Hong Kong Vending System Company Ltd v. Lui Kin Ming and Another

DCCJ 5064/2022

[2023] HKDC 1175

IN THE DISTRICT COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

CIVIL ACTION NO 5064 OF 2022

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BETWEEN

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DECISION

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1.By a summons dated 27 February 2023 (“1^st Summons”), the 1^st and 2^nd defendants seek for an order that the Statement of Claim in the present proceedings be struck out and the plaintiff’s claim be dismissed, or alternatively paragraphs 14 to 29 and items (1) to (5) of the prayers for relief (or parts thereof) of the Statement of Claim (“Impugned Paragraphs”) be struck out on the grounds that:

(a) The Statement of Claim or the Impugned Paragraphs disclose no reasonable cause of action; or

(b) The Statement of Claim or the Impugned Paragraphs fall under the exclusive jurisdiction of the Labour Tribunal and constitute an abuse of the process of the court.

2.On 11 May 2023, without leave of the court, the plaintiff filed the Amended Statement of Claim which contained extensive amendments to the original Statement of Claim. The relevant amendments will be detailed below.

3.On 30 May 2023, the 1^st and 2^nd defendants filed another summons (“2^nd Summons”) to apply for orders which are substantively the same as the 1^st Summons save that the subject of such orders was changed to the Amended Statement of Claim. The defendants also seek an order under Order 3 rule 5 as well as Order 20 rule 4 of the Rules of District Court (“RDC”), that time for the 1^st and 2^nd defendants to apply for an order to disallow the amendments to the Statement of Claim be extended, and the amendments to the Statement of Claim be disallowed. Having canvassed the scope of the latter part of the 2^nd Summons with Mr. Nicholas Oh, Counsel for the defendants, I am of the view that it stands or fall together with the application for an order for striking-out the Amended Statement of Claim.

4.In both the 1^st and 2^nd Summonses, the defendants seek a further order to, if necessary, extend the time for filing the defence (and counterclaim if so advised) to 28 days after the disposal of the said summonses.

5.Also, the defendants have not withdrawn the 1^st Summons notwithstanding the filing of the Amended Statement of Claim. Both the 1^st and 2^nd Summonses remain to be dealt with.

6.For the purpose of disposing of the 1^st and 2^nd Summonses, the material issues that are to be dealt with are:

(a) Whether the Statement of Claim, the Amended Statement of Claim, or the Impugned Paragraphs (both the original versions and as amended) disclose any reasonable cause(s) of action;

(b) Whether the plaintiff’s claim against the defendants (both in the Statement of Claim and the Amended Statement of Claim) falls under the exclusive jurisdiction of the Labour Tribunal; and

(c) Subject to the decisions to be made on the two issues above, what should be the consequential directions to be given.

7.I will deal with these three issues in the order as set out above.

The Pleaded Factual Assertions

8.As apparent from the Statement of Claim and the Amended Statement of Claim, the essence of the present dispute can be understood as a simple complaint by an ex-employer against ex-employees, who had (i) allegedly joined a competitor after they had resigned, (ii) solicited business from some of the “customers” of the ex-employer, and (iii) used the ex-employer’s trade secrets in the process.

9.I will set out the further details which are material to the present decision below.

10.The plaintiff, a limited company incorporated in Hong Kong, is and was at all material times in the business of supplying, developing, operating and restocking of its vending machines in Hong Kong which sell food, snacks and/or drinks. The plaintiff also claimed that those vending machines display videos and/or promotional messages for national education and/or workplace safety.

11.The plaintiff would cooperate with various “customers” for placing the vending machines at the latter’s designated premises. Some “customers” would receive a “rebate” from the sales generated from vending machines, whilst others would not. There was no temporal limit for a vast majority of “customers” for hosting the plaintiff’s vending machines. The arrangement would go on until either such “customers” or the plaintiff give notice for termination.

12.Properly understanding the pleaded case, those “customers” were in fact occupiers of certain premises who allowed the plaintiff to utilize their space for selling products through the plaintiff’s vending machines. They did not pay for the plaintiff’s products or services. Instead, some such “customers” received a “rebate”, which in fact was a share in the revenue generated by the vending machines. To avoid further confusion, I would refer those “customers” as “occupiers”.

