The Court of Final Appeal has recently undertaken a comprehensive review of the extent to which the law will protect information obtained by an employee in the course of employment following the cessation of his employment. The case in question specifically concerned the interplay between confidential information and information protected by legal professional privilege (LPP).
The employee in question, Mr. Aitken, is an Australian qualified lawyer. Whilst he has never worked as a practising lawyer in Hong Kong, he did work in a regulatory capacity for PCCW and, as such, became privy to confidential communications and information between PCCW and their external legal advisors in respect of certain legal proceedings involving CSL.
Mr. Aitken left  PCCW to join CSL in late March 2008. PCCW was, understandably, concerned that Mr. Aitken would use the information obtained during his employment with PCCW  to the detriment of PCCW (as the litigation was ongoing). PCCW therefore applied for an injunction. The injunction imposed two restrictions on Mr. Aitken. The first was an order prohibiting Mr. Aitken from using or disclosing any information of PCCW (relating to the ongoing litigation) (the "Non-disclosure Injunction"). The second was an order prohibiting Mr. Aitken from, effectively, being involved in any capacity with the specific regulatory issue while employed with CSL (to use the words of PCCW, they wanted Mr. Aitken to be "taken out of the arena") (the "Restrictive Injunction"). 
Mr. Aitken accepted the Non-disclosure Injunction. However, Mr. Aitken did not accept  the Restrictive Injunction as it would have the effect of significantly reducing his ability to work in Hong Kong in his chosen career.
Mr. Aitken challenged the Restrictive Injunction. The consequential proceedings have sped through the Court of First Instance, the Court of Appeal and was heard by the Court of Final Appeal in early February this year.
The Legal Issues
The key issue considered by the courts was the interplay and/or conflict between the principles in Bolkiah on one hand and Faccenda Chicken on the other.
(a) The Bolkiah principles
The UK House of Lords in the case of Prince Jefri Bolkiah v KPMG considered the relationship between a solicitor (or an analogous person) and client. It determined that:
  • A solicitor (or a person in an analogous position; in Bolkiah it was KPMG acting in a litigation support role) has a duty to his former client to preserve the confidentiality of information protected by LPP.
  • This duty survives the termination of the client relationship. The duty is absolute.
  • The former client is entitled to prevent his former solicitor from exposing him to any avoidable risk, including the increased risk of use of such information to his prejudice by accepting instructions to act for another client with an adverse interest in that matter and to which the information is or may be relevant.
  • Once the former client establishes that the solicitor possesses relevant information that is privileged, the burden shifts to the solicitor to demonstrate that there is no risk of disclosure.
  • Unless the court is satisfied, on the basis of clear and convincing evidence, that all effective measures have been taken to ensure that no disclosure will occur, a "strict approach is unanswerable" and the solicitor will be restrained from acting for the new client.
(b)  The Faccenda Chicken principles
Faccenda Chicken v Fowler, another UK case, considered the relationship between employer and employee. It determined that:
  • The obligations between an employer and employee are governed by the contract of employment. 
  • In the absence of any express term in the contract, an employee's obligations in respect of the use and disclosure of information are the subject of implied terms.
  • During the course of employment, there is an implied term imposing a duty of good faith or fidelity on the employee.
  • Post-termination, the implied term imposed on the former employee is that he shall not use or disclose any trade secrets or information of a sufficiently high degree of confidentiality as amounts to a trade secret.
  • The burden is on the former employer to identify with precision what trade secrets (or equivalent) he seeks to protect.
  • In deciding whether any particular item of information is to be protected post-termination, the court has to consider all the circumstances of the case, including the nature of the employment and the information itself.  In other words the restriction is not absolute.
Basically Bolkiah applies in relation to a solicitor/client relationship (or an analogous situation) and Faccenda Chicken applied to an employer/employee relationship. Mr. Aitken was an employee of PCCW and also a lawyer.  He was not, however, employed as an in-house lawyer.
The Arguments
PCCW wanted the Bolkiah principles to apply. As such they argued that the fact that Mr. Aitken was an employee, not a retained solicitor, was irrelevant. PCCW's stance was that Mr. Aitken was privy to information which was covered by LPP. LPP is a fundamental right (enshrined in our Basic Law) and is the primary absolute and predominant public interest which trumps all other public interest, should there be a clash; including the public interest in maintaining freedom of employment. It contended that Bolkiah (and the relief granted in that case) is concerned with the nature of the information not the nature of the relationship between the parties. Therefore, PCCW argued, as the information which Mr. Aitken had obtained during his employment was privileged, the Bolkiah principles should be applied. 
Alternatively, PCCW argued, Mr. Aitken  was in a position "analogous to" that of a solicitor. 
On the other side Mr. Aitken and CSL argued that Bolkiah relief is limited to a solicitor/client relationship only as it is founded, not on the nature of the information, but upon the protection of confidentiality in a fiduciary relationship.  In the case of an employer - employee relationship, the governing principles in the protection of confidential information are those set out in Faccenda Chicken.  
If PCCW was correct then an absolute restriction would apply to Mr. Aitken and PCCW would be entitled to "take him out of the arena" with the Restrictive Injunction to ensure there is no risk of inadvertent disclosure of LPP information. If Mr. Aitken's and CSL's submission was correct then  Faccenda Chicken sets the correct test and PCCW are only entitled to the non-disputed Non-disclosure Injunction.
