WPP Marketing Communications (Hong Kong) Limited v. Christopher O’Donnell (HCA 637/2013)

In brief:

An employer unsuccessfully sought to enforce a 12-month noncompetition restriction by way of an interlocutory injunction at the High Court. The Court of First Instance (“CFI”) held that the restriction was drafted too widely and in particular, was too long in duration and the employer was unable to justify it with cogent evidence. The former employee and new employer had both committed to give undertakings in relation to other restrictions by which the former employee was bound. The CFI held that such undertakings provided adequate protection to the employer.

The injunction was also refused on the grounds of delay. The employer was aware that the former employee had joined a competitor in February 2013 but it did not issue a summons until 18 April 2013, nor did it provide witness evidence to explain the delay.

Background

Christopher O’Donnell (“Defendant”) was the former CEO of Kinetic Asia- Pacific whose ultimate parent company is WPP Plc (“Plaintiff”). The Defendant left the Plaintiff’s employment in August 2012 and joined a competitor, Posterscope, in February 2013. This was prima facie in breach of post termination restrictions set out in his employment contract and reiterated in a settlement agreement which he signed in October 2012.

The Plaintiff issued a writ on 18 April 2013 together with a summons for an interlocutory injunction in terms that mirrored the Defendant’s post termination restrictions. The CFI first heard the matter on 25 April 2013 and the Defendant gave an undertaking to honour all but a noncompetition clause, which prevented the Defendant from working for a competitor for a period of 12 months in certain countries, including Hong Kong. If enforceable, the non-compete restriction would have prevented the Defendant from working for Posterscope until August 2013.

The CFI heard arguments on the non-competition restriction on 24 May 2013. The CFI acknowledged that the effect of granting an interlocutory injunction would have had the effect of granting final relief due to the fact that a trial could not take place before the 12 month restricted period expired in August 2013. The CFI held that in those circumstances, the test could not merely be that there must be a serious issue to be tried, but that it had to be able to conclude that the Plaintiff had good prospects or better prospects of success than the Defendant.

Decision of CFI

The CFI refused to grant the interlocutory injunction for the following reasons:

  1. Post termination restriction was too wide

The CFI held that the restriction was very wide and the Defendant was able to demonstrate that it would catch some scenarios, which would be plainly unreasonable. The CFI held that the Plaintiff had not justified

the duration of 12 months with cogent evidence. The Plaintiff had been able to replace the Defendant after just over four months. In addition, the Plaintiff’s argument that it might be justified on the grounds of confidential information, which may inadvertently slip out in the course of the Defendant’s duties with his new employer, was not supported by concrete evidence.

The Plaintiff tried to argue that the Defendant had deep knowledge of its intended operations and strategy for a 12-month period, but the CFI considered that this was a “blanket and bland assertion”. The Plaintiff was criticised for using “big business jargon and catchwords such as ‘strategy’ and words to that effect” which was “of little assistance to the court to visualise what it was that the defendant could inadvertently slip out whilst working for the new employer”. The CFI held that it was incumbent upon the Plaintiff to identify with precision and clarity the items of information that required protection. In this context, the undertaking not to use the information was deemed to be sufficient protection.

  1. Undertaking provided by the Defendant and new employer

The Defendant had provided an undertaking in relation to the other post termination restrictions in his employment contract and was also prepared to provide a further undertaking relating to confidential information (as mentioned above). Posterscope had also offered undertakings therefore the CFI held that the Plaintiff was already sufficiently protected and there was no longer any need for an injunction. The Plaintiff’s argument that the injunction was required to police the Defendant’s compliance with the other restrictions was not accepted.

  1. Delay was unacceptable

The Plaintiff was aware that the Defendant had joined Posterscope in February but waited until 18 April to issue a writ and summons. The Plaintiff argued that the delay was justified, as it had been engaging in correspondence with the Defendant to narrow down the issues. The CFI reviewed the correspondence and held that it was obvious by early March that the Defendant was not going to back down, therefore the Plaintiff should have taken the matter to court, rather than engaging in such lengthy correspondence. The CFI referred to a case where it was suggested that a period of not more than six weeks might be acceptable for unexplained delay. This case was categorised by the CFI as being one of unexplained delay as the Plaintiff had not provided any witness evidence to explain it. The CFI expressed the view that where the former employer was concerned about confidential information even a six-week delay could be too long.

Take away points:

  1. Same old message

This case reiterates once again the need to carefully tailor restrictive covenants and to provide detailed evidence to support their necessity. The fact that the CFI was alienated by the “big business jargon” is a stark reminder to legal and HR professionals who support businesses, to ensure that these business catchphrases are fully probed and explained in simple terms in court proceedings and backed up with detailed evidence.

  1. Strategy of offering undertakings

The Defendant deployed a very successful strategy of offering undertakings by which he was happy to be bound, to undermine the need for an injunction. Ultimately his main objective was to continue to work for his new employer. The undertakings offered by the new employer were also pivotal in persuading the CFI that the Plaintiff’s legitimate business interests were adequately protected. This technique is worth considering as a first step for Defendants and their new employers when facing injunctive action. Employers who are seeking injunctive relief need to carefully analyse the effect of any undertakings offered, as they may be a game changer.

  1. Hardline taken on delay

Most employers will seek to engage in pre-litigation communication in an attempt to avoid the costs and uncertainty of going to court. This case makes it clear that the clock starts to tick as soon as the employer is aware of the breach and if attempts to reach a resolution do not appear to be working out, proceedings need to be issued very promptly.