13.The 1^st defendant was employed by the plaintiff as Sales Supervisor from 28 May 2020. His title was changed to Sales and Operations Manager subsequently, but his terms of employment remained the same. By a resignation notice dated 1 August 2022, the 1^st defendant resigned from the plaintiff on 31 August 2022.

14.The 2^nd defendant was employed by the plaintiff as Senior Sales Executive from 27 April 2020, but her terms of employment were only confirmed by an employment contract signed on 28 August 2022. Her title was changed to Sales Officer (Project) on around 27 August 2020 but, same as what happened to the 1^st defendant, such change of title did not entail any change in her employment terms. By a resignation notice dated 3 October 2022, the 2^nd defendant resigned from the plaintiff on 2 November 2022.

15.The material terms of the respective employments of the 1^st and 2^nd defendants were identical, namely they were entitled to a base monthly salary of HK$14,000, a guaranteed commission for the first 3 months of HK$12,000, and a transportation allowance of HK$4,000. After the first 3 months, the defendants would still be entitled to a commission but with no guaranteed amount. The material obligations of the defendants under their respective employment contracts with the plaintiff (“Employment Contracts”) will be set out in the analysis of the causes of actions below.

16.Since early October 2022, 7 occupiers decided to terminate their cooperation with the plaintiff. Another occupier requested to terminate its cooperation with the plaintiff, and only changed its mind after the plaintiff agreed to reduce the price of the products sold through the vending machines by 25%. Furthermore, 1 further occupier, which was a construction company hosting the plaintiff’s vending machines at two sites, (i) added 3 vending machines operated by the plaintiff’s competitor (a company named Fresh Up Group Limited (“Fresh Up”)) alongside the plaintiff’s 6 vending machines, and (ii) ceased to host a vending machine of the plaintiff at another site on 18 November 2022. It is, however, noted that the plaintiff makes no assertion of any breach of contract against any of the 9 occupiers.

17.It was alleged by the plaintiff that the main contact points of those 9 occupiers were the 1^st defendant “and/or” the 2^nd defendant “at all material times”. Such plea is ambiguous as to:

(a) Whether both the defendants were the plaintiff’s main contact points with all of those 9 occupiers, or each of them were responsible for some of the 9 occupiers; and

(b) When exactly did each of the defendants start and cease to be the plaintiff’s contact point for each of the 9 occupiers.

18.It was further alleged by the plaintiff that the investigation and site visits conducted by its staff had resulted in the following discoveries:

(a) The 9 occupiers had replaced the plaintiff’s vending machines with the same number of Fresh Up’s vending machines. Such plea, however, is contradictory to the plaintiff’s own pleaded case (at paragraphs 9 to 10 of the Amended Statement of Claim) that 1 occupier changed its mind after the plaintiff had given a discount of 25% for the products sold at the vending machines and 1 occupier only added 3 Fresh Up vending machines alongside 6 of the plaintiff’s vending machines.

(b) 1 of the 9 occupiers complained that the plaintiff failed to restock the vending machines despite the former’s various requests for doing so, whilst the plaintiff alleged that it had not received those requests for restocking. It was further alleged that the 1^st defendant had deliberately withheld such requests. Such occupier had been hosting the plaintiff’s vending machines since 2017 and its termination of such cooperation could not have been a coincidence.

(c) Various occupiers, including 1 occupier which actually terminated cooperation with the plaintiff, informed the staff of the plaintiff that the 1^st defendant had reached out to them “recently” (relative to the date of the filing of the original Statement of Claim, namely 21 December 2022) and had placed Fresh Up’s vending machines at their premises.

19.The following assertions are key to its claim against the defendants:

(a) The termination of the cooperation with the plaintiff and the sudden use of Fresh Up’s vending machines en masse within two months could not have been a coincidence. Pending discovery and/or further interrogatories, the inference is that both defendants lured, sabotaged, solicited, negotiated or liaised with those occupiers to terminate their cooperation with the plaintiff.

(b) Both defendants had taken up employment and/or agency/‌consultancy/‌financial arrangement with Fresh Up.

