DEGREEASIA LTD t/a HONG KONG INSTITUTE OF CONTINUING EDUCATION v. PAULES LEE SIU YUK AND OTHERS

HCA1686/2006

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NO. 1686 OF 2006

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J U D G M E N T

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The parties and personalities involved

1.  The 1^st plaintiff (“Degreeasia”) is a company incorporated in Hong Kong.  At the material time it operated an institution known as Hong Kong Institute of Continuing Education (“HKICE”) (in this judgment, sometimes these two names are used interchangeably). 

2.  HKICE’s business included offering degree courses for overseas universities to students in Hong Kong. 

3.  Courses of two such universities are relevant in this action :

(1)     Benedictine College in the United States.

(2)     Indiana University (“IU”), also in the United States.

4.  Mr David Yau (“Mr Yau”) was at all material times the Managing Director of Degreeasia and the main person in charge of the business and operation of Degreeasia. 

5.  The 1^st defendant (“Paules Lee”) was an employee of Degreeasia.  By an employment contract dated 25 June 2005 (“the June 2005 contract”) she was employed as an “education consultant”.  On 1 September 2005 her employment status was changed to that of a “student services co‑ordinator” by a contract of the same date (“the September 2005 contract”). 

6.  The June 2005 contract contained the following clause :

“Confidentiality

You agree that at anytime you cannot disclose any Company’s information, operation procedures, business practice secrecy to any third-party individual, entity, company, association or organization.”

7.  The September 2005 contract contained the following relevant clauses :

“5. Restrictive Covenant

You agree that for a period of one year after leaving the Company you should not attempt to entice away from the Company any member of its staff, any client of the Company or any person who has been in the habit of dealing with the Company and with whom you have had contact during your employment by the Company

In addition, you shall not be employed or enticed to any consultancy position for salaried or non-salaried, to any relevant company, entity, association or organization in the education, training & development or whatsoever industry within one year you have left the Company.

6. Company’s Confidentiality

You agree that at anytime you cannot disclose any Company’s information, operation procedures, business practice and business secrecy to any third-party individual, entity, company, association or organization.  This clause will be effective during the time of your employment and within two years after you have left the Company.  Otherwise, you will be treated by disciplinary action or dismissal with cause by the Company.”

8.  Paules Lee’s employment with Degreeasia was terminated by a termination notice dated 10 June 2006.  The reason for terminating her employment was, apparently, a dispute with other sales staff of Degreeasia over the use of a classroom.  This case is not about the rightness or wrongness of the termination and I mention this purely by way of background.

9.  On 6 June 2006 Paules Lee petitioned for her own bankruptcy and a bankruptcy order was made against Paules Lee on 18 July 2006. 

10.  Paules Lee claimed that after her employment had been terminated by Degreeasia, she entered into an employment contract dated 4 July 2006 with a company known as Advanced Learning Limited (“the July 2006 contract”).  Her job title was “receptionist”.  The address on the letterhead of Advanced Learning Limited was “2/F Ming Tak Building, 101 Wanchai Road, Hong Kong”.  The employment period was stated to be only from 4 July 2006 to 31 August 2006.  According to Paules Lee, she was introduced to this job by the 3^rd defendant, Suen, as a “part time temporary job” only.  Later she left this job but in 2008 she returned to work at Advanced Learning Limited.  The nature of her employment, as well as the identity of her employer, is in dispute.  This will be dealt with below.

11.  In the summer of 2006, she was provided with a name card.  She said it was given to her by mistake and that she was not supposed to have a name card as part of her employment.  I shall deal with this explanation of hers later in this judgment, but at this introductory stage I would set out the contents of the said name card. 

12.  It is a name card of an institution called “Institute of Advanced Learning” (the trade name of the 2^nd defendant in this case, and not Advanced Learning Limited, the entity whose name appeared on the July 2006 employment contract).  It contained her Chinese and English names.  She was described as an education consultant.  It contained her mobile phone number.  It referred to the “In Learning Group”.  Four addresses were mentioned :

(1)     3/F Tai Sang Commercial Building, 24–34 Hennessy Road, Wanchai, Hong Kong.

(2)     The Ming Tak Building address on Wanchai Road (this is the address which appeared on the July 2006 contract).

(3)     5/F Yue Hwa International Building, 1 Kowloon Park Drive, Tsimshatsui, Kowloon.

(4)     3/F Ashley Nine, 9 Ashley Road, Tsimshatsui, Kowloon.

