Do fiduciary duties apply to junior employees?
Introduction
In Eventmaster Limited v Chen Hiu Kwan & Ors [2026] HKCFI 3380, the Court of First Instance (“CFI”) examined a dispute arising from the departure of key members of a sales team who, while still employed, set up and operated a competing business that diverted business opportunities away from their employer. The decision is of particular importance as it addresses the scope of fiduciary duties owed by senior employees and sales staff, the protection of confidential business information in the employment context, and the circumstances in which a competing company may be held liable for the acts of former employees. It also serves as a timely reminder that, although employees may in some circumstances take preparatory steps towards future competition, the Court will closely scrutinise conduct that crosses the line into active competition, misuse of confidential information, or diversion of mature business opportunities during the subsistence of employment.
Background
Eventmaster Limited (“Employer”) is a Hong Kong company which carries on business as service provider in technological support in relation to the organisation and management of events. It had a portfolio of substantial corporate and agency clients, including Pacific Alliance Group (“PAG”), AXA General Insurance Hong Kong Limited (“AXA”), DBS Bank (Hong Kong) Limited (“DBS”), Hongkong Land Limited (“HK Land”), Television Broadcasts Limited (“TVB”) and AIA International Limited (“AIA”) and others. The 1st Defendant, Chen Hiu Kwan (“D1”), joined the Employer in 2016 as business director, where he was responsible for sales and marketing activities, led the sales team and managed key client relationships. The 2nd Defendant, Ngai Chung Ni (“D2”), and the 4th Defendant, Cheung Mong (“D4”), joined the Employer in 2017 as account managers, each being responsible for the sales and marketing activities of subsets of the Employer’s clients.
In April 2019, D1 and D2 incorporated the 3rd Defendant, Episode Limited (“D3” or “Competitor”), to carry on a business similar to that of the Employer, holding 40% and 20% of its shares respectively and acting as its directors. They tendered their resignations by email to the Employer’s sole director (“Employer’s Director”) in July 2019 and contended that their employment came to an end around mid-August 2019. However, the CFI found on the basis of contemporaneous salary slips, bank records and MPF documents that D1 in fact remained employed until 31 August 2019 and D2 until 30 September 2019. There was no dispute that D4 remained employed by the Employer until 29 May 2020.
The Employer’s case was, in essence, that while still employed, D1 and D2 had already begun operating a competing business through the Competitor and had diverted the Employer’s business opportunities to that business. D1 and D2 misused the Employer’s confidential information to prepare competing quotations for the Competitor and to secure work from the Employer’s existing or prospective clients. After D1 and D2 had left their employment with the Employer, D1 induced D4, who was still employed by the Employer, to assist the Competitor, and that D4 thereafter misused the Employer’s confidential information, failed to pass on client requests and diverted business opportunities to the Competitor. In addition to claims for breach of contractual and equitable duties, the Employer also advanced claims against D1, D2 and the Competitor for dishonest assistance, inducement to breach contract and conspiracy to injure by unlawful means.
The main issues before the CFI were:
1. whether D1, D2 and D4 owed fiduciary duties to the Employer;
2. whether the Confidential Information (as defined below) gives rise to duty of confidence;
3. whether D1, D2 and D4 breached their duties to Employer;
4. whether D1, D2 and D3 are liable for other causes of action; and
5. whether the Employer suffered loss and, if so, the quantum thereof.
Fiduciary duties of sales staff
Under the respective employment contracts of D1, D2 and D4 with the Employer, they were each subject to an express confidentiality clause and a “no outside business” clause, which prohibited disclosure of confidential information and engagement in outside employment or business without the Employer’s prior written consent. The CFI also reaffirmed the well-established principle that an employee owes a duty of good faith and fidelity to his employer during the subsistence of the employment. On the facts, this implied duty of fidelity and good faith extended to (1) not soliciting clients to move to a competing business; (2) not taking part in a competing business in a role inconsistent with current employment; (3) not disclosing and misusing confidential information to the employer’s detriment; and (4) disclosing information useful to the employer obtained in the course of employment.
The CFI held that D1, as business director, owed fiduciary duties to the Employer given that he led the sales team, set prices, negotiated contracts for and on behalf of the Employer and was largely entrusted with client management, with the Employer’s Director mainly checking profitability. Further, as clients would often communicate directly with D1 or the account managers reporting to him, the Employer had no way of knowing about client requests unless he chose to pass them on. Accordingly, the Employer no real control over how he deployed the information he obtained in that capacity, leaving it vulnerable to any misuse or withholding of such information – a vulnerability which the CFI regarded as a defining characteristic of a fiduciary relationship.
Importantly, the CFI went further and held that both D2 and D4, although not senior in title, also owed fiduciary duties at least in relation to their sales work. They were in a position of trust and confidence in relation to the Employer’s confidential information and dealt directly with client communications, the Employer was similarly vulnerable to their failure to pass on client requests and to any misuse of that information.
