Departing employees: HK court draws line on competition

Employees are free to plan their next career move. What they cannot do is start taking their employer’s customers, business opportunities and confidential information with them before they leave.

In Eventmaster Ltd v Chen Hiu Kwan & Ors [2026] HKCFI 3380, the Hong Kong Court of First Instance drew a clear line between lawful preparation to compete and unlawful competition during employment, particularly for employees responsible for sales, client relationships and commercially sensitive information. It also confirmed that fiduciary duties are not limited to directors and senior executives.

Brief facts

The individual defendants were members of the employer’s sales team. While still employed, two of the employees set up and operated a competing business through a separate company. They subsequently resigned and continued operating the new business. The employer alleged that, before their departures, the two employees diverted opportunities, withheld client enquiries and used confidential information such as pricing and client data.

A third employee, who remained employed, was alleged to have assisted by sharing internal information and helping to prepare quotations.

The employer brought claims for breach of contractual duties, fiduciary duties and implied duties of fidelity and confidence. It also brought claims for dishonest assistance, inducement to breach of contract and conspiracy to injure by unlawful means.

Findings of the Court

The Court found substantially in favour of the employer.

Employees owe continuing duties of loyalty and good faith: The Court reaffirmed that employees owe an implied duty of fidelity and good faith during employment. This includes obligations not to compete with the employer, not to misuse confidential information, and to disclose business opportunities obtained in the course of employment.

There is a clear distinction between preparation and competition: The Court accepted that employees may take preparatory steps towards future employment or business activities. However, the distinction between preparation and actual competition is highly fact-sensitive. On the facts, the employees had gone well beyond preparation. They were actively operating a competing business, concealing quotation requests, issuing competitive quotations to clients, and using confidential information while they were still employed. The Court found that this amounted to unlawful competition and breaches of their duties.

Fiduciary duties are not limited to directors: Perhaps the most important aspect of the judgment is the Court’s confirmation that fiduciary duties may arise even where the employee is not a director or senior executive. The Court recognised that employees handling client relationships, sales opportunities and commercially sensitive information may owe fiduciary duties, even if they are not directors. The employer is vulnerable to abuse if such employees fail to act in its interests.

Employees cannot appropriate mature business opportunities: The Court also considered the concept of a "mature business opportunity". Certain business opportunities had already crystallised during the employees’ employment and arose because of the employees’ positions with the employer. The Court held that the employees could not simply appropriate such opportunities by resigning before the opportunity formally materialised.

Confidential information extends beyond trade secrets: The Court also confirmed that confidential information is not limited to trade secrets. Client contacts, pricing information, contracts, pipeline opportunities and business strategies were all considered commercially valuable hence protectable.

The Court held that all three employees, together with the competing company, were held jointly and severally liable for breaches of their duties. The Court also found dishonest assistance, inducement to breach of contract and unlawful means conspiracy established on the relevant facts. The employer was awarded compensation for lost business opportunities caused by the breaches.

What this means for employers?

For employers, the decision is a welcome confirmation that the courts will protect valuable confidential information, customer relationships and business opportunities where employees overstep the line. Key takeaways include:

• Preparation is permissible; competition is not. Employees must not solicit clients (including preparing competing quotations and pitches), divert business opportunities or operate a competing business during employment.
• Fiduciary duties can extend beyond senior management. Client-facing and sales employees may owe fiduciary duties and be held to a higher standard. Expectations should be clearly documented in employment contracts and policies.
• Confidential information is broader than trade secrets. Customer contacts, pricing information, quotations, and tender opportunities may all attract protection. Employers should use clear confidentiality clauses, restrict access to sensitive information, and maintain systems for recording client enquiries and quotations.
• Records matter. The Court relied heavily on contemporaneous records, such as emails, quotations, salary and MPF records, and messaging records. Proper record-keeping can be decisive when enforcing rights and recovering loss.

The judgment can be found here.