13.  The 2^nd defendant (“In Learning”) is a company incorporated in Hong Kong.  At the material time it operated an institution known as Institute of Advanced Learning (“IAL”).  In this judgment I shall sometimes refer to those two names interchangeably. 

14.  IAL offered degree courses for overseas universities to students in Hong Kong.  One of them was the programme offered by Utah State University (“USU”) in the United States.

15.  Dr Richard Wong (“Dr Wong”) was at all material times the Managing Director of In Learning.  Advanced Learning Limited (mentioned above as being allegedly the employer of Paules Lee) was also one of his companies. 

16.  Dr Wong had known Mr Yau since about 1997.  Mr Yau was in fact a 50% shareholder of In Learning at the time of its incorporation.  For reasons that I need not go into and which are not relevant to the resolution of the issues in this action (and I have not been asked to make precise findings in relation thereto), the relationship between Dr Wong and Mr Yau has deteriorated since about 2002.  I only need to say that there existed, and obviously still exists, a lot of “bad blood” between Mr Yau and Dr Wong.

17.  The 3^rd defendant (“Suen”) was employed by Degreeasia as a marketing manager by a written contract dated 6 May 2003 (“the May 2003 contract”).  The May 2003 contract did not contain any restrictive covenants or provisions dealing with use of trade secrets or confidential information during, or after, his employment.

18.  There is an unsigned contract dated 1 February 2005 (“the unsigned contract”) which, according to Degreeasia, was intended by it to govern its relationship with Suen.  For reasons that are in dispute, it has never been signed by Suen. 

19.  As will be seen below, there is also an issue as to whether, despite it being unsigned, certain provisions contained therein had become part of the employment contract between Degreeasia and Suen and whether Suen has been in breach thereof.  Those provisions are :

“5. Restrictive Covenant

You agree that for a period of one year after leaving the Company you should not attempt to entice away from the Company any member of its staff, any client of the Company or any person who has been in the habit of dealing with the Company and with whom you have had contact during your employment by the Company.

In addition, you shall not be employed or act in the capacity of consultant or agent to any company, entity, association or organization in the education or training and development business within the Hong Kong Special Administrative Region for the period of one year after leaving the Company.

6. Company’s Confidentiality

You agree that at anytime you cannot disclose any Company’s information, operation procedures, business practice and business secrecy to any third-party individual, entity, company, association or organization.  This clause will be effective during the time of your employment and within two years after you have left the Company.  Otherwise, you will be treated by disciplinary action or dismissal with cause by the Company.”

20.  Suen left the employment of Degreeasia at the end of January 2006.  On 27 January 2006 (Friday) he sent an e‑mail to his colleagues stating that it was his last day at work (it also happened to be the day before Chinese New Year’s eve). 

21.  By a written contract dated 13 March 2006 (“the March 2006 contract”) Suen was employed by IAL as a Program Manager.  The letterhead of the contract bore the name of IAL and it stated the Yue Hwa International Building address referred to above.

The facts leading to the disputes between the parties and the issues

22.  Degreeasia’s pleading has undergone different “authorship”.  The allegations and particulars (as well as the persons alleged to have been guilty of certain acts) sometimes do not “gel” together.  During the course of the trial I have asked for a document from Degreeasia setting out the areas of factual issues in dispute so as to assist me in understanding the pleaded issues.  However, the list of facial issues in dispute handed to me on behalf of Degreeasia does not match with the issues as distilled (doing the best I can) from the pleadings, in that many of Degreeasia’s averments (which are disputed by the defendants) were not reflected there.  Unless there is an express abandonment of a plea or an amendment to the pleadings, there is no alternative for me but to adhere to the pleadings, irrespective of the way in which an advocate has chosen to present (or emphasise) his case forensically.  I shall therefore deal with the issues that can be crystallized from the pleadings.

23.  The complaints of Degreeasia against the defendants are as follows :

(1)     Both Paules Lee and Suen were bound by the restrictive covenants and confidentiality clauses in their respective employment contracts.

(2)     They were in any event subject to the implied duties of an employee as to fidelity and as to use of confidential information and trade secrets during, and after the termination of, the employment relationship. 

(3)     In breach of the restrictive covenants in their contracts of employment, Paules Lee and Suen started working for In Learning within the “prohibited period” after termination of their employment.

