Pccw - Hkt Telephone Ltd And Another v David Matthew Mcdonald Aitken And Another

FACV No. 27 of 2008

IN THE COURT OF FINAL APPEAL OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

FINAL APPEAL NO. 27 OF 2008 (Civil)

(ON APPEAL FROM CACV No. 194 of 2008)

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Between:

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J U D G M E N T

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Mr Justice Bokhary PJ:

1. For the reasons so clearly stated by Mr Justice Ribeiro PJ and Lord Hoffmann NPJ with whose judgments I entirely agree, I would dismiss this appeal, and I would deal with costs in the manner proposed by Mr Justice Ribeiro PJ. The evidence in this case does not establish a real risk, let alone a probability, that the employee cannot participate in the activity concerned on behalf of his new employer without misusing confidential information belonging to his former employer. I do not feel called upon to say what it may or may not be properly open to a court to do in any case in which the evidence, or indeed an admission, establishes such misuse as a real risk, probability or even certainty. All that I will say is a word on the position of any Hong Kong court asked to make an injunction excluding an employee from participation in any given activity. The court would have to consider not only the common law policy which operated in Rakusen v Ellis [1912] 1 Ch 831 but also the “freedom of choice of occupation” which everyone here has by virtue of arts 33 and 41 of our constitution the Basic Law.

Mr Justice Chan PJ:

2. I agree with the judgments of Mr Justice Ribeiro PJ and Lord Hoffmann NPJ, and with Mr Justice Bokhary PJ’s observations.

Mr Justice Ribeiro PJ:

3. The main question arising on this appeal may be stated as follows: Can an employer obtain an injunction against a former employee who acquired confidential and privileged information during his employment, to restrain him not merely from misusing or disclosing such information, but from being employed on matters to which such information may be relevant in his new job with an enterprise having interests adverse to those of the employer? The appellants seek such an injunction against the respondents.

A. The parties

4. The 1st appellant is a telecommunications company and the largest fixed network operator (“FNO”) in Hong Kong. The second appellant is a member of the same group of companies, to which it provides employment services. I shall refer to the appellants together as “PCCW”.

5. The 2^nd respondent (“CSL”) is the largest mobile network operator (“MNO”) in Hong Kong and presently employs the 1^st respondent (“Mr Aitken”). Mr Aitken was admitted as a solicitor in New South Wales in 1997 and was in private practice for some five or six years before spending the following two years as an in-house lawyer for an Australian telecommunications company. He came to Hong Kong and joined CSL in 2005, occupying the post of Legal Advisor, Legal and Regulatory Affairs for some 18 months. He then joined PCCW as General Manager, Regulatory Compliance on 5 March 2007 and left on 20 March 2008 to re-join CSL as Head of Regulatory and Corporate Affairs. Mr Aitken is, however, not admitted as a solicitor in Hong Kong and did not act as in-house lawyer when employed by PCCW.

B. The context of the dispute

6. The telecommunications industry in Hong Kong is subject to regulation by the Telecommunications Authority (“TA”) pursuant to the Telecommunications Ordinance.[1] The imminent deregulation of Fixed-Mobile Interconnection Charges (“FMIC”) lies behind the present dispute. The current regime for such interconnection charges laid down by the TA involves a policy known as Mobile Party Network Pays (“MPNP”). This means that MNOs are required to pay interconnection charges for all calls passing between MNO and FNO networks, regardless of where such calls originate.

7. The TA issued a statement on 27 April 2007 (“the 2007 Statement”) announcing that the MPNP policy would cease with effect from April 2009, leaving FNOs and MNOs to negotiate among themselves the interconnection terms and charges applicable thereafter. At the same time, the 2007 Statement provided for continuation of the requirement known as “Any-to-Any connectivity” (or “A2A”) whereby each network operator is obliged to connect other networks’ calls to its own network.

