The plaintiff is a private company incorporated in Hong Kong.  According to the plaintiff, it provides fund management services and manages assets and capital for the benefit of institutional investors from around the world.

3.The 1st defendant is an information technology professional.  According to his CV that was previously provided to the plaintiff, the 1st defendant has described himself as a technology innovator specialising in software architecture, security and leadership.

4.The 2nd defendant is also a private company incorporated in Hong Kong.  According to the 2nd defendant, it is an institutional asset management firm which invests globally.

5.By a letter dated 21 January 2019 (“the First Offer Letter”), the plaintiff made an offer of employment to the 1st defendant for the position of Technology Consultant for a fixed term from 11 February 2019 to 10 February 2020 subject to the terms and conditions set out therein (including the appendices) and in the plaintiff’s standard terms and conditions.  As mentioned in the letter, the 1st defendant was to report to Mr Iosif Ziman, the plaintiff’s Chief Technology Officer.  On 23 January 2019, the 1st defendant countersigned the First Offer Letter and accepted the offer of employment.

6.It was an express term in the First Offer Letter that the 1st defendant should observe and comply with post-termination restrictions, including (1) a six-month non-competition restriction, (2) a six-month non-solicitation and non-dealing restriction relating to clients and prospective clients, (3) a six-month non-solicitation of employees restriction and (4) a six-month non-poaching of employees restriction.

7.According to the plaintiff, the 1st defendant commenced employment in early March 2019 and the plaintiff became very satisfied with the 1st defendant’s performance.  By a letter dated 7 August 2019 (“the Second Offer Letter”), the plaintiff made an offer to convert the 1st defendant’s fixed term employment to a permanent and full-time employment with effect from 8 August 2019 with the position title of Head of Platform Technology.  As stated in the Second Offer Letter, the 1st defendant’s base salary was US$300,000 per annum (payable as HK$195,000 per month) and that all other terms and conditions would remain the same.

8.In March 2020, the plaintiff’s Chief Technology Officer (Mr Ziman) fell seriously ill and the 1st defendant was given additional responsibilities. 

9.By a letter dated 22 February 2021, the 1st defendant gave three months’ notice to resign from the plaintiff.  The plaintiff sent a letter dated 23 February 2021 to the 1st defendant acknowledging receipt of his notice of resignation and noting that his employment with the plaintiff would cease on 21 May 2021.

10.According to the plaintiff, the 1st defendant completed the handover process by the end of April 2021 and the plaintiff was content to let the 1st defendant go on garden leave for the last three weeks of his notice period.  By a letter dated 29 April 2021, the plaintiff set out details of the garden leave arrangements and reminded the 1st defendant of the various post-termination restrictions, including the prohibition to commence employment with a competitor for a period of 6 months from the commencement of the garden leave (i.e. up to and including 31 October 2021).  It was also stated in this letter that the plaintiff would pay the 1st defendant, after the termination date on a monthly basis, in arrears a sum equivalent to his monthly base salary during the 6-month restriction period.

11.The 1st defendant commenced his garden leave on 1 May 2021.

12.Unbeknownst to the plaintiff, the 1st defendant started working as the Chief Technology Officer for the 2nd defendant since 24 May 2021.  The plaintiff only knew of this commencement date when the 1st defendant filed his affidavit evidence in these proceedings on 13 August 2021.

13.On 23 June 2021, the plaintiff transferred HK$193,500 to the 1st defendant’s bank account being the sum equivalent to the 1st defendant’s monthly base salary (HK$195,000) less his individual MPF contribution of HK$1,500.  In an email to the plaintiff dated 24 June 2021, the 1st defendant stated that his employment with the plaintiff had ceased on 21 May 2021, that he was not aware of any outstanding payments due, and that the payment appeared to have been made in error, and requested to have the plaintiff’s bank details so that he could return the payment.  In reply, the plaintiff told the first defendant that the payment was for the non-competition.

14.On 30 June 2021, the plaintiff received a cheque from the 1st defendant which was made payable to the plaintiff in the sum of HK$193,500.  The returned cheque was sent to the plaintiff by courier enclosed in an envelope with a label stating the 2nd defendant as the customer.

15.Between 6 and 19 July 2021, correspondence ensued involving the plaintiff, the 1st defendant, the 2nd defendant and the 1st defendant’s solicitors.  In such correspondence, it was made clear to the plaintiff that the 1st defendant considered that the non-competition clause in question was unenforceable.

16.On 27 July 2021, the plaintiff issued the Writ herein against both the 1st and 2nd defendants.  The plaintiff seeks against the 1st defendant a declaration that the non-competition clause in question is valid and binding on the 1st defendant, and an injunction in terms of the non-competition clause.  As against the 2nd defendant, the plaintiff seeks an injunction to restrain it from procuring the 1st defendant’s breach of the non-competition clause, or alternatively, damages for procuring the 1st defendant’s breach of contract.

17.On the same day (27 July 2021), the plaintiff issued an inter partes summons seeking an interlocutory injunction as against the 1st defendant to enforce the non-competition clause, and expedited directions from the court for the hearing of the summons and the trial of the action. 

18.By a consent order dated 29 July 2021, Madam Justice Linda Chan gave directions to the parties for the filing of affidavit evidence and adjourned the plaintiff’s inter partes summons to a date to be fixed for argument.

B.  APPROACH IN DETERMINING THIS INJUNCTION APPLICATION

19.The court generally applies the American Cyanamid principles to determine whether an interlocutory injunction should be granted in a case of enforcement of a covenant in restraint of trade: Lawrence David Ltd v Ashton [1989] ICR 123 at 132B-C (Balcombe LJ).

20.Where the grant or refusal of an interlocutory injunction would in effect dispose of the action finally, as Chow J (as he then was) said in BMC Global Ltd v Tor Asia Credit Master Fund LP (unreported, HCA 2392/2016, 14 Oct 2016) §§36-38:

20.1   “the court would have more regard to the plaintiff’s prospects of success in considering the issue of balance of convenience”;

20.2   “it is neither possible nor appropriate for the court to seek to formulate a precise threshold that the plaintiff must meet before the court may grant an injunction in his favour”;

20.3   “[t]he significance of the merits of the plaintiff’s case as a factor in considering the issue of balance of convenience would vary according to the particular context and circumstances of each case.  Ultimately, the court’s task is to arrive at a result which would carry the lowest risk of injustice as a result of the grant or refusal of an injunction.”