(4)     Paules Lee had, during her employment with Degreeasia, compiled, duplicated or made a copy of a confidential students list containing the names, telephone numbers, contact details and addresses of Degreeasia’s students and had kept it when she moved to work for In Learning.

(5)     Paules Lee and Suen had enticed away Degreeasia’s students to enroll in degree courses offered by In Learning.

(6)     Suen had, after the termination of his employment contract with Degreeasia, telephoned one Madam Crystal Au, an education consultant of Degreeasia, to ask her to divert Degreeasia’s telephone line to Suen for the purpose of enticing students away from Degreeasia.

(7)     In Learning had dishonestly and knowingly misappropriated Degreeasia’s confidential information and trade secrets by procuring Paules Lee and Suen to do so. 

(8)     In Learning is liable to Degreeasia because it had, or had knowingly, employed Suen and Paules Lee who were bound by the restrictive covenants in their respective contracts of employment. 

(9)     In Learning had, through Dr Wong, asked a young man called Cheng Man Kit (who was the younger brother of a former employee of In Learning Madam Sally Cheng—who had since “switched over” and moved to work for Degreeasia) to enroll as a student in Degreeasia’s IU programme and had also written malicious and injurious e‑mails in Cheng Man Kit’s name to IU. 

(10)   In Learning has made false complaints to the Education and Manpower Bureau about the Indiana University programme offered by Degreeasia.  I should say that this aspect of the case is not really supported by any evidence and I dismiss it right at the outset. 

(11)   In Learning, through Dr Wong, had “badmouthed” Degreeasia in front of students who were enrolled in Degreeasia’s Benedictine College programme.

24.  The responses of the various defendants are :

(1)     Paules Lee disputes the validity of the confidentiality clause and the restrictive covenant in the September 2005 contract.

(2)     In any event she denies that she has been in breach of her obligations (whether under the express provisions of the September 2005 contract or under any implied terms) in that :

          (a)    She was only employed as a part time temporary receptionist by Advanced Learning Limited, and the name card (naming her to be an education consultant of IAL) was supplied to her by mistake.

          (b)    She has not stolen or misappropriated any confidential students list from Degreeasia. 

          (c)    She admits that she has spoken to a Degreeasia student called Lam Yiu on the phone but contends that it was Lam Yiu who took the initiative of calling her (and not the other way round). 

          (d)    She further admits that she has told Lam Yiu about her new job and has asked Lam Yiu to come up to her new workplace to see if Lam Yiu would be interested in working there, but she denies having lured Lam Yiu or her friends to switch from Degreeasia to In Learning. 

(3)     Suen disputes that the confidentiality clause and the restrictive covenant in the unsigned contract had been incorporated into his employment contract with Degreeasia, in that he had never agreed to the terms of the unsigned contract. 

(4)     In any event Suen disputes the validity of the said two clauses. 

(5)     Suen denies having asked Crystal Au to divert calls to his telephone line.

(6)     Dr Wong (on behalf of In Learning) denies having asked Cheng Man Kit to enroll in the IU programme or that he had sent e‑mails to IU or had “badmouthed” Degreeasia in front of Lam Yiu and others. 

The issues one by one

25.  I now proceed to deal with the issues one by one. 

Validity of the restrictive clauses and confidentiality clauses

26.  Both Paules Lee and Suen had restrictive covenants and confidentiality clauses in their respective contracts of employment (in Suen’s case, I should say “putative contract of employment” because of the dispute over whether the terms of the unsigned contract had become part of his terms of employment).  While each case turns on the wording of the particular clause in question, the law governing the validity of such clauses is common to both defendants. 

27.  In Learning and Suen are legally represented whereas Paules Lee acted in person.  Paules Lee is therefore under some handicap in terms of making legal submissions on the validity of the restrictive covenant in her employment contract.  However, since part of Degreeasia’s case against In Learning is “derivative” upon making good its case of breach of restrictive covenants against Paules Lee, In Learning has an interest in addressing the issue of Paules Lee’s restrictive covenant as well.  Submissions have in fact been made to me by Miss Janine Cheung, counsel for In Learning and Suen, on the validity of Paules Lee’s restrictive covenant.

28.  A preliminary point taken by Miss Cheung is that no consideration has been provided by Degreeasia in return for clauses 5 and 6 of the September 2005 contract.  The basis of this argument is that the terms of the June 2005 contract (which, it will be recalled, was the contract under which Paules Lee was employed by Degreeasia as an education consultant) and the September 2005 contract were largely identical and the only additional clauses were clauses 5 and 6.  Therefore, it is said, no additional consideration has been given by Degreeasia in return for the more onerous post‑employment restraints imposed in the September 2005 contract.

