Few things unsettle an employer more than discovering that a trusted, long-serving employee has quietly lined up a deal with a key client before leaving. In N.P. King (Hong Kong) Limited & Anor v Lam Wing Lam & Anor [2026] HKCFI 5167, the Court of First Instance considered exactly that situation.
The employee had worked for the employer as a Sourcing Engineer since 2006 and was in charge of its major customer, ATA Group. While still employed, he set up his own company and, the day before resigning, signed a contract to provide services to ATA Group from the day after his employment ended. ATA Group then terminated its contract with the employer. After leaving, he also approached three of the employer’s other customers with price lists. The employer sued him and his company for over HK$3 million for breach of his employment contract, his duty of fidelity and fiduciary duties, misuse of confidential information and solicitation of customers.
On its face, the matter looked like a clear case of an employer being wronged, yet the employer succeeded only in part. The Court found that the employee had breached his duty of fidelity and his post-termination non-solicitation and non-competition restrictions, but rejected the fiduciary, confidentiality and document deletion claims, and dismissed the claim against his company. Instead of the sum claimed, the employer recovered HK$232,180.10 in damages. The case shows that, however unfair a departure may seem to an employer, the outcome will turn heavily on the facts: what the employee’s role and authority actually were, how the employment contract was drafted, how the claim was pleaded, and what the evidence proves the employee did.
Practical Guidance from the Judgment
The judgment breaks no new legal ground, but it offers useful lessons on protecting client relationships and bringing a claim that will succeed at trial.
(a) Seniority alone does not create fiduciary duties
Employers often assume that a senior, trusted employee automatically owes fiduciary duties. Here, the employee was the second most senior person on the ATA account and represented the employer in dealings with ATA Group and its suppliers. Even so, the Court held that the key feature of a fiduciary relationship is that the employee exercises a power or discretion on the employer’s behalf that affects its interests.
The employer had not pleaded or proved what power or discretion the employee actually had. As the burden was on the employer, the fiduciary claim failed, and so did the dishonest assistance claim against his company. Employers alleging fiduciary duties against a non-director should be ready to prove the specific decisions the employee could make for them, such as pricing authority or negotiating mandates. Job descriptions and records of delegated authority will be key.
(b) The implied duty of fidelity can fill the gap
The failure of the fiduciary claim was not the end of the matter. Every employee owes an implied duty of good faith and fidelity during employment, including not to compete with their employer. The employer had pleaded this duty alongside its fiduciary case, and the Court treated the two as the same in substance here .
The question was whether signing the ATA contract was mere preparation or a substantive step. The Court rejected the employee’s claim that the contract depended on the employer’s consent. By signing it while still employed, he had taken a substantive step that was bound to take the ATA business away. The services under the two contracts also overlapped substantially, so he was in direct competition with his employer. It made no difference that ATA Group may have started the discussions. Employers should therefore plead the duty of fidelity, and any relevant express restrictions, alongside a fiduciary claim. A binding deal with a client before employment ends is treated very differently from permitted preparation.
(c) Drafting and protecting post-termination restrictive covenants
Once the employment ended, the employer had to rely on its express restrictions. By approaching three customers and circulating price lists for similar products, the employee breached the 12-month non-solicitation and non-competition clauses. He did not challenge the non-solicitation clause, given the employer’s unchallenged evidence of its heavy investment in his training and the head start a departing employee could gain. As there was no evidence of actual loss, the Court awarded only nominal damages of HK$5,000.
The two-year non-disclosure clause fared worse. The Court noted that such a restriction will only be enforced after employment if it is reasonably necessary to protect a trade secret or prevent abuse of influence over customers. Although the contract labelled price and customer lists as “Confidential Information”, the employer had not shown that the information was in fact confidential. Its own evidence also limited its damages. Based on its evidence that a replacement would need about 6 to 12 months to gather updated pricing information, the Court found that ATA Group would have stayed for only about 12 months after the employee left, not the two years the employer argued for. Restrictions should therefore be tailored to the role and supported by evidence of the interest they protect, including records showing the information is genuinely not public.
(d) Pleading breach of confidence with precision
In terms of confidentiality, the Court reiterated that confidential information must be defined with some precision and its confidential character particularised. The employment contract defined “Confidential Information” by reference to four categories, but the employer confirmed only during cross-examination that it relied on two, price lists and customer lists, which the Court found unsatisfactory. Nor did the employer explain why that information was confidential, for example by showing it was not publicly available. Citing earlier cases where such lists were held confidential did not help, as confidentiality depends on the facts of each case. Before starting proceedings, employers should identify exactly what information was misused, why it is not public and how it was protected.
(e) Oral waivers of restrictive covenants
The employee argued that, when he resigned, a director of the company had released him from his covenants by telling him to look after the ATA account but not to take other customers. The Court accepted that he had told the director he would work with ATA Group, but found the alleged representation not proven. It was inherently improbable that he would not have recorded such an important release in writing or mentioned it later. Even if the words were said, they were contradictory and not a clear and unequivocal waiver.
Although the waiver argument failed, the Court found the director’s account of the exit conversations unsatisfactory. Informal exit conversations create uncertainty for both sides, so any release or change to restrictive covenants should be put in writing, properly approved and clearly limited in scope.
Protecting client relationships
Well-drafted contracts are only half the battle. Restrictive covenants for client-facing staff should be tailored to their role, and authority, confidential information and any exit concessions should be properly documented. Suspected breaches should be acted on promptly, so that evidence is preserved and interim relief remains available.
N.P. King shows that the Hong Kong courts will hold employees to their duty of fidelity and to properly supported restrictive covenants, but will test claims closely against the pleadings and the evidence.
