In the Court of Final Appeal case of PCCW – HKT Telephone Limited & Another v David Matthew McDonald Aitken & Another FACV 27 of 2008, the Court decided on whether an employer could obtain an injunction against a former employee who acquired confidential and privileged information, 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.

Background

The 1^st respondent (“Mr. Aitken”) was admitted as a solicitor in Australia.  He came to Hong Kong and joined the 2^nd respondent (“CSL”) in 2005 as Legal Advisor, Legal regulatory Affairs for 18 months.  He then joined the appellants (collectively as “PCCW”) as General Manager, Regulatory Compliance (as opposed to an in-house lawyer) on 5 March 2007. Mr. Aitken is not admitted as a solicitor in Hong Kong.

In April 2007, the Telecommunications Authority proposed that the policy of requiring mobile network operators (“MNO”) to pay fixed network operators (“FNO”) fixed-mobile interconnection charges (“FMIC”) would cease with effect from April 2009 (“the 2007 Statement”). PCCW, being the largest FNO in Hong Kong, was largely concerned by significant loss of income following de-regulation. For the following 3 months, Mr. Aitken was privy to confidential and privileged documents and discussions that took place between PCCW and their legal advisers.

On 20 March 2008 Mr. Aitken left PCCW to re-join CSL as Head of Regulatory and Corporate Affairs.

In May 2008, PCCW, through a press conference held by CSL, realized that Mr. Aitken was actively involved in FMIC issues arising from the 2007 Statement.  As a result, PCCW sought orders restraining Mr. Aitken from having any involvement, whether direct or indirect, in FMIC issues related to or arising out of the 2007 Statement; and disclosing or using any confidential information of the plaintiffs, whether in relation to the FMIC issues or otherwise.

The Legal Principle

Former employees and confidential information

An employee, while employed, is subject to an implied duty of fidelity which requires him not to divulge or use, save for his employer’s benefit, any confidential information appertaining to the employer’s business.  However, post-termination relief against an employee is confined to restraining misuse or disclosure only of trade secrets and confidential information of an equivalent status.  However, an employer is not entitled to restrain the former employee from deploying his own skill and knowledge for the benefit of himself and his new employer.

A further limitation on post-termination relief reflects the policy of securing the freedom of individuals to seek employment in the labour market.  The Court will generally refuse an injunction to restrict an employee’s field of activity (as opposed to restraining misuse or disclosure) except insofar as such restriction flows from an enforceable restrictive covenant which is subjected to the test of reasonableness.

Solicitors and the confidential information of former clients

Relationship of solicitor and client is a fiduciary relationship in which all the confidences are those of the client.  Only the client can waive such confidentiality (and, where the communications are privileged, waive such privilege).  The policies of protecting an employee’s freedom to deploy his personal skill and knowledge for his own benefit and of securing the free availability of employees in the labour market do not extend to a solicitor who wishes to accept instructions from a new client whose interests are adverse to those of the former client.

Decision

PCCW had sought to extend the special remedy against solicitors to be extended to employees who have confidential and privileged information by referring to a passage in Lord Millett’s speech in Prince Jefri Bolkiah v KPMG [1999] 2 AC 222:-

“.…a solicitor or other person in possession of confidential information should not act in any way that might appear to put that information at risk of coming into the hands of someone with an adverse interest.”

The court held that for the special remedy available against solicitors to apply to “other person”, that person must be in a situation analogous to solicitors. 

PCCW submitted in the alternative that Mr. Aitken was in a position analogous to that of a solicitor, i.e. he was an in-house lawyer with the same responsibilities as an outside lawyer.  However, the court found that Mr. Aitken had not acted as an “in-house lawyer” as he offered no legal advice to PCCW.

In the circumstances, the court held that the Bolkiah approach did not apply to this case to extend the special remedy against solicitors to Mr. Aitken.

The court in reaching its decision expressly left open the questions concerning possible relief against an in-house lawyer who changes jobs to take up a position on the other side of a contentious issue; or against a person who moves from employment as an in-house lawyer to private practice as a solicitor (or vice-versa) to act on the other side of a contentious matter.  Therefore, it is still questionable whether the special remedy against solicitors would apply to in- house lawyers and the extent of such remedy if applicable.