29.  I reject this argument.

30.  Leaving aside the point that “lack of consideration” is something that has to be positively pleaded by way of defence, the very premise of this argument has not been made out on the facts.  The terms of the June 2005 contract and the September 2005 contract were not largely identical.  The salary is different: it was HK$8,000 per month under the June 2005 contract and HK$9,000 under the September 2005 contract.  Materially, the nature of Paules Lee’s job was (contrary to Miss Cheung’s submissions) not the same under the two contracts.  It is Suen’s evidence (which I accept in this regard) that he interviewed Paules Lee when she joined HKICE in 2005.  After the busy summer months, he chose some education consultants who had a sense of responsibility and were diligent but who were not good at the work of education consultants and suggested that they should become student services co‑ordinators instead.  Paules Lee was one of such education consultants (together with others such as June, Cathy and “Bee”).  Whatever may be the reason why Paules Lee changed from being an education consultant to a student services co‑ordinator, the fact is that the job nature was different.  Put on a high level of generality, the task of education consultants was to recruit new students whereas that of student services co‑ordinators was to look after students who have already enrolled.  This was a variation of her employment which is capable of prejudicing or benefiting either party.  It is trite law that a variation of contract of this type generates its own consideration to support the agreement to vary (see Chittyon Contracts (30^th ed.) (Vol.1) §3–079 at p.299).  In my view, such consideration is also capable of supporting the agreement to include clauses 5 and 6 in the “new deal”. 

31.  I now turn the substantive arguments on the validity of clauses 5 and 6. 

32.  The basic rule is that covenants in restraint of trade are unenforceable unless they can be shown to be reasonable in the interests of the parties and in the public interest (see Bridge v Deacons [1984] 1 AC 705 at 713A–B per Lord Fraser of Tullybelton).  It is trite that the burden of demonstrating the reasonableness of a covenant is on the party seeking to enforce it, in this case Degreeasia.

33.  The law on enforceability of restrictive covenants in an employment contract is later conveniently summarized in Office Angels Ltd v Rainer‑Thomas and O’Connor [1991] IRLR 214.  They are as follows :

(1)     If the court is to uphold the validity of any covenant in restraint of trade, the covenantee must show that the covenant is both reasonable in the interests of the contracting parties and reasonable in the interests of the public; (see for example Herbert Morris Ltd v Saxelby [1916]AC 688 at p.707 per Lord Parker of Waddington).

(2)     A distinction is, however, to be drawn between (a) a covenant against competition entered into by a vendor with the purchaser of the goodwill of a business, which will be upheld as necessary to protect the subject‑matter of the sale, provided that it is confined to the area within which competition on the part of the vendor would be likely to injure the purchaser in the enjoyment of the goodwill he has brought, and (b) a covenant between master and servant designed to prevent competition by the servant with the master after the termination of his contract of service : (see for example Kores Manufacturing Co Ltd v Kolok Manufacturing Ltd [1959] Ch 109 at p.118 per Jenkins LJ).

(3)     In the case of contracts between master and servant, covenants against competition are never as such upheld by the court.  As Lord Parker put it in Herbert Morris Ltd v Saxelby(supra) at p.709 :

“I cannot find any case in which a covenant against competition by a servant or apprentice has, as such, ever been upheld by the Court. Wherever such covenants have been upheld it has been on the ground, not that the servant or apprentice would, by reason of his employment or training, obtain the skill and knowledge necessary to equip him as a possible competitor in the trade, but that he might obtain such personal knowledge of and influence over the customers of his employer, or such an acquaintance with his employer’s trade secrets as would enable him, if competition were allowed, to take advantage of his employers’ trade connection or utilize information confidentially obtained.”

(4)     The subject‑matter in respect of which an employer may legitimately claim protection from an employee by a covenant in restraint of trade was further identified by Lord Wilberforce in Stenhouse Ltd v Phillips [1974]AC 391 (at p.400) as follows :

“The employers’ claim for protection must be based upon the identification of some advantage or asset inherent in the business which can properly be regarded as, in a general sense, his property, and which it would be unjust to allow the employee to appropriate for his own purposes, even though he, the employee, may have contributed to its creation.”