21.Therefore, even in a case where the grant or refusal of an interlocutory injunction would in effect dispose of the action finally, the court should nonetheless take the course which appears to carry the lower risk of injustice if it should turn out to have been wrong in the sense of (1) granting an injunction to a party who would fail if there were to be a trial, or (2) in failing to grant an injunction to a party who would succeed if there were to be a trial: cf Films Rover International Ltd v Cannon Film Sales Ltd [1987] 1 WLR 670 at 680E-G (Hoffmann J as he then was).

22.This is consistent with the basic principle concerning interlocutory injunctions that “the court should take whichever course seems likely to cause the least irremediable prejudice to one party or the other”, and “[w]hat is required in each case is to examine what on the particular facts of the case the consequences of granting or withholding of the injunction is likely to be”: National Commercial Bank Jamaica v Olint Corp [2009] 1 WLR 1405 at §§17 and 19 (Lord Hoffmann). 

23.As mentioned earlier, the only substantive remedies sought by the plaintiff against the 1st defendant in these proceedings are a declaration that the non-competition clause in question is valid and binding, and an injunction to enforce the non-competition clause.  Given that the injunction sought by the plaintiff would only be valid until 31 October 2021 and it would not be possible to have a trial before then, it was clear to me that the grant or refusal of an interlocutory injunction might in effect finally dispose of the claim between the plaintiff and the 1st defendant.  In exercising my discretion in considering whether to grant the injunction as sought by the plaintiff, I had taken into account the legal principles as set out above.

C.   BALANCE OF CONVENIENCE

C1.    Assessment of the Plaintiff’s Prospects of Success against the 1st Defendant

24.It is well-established that covenants in restraint of trade are unenforceable unless they can be shown to be reasonable in the interests of the parties and in the public interest: Bridge v Deacons [1984] AC 705 at 713A-B (Lord Fraser).

C1a.  Whether the NCC protects the plaintiff’s legitimate interests

25.The non-competition clause (“the NCC”) in the employment contract between the plaintiff and the 1st defendant reads as follows.

“You hereby agree that you shall not (without the prior consent in writing of the [plaintiff]), in [Hong Kong], for a period of six months from the Relevant Date, whether on your own behalf or in conjunction with or on behalf or any other person, firm, company or other organisation, (and whether as an employee, director, principal, agent, consultant or in any other capacity whatsoever), in competition with the [plaintiff] directly or indirectly:

2.1. be employed or engaged in;

2.2. perform services in respect of; or

2.3. be otherwise materially concerned with;

the research into, development, supply, provision, or marketing of any product or service (including investment or asset product or investment or asset management related service) which is of the same or similar type to any product or service researched, or developed, or supplied, or marketed by the [plaintiff] during the Relevant Period.

PROVIDED ALWAYS that the provisions of this paragraph 1 shall apply only in respect of such products or services with which you were either materially concerned or connected, or for which you were responsible whilst employed by the [plaintiff] during the Relevant Period.”

26.For the purpose of the NCC, there was no dispute between the parties that the “Relevant Date” is 1 May 2021, and the “Relevant Period” is from 1 May 2020 to 1 May 2021.

27.The plaintiff’s case is that the 1st defendant had been developing IT products and providing services to the plaintiff during the relevant time and was privy to confidential information, and that it is legitimate for the plaintiff to protect its interests in the confidential information through the NCC.  In his first affirmation (at §12), Mr Matthew Buck (the plaintiff’s current Chief Operating Officer and former Head of Operations & Technology) said:

“[The 1st defendant] worked together with [the plaintiff’s] investment teams and was instrumental in improving the technology infrastructure used to execute [the plaintiff’s] trading strategies. Given his key role, [the 1st defendant] has not only acquired confidential information regarding [the plaintiff’s] proprietary technology, but also highly confidential and sensitive information about [the plaintiff’s] trading strategies across all asset classes and products in which it trades. He was part of the design process for trading opportunity tools deployed for the credit, convertible bonds, rates and equities business lines.”

28.The plaintiff has identified several tools in which the 1st defendant was materially involved at the material times and the 1st defendant is said to have acquired confidential information when he had dealings in connection with them.

29.Before dealing with the specific “tools”, it is necessary to set out the plaintiff’s evidence on how the plaintiff is internally structured in order to better understand the evidence adduced by the parties. The following is taken from the affirmation of Mr Simon Cox of the plaintiff.

“5. BFAM has the following trading desks. A "desk" means an investment team by reference to the kind of investment they engage in:

(1) Credit desk;

(2) Rates & Systematic desk;

(3) Equity Volatility desk (often referred to internally as ‘EqVol’);

(4) FX Volatility desk (often referred to internally as ‘FX Vol’); and

(5) Equity-linked desk.

6. BFAM has a dedicated team of technology professionals who sit within the various desks. They work closely together because the technology professionals not only advise the traders on the technology available to implement and enhance their trading strategies, they also know about those strategies in order to tailor make in-house technology or source those of third-party providers (in some cases a combination of both), to enhance these trading strategies and increase productivity.

7. The technology professionals embedded within the various desks are commonly referred to as ‘Strats’, short for strategists or strategy developers. In early 2020, I was appointed as a 'Strat' on the Equity-linked desk. In early 2021, I was appointed head of Strategy Development, leading BFAM's team of ‘Strats’.

8. Besides the Strategy Development team, BFAM has the following additional teams providing technology support:

(1) Data Engineering team (currently headed by Nitin Nihalani) which provides support in relation to storage and analysis of BFAM's data;

(2) Cross-asset team (currently headed by Ansel Freniere) which supports the noninvestment team (comprising middle office, legal and compliance, investor relations and human resources);

(3) Trading technology team (currently headed by Alex Sung) which supports BFAM's business operation by designing technology infrastructure, and building software, to support its trading desks; and

(4) ‘Run the Bank’ team, commonly referred to internally as 'RTB', (currently headed by Charles Lin) which provides frontline support for all aspects of technology.

9. All of the above teams (including the Strategy Development team) together form BFAM's Technology Team. The Technology Team's functions fall under the CTO's scope of duties. In practice, items (1) - (3) represented some 85% of BFAM's technologic strategy development workload. Item (4), RTB, represents about 15% of BFAM' s technologic support workload.

10. In around March 2020, CTO Mr Iosif Ziman became ill and was away on sick leave for an extended period. Mr Mills assumed many of Mr Ziman’s responsibilities and in practice was working as BFAM's CTO since that time, in particular the functions set out in paragraph 8(1) to (3) above and that of the Strategy Development Team. Since then, Mr Mills became the most senior person in BFAM's Technology Team and the person to whom most technologists, including the Strategy Development team, reported. The exception is the RTB Team, which reported directly to Matthew Buck, BFAM's COO.

