HK court rejects a 12-month non-compete restraint

The Hong Kong Court of First Instance decision in Pando Finance Ltd v Ng Ean Kiam [2026] HKCFI 1046 is a timely reminder that non compete clauses remain firmly under judicial scrutiny. While the legal principles governing post termination restraints and interlocutory injunctions remain unchanged, the case illustrates how exacting the Court’s approach has become in practice.

Background of the case

The Plaintiff, a virtual asset management firm, applied for an interlocutory injunction to prevent the Defendant, its former employee, from working at a competitor.

The Defendant, an experienced fund manager and SFC responsible officer, resigned from the Plaintiff and joined a competitor. Within a few months of his joining, the competitor launched investment products that were similar to those previously authorised by the SFC for the Plaintiff.

The Plaintiff alleged breach of both confidentiality and a 12-month non-compete clause in the employment contract, and sought to restrain the Defendant from working for any competitor for one year post-termination.

Findings of the High Court

The Court refused to grant the injunction on the basis that the Plaintiff had failed to establish good or better prospects of success in enforcing the non-compete clause or proving breach. The Court noted that as the non-compete period would expire before trial, the Plaintiff needed to meet a higher threshold than simply showing a “serious issue to be tried”.

The Court also identified a few flaws in the Plaintiff’s case:

• Unjustified worldwide non-compete restriction: The non-compete clause was drafted without any geographical restriction and therefore operated on a worldwide basis. The Court found this unjustifiable as the confidential information at issue related solely to Hong Kong-specific SFC applications.
• Unjustified 12-month restraint: The 12-month restraint period was not supported by evidence of any particular operational strategies or confidential information with a relevant “shelf life”.
• Unjustified scope of restricted activities: The scope of restricted activities was overly broad, extending beyond virtual asset management. The Court found no legitimate reason for preventing the Defendant from taking up roles in ordinary securities or traditional fund management, even if such activities formed part of the Company’s wider business.
• Failure to identify particulars of the protected information: The Plaintiff failed to adequately specify the confidential information sought to be protected. Much of the information relied upon was generic or publicly accessible, including through prospectuses on the SFC’s website.
• No evidence of misuse: There was insufficient evidence of any ongoing misuse of confidential information or continuing unlawful “springboard” advantage.
• Balance of convenience favoured the Defendant: On the balance of convenience, the Court preferred the Defendant’s position, noting the risks of irreparable harm to his career, including loss of his current employment and reputational “stigma” from an abrupt termination. The Court also took into account the delay of about four to six weeks, from when the Plaintiff said it became aware of the Defendant’s new role, to the commencement of proceedings.

Takeaway for employers

While there has been no changes to the underlying legal principles on enforcement of post-termination restrictive covenants and/or interlocutory applications, this case highlights the level of detail and evidential support the Court expects in applications to enforce post-termination restraints. Employers should bear in mind the following:

• Tighten the geographical scope by reference to demonstrable legitimate interests: The Court is rarely prepared to enforce a worldwide non compete. Where the legitimate interest lies in protecting Hong Kong-specific confidential information, restraints should be drafted accordingly. Broad, group wide or “catch all” restrictions aimed at suppressing competition generally are unlikely to survive scrutiny.
• Tailor the duration of restraint to particular circumstances: The duration of the restraint must be objectively justified. The Court looked for concrete evidence showing that the relevant confidential information or strategies would remain competitively sensitive during the restricted period. In practice, the Court is slow to enforce a 12 month non compete, save in cases involving senior management or exceptional circumstances.
• Define the scope of the restricted activities: Restrictions extending beyond the employee’s actual role or matters which they had material involvement during employment are particularly vulnerable. Seeking to prevent a former employee from working in adjacent or traditional roles, simply because they fall within the employer’s wider business, risks being characterised as excessive and unjustified.
• When enforcing restraints, act quickly and marshal specific evidence: Unexplained delay and reliance on very general descriptions of information sought to be protected can be fatal to an injunction application. This is especially the case where the employee has given strict confidentiality undertakings, which the Court may regard as an adequate, less oppressive form of protection.

The judgment can be found here.