8. As the existing MPNP regime has been yielding to FNOs an annual revenue of some HK$600 million, of which PCCW receives two-thirds, the imminent deregulation poses the threat of a significant loss of income to PCCW. Moreover, given the continued A2A obligation, PCCW’s concern has been that MNOs would be in no hurry to negotiate acceptable replacement FMIC terms. In evidence filed in the middle of last year, it was common ground that the 2007 Statement raises the single most important issue facing MNOs and FNOs in Hong Kong “for at least the next 12 months and probably for some time thereafter”.

9. PCCW’s reaction to the 2007 Statement was immediately to begin exploring legal avenues for protecting its interests, both vis-à-vis the TA and other MNOs, including CSL. There was a flurry of activity during the three months or so following its issue. The solicitors’ firm, Herbert Smith, was instructed and London leading counsel experienced in administrative and competition law were brought in to advise. There were meetings and communications with these legal advisers involving consideration of possible legal options, including appeals to the Telecommunication (Competition Provisions) Appeal Board (“the Appeal Board”) and judicial review proceedings. PCCW says that pursuant to such advice, certain commercial and legal strategies were adopted and specific proceedings launched. The information and advice discussed in these meetings and communications have been found to be at least triably confidential and privileged (to the extent that they have not subsequently entered the public domain).

10. It is PCCW’s case that Mr Aitken was intimately involved in this activity and therefore privy to the confidential and privileged discussions which took place. Mr Aitken disputes the extent of his involvement and says that he has little recollection of what then transpired. However, the Judge found that there is at least a triable issue as to his involvement in the manner alleged.

C. PCCW’s complaint

11. When the position of Head of Regulatory and Corporate Affairs became vacant at CSL, Mr Aitken applied for and was offered the job. On 23 January 2008, he gave three months’ notice to terminate his PCCW employment, as required under his contract of employment.

12. His contract also contained two relevant covenants. First, there was an undertaking not to “make use of, divulge or communicate to any person ... any of the trade secrets or other confidential information of or relating to [PCCW]”, a restriction which would continue to apply after termination without a time limit. This confidentiality undertaking applied to matters including “all information not publicly available relating to [PCCW]” including information relating to “business strategies”, “PCCW’s Fixed Telecommunications Network Services Licence ... and [PCCW’s] dealings with OFTA” and its “dealings with any government or quasi-government department ...”

13. Secondly, there was a restrictive covenant whereby Mr Aitken undertook that, except with PCCW’s permission, he would refrain from taking employment in Hong Kong with any of PCCW’s competitors for a period of three months after termination of his employment.

14. When giving notice of termination, Mr Aitken asked PCCW to waive the restrictive covenant so that he could take up his job with CSL without waiting for three months. PCCW agreed to do so. Mr Stuart Z Chiron, to whom Mr Aitken then reported, states that the waiver was granted since he had understood from Mr Aitken that FMIC issues would fall outside the ambit of the latter’s new role at CSL. Mr Aitken denies giving that impression. In the event, his employment with PCCW ceased on 20 March 2008 and began with CSL on 25 March 2008.

15. In mid-April 2008, about a year before the MPNP policy was to end, PCCW applied to the TA for permission to increase its FMIC tariff by 25%. As Mr Chiron later explained, this was to provide PCCW with a bargaining chip to encourage the start of serious negotiations with MNOs on deregulated FMIC terms and rates. The TA gave its approval and the 25% increase was announced on 23 May 2008. Two days later, CSL held a press conference attended by Mr Aitken, amongst others. It criticized PCCW’s unilateral increase of the connection tariff and the TA’s approval given without consultation. It promised legal action in response and stated that Mr Aitken should be contacted for further information.

16. Mr Chiron states that Mr Aitken’s participation in the press conference came as a surprise since he had believed that the latter would not be involved in FMIC issues. Solicitors’ letters were sent to Mr Aitken and CSL demanding an undertaking that Mr Aitken would not involve himself in such work. When such undertakings were not forthcoming, PCCW launched the present action and sought interim injunctive relief restraining Mr Aitken from FMIC involvement.

17. PCCW asserts that Mr Aitken has been privy not merely to the confidential and privileged strategic...