Misuse of confidential information and diversion of business
The Employer’s confidential information included emails, invoices, quotations, contracts, agreements, business strategies and client documents concerning its clients (“Confidential Information”), stored on a password‑protected Google Drive accessible only to the sales team. Applying Faccenda Chicken Ltd v Fowler [1984] ICR 589, the CFI accepted that the Confidential Information fell within Class 2 (i.e. information which was confidential), which D1, D2 and D4 were not entitled to misuse in the course of employment with Employer.
Furthermore, the CFI considered it inherently improbable that, having incorporated the Competitor in April 2019, D1 and D2 had not pursued competing business before their resignations in August 2019. The CFI found that, on a number of occasions, D1 and D2 had diverted business opportunities from the Employer’s existing corporate clients to D3, by concealing requests for quotations from the Employer and preparing competing quotations using their knowledge of client requirements and the Employer’s pricing. One of the clearest instances concerned PAG. PAG approached the Employer in June 2019 regarding an event registration application, but no quotation was ever issued by the Employer. Instead, the Competitor later issued an invoice in September 2019 bearing a quotation number containing the date “20190717”, which the CFI interpreted as showing that D3 had sent the quotation on 17 July 2019, at a time when D1 and D2 were still employed by the Employer. This inference was reinforced by the D3’s Facebook post referring to “two months” of preparation for the event, which supported the conclusion that the PAG opportunity had been diverted to the Competitor during the subsistence of their employment.
The CFI identified a similar pattern in relation to clients including AXA, Hongkong Land and Prada. In relation to AIA and TVB, the CFI went further and held that several of the projects constituted “mature business opportunities” generated through the employees’ prior work for the Employer, and were therefore not opportunities which they were entitled to appropriate for themselves even after their employment had ended.
Liability of the Competitor and dishonest assistance
Given that D1 and D2 respectively held 40% and 20% of shares in the Competitor, together controlled a majority interest, and acted as its directors, the CFI was satisfied that they constituted the Competitor’s “daily operating mind”. The CFI further noted that they had jointly incorporated the Competitor in April 2019, tendered resignations from Employer in parallel in July 2019, and were, on D2’s own evidence, the only staff members working for the Competitor up to May 2020. Their knowledge and conduct were therefore imputed to the Competitor. Since D1 and D2 were both recipients of the Employer’s Confidential Information, the Competitor likewise acquired notice of its confidential nature and was under a corresponding duty of confidence not to use that information to the Employer’s detriment.
The CFI held that D1, D2 and the Competitor were liable for dishonest assistance in relation to the breaches of fiduciary duty and confidence arising from the diversion of the Employer’s business, as well as for dishonestly assisting D4’s breaches during her continuing employment. The CFI further found that D1 had procured/induced D4’s breaches of contract by involving her in the Competitor’s business whilst she was still employed by the Employer, and that D1, D2 and the Competitor were liable for unlawful means conspiracy by acting in concert to divert Employer’s business through breaches of fiduciary, contractual and confidence-based duties.
Quantum
On remedies, the Employer elected to pursue equitable compensation for its equitable causes of action under the heads of breach of fiduciary duties and breach of confidence, with the remedy of damages sought for the remaining causes of action in common law.
The CFI accepted that the appropriate basis for assessment was the loss of chance of further orders, applying the formula: Loss = Quotation price x Chance of winning x Gross Profit Margin. The CFI used a 40% “chance of winning” where the Employer had been prevented from quoting (or 20% where both the Employer and the Competitor had quoted), and a gross profit margin of 35%. On that basis, the CFI awarded a total of HK$223,097 against D1, D2 and the Competitor jointly and severally in respect of PAG, AXA, HK Land, Prada, AIA and TVB, and a further HK$59,042 against all four defendants jointly and severally in relation to the Employer’s other potential and existing clients.
Takeaways
The decision in Eventmaster Limited confirms that, in an appropriate case, fiduciary duties may extend to employees engaged in sales and account management where they are entrusted with client relationships and confidential information, and where the employer is vulnerable to their failure to pass on client requests or to any misuse of such information. It also illustrates the importance, from an employer’s perspective, of clearly defining employees’ responsibilities and ensuring that confidentiality and outside business restrictions in employment contracts properly reflect the degree of trust placed in those employees.
Eventmaster Limited further makes clear that the permissible taking of preparatory steps towards future competition has limits. Once employees begin pursuing competing business during the course of employment, misuse confidential information, conceal client enquiries or divert business opportunities, they risk liability for breach of fiduciary duty, breach of confidence and breach of their contractual and fidelity obligations, with contemporaneous documents often proving central to the Court’s assessment.
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Important: The law and procedure on this subject are very specialised and complicated. This article is just a very general outline for reference and cannot be relied upon as legal advice in any individual case. If any advice or assistance is needed, please contact our solicitors. |
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Published by ONC Lawyers © 2026 |
