Legal Update: What are you actually guarding against? – an unusual court case about non-competition clause for a security guard
In 港滙物業管理有限公司 v 吳永志 [2026] HKDC 1421 (Chinese judgment only), the District Court considered whether a clause preventing a security guard from working at buildings to which he had previously been assigned for 12 months after termination was valid and enforceable.
Summary of Facts
The Plaintiff is a property management company and the Defendant was employed as a security guard.
The Defendant’s employment contract provides that, all employees shall not, within 12 calendar months from the date of termination of employment, take up employment or perform duties at any of the buildings to which they were assigned whilst employed by the Plaintiff (the “Restriction”) (see the original Chinese text below).
“…全部員工，於離職日起計12個曆月內，不得於本公司受雇期間曾派駐當值之全部大廈任職及當值 …”
The Defendant resigned from the Plaintiff on 16 December 2021 and his employment terminated on 31 December 2021. On the next day, he started his employment with another property management company and was assigned to work at Tai Foo Building, where he was previously assigned by the Plaintiff to work since 1 January 2017.
The Plaintiff sought to enforce the Restriction against the Defendant and further claimed against him HK$144,000 in damages for breach of contract.
Court’s Analysis
We note the following main points from the decision setting out the general principles and the Court’s approach on the relevant issues.
General Principles
It is well established that a post-termination restriction will only be enforceable if it can be shown that it does not go further than what is reasonably necessary to protect the legitimate business interest of the employer. The common factors that the court will look at include the nature of the industry in question, the employee’s position, role and seniority, the length of restricted period and commercial need for such, the geographical coverage of the restrictions.
Lack of Protectable Interests
The Plaintiff argued that property management depended heavily on trust between frontline personnel and residents and that the Defendant had acquired knowledge of residents’ access habits, private information and complaint histories. On this basis, the Plaintiff considered that the trust accumulated through the Plaintiff’s training and operations would be transferred to a competitor if he remained at the same building.
The Defendant argued that there is no evidence that the Defendant’s contact with the relevant residents can constitute protectable interest of the Plaintiff; nor was there any evidence supporting that the Defendant had gained meaningful influence over the relevant incorporated owners.
The Court agreed with the Defendant noting in particular that the Defendant did not have:-
- (i) any management or decision-making responsibility or access to trade secrets; and
- (ii) any sufficient personal influence over the owners’ corporation or residents;
having regard to the fact that the management contract of the buildings are between the relevant owners’ corporations and property management company such as the Plaintiff (i.e. that they do not have any direct contractual relationship with the individual security guards)
Scope not reasonable
The Court did not consider the Restriction to be reasonable given that:-
- extended to all buildings to which the Defendant had been assigned throughout his employment and contained no geographical limit;
- a 12-month restraint was, on its face, excessive for a junior employee whose contractual notice period was only 15 days;
- the Defendant was a junior employee earning HK$12,000 per month and there was no evidence that his position gave him access to confidential business information or meaningful influence over customers.
In the circumstances, the Court held that the Covenant was invalid and dismissed the Plaintiff’s claims.
Key Takeaways
It is relatively rare to see a court decision on enforceability of post-termination restrictions concerning employees of this type. Whilst the answer to the question is not unexpected, it is useful to summarise a few important points raised by the case, which may apply to other cases.
Importance of particulars
The Court in this case noted that the closing submission by the Plaintiff “is the first time in this case that the plaintiff has raised the alleged business interests” as the Plaintiff did not set out the issue in its Statement of Claim.
The importance to plead sufficient particulars of the business interest was emphasized in the case of Natuzzi Spa v De Coro Ltd [2006] HKEC 1077 stated that:-
“Since the burden of establishing the enforceability of a restrictive covenant rests on the Plaintiff, it should have pleaded the same with full particulars including all facts and matters relied upon by it to assert that the covenant is enforceable. A bare assertion that the clause is enforceable is not enough. It should plead the interests it relied upon and how such interests reasonably warrant a protection as wide as that embodied in the contract …”
[underlined is our emphasis]
Consideration of seniority
The Court also mentioned a number of times in its decision the lack of seniority of the employee in question (i.e. the Defendant).
The obvious message is that the seniority of an employee is often forms an important part of the consideration in the court’s assessment of enforceability of a post-termination restriction (as mentioned).
The ancillary point, however, is that when an employer should have different post-termination restriction for different levels of employees as opposed to adopting a one-size-fits-all approach (see Moxie Communications Ltd v. Lai Cheuk Lok [2024] HKDC 1323).
Length of restriction
Generally, non-competition clauses are more difficult to enforce than other type of restrictive covenants, particularly if they could already protect the interests of the employer. Therefore, a reasonable length of restriction is important for the clauses to be enforceable.
The Court have noted that a 12-month restriction is on the higher end of the spectrum and requires cogent evidence to justify. See for example paragraph 22 of WPP Marketing Communications (Hong Kong) Ltd v Christopher O’Donnell [2013] HKEC 1346 and paragraph 39 of BFAM Partners (Hong Kong) Ltd v Gareth John Mills and another [2021] HKEC 4452.
In this case, the 12-month restriction was held to be, prima facie, too lengthy and unreasonable, considering the Defendant’s junior position, monthly salary of HK$12,000 and the notice period of mere 15 days for termination.
Relevant information
See relevant discussion regarding protective covenants restraining competition in The Hong Kong Market Entry Playbook – Tanner De Witt.
Russell Bennett and Mark Chiu
For more information on employment matters, please contact:
Partner | [email protected]
Partner | [email protected]
Disclaimer: This publication is general in nature and is not intended to constitute legal advice. You should seek professional advice before taking any action in relation to the matters dealt with in this publication.