Causes of Action

20.Based on the simple factual assertions summarized above, the plaintiff has however come up with a labyrinth of causes of action. Some of the causes of action cross-referred to pleaded facts in support of another cause of action. For the purpose of the present decision, it is best to analyze each of the pleaded causes of action based on the alleged breaches of duties or tortious acts, the gist which can be summarized as follows:

(a) The defendants took preparatory steps to compete with or diverge business from the plaintiff and/or solicited the occupiers away from the plaintiff, and/or made secret profits, during the course of their respective employments with the plaintiff, and therefore the defendants were in breach of (i) the implied duty of trust and confidence and fidelity under the Employment Contracts, and (ii) their fiduciary duties owed to the plaintiff (“Duties of Loyalty”);

(b) Upon joining Fresh Up, the defendants were in breach of clause 6.2 of the Employment Contract which provided that, during the employment with the plaintiff and within 12 months after the end of the said employments, the defendants would not in any way seek or accept employment in any capacity or position with any company or individual that had direct or indirect competition with the plaintiff (“Non-compete Clause”);

(c) The defendants solicited business from the 9 occupiers and were therefore in breach of clause 6.4.1 of the Employment Contract which provided that, within 12 months after the termination of employment with the plaintiff, the defendants should not solicit business or carry out business activities with any individual, company or business organization which had business dealings with the plaintiff during the defendants’ respective employments with the plaintiff (“Non-solicitation Clause”);

(d) The defendants referred each other to join Fresh Up and therefore was in breach of clause 6.4.2 of the Employment Contract which provided that, within 12 months after the termination of the employment with the plaintiff, the defendants should not hire or provide employment to any employee who was employed by the plaintiff within 12 months prior to the termination of the employment relationship (“Non-hiring Clause”, together with the Non-compete Clause and the Non-solicitation Clause, “Restrictive Covenants”);

(e) The defendants had disclosed confidential information of the plaintiff to Fresh Up and therefore were in breach of (i) clause 7.2 of the Employment Contract which provided for the defendants obligations not to disclose the plaintiff’s confidential information to third parties, not to use the confidential information for their personal benefits (including the benefits of relatives and friends), and to return all confidential information the plaintiff as soon as the employments were terminated, (ii) the implied duty of trust and confidence and fidelity under the Employment Contract, (iii) the common law duty of confidence to the same effect as clause 7.2, and (iv) their fiduciary duties (“Duties of Confidence”);

(f) The defendants entered into an express or tacit agreement or understanding (and/or with other persons unknown to the plaintiff) to carry out all acts constituting the other causes of action as summarized above and they acted with the predominant purpose of injuring the business of the plaintiff, or alternatively, the defendants acted with a common intent to injure the plaintiff by unlawful means (by acting in breach of contract, duty of fidelity, fiduciary duty, and/or interfere with the plaintiff’s trade and business by unlawful means) (“Tort of Conspiracy”);

(g) The defendants knowingly caused loss to the plaintiff by unlawful means (by acting in breach of contract, duty of fidelity, fiduciary duty, and/or a conspiracy to injure the plaintiff) (“Causing Loss by Unlawful Means”).

Applicable Principles

21.The law in relation to an application for striking out on the basis of disclosing no reasonable cause of action is well settled.

22.Striking out is a drastic remedy, and the court will not strike out a claim unless the court is satisfied that the legal basis of the claim is unarguable or almost incontestably bad. Where legal viability of the cause of action is sensitive to the facts, an order to strike out should not be made. It is only in plain and obvious cases that the court should exercise its summary powers to strike out the pleading under the relevant rule. A reasonable cause of action means a cause of action with some chance of success when only the allegations in the pleading are considered. Ordinarily, the court should not decide difficult points of law in striking out proceedings: Re Lui Kwan Cheung (Deceased) [2020] HKCFI 1243, §§13-15.

23.On the other hand, a party should know his case and be in a position to identify the relevant evidence when he starts a claim. It is an abuse of the court’s process to start a case without a solid foundation hoping that something will turn up in the course of the proceedings, for example at the stage of discovery or on cross-examination, or to stop time from running: The New China Hong Kong Group Ltd (in Creditors’ Voluntary Liquidation) v Ng Kwai Kai, unreported, HCA 519/2010, 11 February 2011, §70.

24.Also, the elementary rule of pleading is that every pleading must contain only a statement of the material facts on which the party pleading relies upon, and not the evidence by which they are to be proved. The pleading of inferences provided the source of the material facts, that is, how a party is going to prove his case, and therefore it is evidential in nature and liable to be struck out: Total Lubricants Hong Kong Limited & Ors v Christophe de La Cropte de Chanterac & Ors, unreported, HCA 1694/2008, 15 December 2009, at §18.