At the Court of First Instance
The judge at first instance (Deputy Judge Au) agreed that Bolkiah applies only to a solicitor/client relationship where confidential and privileged information is imparted under a duty of confidence. Bolkiah is not of general applicability and does not apply in an employer/employee relationship. 
The judge then considered whether Mr. Aitken was in a position analogous to that of a solicitor whilst employed by PCCW. He decided that although Mr. Aitken had been privy to conferences and discussions which were legal in nature, he did not participate in a professional capacity as a lawyer and, therefore, his role could not be said to be analogous to that of a solicitor.
The Restrictive Injunction was discharged.
DJ Au, on the other hand, was satisfied that there was a serious question to be tried whether Mr. Aitken was privy to certain categories of allegedly confidential information. He therefore granted the Non-disclosure Injunction although re-fashioned it in narrower and more particularised terms than that sought by PCCW.
At the Court of Appeal before VP Tang, Le Pichon JA and Stone J
Immediately after DJ Au's ruling, PCCW mounted an appeal. The Court of Appeal upheld the First Instance decision by a majority (Le Pichon JA dissenting).
In the Court of Appeal PCCW relied on Lord Millet's judgment in Bolkiah, that:
"It is of the highest importance to the administration of justice that a solicitor or other person in possession of confidential and privileged information should not act in any way that might appear to put that information at risk or coming in to the hands of someone with an adverse interest." (emphasis added). 
PCCW asked the Court to read the words "other person" widely and that, Mr. Aitken should be wholly removed from his dealings with the specific regulatory issue and associated matters in his current employment with CSL. 
Mr. Aitken and CSL took the position that the case is really about "trade secrets" (or information of a similarly high standard of confidentiality). As such the correct statement of the law relating to an employee's post-termination duty of confidentiality is that laid down in Faccenda Chicken. Bolkiah has never been applied in an employee/employer situation and the two distinct lines of case law, underpinned, as they are, by very different policy considerations, should not be confused.
Stone J in delivering the lead judgment of the Court of Appeal refused to accept PCCW's interpretation of "or other person". In his Lordship's view, the phrase "or other person" could only have been intended as a reference to a relationship analogous to a client/solicitor relationship. To apply the Bolkiah remedy to an employer/employer context would create "a new form of 'servitude or serfdom' whereby the employee is precluded from transport of his acquired skills within the labour market". 
Stone J stated that it is "precisely the nature of the solicitor/client relationship which gave rise to extraordinary duties, duties which upon no basis properly can fall upon a mere employee, however well qualified."
PCCW's fall-back position, that Mr. Aitken was in any event in an "analogous relationship" with his former employer, was also roundly rejected by Stone J.
Simply put therefore, Mr. Aitken, as a former employee of PCCW, should not be restrained by the very onerous terms of the Restrictive Injunction.
That was of course not the end of the legal journey. PCCW appealed again to the Court of Final Appeal.
At the Court of Final Appeal before Bokhary PJ, Chan PJ, Ribeiro PJ, Litton NPJ and Hoffmann NPJ
Much of the First Instance and the Court of Appeal submissions were echoed in this appeal.  By an unanimous decision the Court of Final Appeal dismissed PCCW's appeal.   
PCCW cited a number of cases concerned with maintaining the inviolability of privileged communications against competing public policies (of which transportation of labour skills was but one).
Mr. Ribeiro PJ in delivering the lead judgment pointed out that the appeal was concerned with the nature and scope of relief available to PCCW to maintain the confidentiality of information acquired by Mr. Aitken as a former employee. The issues of LPP were not engaged; in those cases where solicitors have been enjoined against acting for new clients, such relief was founded on the basis of protecting confidentiality in the context of a fiduciary relationship between solicitor and client.
Lord Hoffmann also stated in his judgment that "there is a very considerable difference between the position of a solicitor and an employee, even though the confidential information which they have obtained may be the same." The much relied-on Bolkiah was concerned with relief ordered against a firm for all purpose to be treated as a firm of solicitors. Notably, a solicitor will not be dependant upon one client for his livelihood whereas an employee can only work for one employer at any given time, and chances are his new employer is likely to be in the same line of business and therefore be in competition with the previous one. Mr. Aitken, who falls to be treated simply as an ex-employee, is therefore not subject to the same kind of obligations as were the case in Bolkiah.
Furthermore, it is well established in employment law that an employee brings to a job his own stock of skill, knowledge and experience and therefore it is important to distinguish between this and an employer's trade secrets (or equivalent) which are entitled to protection. Mr. Bokhary PJ also acknowledged one's freedom of choice of occupation under the Basic Law.
As a final point, the Court of Final Appeal specifically left open the question of the relief available against an in-house legal advisor of a company moving to a competitor to work on the other side of a contentious matter or solicitors moving between private practice and in-house roles when acting on both sides of litigation. 
The proper way for an employer to protect the use or disclosure of confidential information (be it privileged or not) is by means of properly drafted post-termination restrictive covenants. The Bolkiah principles to protect information subject to legal privilege should be narrowly interpreted.
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