11. Mr Ziman returned to work in around late 2020 but with a reduced workload and reduced responsibilities.  Mr Mills’ responsibility as set out above remained the same despite Mr Ziman’s return.  Mr Mills remained the person to whom most technologists, including the Strategy Development team, reported.  I, along with the other Strats, reported directly to Mr Mills.”

30.“Vol Tool” 

30.1   This is a tool of the plaintiff to enable the plaintiff’s volatility traders to analyse market prices across a number of option asset types in order to see where assets are trading either at a premium or discount and to take advantage of price volatilities.  According to the plaintiff, the 1st defendant had been privy to the plaintiff’s volatility trading strategies so that he could enhance and refine the Vol Tool.

30.2   The 1st defendant accepted that he had oversight of the Vol Tool, but stated that he only had high level knowledge of the requisite functionality of the tool and its enhancements as and when they were required by the business.  He said he did not have access to any trading strategies which the investors were employing or the source code written by the developers.  Indeed, the general thrust of the 1st defendant’s evidence is that he “did not need to know and did not make it [his] business the details of trading strategies used by the revenue generators in order for [him] to be able to perform his duties” and did not know the source code or had access to source code for the plaintiff’s proprietary technology.

30.3   In its reply affidavit evidence, the plaintiff disputed the 1st defendant’s denial of access to trading strategies.  The plaintiff (through the affirmation of Mr Jeroen Van Der Ven) explained that the Vol Tool is also used by the plaintiff’s Foreign Exchange Volatility team with functionality including a “gamma hedging execution framework” (“GammaBot”).[1]  According to plaintiff, the 1st defendant had attended regular monthly volatility “deep dive” meetings during which business objectives and trading strategies would be discussed along with how the technology or tools could be developed or enhanced to support the plaintiff’s business.  The plaintiff said that the details discussed at the various meetings attended by the 1st defendant and the regular reports provided to the 1st defendant contained confidential information.

30.4   Specifically, Mr Buck said in §12 of his second affirmation:

“… it is untrue where GM [the 1st defendant] says that there was no need for him to understand the trading strategies employed by the traders and that he did not seek to do so. GM would not have been able to perform his job without a comprehensive understanding of BFAM's business, its desks, and its trading objectives and strategies. GM did not sit on the trading desks, but he oversaw the work of the strats embedded in the desks. GM spoke regularly to BFAM's Senior Portfolio Managers. He also attended, and participated in, regular business facing meetings held by the strats with their respective trading desks, as well as regular internal technology meetings attended only by strats at which the respective desks' trading objectives, needs and strategies were discussed. Additionally, GM attended and participated in 'Deep Dive' meetings at which he and/or the strats for the desk in question would give presentations to Mr Fuchs (BFAM's founder, CEO and Chief Investment Officer ("CIO")) and the relevant stakeholders concerned relating to the businesses of the various desks.”

I had noted that numerous redacted documents have been exhibited by Mr Buck to demonstrate the involvement of the 1st defendant at the material times.

31.Cloud Platform

31.1   This is a platform operating in the Cloud which hosts and analyses data across the plaintiff’s asset management and investment businesses.  According to the plaintiff, the 1st defendant’s role was not limited simply to overseeing the building/development of the technology but he also worked closely with the plaintiff’s investment teams on the

on-boarding, hosting and analysis platform with a view to understanding their needs and objectives, and together with the investment teams in enhancing their trading strategies based on the platform.  The 1st defendant was said to have acquired key confidential information to enable any competitor to overcome any concerns they may have about using Cloud-based solutions for hosting extremely large amounts of data for data analytic purposes and to adopt similar tools for identifying price differences and volatilities in order to take advantage of such price differences/volatilities.

31.2   The 1st defendant claimed that there is no proprietary or confidential information involved in the Cloud platform project.  He said that in order to change from storing data on the plaintiff’s servers to storing data in the Cloud, he subscribed for various accounts from Amazon and Microsoft on behalf of the plaintiff.  Accordingly, he said it was unclear to him how or on what basis the plaintiff is claiming that overseeing the use of Cloud technology would involve confidential information.

31.3   The 1st defendant’s queries were subsequently dealt with in the affirmation filed by Mr Nitin Nihalani on behalf of the plaintiff.  The plaintiff explained that (a) historically, hedge funds (including the plaintiff) had been reluctant to use a Cloud-based platform for data storage given concerns about data security and regulatory compliance requirements, (b) a lot of other hedge funds of a similar size to the plaintiff would be early in their journey of using Cloud technology, (c) the Amazon/Microsoft “out-of-the-box” infrastructure does not have the necessary levels of security to prevent cyberattack and is highly configurable, and (d) the 1st defendant was the primary administrator for the plaintiff’s Cloud platform and supervised the plaintiff’s Data Engineering Team, and was accordingly aware of the business priorities and strategies relating to datasets and how the desks of the plaintiff would want to do with the relevant data.

31.4   Mr Buck in his second affirmation said that “[it] is the security aspect and configurations of [the plaintiff’s] Cloud platform created by [the 1st defendant], and [the plaintiff’s] approach to solving security issues in relation to the management of its data … which is proprietary to [the plaintiff]”.

32.Proprietary technology for the plaintiff’s credit analysis reports and the calculation of convertible bond values, and the “CAR Tool”

32.1   According to the plaintiff, it has a proprietary technology used for its credit analysis reports, and the calculation of convertible bond values, and the “CAR Tool”, which is a credit analysis report tool.  The plaintiff said that the 1st defendant oversaw the individuals responsible for building such technology and worked with the plaintiff’s investment teams in enhancing their trading strategies based on such technology.

32.2   The 1st defendant said that he has never sought to access any proprietary technology developed by the software developers and the code was never shared with him.  In relation to the CAR Tool, the 1st defendant said that it was a tool built by Mr Simon Cox and he (the 1st defendant) only has a peripheral understanding of the software.  He again said that he did not need to know of and did not make it his business to familiarise with any trading strategies in order to project manage the work.

