August 11, 2022


Business Activity

High Court grants injunction and enforces six-month non-compete clause against former employee | Dentons

In the current decision BFAM Associates (Hong Kong) Ltd v. Gareth John Mills & Segantii Money Administration Minimal,1 the court granted an injunction to correctly restrain a previous worker from continuing to do the job for a competitor until finally the expiry of his 6-thirty day period non-compete restrictive covenant.

Mr Mills was used as a technological innovation consultant by BFAM, a organization that presents fund administration solutions. He specialised in application architecture and security, and was “instrumental in improving upon the engineering infrastructure utilised to execute BFAM’s buying and selling strategies”, in conditions of aiding to build investing tools to analyse marketplace selling prices and overseeing the making and progress of a cloud platform that hosted and analysed data across BFAM’s asset administration and financial commitment corporations. He also had obtain to hugely private details this kind of as BFAM’s trader and customer information as well as its effectiveness calculation device which calculated how BFAM’s earnings/loss polls ended up calculated and distributed, and how team bonuses had been awarded.

After approximately two many years of doing work for BFAM, Mr Mills resigned. He was reminded of his post-termination restrictive covenants which bundled a six-thirty day period non-compete clause that prevented him from performing for a competitor but, for this, BFAM also agreed to pay him his basic wages for the six-month period of time. Unbeknown to BFAM, 3 days right after his formal previous day of work with BFAM, he started working for Segantii, which the courtroom identified to be a competitor of BFAM for the purposes of the injunction software. As agreed, BFAM compensated Mr Mills a sum equal to his month-to-month simple income immediately after termination, but Mr Mills returned the funds and the courier bundle containing the returned cheque named Segantii as the consumer of the courier firm. It was then exposed that Mr Mills was previously performing for Segantii, in breach of his non-compete restrictive covenant.

BFAM sued Mr Mills as perfectly as Segantii, and applied to the court for an interlocutory injunction to restrain Mr Mills from doing the job for Segantii until finally the expiry of his 6-thirty day period non-contend clause. If granted, the injunction would have successfully disposed of the action because a trial would not get area in advance of the expiry of the six-month interval. In point, by the time BFAM introduced the injunction software, there have been only three months remaining of the restrictive covenant.

Both Mr Mills and Segantii contested the injunction software. Their most important argument was that the non-contend clause was unenforceable (for the reason that it was unreasonable), but all of their arguments had been rejected by the court docket, which located on the evidence that the clause was fairly essential to shield BFAM’s reputable pursuits. In keeping so, the court docket reiterated some essential ideas governing the enforceability of put up-termination restrictive covenants:

  • Despite the fact that the time for ascertaining the reasonableness of a restrictive covenant is the time of creating the agreement, it is permissible to acquire into account that personnel may be promoted in assessing the reasonableness of the restriction.
  • There is a difference in between an employer’s private details, these as trade strategies or data of a very similar mother nature, and the skill, working experience, know-how and general information acquired by an employee as aspect of his task in the course of the work. The previous is able of protection but the latter is not. Obtaining explained that, even if a previous employer does not try to remember each and every piece of complex and subtle private data specifically, it is not inconceivable that he may possibly however have a standard effect of the info and, in this circumstance, the courtroom located that Mr Mills would still know BFAM’s payment buildings applicable to the calculation of profit and loss polls of four portfolio administrators and the traders in their teams, and their approximate full compensation in broad conditions, even if he could not recall the precise figures.
  • The existence of other limits these as a non-solicitation clause, confidentiality clause and shipping and delivery-up of confidential information did not render the non-contend clause unenforceable or unnecessary.

In granting the injunction in favour of BFAM, the courtroom also made an adverse value purchase against Segantii, noting that it experienced submitted comprehensive affidavit evidence in contesting the injunction software and its submissions have been, in truth, purportedly created on behalf of Mr Mills, which prompted BFAM to devote added time and incur extra expenses in dealing with the submissions designed by Segantii.

This is a welcome decision for businesses in Hong Kong, exactly where motion of expertise occurs usually and normally without the need of observe, and which can trigger catastrophic disruption to enterprises. A bespoke, very well-drafted set of put up-termination restrictive covenants will defend an employer’s legit business passions and prevent breaches by workers and competitors alike.

  1. [2021] HKCFI 2904.