The Hong Kong Court of First Instance held that account managers, as well as directors, could owe fiduciary duties in relation to their sales work where they were trusted to handle client enquiries and commercial information.
The case is important for employers because it looks beyond job titles. Rather than focusing on whether the employees were senior enough to be treated like directors, it considered what they actually did, what information they controlled, the extent to which the employer depended on them, and whether the employer was vulnerable if they failed to pass on client opportunities.
This approach is not new. A junior or mid-level employee may not run the business, but a client-facing employee can still act as a crucial gatekeeper. Where a client contacts an employee directly, and the employer would not know about the enquiry unless the employee reported it, the employee may owe more than the ordinary duty to attend work and perform their role.
For employers, this is not a case about banning ambition or preventing staff from moving on. The Court accepted the familiar principle that employees may prepare for future employment and may, in appropriate circumstances, take steps towards a future competing business. The line is crossed when preparation becomes active competition, misuse of confidential information, concealment of live opportunities, or persuading customers to move while the employee is still meant to be serving the employer.
Background
Eventmaster provides technology support for events. Its business relies heavily on quotations, client contacts, pricing, event requirements and sales follow-up.
The first defendant, Matthew, was Eventmaster’s Business Director and managed sales and marketing. Jenny and Eugenie were Account Managers responsible for sales and marketing for certain clients.
In April 2019, while still employed by Eventmaster, Matthew and Jenny incorporated Episode Limited. Episode’s business was similar to Eventmaster’s business. Matthew and Jenny became directors of Episode, and together they held the majority of its shares.
Eventmaster’s case was that Matthew and Jenny did not merely prepare to leave the company and compete with the business in the future. Eventmaster alleged that the two directors used Episode to compete while they were still employed, diverted business opportunities away from Eventmaster, and used Eventmaster’s confidential information to prepare competitive quotations.
Eventmaster also alleged that Eugenie, who remained employed until May 2020, assisted Episode from within by working on its quotations, concealing quote requests, disclosing confidential information and helping it compete for client work.
Their contracts prohibited unauthorised disclosure of confidential information and outside employment, business or paid services without prior written consent.
The dispute, therefore, turned on when preparation for future competition becomes a breach of duty to the current employer, requiring the Court to examine the employees’ conduct client by client.
The Court’s analysis and decision
The Court began with the duty of good faith and fidelity: employees must not secretly act against their employer’s interests while employed.
This meant the employees could not solicit Eventmaster’s customers for Episode, take part in a competing business in a role inconsistent with their employment, disclose or misuse confidential information, or pass on useful information obtained in the course of employment.
The Court then considered fiduciary duties. A fiduciary duty is sometimes described as a duty of loyalty. In practical terms, these can arise where an employee is trusted with information or opportunities in circumstances where the employer is dependent on them and vulnerable to misuse of that trust. The employee must not put personal interests ahead of the employer’s interests.
The Court held that Matthew owed fiduciary duties to Eventmaster, given his role as Business Director, his leadership of the sales team, his authority to set prices and negotiate sales terms, and his central role in client matters.
More notably, Jenny and Eugenie also owed fiduciary duties in relation to their sales work. Although they were not senior employees or de facto directors, they handled client enquiries and confidential sales information, and Eventmaster depended on them to pass that information on.
The Court also confirmed that emails, invoices, quotations, contracts, agreements, business strategies and client documents could be treated as confidential information. Pricing information remained confidential even if later adjusted or discounted, because starting prices could still shape negotiations and help a competitor pitch for work.
On the facts, the Court found that Jenny and Eugenie breached their duties in relation to a number of clients and projects.
The Court also found that Matthew, Jenny and Episode had dishonestly assisted each other in breaches relating to certain clients, and assisted Eugenie where she acted for Episode from within Eventmaster.
Matthew was also liable for inducing Eugenie to breach her employment contract, as he knew, or should have realised, that she was bound by a duty of confidentiality and outside business restrictions.
On compensation, Eventmaster did not recover everything claimed. The Court assessed loss by reference to loss of chance, recognising that Eventmaster had lost the opportunity to compete properly for work.
Ultimately, the Court held Matthew, Jenny and Episode jointly and severally liable for compensation totaling HK$223,097 for breaches relating to six of Eventmaster’s clients. Matthew, Jenny, Eugenie, and Episode were also jointly and severally liable for compensation or damages totaling HK$59,042 for breaches relating to other clients as well as streaming services.
Key takeaways
Employers should not assume that fiduciary duties only apply to senior management. A client-facing employee who receives direct client enquiries, holds pricing information and controls whether opportunities are reported internally may owe fiduciary duties in relation to that work.
An employee’s job title is less important than practical control. If an employee is the gateway between the client and the company, the role should be treated as risk-sensitive, regardless of title.
Outside business restrictions are useful, but staff should understand that moonlighting for a competitor, preparing its quotations, or using company time or devices for competing work can create serious legal exposure.
Client emails, quotations, pricing history, event requirements, business strategies and tender invitations can all be protected during employment as confidential information, particularly where competitors could use that information to undercut or approach clients.
Employers should support contractual protections with practical controls: central logging of client enquiries, storage of quotations in company systems, controlled access to pricing files, and closer oversight when client-facing staff resign or move to part-time work.
Employers should also act promptly on warning signs, such as parallel resignations, client requests going quiet, missing quotations, or staff using personal devices or channels for work matters.