(5)     If the court is to uphold restrictions which a covenant imposes upon the freedom of action of the servant after he had left the service of the master, the master must satisfy the court that the restrictions are no greater than are reasonably necessary for the protection of the master in his business: (see Mason v Provident Clothing & Supply Co Ltd [1913] AC 724 at p.742 per Lord Moulton).  As Lord Parker stressed in Herbert Morris Ltd v Saxelby(supra) at p.707, for any covenant in restraint of trade to be treated as reasonable in the interests of the parties ‘it must afford no more than adequate protection to the benefit of the party in whose favour it is imposed’ [Lord Parker’s emphasis].

34.  Later in the same judgment, Sir Christopher Slade said (from paragraphs 54 to 56) :

“A covenant which prohibits wholly the carrying on of business by a former employee in a specified area for a specified time will always be approached with caution by the court, since it amounts to a covenant against competition. In Scorer’s case (supra) a covenant of this type was justifiable because otherwise the defendant would have been able to take unfair advantage of contacts and information with regard to the plaintiff’s clients and properties which he had obtained while serving with the plaintiff (see at p.1423E per Sellers LJ). As Danckwerts LJ put it (at p.1425 B–C) :

‘But the real point was, as it seems to me, to prevent the defendant using the confidential knowledge and association which he received from the course of his operation on behalf of the plaintiff. It is very difficult to protect (which can be done legitimately) such confidential knowledge without in some way imposing a restriction upon completion.’

Other circumstances, apart from the existence of confidential information, may in particular cases render a covenant against solicitation and dealing of little practical use to an employer and may thus justify the imposition on his employee of a covenant against competition drawn by reference to an area. The decision of the House of Lords in Fitch v. Dewes [1921] 2 AC 158 is one example of a case where an area restriction on competition has been upheld. That was case of covenant entered into by a solicitor with his managing clerk. Another example, given by Mr Tabachnik, of a case where an area restriction might be justifiable is that where the employer’s clients, though recurring, are not readily identifiable, e.g. in the case of a barber’s shop or a business dealing mainly with cash customers.

In the present case, however, the plaintiff’s clients—and for the reasons given above we are not in the present context concerned with their pool of temporary workers—are in general readily identifiable.  An area restriction against competition is not required for the protection of any trade secrets or confidential information.  Mr Ross-Munro’s forceful argument has not in the end convinced me that a covenant in the form of clause 4.5(b) was reasonable in the interests of the parties and afforded no more than adequate protection to the plaintiff in respect of its connection with its clients.  My reasons for this conclusion may be quite shortly stated.”

35.  Office Angels was subsequently considered in Steiner (UK) Ltd v Spray (1 December 1993, unreported).  The case itself concerns hair stylists but parts of the judgment of Hoffman LJ (as Lord Hoffman then was and who, as Mr Hoffman QC, argued Bridge v Deacons on behalf of the respondent, Deacons, in the Privy Council) contain the following observations which are of assistance in general :

“It is clearly established that the employer is not entitled to protect himself merely against competition. The only legitimate interests which, as against a former employee, he is entitled to protect are his trade secrets and customer connections to the extent that the employee may have gained influence over the customer so they would be likely to follow the employee to his or her new employment. There is no question of trade secrets in this case. But the plaintiffs, in their affidavits, asserted that a hairdresser such as the defendant does, in the nature of things, acquire an influence over the customers so they would be likely to follow her to another salon. Mr Mehigan said that the plaintiff’s evidence is rather thin on this point. But it is a matter of common knowledge that people are loyal to their hairdressers and that that loyalty which, in law, is part of the goodwill of the employer, induces them to leave and thereby cause damage to the employer’s goodwill.”

36.  The authorities of (among others) Office Angels and Steiner as well as the theme about personal influence and loyalty is later picked up in Dawney, Day & Co. Ltd v D’Alphen [1998] ICR 1068 (not a hairdresser case) at 1081 by Robert Walker J (as Lord Walker of Gestingthorpe then was) :

“This principle is from time to time applied in the hairdressing business. Restrictive covenants are common in that business and from time to time come before the court (see for instance Steiner (UK) v Spray Court of Appeal, 1 December 1993). As Hoffmann LJ said in that case, it is common knowledge that people are loyal to their hairdressers. That loyalty is founded primarily on the individual hairdresser’s skill in cutting and setting hair, and on his or her pleasant and sympathetic personality. Nevertheless the customer’s loyalty is in law, as Hoffmann LJ says, part of the employer’s goodwill. It is the employer who has provided the employee with the opportunity to improve his or her skills and to establish and develop a personal relationship with the customer; and it is the employer who has borne the cost of providing attractive premises and facilities which may help to cement the personal relationship (see also Marion White Ltd v Francis [1972] 1 WLR 1423, 1429).”