Analysis of the Pleaded Causes of Action

(i) Breach of Duties of Loyalty

25.The pleaded breach of Duties of Loyalty was based on the implied duty of trust and confidence and fidelity under the Employment Contracts, and fiduciary duties.

26.The defendants did not dispute that they owed the implied duty of trust and confidence and fidelity under the Employment Contracts, but Mr Oh argued that even the pleaded facts are taken to their highest, one would not arrive at the conclusion that the defendants were fiduciaries to the plaintiff.

27.An employment relationship, in itself, does not attach fiduciary duties. However, an employment relationship, in itself, does not preclude fiduciary duties either. Much depends on the employee’s role and functions. A senior employee/manager has been held to owe fiduciary duties to his employer in carrying out the specific duties to which he was assigned: Leader Screws Manufacturing Company Limited [2021] HKCFI 141, §§46-48.

28.In paragraph 18 of the original Statement of Claim, it was only alleged that the 1^st defendant, who allegedly held a managerial position/‌senior position at the plaintiff prior to his resignation, owed a fiduciary duty. In the Amended Statement of Claim, paragraph 18 was expanded:

(a) To include further particulars of the roles of the 1^st defendant in support of the existence of a fiduciary duty; and

(b) To include the assertion that 2^nd defendant was also a fiduciary on the same bases as those for the 1^st defendant.

29.The law is clear that whether an employee also owes fiduciary duties to the employer depends on his/her actual role and functions. It is a fact sensitive question. I therefore do not consider it appropriate to draw any conclusion on this issue simply based on the pleading itself. Nor do I find a comparison between the pleaded facts and the facts of (i) Leader Screws (above) or (ii) the authorities cited therein, as Mr Oh argued, sufficient for the purpose of striking out.

30.Nevertheless, those duties that are relevant to the pleaded Duties of Loyalties ceased to exist when (i) the Employment Contracts were terminated, and (ii) the defendants ceased to be fiduciaries upon their respective resignations. This is consistent with the focus of the pleaded breach of Duties of Loyalty, namely the pleaded conducts of the defendants before they resigned.

31.Unlike the case against the 1^st defendant where it was asserted that he withheld an occupier’s requests to restock on purpose (see paragraphs 13.2 and 13.3), there were no pleaded acts of the 2^nd defendant, whether originally or as amended, that could be considered as preparatory steps to compete with or diverge business from the plaintiff and/or solicit the occupiers away from the plaintiff, and/or to make a secret profit, during the course of her employment with the plaintiff (see paragraph 19.7).

32.The 2^nd defendant’s resignation notice was dated 3 October 2022, and for the present purpose, I assume it was also the date when the said notice was tendered. It coincided with the beginning of the troubles with the 9 occupiers. She was said to have joined Fresh Up at an unspecified date. The only pleaded basis for the 2^nd defendant’s pleaded breach of Duties of Loyalty was:

“19.4 As to the remaining [occupiers], it is averred that the termination of contractual relationship/‌arrangement, and the threat to terminate [the plaintiff’s] services, and the sudden use of competing vending machines by the [occupiers] en masse within 2 months could not have been a coincidence. Pending discovery and/or further interrogatories, The the inference is that [the defendants] lured, sabotaged, solicited, negotiated or liaised with, inter alia, the [occupiers] to terminate their contractual relationship/‌arrangement with [the plaintiff] during their respective employment…”

33.I do not consider paragraph 19.4 a valid basis in support of the plaintiff’s case against the 2^nd defendant:

(a) The phrase “could not have been a coincidence” is not a factual assertion, but an argument.

(b) As held in Total Lubricants, the pleading of an “inference” is evidential in nature rather than a material fact.

(c) The phrase “[p]ending discovery and/or further interrogatories” is an open admission that the plaintiff could not plead any matters further. As held in The New China Hong Kong Group (supra), one cannot simply make an assertion admittedly without basis and hope that something may come up during discovery or interrogatories. To conduct any proceedings in such manner is an abuse of process, which falls foul of a number of requirements under the modern rules of litigation, such as the requirement of a statement of truth under O 41A of the RDC that the facts stated in a pleading must be believed (with reasonable basis) to be true. Further, the long-standing rule against fishing in discovery reflects the same spirit of the law.

