Hua Min Tourism Reservation Co Ltd v. Yuen Ka Mi

HCA 992/2006

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NO. 992 OF 2006

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BETWEEN

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Before : Deputy High Court Judge To in Chambers (Open to Public)

Date of Hearing : 6 February 2007

Date of Decision : 6 February 2007

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D E C I S I O N

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Background

1.The Plaintiff operates a travel business.  The Defendant was its former product supervisor.  For the purpose of this application, it is not disputed that the Defendant had entered into a restrictive covenant with the Plaintiff prior to her change to her position as product supervisor and that the restrictive covenant was incorporated into her new employment contract.  The restraint was for a period of one year and covered Hong Kong and Mainland China.

2.It is common ground that the Plaintiff unilaterally reduced the Defendant’s year end bonus on 26 January 2006 and the Defendant immediately intimated that she would resign, which she did by giving notice on 27 January 2006 to resign with effect from 15 February 2006.  She then joined Travel Asia (HK) Limited, another travel agent in the same industry.

3.The Plaintiff complains that the Defendant took away confidential information stored in the Plaintiff’s computer and used the information for the benefit of the Defendant’s new employer.  At an inter parte hearing on 12 May 2006, which the Defendant did not appear, the Plaintiff obtained an interlocutory injunction order from Burrell J restraining the Defendant until trial or further order from misusing the confidential information.  The Defendant now seeks to discharge or vary that order. 

4.The confidential information, which the Plaintiff seeks to protect, is information about hoteliers’ names, contact particulars of their sales representatives and bottom line prices which were obtained through the effort and costs of the Plaintiff.  The Plaintiff claims it has a proprietary interest in respect of the information.  The Plaintiff argues that with the knowledge of the hoteliers’ bottom line prices, the competitor was able to obtain favourable bookings direct with the hotels without going through the Plaintiff.  Hence, the Plaintiff suffered loss in business.

5.The Defendant argues that the information about the hoteliers’ names and contact particulars are in the public domain and accessible through the hotel suppliers’ website.  The Plaintiff argues that the name of the sales representative and the bottom line prices are not so available and unless restrained the Defendant would be able to use the confidential information as a platform to contact sales representatives of hoteliers to the detriment of the Plaintiff.  

6.Given the information technology these days, it is unrealistic to argue that the names and contact particulars of hoteliers are not in the public domain.  It is also unrealistic to argue that any travel agent could not get in touch with responsible sales representatives of the hoteliers or that the hoteliers would not do business with any travel agent who is unable to give the name of the sales representative.  As the incident involving Hotel Equatorial shows, the same Miss Rebecca Fok of Hotel Equatorial contacted both the Plaintiff and Travel Asia (HK) Limited back in 2004.  Price is of course a piece of confidential information.  But according to the Plaintiff, price changes frequently, especially on occasions of special promotions and in any event within a year.

7.In an application of this nature, it is impossible for me to make any finding of facts in dispute.  I would assume in favour of the Plaintiff that the price information it seeks to protect is confidential information within the meaning of Faccenda Chicken Ltd v Fowler [1987] Ch 117 and the Plaintiff has a proprietary interest in the protection of that information.  I would assume that the restrictive covenant is not unreasonable in terms of time and scope.  I would also assume that the Plaintiff would suffer damage if such protection is not afforded.  In favour of the Defendant, I would assume that she had not taken away the information as was alleged against her and she would be driven out of work if the injunction is to continue.  Then I shall take out the American Cyanmid balance and determine where the balance of convenience lies.

8.In less than ten days, a year would have passed since the Defendant quit her employment.  The price information would almost be stale.  The restrictive covenant will no longer bite.  The hoteliers’ contact particulars are available in the public domain.  Even if the Defendant had the price information, most of the information is out of date now and could be of limited usefulness.  The Defendant’s skill in how to contact those hoteliers and bargain for favourable price acquired during her employment with the Plaintiff has become part of her stock of knowledge which she is free to use in favour of her new employer.  As the price information is mostly outdated now or will be outdated in less than ten days, it is unlikely that the Plaintiff would suffer any or any serious damage if the injunction order is discharged.  Applying the American Cyanamid test, I find that the balance lies heavily in favour of discharging that part of the injunction order pertaining to the confidential information.

9.There is still the question of the restrictive covenant which will expire in about ten days.  The Plaintiff complains that the Defendant did not give adequate notice of her resignation and the Defendant says that she was constructively dismissed.  The circumstances leading to the Defendant’s resignation are not in dispute.  I think it is almost incontrovertible that by reason of the unilateral reduction in bonus, the Defendant was entitled to treat herself as constructively dismissed, though that was not so stated in her letter of resignation.  Where an employee treats herself as having been constructively dismissed, she is entitled to quit forthwith or by giving adequate notice.  I should add that in case of constructive dismissal, any notice if given by the innocent party need not be adequate as he is entitled to quit without giving any notice at all: per Lord Denning in Western Escavating (ECC) Ltd v Sharp [1978] 1 CR 221at 226.  The Plaintiff’s complaint of inadequate notice is irrelevant.

10.While reserving the Plaintiff’s position on the issue of constructive dismissal, Mr Yip, counsel for the Plaintiff, concedes, and rightly so, that as a matter of law if an employer repudiates the contract of employment with his employee, the restrictive covenants in that contract of employment is repudiated as well and is not binding on the employee upon termination of the employment.  That being the law, the balance also lies in favour of discharging the injunction order pertaining to the restrictive covenant.

11.In the circumstances, I allow the Defendant’s application.  I discharge the injunction order granted by Burrell J with effect from 15 February 2007.  The reason for discharging the order with effect from that date is because by then all the price information which the Plaintiff sought to protect will be outdated and meaningless to the Defendant.  Of course, by that time, the Defendant shall also be released from her restrictive covenant with the Plaintiff.

Conclusion

12.The injunction order is discharged after a contested hearing.  It would be inappropriate to have the costs reserved or to order costs in the event.  In the circumstances, I order that the Defendant shall have costs of the application with certificate for counsel, to be taxed if not agreed.  The Defendant’s own costs to be taxed in accordance with Legal Aid Regulations.

Mr. Simon S M Yip, instructed by M/s Yu & Associates, for the Plaintiff

Mr. Godfrey Chun, instructed by M/s Lau & Chan, for the Defendant