32.3   The plaintiff sought to deal with the 1st defendant’s denials in the affirmation of Mr Matthew Shaw.  In that affirmation, Mr Shaw said that (a) the 1st defendant had access to the source code in relation to the bond marketing tool that Mr Shaw created, and (b) in order for the 1st defendant to supervise Mr Shaw’s work on the CAR Tool, the 1st defendant needed to understand the business of the plaintiff’s Credit desk and its operational needs (which is confidential and sensitive information), and the 1st defendant acquired such information by attending and participating in regular meetings with the Credit desk, as well as the periodic “deep dive” meetings. 

32.4       Further, Mr Shaw exhibited to his affirmation (a) a redacted email to show that the 1st defendant’s comments were sought on a document dealing with a feature of the CAR Tool for the pricing of index options which used data from a variety of brokers to determine and compare the fair price to bid/ask spreads, and (b) a redacted document created by the 1st defendant for a presentation highlighting achievements for technology support to the Credit desk in 2020 and containing data about the Credit desk’s trading strategies.

33.“Client Relationship Management System”

33.1   According to the plaintiff, the 1st defendant had access to all data held by the plaintiff on its investors and clients and had worked on a client relationship management system accessible only via login and password by the plaintiff’s investors and clients.

33.2   The 1st defendant accepted that he provisioned the secure data storage medium for this project but says that he did not handle data input related to the project in the 12 months prior to his resignation.  He said although he had historically had access to investor client relationship management data, the project in the last 12 months to build out the internal store of the data was undertaken by another person (Kenneth Lam) and there was no need for him (the 1st defendant) to access such information.

33.3   The plaintiff’s reply affidavit evidence stated that the 1st defendant helped to set up and configure the client relationship management system, which contains the names of investors (some of which have required the plaintiff to enter into non-disclosure agreements), sums invested and management fees.

34.“Bonus Calculation Tool”

34.1   The plaintiff said that the 1st defendant had been working on the plaintiff’s bonus calculation tool for the past 2 years and had intimate knowledge regarding how the plaintiff’s profit/loss pools were calculated, how profits were distributed, how the plaintiff’s bonus scheme operated and the bonuses awarded to all employees, including senior management.  The plaintiff believed that such information could be used to structure remuneration packages to lure key and high-performing traders away from the plaintiff to its competitors. 

34.2   The 1st defendant accepted that he designed the tool and wrote the code associated with its installation.  However, according to the 1st defendant, since his last work on this tool was in February 2021, he has no recollection of any data that was inputted into the system.

34.3   In his reply affirmation, Mr Mohit Seth said that it was he who provided the 1st defendant with the relevant data from HR regarding the compensation structures used, the exceptions applied, and who receives the exceptions, as well as details of the payouts the portfolio managers are on, and the bonuses awarded to all employees.  Mr Seth exhibited chat messages (with confidential details redacted) between him and the 1st defendant showing the 1st defendant’s intimate involvement in the bonus process and the level of confidential and sensitive information that the 1st defendant was privy to for the purposes of creating the bonus calculation tool and calculating the total compensation payable for all of the plaintiff’s employees for 2020.  Mr Seth also said that even if the 1st defendant cannot recall the precise dollar amounts paid to the 4 portfolio managers (who are responsible for a significant majority of the plaintiff’s total revenue) and the traders in their teams, he would know the compensation structures applicable to the calculation of their profit and loss pools and their approximate total compensation in broad terms. Mr Seth has also exhibited some written exchanges between the 1st defendant and Mr Benjamin Fuchs (the plaintiff’s founder, CEO and Chief Investment Officer). One of the emails showed the 1st defendant had considered it appropriate to put the information relating to “the admin/recover details for the sensitive ‘Comp Sheet Database’” created by the 1st defendant into a safe.

35.In addition to the technology and tools mentioned above which the 1st defendant was said to have acquired confidential information when he had dealings in connection with them, the plaintiff also relied on the fact that the 1st defendant was privy to the confidential information that was used for a compensation management tool created by the 1st defendant.  According to the plaintiff, this tool calculates the total contractual compensation for all of the plaintiff’s employees, including base salaries and bonuses, and the confidential data would be passed to the 1st defendant directly for him to effect the input and feed the tool.  The plaintiff said that the 1st defendant would know and recall the overall details of the compensation of the plaintiff’s 4 senior portfolio managers.

36.The plaintiff submitted that an employer has a legitimate interest in protecting two categories of information when an employee leaves employment.  The first category is confidential information which the employee could not use or disclose during his employment without breaching his duty of fidelity to his employer, but which, in the absence of an express restrictive covenant, he would be at liberty to use thereafter.  The second category consists of trade secrets.  The plaintiff relied on Faccenda Chicken Ltd v Fowler [1987] 1 Ch 117 and Littlewoods Organisation Ltd v Harris [1977] 1 WLR 1472 as authorities to support its submissions. I did not understand the defendants to take issue with such submissions of the plaintiff. 

37.The plaintiff submitted that the evidence demonstrates that the 1st defendant was privy to both categories of information associated with the products and services contemplated under the NCC which constitute legitimate interests that the plaintiff is entitled to protect.

38.The defendants advanced two main points to contend that the NCC is unreasonable (and therefore unenforceable).

39.First, the 1st defendant submitted that the plaintiff has wrongly relied on matters subsequent to the date of the First Offer Letter (i.e. the time of contract) to assess whether the NCC is reasonable.  Relying on what Underhill J said in Patsystems v Neilly [2012] IRLR 979 at §33, the 1st defendant submitted that the time for ascertaining the reasonableness of a restrictive covenant is the time of the making of the contract.  The 1st defendant argued that he was employed as a Technology Consultant at the time of the contract, and that all the examples provided by the defendant of the IT platforms and tools that the 1st defendant was materially involved in during the “Relevant Period” (i.e. from 1 May 2020 to 1 May 2021) were not matters within the contemplation of the parties when he and the plaintiff entered into the contract.  The 1st defendant submitted that stripping away the voluminous affirmation of what the 1st defendant might have been privy to during the “Relevant Period”, the plaintiff was left with little evidence as to the types of information which the parties had contemplated the 1st defendant would in fact have accessed and could retain as at the time of the First Offer Letter.  Similar arguments were advanced on behalf of the 2nd defendant.

40.I was unable to accept the defendants’ submissions that the plaintiff has assessed the reasonableness of the NCC by reference to a wrong timeframe.