34.Without more, the assertion that the 2^nd defendant did start to take steps to solicit the occupiers before her resignation on 2 November 2022 as pleaded is incontestably bad. The coincidence in time is neither here nor there. None of the other pleaded facts can correlate the occupiers moving to Fresh Up and the 2^nd defendant’s purported acts of tendering her resignation. This is particularly so when the Plaintiff has pleaded that the 1^st defendant had already joined Fresh Up before the occupiers started to switch and he had taken steps to solicit the occupiers.

35.I therefore consider that whether in its original claim or as amended, the plaintiff has not shown a reasonable cause of action against the 2^nd defendant insofar as the alleged breach of Duties of Loyalty is concerned.

36.The references to the 2^nd defendant in paragraphs 19.7 of the Amended Statement of Claim should be struck out.

(ii) Breach of Restrictive Covenants

37.The Restrictive Covenants are pleaded as express terms in the Employment Contracts.

38.It is well established that an employer is entitled to make use of a restrictive covenant to protect his interests in his trade secrets and in his business connections. However, the restrictive covenant, to be valid, must afford no more than adequate protection to the party in whose favour it is imposed. It must be reasonable not only in reference to the interests of the parties concerned, it must also be reasonable in reference to the interests of the public. The onus of proving the reasonableness of the restriction rests on the party who seeks to enforce the restriction. For the purpose of pleadings, the enforceability of a restrictive covenant should be expressly pleaded with full particulars including all facts and matters relied upon to assert that the covenant is enforceable. A bare assertion that the clause is enforceable is not enough. The interests to be relied upon and how such interests reasonably warrant a protection as wide as that embodied in the contract must be pleaded: Natuzzi SPA v De Coro Limited, unreported, HCA 4166/2003, 16 June 2006, per Johnson Lam J (as he then was) at §44 and 63.

39.In the original Statement of Claim, there was complete silence on the enforceability of the Restrictive Covenants. Therefore, the pleaded breach of the Restrictive Covenants disclosed no reasonable cause of action as a crucial element was not pleaded.

40.The plaintiff has, however, sought to remedy such a flaw by adding paragraph 15A (which altogether contained 18 sub and sub-sub paragraphs) into the Amended Statement of Claim, which sets out a host of justifications for the reasonableness of the Restrictive Covenants.

41.Without commenting on the strength of the particulars pleaded in paragraph 15A of the Amended Statement of Claim, I find that justifications for the reasonableness of the Restrictive Covenants are fact sensitive in nature, and I do not find the Restrictive Covenants plainly and obviously unenforceable on the face of the pleading. Incidentally, the two authorities mainly relied upon by Mr Oh in his submissions, namely Natuzzi SPA (supra) and Degreeasisa Ltd t/a Hong Kong Institute of Continuing Education v Paules Lee Siu Yuk & Ors, unreported, HCA 1686/2006, 25 June 2010, at §§32-34, were both trial judgments.

42.Nevertheless, I do not see a reasonable cause of action against the 2^nd defendant in respect of the purported breach of the Non-solicitation Clause and the Non-hiring Clause. Same as the problem in relation to the pleaded breach of Duties of Loyalty, the plaintiff has not pleaded any acts against the 2^nd defendant in support of the assertion that she did solicit the occupiers after she had joined Fresh Up (hence the breach of the Non-solicitation Clause), or she was the person who caused the 1^st defendant to join Fresh Up (hence the breach of the Non-hiring Clause).

43.Similarly, I do not see any reasonable cause of action against the 1^st defendant in respect of the alleged breach of the Non-hiring clause. Paragraph 19.6 is totally embarrassing. One cannot tell from paragraph 19.6 whether the plaintiff suggested that it was the 1^st defendant who solicited/‌referred the 2^nd defendant to join Fresh Up, or the reverse was true. Such ambiguity is obviously owing to the speculative nature of the allegation.

44.As a result:

(a) Paragraph 19.6 is struck out;

(b) The references to 2^nd defendant in paragraphs 13.6 and 19.5 of the Amended Statement of Claim be struck out.

(iii) Breach of Duties of Confidence

45.In the original Statement of Claim, the plea for the breach of Duties of Confidence was sketchy, with fleeting references to the crucial elements such as the substance of the “Confidential Information”, defined to include client list, price information and/or sales/‌revenue record in the original paragraph 19.8.

46.In the Amended Statement of Claim, sub-paragraphs 22.1 to 22.10 were inserted to expand on the definition of Confidential Information to include the location of the plaintiff’s vending machines in areas inaccessible to the general public (see paragraph 22.2).