37.  As to the criterion on which the courts will judge or assess the reasonableness of a restraint in terms of protecting the employer’s legitimate interest, Godfrey J said in HoWing Cheong & others v Graham Margot & another [1991] 1 HKLR 245 at 249G–I :

“But even if the major reason for the imposition of the restriction had been to protect the plaintiffs from an unfair invasion of their customer connection (and I am prepared to accept that this was a subsidiary reason) the period of 3 years was in my judgment longer than was reasonably required for the purpose, taking a ‘broad and commonsense view’ : see Stenhouse Ltd v Philips [1974] 2 WLR 134 per Lord Wilberforce at p140G [note: in the official law reports the citation should be [1974] AC 391 at 402]. As is pointed out by Mr J.D. Heydon in his valuable monograph on the Restraint of Trade Doctrine, at pp.158, 159, there are two, or at any rate two main, factors which have to be considered in determining the reasonableness of time restraints which purport to protect a customer connection. The restraint will be reasonable only if its duration is no longer than necessary (1) for the employer to put a new man on the job and for the new employee to demonstrate his effectiveness to customers and (2) to prevent an employee who has quit the territory from returning to acquire the employer’s business”.

38.  Degreeasia relied on Waung J’s remarks in BSC Building Material Ltd v Cheung [1998] 2 HKC 425 at 433A to the effect that the law on this subject has developed in a way too heavily in favour of the employee.  Quite apart from the fact that it is a question of debate whether the law has truly developed in a way too heavily in favour of the employee (and, like in many cases, judicial utterances could very well have been influenced and coloured by the view the particular tribunal has taken of the “moral turpitude” of the characters involved in the case before it), the short answer is that the law in this area is too well settled and entrenched for me to take the bold step of changing it.  In any event Degreeasia had not put forward any alternative formulation of the applicable principles which would take the place of the existing principles. 

39.  Degreeasia further relied on the decision of Chu J in Beacon College Ltd v Yiu Man Hau Alfred & others [2001] 4 HKC 433 as an example that a restraint of trade of one year in the case of a tutoring college was reasonable.  However, quite apart from the fact that comparision of the factual results with other cases is rarely a helpful exercise in this area of the law (because the matter invariably involves the precise terms of the covenant and the evidence adduced before the court of that particular employment and employee—Beacon College was about the employment of teachers and tutors), the actual decision in Beacon College in fact did not contain any discussion or ruling of the reasonableness of any restrictive covenant at all.  The decision is therefore of no assistance and is in fact irrelevant. 

40.  It is well established that if a restrictive covenant cannot be shown by the employer to be reasonable, it will be struck down and will not be enforced unless the offending part can be severed by applying a notional “blue pencil” in removing words.  The court cannot and will not re‑write the covenant or contract by substituting what in its view would be a “reasonable” restriction as to time, geographical location or types of work (see Chitty §16–197).  If an employer includes an over‑ambitious covenant in its employment contract, he cannot expect that in case the covenant is struck down the court will come to its rescue or assistance.  Such an employer cannot be heard to say that the existence of a restrictive covenant in its contract indicates an intention to impose some sort of post‑employment restraint on its employees and therefore the court should somehow give effect to such an intention by imposing a restraint for what the court regards to be (say) a “reasonable period”.

41.  I now turn to the facts of this case.

42.  I am of the firm view that the restrictive covenants in the case of both Paules Lee and Suen are unenforceable because they do not pass the reasonableness requirement as laid down by the authorities. 

43.  First I deal with Paules Lee.  The restrictive covenant in her case is clause 5 of the September 2005 contract.  Clause 5 has two parts.  The first part is a covenant against solicitation.  The second part is a covenant against employment.  I shall first deal with the covenant against employment.

44.  Her last position in Degreeasia was student services co‑ordinator.  She worked at the front desk of the 7^th floor where most of the classrooms were located.  She was responsible for class A3 of the Benedictine College programme although sometimes her work required her to deal with students outside class A3.  Her work included making photocopies of class materials for teachers and students, taking the daily attendance record of the students, handling the borrowing and returning of library books, chasing the students for tuition and fees for other school activities, tidying up classrooms after class and contacting the students in case there were sudden or ad hoc announcements to be made. 