40.1   It was common ground, and is trite, that the time for ascertaining the reasonableness of a restrictive covenant is the time of the making of the contract.  It does not, however, follow that evidence about matters which happened after the making of the contract would be irrelevant for the purpose of determining the reasonableness of the NCC.  The key is to ascertain the parties’ intentions, or what they contemplated, at the time when the contract was made.  If it was within the parties’ intentions or contemplation at the time of the contract to anticipate a matter from arising subsequently, it cannot be objectionable for the court to take into account evidence about such a matter when determining whether the restrictive covenant is reasonable.  As Lord Briggs, Lord Hamblen and Lord Burrows JJSC said in Harcus Sinclair LLP v Your Lawyers Ltd [2021] 3 WLR 598 at §70(i):

“Provided the enquiry is confined to the parties’ intention, or what they contemplated, at the time the contract was made, it is hard to accept that there is any good reason of principle or policy why a party should be prevented from seeking to protect its interests by a clause which anticipates what both parties intended, or contemplated, would occur even if they have not reached any binding agreement to bring about that occurrence.”

40.2   Accordingly, the courts have in the past considered that it is permissible to take into account that the employee might be promoted in assessing the reasonableness of the restriction:  Harcus Sinclair (above) at §§67-70.

40.3   In the present case, Mr Buck stated in his second affirmation (at §6):

“At the time BFAM was interviewing GM, I discussed with him future career prospects within BFAM. I told GM that there were good prospects of him being offered a permanent position. Whilst I made no promises, I also recall telling GM that depending on how matters developed, and on how he performed, that I thought, given his skill-set, that there might be a path for him to become CTO someday.”

I noted that the 1st defendant did not appear to dispute the above statements.

40.4   I considered that at the time of the First Offer Letter (i.e. 21 January 2009), it was within the intentions or contemplation of both the plaintiff and the 1st defendant that (1) the 1st defendant’s duties and responsibilities might change if there was a change of the nature of his employment from a non-permanent position to a permanent one, or if there was a promotion for him to become the CTO of the plaintiff, (2) the 1st defendant would need to develop products for and provide services to the plaintiff in the course of his employment (as expressly mentioned in the NCC), and (3) the 1st defendant would come across confidential information in the course of developing products for and providing services to the plaintiff and it was important to the plaintiff that the confidentiality of such information must be preserved.[2]

40.5   Accordingly, I did not consider it impermissible for the plaintiff to rely on the evidence relating to the products and services provided by the 1st defendant to the plaintiff, and the confidential information said to have been acquired by the 1st defendant, during the relevant period.

41.The second point advanced by the defendants was that the 1st defendant does not possess confidential information belonging to the plaintiff, that it is inherently improbable for the 1st defendant to have retained such information in his head, and that the plaintiff has not identified any legitimate interest protectable by the NCC.  In the course of advancing this contention, the defendants emphasised the 1st defendant’s evidence that he did not in fact access any of the confidential information relied upon by the plaintiff during his employment.  As is apparent from the above, such evidence was heavily disputed by the plaintiff.  The defendants also referred to the 1st defendant’s evidence that he had delivered up the plaintiff’s confidential information before he left the plaintiff’s employment pursuant to the delivery up clause of the contract.

42.I considered that the plaintiff has adduced sufficiently cogent evidence with particulars to identify the confidential information in respect of which (1) the plaintiff was privy to and accessed during the relevant period and (2) it can legitimately claim protection by way of the NCC.  Such evidence included (a) the business objectives, operational needs and trading strategies learned by the plaintiff in relation to how the plaintiff’s technology and tools could be developed or enhanced to support the plaintiff’s business, (b) the knowledge on how the plaintiff’s technology had been specifically secured and configured to cater for the business priorities and strategies of the plaintiff, (c) the source codes in relation to the bond marketing tool and the bonus calculation tool, (d) the information on the remuneration and compensation of the plaintiff’s employees.[3]

43.In this context, I had firmly borne in mind the distinction between an employer’s confidential information (such as trade secrets or information of a similar nature) on the one hand, and the skill, experience, know-how and general knowledge acquired by an employee as part of his job during his employment on the other.  The former is capable of protection, but the latter is not.  See FSS Travel & Leisure Systems Ltd v Johnson [1998] IRLR 382 at §§31-32 (Mummery LJ).  On the evidence available before the court, it seemed to me that the plaintiff has shown that the confidential information in question can fairly be regarded as a separate part of the 1st defendant’s stock of knowledge which a man of ordinary honesty and intelligence would recognise to be the property of the plaintiff: cf Printers & Finishers Ltd v Holloway [1965] 1 WLR 1 at 5A-C (Cross J).

44.I had also borne in mind the 1st defendant’s evidence regarding the delivery up of confidential information before he left the plaintiff’s employment.  The defendants submitted that the 1st defendant had delivered up the plaintiff’s confidential information pursuant to clause 73 of the plaintiff’s Standard Terms of Conditions of Employment.  However, it is clear from such a clause that the delivery up of confidential information could only take place if such information existed or was contained in a form that could physically be handed over to the plaintiff.  It would not include confidential information which had been retained by the 1st defendant in his memory, whether consciously or not.

45.The defendants argued that the confidential information in question would be complex and sophisticated, and relied on the 1st defendant’s evidence that he has no recollection of the confidential information that he had accessed.  Nonetheless, even though the 1st defendant may not remember every piece of confidential information precisely, it is not inconceivable that he may still have a general impression of the information.  Specifically, in the context of the confidential data that the 1st defendant had previously received for the bonus calculation tool, I also found Mr Buck’s unchallenged evidence fairly compelling when he said that the 1st defendant would still know the plaintiff’s compensation structures applicable to the calculation of profit and loss pools of the 4 portfolio managers and the traders in their teams and their approximate total compensation in broad terms even though he may not remember the exact figures (see §34.3 above).  Accordingly, on the available evidence, I was not persuaded by the defendant’s submissions that it is inherently improbable for the 1st defendant to have retained any confidential information in his head.

46.As is apparent from the summary of the evidence above, there are factual disputes between the plaintiff and the 1st defendant on whether the information in question is confidential which can enable the plaintiff to claim protection through the NCC, and the extent to which the 1st defendant may remember the confidential information in question.  It was obvious that the court could not resolve such disputes on the basis of the affidavit evidence filed by the parties.  Nonetheless, based on the evidence adduced and the submissions made by the parties for the purpose of the present interlocutory application, it seemed to me that the plaintiff had sufficiently demonstrated the NCC would protect its legitimate interests.

