Non Compete & Non Solicitation Violation

Recently one of the co-owners of our Hong Kong company quit their job informing us that they wanted to get another job and do a different thing.



Days after they left, we recieved evidence that our largest customers have been stolen and a few months later we can not get these clients back - we even have in our posession a letter from our client confirming that this business had been moved over to another company from this co-owner. This has been confirmed by the individual verbally and also we have evidence in writting. In addition we have tried to make contact with our old clients but members of the company have been physically threatened by this co-owned not to make contact with these clients.



The knock on effect of this situation is this person stealing the clients has forced the company to not be able to trade, to close the offices and lay off staff.



In addition to this at the time of these clients being taken, the company owed some outstanding bills to vendors which the other co-owner knew about, so has basically taken these clients for their own gain and left a huge financial mess for the other owners to deal with.



The co-owner who is still an owner of the company has a non compete and non solicitation contract stating he can not work for another company nor solicit clients after they have left.



We have no problem them wishing to leave and work for a competitor in the same industry, but stealing our largest clients for their own gain is something we want to take up legally because a contract was signed and agreed to with this person.



Does anyone have any advice on what can be done and know if this is a criminal situation because the co-owner knew the company had bills to pay and the removal of clients from the company means we now cant trade and are almost facing closure because we can not pay these vendors.



Thanks

The HK courts are often reluctant to enforce non-solicit or non-competition clauses even though they are common in agreements since such restrictions are seen as a restraint of trade. There has been case law in HK that the period for such restraint of employment imposed on a person under an agreement should reasonably be 1-3 months (depending on the facts of each case). There is however a difference between a restriction regarding employment and one regarding sale of a business; when one has received a purchase amount the restriction has been "bought" and therefore is more likely to be enforced. So, if the co-owner solicited your major client immediately after he has left your company, you may have a civil case against him for damages plus possibly compensation for your company's losses.


So far as criminality is concerned, it would be hard to prove fraud or misrepresentation. Chances for criminal charges to be made against him are low but it would depend on your evidence and the police/prosecution. Having said that, you can go to the Commercial Crime Unit of the Police and report the case nonetheless and see if they would take it on.


If you would like further legal assistance on this a consultation meeting can be arranged; weirlaw@hongkonglaw.com



Weir & Associates

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Hong Kong

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Email : WeirLaw@HongKongLaw.com

www.HongKongLaw.com/weirlaw