Cheung Hoi Kwong v. Cheung Kee Garden Ltd

HCMP000797/1979

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Coram: Zimmern, J.

Date of Judgment: 13th January, 1981.

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JUDGMENT

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1. The Plaintiff in this matter is a man who in his early days helped his father to sell flowers. He branched out on his own and started the business of selling and hiring potted plants and at Christmas, Easter, Chinese New Year seasonal flowers to offices, hotels, restaurants, department stores and such like establishments. He provided a follow up service to the plants rented out. He purchased most of the plants from wholesalers in the New Territories. He acquired a piece of land at Tai Po and a piece of land at Tin Hau Temple Road, the latter only under licence from the Crown at a nominal fee, terminable at short notice. His business was a minor success story though he suffered from ill health all his life.

2. In 1977 he was minded to migrate to the U.S.A. to join his two children there. He sold his business to the Defendants under a sale and purchase agreement dated 8th December 1977 for a total consecration of $2.6 millions. Under the agreement he agreed to work for the purchasers for a year and guaranteed the turnover and profits for that year as stipulated thereunder. At the end of the year the Defendants offered him another term of employment which he turned down. He left for the United States of America, did not like it and returned to Hong Kong. Under Clause 15 of the agreement the Plaintiff had covenanted as follows:

"The Vendor or his immediate family shall not at any time after the completion date without the consent in writing of the Purchaser directly or indirectly carry on or be concerned or be interested in the business of horticulturalists and gardeners or go into competition with the Purchaser within the Colony of Hong Kong either alone or jointly with or as director manager agent or servant or any other person firm or corporation."

3. After his return to Hong Kong he sought the consent of the Defendants to start a business on his own and was refused. He now seeks by originating summons for a declaration by this Court that Clause 15 is and was void and/or unenforceable.

4. Mr. Chan for the applicant has raised many arguments in this matter but I think the parties having agreed and rightly agreed that the issue of public policy has no relevance, the only question is whether the restraint under Clause 15 is wider than it is reasonably required for the protection of the business transferred. The Defendants had paid a high price for the goodwill of the business and in this type of business, I take the view that all parties knew that most of that goodwill was personal to the Plaintiff and that was why they were anxious to keep him on and if he was not prepared to be retained then to keep him out of competition. The restraint in this case as to time which is for the duration of his life and space which is within the Colony of Hong Kong was not in my view too wide. The reference to his immediate family is clearly separable. My sympathies are all for the Defendants but I am in no doubt that in respect of the type of businesses which the Plaintiff is restrained to carry on is by a long way wider than is reasonably required for the protection of the business transferred by the Plaintiff to the Defendants. Clause 15 uses the term "business of horticulturalists and gardeners". It is clear from the affidavit that the business transferred dealt with potted plants, seasonal flowers only. But that restraint the Plaintiff, indeed, is restrained from even dealing in vegetables, fruits, whether by way of cultivation or by the way of sale in the market and therefore far too wide reasonably necessary for the protection of the business transferred. I repeat that my sympathies are all for the Defendants but the Plaintiff will have the declaration sought with costs.

Representation:

Edward Chan (Woo Kwan Lee & Co.) for Plaintiff

G. Rodway (Philip K.H. Wong & Co.) for Defendant