47.For the sake of completeness, it is right to mention that I had also considered the question of whether the 2nd defendant should be regarded as a competitor of the plaintiff.  The plaintiff had adduced evidence to suggest that the plaintiff and the 2nd defendant are competitors.  Mr Seth stated in his first affirmation that “[there] can be no doubt that BFAM and Segantii are in competition with one another, both in terms of capturing returns in the same investment markets and also in terms of attracting the limited amount of capital that high calibre global institutional investors allocate to Hong Kong headquartered hedge fund managers”.  Originally, when the 2nd defendant filed evidence to oppose the present injunction application, Mr Kurt Ersoy (the 2nd defendant’s Chief Executive Officer) in his affirmation said that businesses of the plaintiff and the 2nd defendant are “markedly different”.  However, no submissions (whether written or oral) were advanced on behalf of the 1st and 2nd defendants subsequently to suggest that the 2nd defendant should not be regarded as the plaintiff’s competitor.  Accordingly, for the purpose of this injunction application, I had treated the 2nd defendant as a competitor of the plaintiff.

C1b.  Whether the NCC goes no further than is reasonably necessary

48.The NCC only seeks to restrict the 1st defendant from being employed or engaged in the provision of products and services to a competitor of the plaintiff for a period of 6 months after the termination of employment with an express geographical limit in Hong Kong.  Mr Buck had explained in his first affirmation why the plaintiff chose a period of 6 months. Essentially, he explained that the life-cycles of trading strategies of a hedge fund manager would be around 6 months and a 6-month non-competition clause would mitigate the harm that would be caused by any disclosure of confidential acquired by an employee after leaving the plaintiff’s employment.

49.The defendants did not make any submissions on the duration or geographical limit of the NCC.  Instead, they submitted that because there are other post termination restrictions in the employment contract, the plaintiff would be sufficiently protected and the need for protection by the NCC would be diminished.  The defendants submitted that the following clauses in the employment contract are “eminently more appropriate to prevent disclosure or misuse of [the plaintiff’s] confidential information”.

49.1   a 6-month covenant (in clause 3 of Appendix B of the First Offer Letter) to restrict the 1st defendant from soliciting, assisting in soliciting, accepting, facilitating the acceptance of, or dealing with, the custom or business of the plaintiff’s clients or prospective clients (“the Non-Solicitation Clause”);

49.2   a 6-month covenant (in clauses 4 and 5 of Appendix B of the First Offer Letter) to restrict the 1st defendant from inducing, soliciting, enticing or procuring any employee to leave the plaintiff’s employment, or being involved in accepting into employment or otherwise engaging or using the services of any employee of the plaintiff (“the Non-Poaching Clauses”);

49.3   clause 43(b) of the plaintiff’s Standard Terms and Conditions of Employment which provides that “Confidential Information must not be (directly or indirectly) used or disclosed or made accessible to any person or firm, corporation or any other entity, including competitors and the public, except as your work at the Company may require and only on a need to know basis or with the prior written approval of an authorized senior officer of the Company or where disclosure is required by law.  This applies to the period of your employment and after the termination of your employment without limitation in time.” (“the Confidentiality Clause”)

49.4   clause 43(b) of the plaintiff’s Standard Terms and Conditions of Employment which provides that “[u]pon termination of your employment with the Company you are required to deliver to the Company all documents or other tangible forms which you have in your possession or control which contain or are derived from Confidential Information” (“the Delivery Up Clause”).

50.It was immediately apparent that the Non-Solicitation Clause and the Non-Poaching Clauses would not assist in preventing disclosure or misuse of the plaintiff’s confidential information.  As to the Delivery Up Clause, as mentioned above, it would not be applicable to the plaintiff’s confidential information that has been retained in the 1st defendant’s memory.

51.As far as the Confidentiality Clause is concerned, I did not consider that it would provide much comfort to the plaintiff for the protection of its confidential information.  

51.1   As a general proposition, a non-competition clause may be necessary to protect an employer’s confidential information even if there is a confidentiality clause in the employment contract.  This is because it is often difficult to prove whether the information is or is not confidential.  As Lord Denning MR said in Littlewoods Organisation Ltd v Harris [1977] 1 WLR 1472 at 1479B-C:

“But experience has shown that it is not satisfactory to have simply a covenant against disclosing confidential information. The reason is because it is so difficult to draw the line between information which is confidential and information which is not: and it is very difficult to prove a breach when the information is of such a character that a servant can carry it away in his head. The difficulties are such that the only practicable solution is to take a covenant from the servant by which he is not to go to work for a rival in trade. Such a covenant may well be held to be reasonable if limited to a short period.”

51.2   Similarly, in Harcus Sinclair (above), Lord Briggs, Lord Hamblen and Lord Burrows JJSC at §84(iv) said:

“… even if one were just protecting confidential information, a non-compete undertaking may be needed. This is because it is often difficult to prove what is and what is not confidential information and in particular, whether that information has been misused. A non-compete undertaking may be a useful means of ensuring that confidential information is protected without needed to prove, through protracted litigation, that the information has been misused …”

51.3   As mentioned above, at the time when the contract was entered into between the plaintiff and the 1st defendant, it was clearly contemplated that the 1st defendant would have accessed to confidential information.  In the circumstances of this case, it seemed reasonable to me for the NCC to be included in the contract (despite the Confidentiality Clause) in order to avoid any potential disagreement between the parties on what would be and what would not be confidential information upon the termination of the contract.

51.4   Indeed, as things turned out, there were serious disputes on whether the 1st defendant came across the information which the plaintiff claimed to be confidential and whether such information was confidential.  As mentioned above, the 1st defendant’s position was that he did not regard the information which he came across in the course of his employment during the relevant period in relation to the various technology and tools of the plaintiff was confidential (except the data associated with the bonus calculation tool).  If the 1st defendant did not regard a piece of information to be confidential, he would not regard himself to be bound by the Confidentiality Clause in relation to such information. 

51.5   Therefore, in the circumstances of the present case, it seemed to me that the NCC was reasonably necessary to protect the plaintiff’s confidential information, despite the existence of the Confidentiality Clause.  

52.Accordingly, on the basis of the evidence adduced and the submissions made by the parties, it seemed to me that the NCC goes no further than is reasonably necessary to protect the plaintiff’s legitimate interests.

C1d.  Conclusion

53.As mandated by the authorities, I had formed some assessment of the plaintiff’s prospects of success in its claim against the 1st defendant.  On the basis of the available evidence adduced and the submissions advanced by the parties, I was satisfied that the plaintiff had demonstrated that it has better prospects of success than the 1st defendant on whether the NCC would be enforceable: cf WPP Marketing Communications (HK) Ltd v O’Donnell (unreported, HCA 637/2013, 24 May 2013) at §11 (Recorder Shieh SC).