47.Contrary to the arguments of the defendants, the plaintiff has pleaded with sufficient specificity as to the substance of the Confidential Information that the defendants had allegedly misappropriated and misused for the purpose of setting out its case.

48.I also find that the plaintiff has pleaded a prima facie case of (i) the defendants owing duties of confidence to the plaintiff, (ii) the defendants had access to the Confidential Information, and (iii) the Confidential Information was of confidential nature which attracts the operation of the relevant legal principles.

49.As to the plea of (i) continuous possession of the Confidential Information after resignation, and (ii) the use of it for the purpose of operating Fresh Up’s business:

(a) The plaintiff has pleaded sufficiently against the 1^st defendant. The use of the Confidential Information, on the face of the Amended Statement of Claim, goes hand in hand with the allegation of soliciting the occupiers which used to cooperate with the plaintiff.

(b) Nevertheless, for the same reason in respect of striking out the pleaded breach of Duties of Loyalty, the Non-solicitation Clause and the Non-hiring Clause, there is no pleaded basis to support the alleged breach of the Duties of Confidence by the 2^nd defendant. None of the matters pleaded can sustain any allegations that the 2^nd defendant remained in possession of the Confidential Information in any tangible form (as opposed to her own memory) and had used such information for Fresh Up.

50.The references to the 2^nd defendant in paragraphs 19.8 and 22 to 23 of the Amended Statement of Claim should be struck out.

(iv) Conspiracy to Injure

51.For the same reasons in respect of striking out (i) the pleaded breaches of Duties of Loyalty, the Non-solicitation Clause, the Non-hiring Clause and the Duties of Confidence against the 2^nd defendant, as well as (ii) the pleaded breach of the Non-hiring Clause against the 1^st defendant, there is no pleaded basis to support a purported agreement between the 1^st and 2^nd defendants to cause any injury to the plaintiff. The pleaded Conspiracy to Injure in paragraphs 25 to 26A and 29.5 must be struck out.

(v) Causing Loss by Unlawful Means

52.The pleading of the tort of Causing Loss by Unlawful Means is liable to be struck out in total for the following reasons.

53.In law, the key conditions of liability for causing loss by unlawful means in situations where three parties are involved are (i) an intention to cause loss to the plaintiff, (ii) use of “unlawful means” against a third party, and (iii) interference with that third party’s freedom to deal with the plaintiff: see Clerk & Lindsell on Torts, 23^rd ed, at §23-78.

54.In the plaintiff’s claim, there is no allegation that (i) the 9 occupiers were in breach of any contract with the plaintiff, (ii) the defendants had committed any unlawful acts against any of those of 9 occupiers, or (iii) the defendants had interfered with the 9 occupiers’ freedom to deal with the plaintiff.

55.In the end, the unlawful means that were relied on by the plaintiff were “acting in breach of contract, duty of fidelity, fiduciary duty and/or conspiracy to injure” (see paragraph 27), which are all separate and independent causes of action in their own right. The tort of causing loss by unlawful means does not overlap with those other causes of action in the present dispute. The key elements, namely (i) use of “unlawful means” against a third party (ie the 9 occupiers) and (ii) interference with the 9 occupiers’ freedom to deal with the plaintiff, were missing.

56.The plea for the tort of Causing Loss by Unlawful Means as pleaded in paragraphs 27 to 28A should therefore be struck out.

(vi) The Reliefs

57.Given my rulings above, relief (1B) should be struck out as the causes of action for the Conspiracy to Injure and the tort of Causing Loss by Unlawful Means are struck out. Also, references to the 2^nd defendant in reliefs (3), (4), and (5) should be struck out.

58.Under relief (1A), the plaintiff seeks a declaration that both defendants acted in breach of contract, fiduciary and/or fidelity duties and/or confidence. I am of the view that it should be struck out for the following reasons (which would also serve as additional reasons to strike out relief (1B)):

(a) The power to grant declaratory relief is derived from the inherent jurisdiction of the court. If a declaration would not serve any practical purpose, this will weigh heavily in the scales against the grant of the declaratory relief. A practical purpose means that the declaration should solve a real difficulty with which the claimant is faced, but there is no requirement that a claimant must be in a position to demonstrate that he will benefit in a material or tangible way as a result of the declaration: Equis (Hong Kong) Limited v George Allen Cowan [2021] HKCFI 768, §§37-40.