45.  I have not lost sight of the fact that the wording of the September 2005 contract can be said to cover work beyond the above tasks and which might include “selling” or “promoting” courses to new students (e.g.  ”student recruitment activities”, “attending promotion activities”) and there were references in the contract to “student retention” or “internal referral” bonuses.  However, in understanding the contemplated ambit of Paules Lee’s employment, one must have regard to the background to the conclusion of the September 2005 contract.  In doing so I bear in mind that the validity of a covenant is to be judged as at the time of its conclusion (see Chitty §16–088) and therefore I would not take into account the fact that in fact Paules Lee has not subsequently been deployed for promotional or recruitment activities and had remained a student services co‑ordinator pure and simple.  I would also not take into account the fact that in fact no bonus scheme had subsequently been devised or implemented for Paules Lee.

46.  But even so, the background facts (which I am entitled to take into account) are reasonably clear that Paules Lee was “converted” from an education consultant to a student services co‑ordinator because her work as an education was not regarded as satisfactory.  While the wording quoted above may arguably contemplate that Degreeasia might deploy her, from time to time, to help out in recruitment activities (education fairs and the like), it is unlikely that the parties would have contemplated that those would be her main tasks or that she could “double up” as an education consultant.  After all, her job was re‑titled student services co‑ordinator and a change in the main duties and nature of work must have been contemplated. 

47.  Viewed in this light, I accept Miss Cheung’s submissions that Paules Lee’s tasks appeared to be administrative in nature.  “Administrative” is not a term of art in this context, and I have used this phrase to describe the sort of routine paperwork and liaison work that would invariably have to be done in any education or commercial institution.  I use it to draw a contradistinction with an academic member of staff (e.g.  a teacher or a tutor) who would be expected to acquire a certain degree of influence over (and command loyalty from) the students (who are the “customers”). 

48.  The point is really too simple to require elaborate elaboration, and no amount of self‑serving oral evidence from Degreeasia’s witnesses can alter what is actually a common sense conclusion.  Students enroll (or decide whether to remain) at an educational institution based on the quality of the teaching staff and teaching materials.  They may also do so based on the reputation or standing or quality of the degree or ultimate qualification that would be attained.  Many people or staff members in an academic institution would come into regular contact with its students and can strike a good rapport with its students : for example, librarians, amahs, clerical staff, security guards, but students do not base their choice of courses (and do not choose whether to remain with one course or to switch to another) based on their rapport with such persons. 

49.  On the facts of this case it is stretching the point too much to suggest that someone in the position of Paules Lee (who no doubt had developed a certain rapport with the students to the extent that they had become friends—more on this below) would command the sort of influence and customer loyalty which could amount to Degreeasia’s asset (which may loosely be termed the “goodwill” or “connection” acquired on behalf of Degreeasia) which was protectable by a restrictive covenant in the eyes of the law. 

50.  Put bluntly, students do not choose to enroll in a course at Degreeasia (or, if they are existing students, decide whether to stay on) because of the efforts of Paules Lee (or someone in her position) and it was as simple as that.

51.  In any event, even if Paules Lee can be regarded as someone whose nature of work is such that she could in principle be subject to some post‑employment restraints, I am of the firm view that the restrictions in her employment contract were unreasonable (and Degreeasia has failed to persuade me that they are reasonable). 

52.  The evidence about the origin of the restrictive covenant was given by Mr Yau.  Before I discuss his evidence, I would comment on his evidence generally.  He gave me the impression as someone who was aware of the primary factual disputes in this case only in very broad brush terms.  While he could testify directly about the origin of the restrictive covenants, he could not assist in a lot of the primary facts relevant to the individual allegations in this case.  Much of what he said on those matters is hearsay.  He has probably been put forward as a witness because he is “the boss” and had to be seen to be leading the team in the litigation.

53.  According to Mr Yau, at the earlier stage (e.g. in 2003 when Suen first joined Degreeasia) there were no restrictive covenants in the employment contracts of Degreeasia because the business was young and not strong enough to enforce such provisions.  As the business grew he had conversations with legal advisors and he understood the importance of protecting the business’s assets.  There was also a suggestion by him that he was alerted to the significance or importance of such clauses because one of In Learning’s former employee Sally Cheng (who later joined Degreeasia—more about this below) had been sued by In Learning on the basis (among other things) of a restrictive covenant in her contract (Mr Yau decided to help her out and the case was eventually settled—see below). 