C2.    Prejudice to the Plaintiff if Interlocutory Injunction were not Granted

54.The plaintiff submitted that it would suffer irreparable damage if the 1st defendant was allowed to work for its competitor (the 2nd defendant) without regard to the NCC, and that it would be very difficult and costly to seek to quantify its loss in monetary terms. 

55.The defendants argued that the plaintiff was guilty of delay in seeking relief from the court (to obtain interim relief) and it therefore could not be heard to say that it would suffer irreparable damage.  In order to understand such an argument, it is necessary to set out some further details to the chronology of events.

55.1   On 7 June 2021, the 1st defendant told Mr Buck of the plaintiff that he (the 1st defendant) was advised that the NCC was unenforceable.  However, the plaintiff did not know that the 1st defendant had already started working for the 2nd defendant.

55.2   On 23 June 2021, the plaintiff still considered the 1st defendant to be bound by the NCC because the plaintiff made payment to the 1st defendant for the non-competition.

55.3   The plaintiff (through Mr Seth) only found out that the 1st defendant was already working for the 2nd defendant on 8 July 2021.

55.4   It then took the plaintiff some time to look for suitable lawyers who were not in a position of conflict.  On 27 July 2021, the plaintiff commenced proceedings herein against the defendants.  The inter partes summons for the present interlocutory injunction was also taken out on the same date.  It appeared that the summons was originally fixed for a hearing on 30 July 2021.  On 29 July 2021, by consent, that hearing was vacated and directions were given for the filing of evidence and the fixing of the substantive hearing.

56.Essentially, the crux of the defendants’ argument was that because the plaintiff forwent the opportunity to apply for an “interim interim injunction” at the originally-scheduled hearing on 30 July 2021, the plaintiff could be heard to say that it would suffer irreparable damage if no injunction were granted.

57.I did not consider this argument to be a sufficient response to the plaintiff’s contention that it would be very difficult and costly to seek to quantify its loss in monetary terms.  In the present application, the plaintiff sought protection of its confidential information.  What consequences might follow from the disclosure or misuse of the plaintiff’s confidential information would be an objective question and could not in my view depend on what the plaintiff in fact did after the taking of its injunction application.  The defendants’ argument arising out of the absence of any “interim interim injunction” might be more relevant to the utility of the injunction, which will be discussed below.

C3.    Prejudice to the Defendants if Interlocutory Injunction were Granted

58.There was no suggestion from the 1st defendant that his livelihood would be affected if the injunction were granted.  Moreover, the plaintiff had agreed to provide the usual understanding as to damages.  Insofar as the 1st defendant may suffer any harm (such as any loss or reduction in salary) as a result of the granting of the injunction, such harm would be compensable in monetary terms.  The plaintiff had demonstrated its means in its affidavit evidence and the 1st defendant did not suggest that the plaintiff would not be able to honour its undertaking. 

59.I also noted the confirmation from the plaintiff (through Mr Buck) that the plaintiff would pay the 1st defendant his base salary just before he left the plaintiff’s employment during the non-competition period if the injunction were granted.

60.The 2nd defendant claimed that the granting of the injunction would cause serious disruption to its business that could not be assessed in money terms.  The 2nd defendant stated that if the injunction were in place, its technology teams would become leaderless, its staff would suffer a loss of morale, and the building of IT platform in its offices outside Hong Kong would be undermined.  I noted that these claims were made in very general terms.

C4.    Other Discretionary Factors Relied Upon by the Defendants

61.The defendants also submitted because (1) it was too late for the injunction to be a meaningful remedy and (2) the plaintiff had delayed in seeking injunctive remedy, I should exercise my discretion to refuse the injunction application. 

62.On (1), the defendants argued that the 1st defendant had already been working for the 2nd defendant since 24 May 2021 and that any confidential information of the plaintiff would have already been leaked to the 2nd defendant.  It was therefore argued that the injunction would have served no utility in protecting the plaintiff.  I was not persuaded by these arguments.

62.1   It was common ground that at the time of the substantive hearing (6 September 2021), there was still about 8 weeks left before the NCC would expire.  The question for me was whether the granting of the injunction on 6 September 2021 would serve no practical purpose.

62.2   The plaintiff had adduced evidence (in §31 of Mr Buck’s 1st affirmation) to say that the knowledge the 1st defendant has in his head about the plaintiff’s business operations, technology infrastructure and trading strategies was such that it would take him a fairly significant amount of time to replicate at a competitor, and it would be necessary in many cases to build and adapt the technological infrastructure before trading strategies could be replicated.  This was not refuted by the 1st defendant in his affirmation (even though he specifically responded to other matters in §31 of Mr Buck’s 1st affirmation).  Therefore, the nature of the information that was said to be possessed by the 1st defendant is not necessarily such that damage would be immediately occasioned to the plaintiff once the information in question is divulged.

62.3   In support of their argument, the defendants also referred to the fact that the plaintiff did not seek an “interim interim injunction” at the end of July 2021 when it had an opportunity to do so.  The Court was not informed the reason as to why the plaintiff did not previously seek such a holding injunction. Nonetheless, there could have been a variety of different reasons for not taking such a procedural step and I did not think it was appropriate to speculate about or infer the reason(s). 

62.4   In these circumstances, I was not satisfied that the Court would be acting in vain when granting the injunction.

63.On (2), the defendants made a general argument to the effect that the plaintiff’s delay in seeking the injunction demonstrated that the plaintiff’s fear was not genuine.  I did not find any substance in this argument.

63.1   From the evidence, the plaintiff had explained (1) it only knew for certain on 8 July 2021 that the 1st defendant had started working for the 2nd defendant and (2) what happened between 8 July and 27 July 2021 when it issued the Writ and the injunction application.  I did not consider that the period of 19 days could properly described as delay on the part of the plaintiff.

63.2   In any event, I did not find there was sufficient basis for the defendants’ argument that the plaintiff’s fear that its confidential information would be divulged by the 1st defendant was not genuine.

D.      DISPOSITION

64.For the above reasons, having examined the available evidence and taking into account the matters relied upon by the parties, I considered that the granting of the injunction in favour of the plaintiff would carry the lowest risk of injustice and cause the least irremediable prejudice. 