(b) Order 1A rule 2(1) of the RDC mandates the court to give effect to the underlying objectives as set out in rule 1, which are well-known objectives seeking to enhance fairness, cost-effectiveness and proportionality in the disposal of the proceedings.

(c) The claim for declarations under reliefs (1A) & (1B) were not included in the original Statement of Claim, but were added after the defendants took out the 1^st Summons for an order to strike out the original pleaded claim on the basis that, inter alia, the claim should fall within the exclusive jurisdiction of the Labour Tribunal.

(d) It is in fact highly unusual for declarations of liabilities of such nature and in similar disputes to be sought, let alone granted. Those declarations apparently serve no purpose other than as a justification for keeping the present dispute out of the jurisdiction of the Labour Tribunal. Nor has Counsel for the plaintiff, Ms Connie Lee and Mr Joshua Yeung, offered any justification(s) otherwise.

(e) As such, whilst I am conscious of the discretionary nature of the court’s power to grant a declaration (as explained in Equis (supra)), I see no practical purpose for reliefs (1A) & (1B) or how the grant of them would be in line with any of the objectives under Order 1A rule 1 of the RDC.

The Present Proceedings and the Exclusive Jurisdiction of the Labour Tribunal

59.As a result of my rulings above, the remaining causes of action against the 1^st defendant are:

(a) The breach of the Non-compete Clause;

(b) The breach of the Non-solicitation Clause;

(c) The breach of fiduciary duties in respect of the pre-resignation steps; and

(d) The breach of the Duties of Confidence.

60.The only remaining cause of action against the 2^nd defendant is the breach of the Non-compete Clause.

61.I am not satisfied that the remaining claims against the 1^st defendant falls within the exclusive jurisdiction of the Labour Tribunal. Given the expiry date of the Restrictive Covenants, namely 31 August 2023, any claim for a permanent injunction to enforce any of the Restrictive Covenants will not be granted. However, the claim for injunctive relief in relation to the breach of Duties of Confidence still stands. Whilst the plaintiff has not taken out any application for an interlocutory injunction to protect its position vis-à-vis the alleged breach of Duties of Confidence, whether a permanent injunction will be granted at the end of the trial is a question best answered at the end of the trial if the 1^st defendant is to be found liable.

62.I have considered Mr Oh’s argument that the claim for injunctive reliefs was only “window dressing” to keep the present dispute out of the jurisdiction of the Labour Tribunal. I am of the view that the material question for the purpose of the defendants’ striking-out application is whether the remaining claim against the defendants falls within the exclusive jurisdiction of the Labour Tribunal, not whether the Labour Tribunal is the more suitable forum.

63.On the other hand, the remaining pleaded claim against the 2^nd defendant for the breach of the Non-compete Clause is only monetary in nature, and therefore it falls within the exclusive jurisdiction of the Labour Tribunal under section 7 and the Schedule of the Labour Tribunal Ordinance, Cap 25. The claim against the 2^nd defendant for the breach of the Non-compete Clause should therefore be struck out as an abuse of process.

Disposition

64.For the reasons above, I make the following orders:

(a) The plaintiff’s claim herein against the 2^nd defendant be struck out;

(b) Paragraphs 13.6, 19.4, 19.6, 25 to 28A, 29.5, items (1A) and (1B) of the prayers of relief of the Amended Statement of Claim be struck out;

(c) The plaintiff shall file and serve a re-amended Statement of Claim incorporating the rulings above within 21 days from the date of this Decision; and

(d) Time for the 1^st defendant to file and serve his Defence (and Counterclaim, if so advised) be extended to 28 days from the date of the service of the re-amended Statement of Claim.

65.Insofar as the costs of the 1^st and 2^nd Summonses are concerned, I have considered the different extents of successes of all parties, and make the following cost order nisi:

(a) The 1^st defendant be entitled to half of his costs of and occasioned to the 1^st and 2^nd Summonses;

(b) The 2^nd defendant be entitled to the entirety of her costs of and occasioned to the 1^st and 2^nd Summonses; and

(c) Such costs to be taxed if not agreed with certificate for Counsel.

Ms Connie Lee and Mr Joshua Yeung, instructed by Charles Chu & Kenneth Sit, for the plaintiff

Mr Nicholas Oh, instructed by W K To & Co, for the defendants