65.At the end of the substantive hearing, I indicated to the parties that I would grant an injunction in favour of the plaintiff.  I enquired with the 1st defendant’s counsel to ascertain if the 1st defendant had any submissions to make on the terms of the injunction as appeared in the plaintiff’s inter partes summons.  After taking instructions, no submissions were made on the wording of injunction.  I then made an order in terms of paragraphs 1 and 2 of the plaintiff’s inter partes summons.

66.As to the costs between the plaintiff and the 1st defendant, it was accepted on behalf of the 1st defendant that the usual costs order where a plaintiff has successfully obtained an interlocutory injunction is “the plaintiff’s costs in the cause”.  The plaintiff sought such an order as against the 1st defendant and I granted it at the end of the substantive hearing. 

67.As to the costs between the plaintiff and the 2nd defendant, the plaintiff asked for the opportunity to deal with them on paper and I gave directions for the parties to file written submissions after the hearing.  Having considered the written submissions from the plaintiff and the 2nd defendant, I decline to make the usual costs order as mentioned in the previous paragraph as against the 2nd defendant.  My reasons are as follows.

67.1   As mentioned above, the plaintiff seeks from the 2nd defendant in the present proceedings an injunction to restrain it from procuring the 1st defendant’s breach of the NCC, or alternatively, damages for procuring the 1st defendant’s breach of contract. 

67.2   The plaintiff did not seek any injunction or other substantive orders against the 2nd defendant in the inter partes summons dated 27 July 2021.  Nonetheless, further directions were sought by the plaintiff in the summons (including expedited directions for the hearing of the summons and the trial of the action).  The summons was served on both the 1st and 2nd defendants.  The 2nd defendant would be affected by the expedited directions for the trial sought by the plaintiff and this was presumably why the summons was served on the 2nd defendant.

67.3   Nonetheless, the 2nd defendant filed an affirmation to oppose the plaintiff’s application for injunction against the 1st defendant.  In that affirmation, Mr Ersoy of the 2nd defendant dealt with (1) the differences between the plaintiff’s and the 2nd defendant’s businesses, (2) the circumstances under which the 1st defendant came to be employed by the 2nd defendant, (3) the 1st defendant’s role at the plaintiff, the plaintiff’s confidential information and the NCC, (4) the 1st defendant’s role at the 2nd defendant, (5) the plaintiff’s alleged delay in seeking the injunction, (6) the question of adequacy of damages, and (7) the potential impact of an injunction on the 2nd defendant’s business.  At the end of his affirmation, Mr Ersoy asked the Court to dismiss the plaintiff’s injunction application.

67.4   The plaintiff considered it necessary to respond to Mr Ersoy’s affirmation.  This was done by Mr Buck when he prepared his second affirmation. 

67.5   When the parties filed skeleton submissions before the substantive hearing, the 2nd defendant’s counsel filed a lengthy skeleton with 18 authorities to oppose the injunction application by making a wide range of submissions (including those which have been mentioned above).  In the course of his oral submission, counsel for the 2nd defendant made submissions beyond the question of prejudice to the 2nd defendant if the injunction were granted.

67.6   In its written submissions on costs, the plaintiff submitted that the 2nd defendant should pay half of the plaintiff’s costs occasioned by the inter partes summons to be taxed forthwith if not agreed.  The plaintiff contended whilst the 2nd defendant could have filed evidence only on the question of how it (the 2nd defendant) might be inconvenienced by the injunction, it was unjustified to mount a full-scale opposition to the plaintiff’s application on every front and to make submissions which should properly be made by the 1st defendant.  The conduct of the 2nd defendant, argued the plaintiff, had caused duplication of work and wastage of time and costs on the part of the plaintiff, and was contrary to the underlying objectives of the Rules of the High Court.

67.7   In reply, the 2nd defendant submitted that there is no legitimate basis for the court to depart from the traditional practice of awarding the plaintiff’s costs in the cause of the action.  The 2nd defendant contended that (1) it was entitled to separate legal representation and to make separate submissions, (2) the plaintiff’s costs have not been increased as a result of any duplication of work between the 1st and 2nd defendants, (3) its conduct was not contrary to the underlying objectives.

67.8   In my view, there is force in the plaintiff’s criticisms on the extent of the 2nd defendant’s involvement in the inter partes summons.  As a party who is named in the proceedings and a recipient of the inter partes summons, the 2nd defendant would be entitled to be heard on the inter partes summons.  However, the matters arising out of the inter partes summons on which a party should address must depend on how that party would be affected by the relief sought in the summons.  The plaintiff appears to accept that the 2nd defendant was entitled to file evidence on how the granting of the injunction would inconvenience the 2nd defendant (i.e. how the 2nd defendant might be prejudiced by the granting of the injunction).  The 2nd defendant would also be entitled to be heard on what expedited directions the plaintiff had wanted for the trial.  Nonetheless, the 2nd defendant considered it appropriate to participate in the inter partes summons by adducing evidence and making submissions which went far beyond the expedited directions for trial and the question of prejudice.  Much of the 2nd defendant’s submissions were in fact purportedly made on behalf of the 1st defendant in opposing the plaintiff’s injunction application (see paragraphs 38, 39, 41, 45, 49, 55 to 57 and 61 to 63 above).

67.9   As a result of the stance taken by the 2nd defendant, the plaintiff would have had to spend additional time (and thereby incurring additional costs) in considering and dealing with (1) the allegations made in Mr Ersoy’s affirmation filed on behalf of the 2nd defendant which are unrelated to the 2nd defendant’s prejudice and (2) the lengthy written submissions filed on behalf of the 2nd defendant’s counsel which should have been (and was in fact) made by the 1st defendant.  It is self-evident that adducing unnecessary evidence and/or making duplicative submissions are the antithesis of promoting reasonable proportion and procedural economy in the conduct of proceedings, or ensuring fairness between the parties.  It seems to me that the additional costs incurred by the plaintiff should be payable by the 2nd defendant to the plaintiff in any event.  I do not believe that this position would change even if the 2nd defendant were to be successful in resisting the claim by the plaintiff after the trial.

67.10   In these circumstances, I make an order that (1) 15% of the costs of and occasioned by the inter partes summons be payable by the 2nd defendant to the plaintiff to be taxed forthwith if not agreed, and (2) the remaining 85% of the costs of and occasioned by the inter partes summons be to the plaintiff in the cause to be taxed if not agreed.

Ms Frances Lok, instructed by Hugill & Ip, for the plaintiff

Mr Byron Chiu, instructed by Stephenson Harwood, for the 1st defendant

Mr Jason Yu, instructed by Linklaters, for the 2nd defendant