54.  According to Josephine Choi Ka Ling (“Choi”), a director of Degreeasia, the period of restraint in the restrictive covenants was decided by Mr Yau.  As to the types of activities to be restrained by the restrictive covenant, according to Choi it was based on legal advice but she did not know who had spoken to the lawyers.

55.  All the above, however, went nowhere towards providing any positive justification for the contents of the restrictive covenants or addressing the criterion laid down by Godfrey J in Ho Wai Cheong at 249H–I.  On the evidence, little training was required to perform the task of Paules Lee.  The items of work in question are not nuclear science, and purely as a matter of common sense (and even without the need for positive evidence as to the period of training required) the training period could only be in the region of a few months.  That is in fact not inconsistent with some of the evidence given at trial.  On no view can one say that one needed one year to train up someone to take the place of Paules Lee.  Degreeasia has adduced no evidence to this effect.  The point can readily be tested by the fact that Paules Lee only started her role as student services co‑ordinator in September 2005 (when Lam Yiu and her friends in class A3 started).  She was fired in June 2006, less than a year after commencement of her work as student services co‑ordinator (and less than a year since she had first known Lam Yiu and her friends).  On Degreeasia’s own case Paules Lee must have acquired her influence over (and won the loyalty of) the students within less than a year. 

56.  Nor, even if one were minded to treat Lord Wilberforce’s test in Stenhouse (cited by Godfrey J in Ho Wai Cheong at 249G) as a separate and slightly different test from that propounded by Godfrey J (and I do not think that it was really that different), did Degreeasia’s evidence provide any basis for finding that the restraints were reasonable on a “broad and commonsense view”, having informed oneself as fully as one can “of the facts and circumstances relating to the employer’s business, the nature of the employer’s interest to be protected, and the likely effect of this on solicitation” (per Lord Wilberforce at 402D–E). 

57.  Even if (contrary to my earlier finding) Paules Lee is to be regarded as having the sort of connection with or influence over the students as to render it legitimate to subject her to a restrictive covenant, the fact remains that any such connection or influence would be extremely flimsy and weak.  A one year‑restraint is, on any view, too long. 

58.  The coverage of the covenant is also unreasonable.  I have reminded myself of the caution (see Chitty §16–104) that “if a clause is valid in all ordinary circumstances which can have been contemplated by the parties, it is equally valid notwithstanding that it might cover circumstances which are so ‘extravagant’, ‘fantastical’, ‘unlikely or improbable’ that they must have been entirely outside the contemplation of the parties”.  Even then, I find that the wording of the clause to be overly restrictive so that to give effect to it (without giving any “extravagant”, “fantastical” or “unlikely or improbable” construction) would substantially deprive Paules Lee’s ability to earn a living in a way which is wholly disproportionate to any legitimate interest of Degreeasia. 

59.  I have already set out the wording of Paules Lee’s covenant against employment.  It covered (materially) any consultancy position (salaried or non‑salaried) to any relevant company, entity, association or organization in the education, training and development “or whatsoever industry”.  “Or whatsoever industry” is plainly too wide but even if it is severed off (or “blue‑pencilled”), the remainder is still too wide.  “Consultancy” is not defined.  But even assuming that “consultancy” is intended to be limited to work similar to “education consultants” within Degreeasia (i.e. introduction of courses to, and recruitment of, new students), the words “education, training & development … industry” could potentially cover industries or institutions or courses or clientele which had nothing to do with that part of Degreeasia’s business with which Paules Lee had been involved and which Degreeasia can have no legitimate interest in preventing Paules Lee from working for. 

60.  That is not the end of the matter in Paules Lee’s case because there is still the first part of clause 5, namely the covenant against solicitation. 

61.  As a matter of principle, the doctrine against restraint of trade applies to total and partial restraints (see e.g. Chitty §16–080).  In Stenhouse, for example, clause 4 of the contract in question (see 399A–B) is a covenant against solicitation and the Privy Council was of the view that the clause was no doubt in restraint of trade (400D).  The law on restraint of trade is therefore still engaged and Degreeasia therefore faces the burden of having to establish reasonableness. 

62.  In particular, Degreeasia still needs to show that the nature of Paules Lee’s employment was such that a post‑employment restraint could legitimately be imposed on her.  On this, the discussion above about the nature of her employment (and the short point that students decide to enroll in or stay with Degreeasia’s courses not because of Paules Lee’s skills as a student services co‑ordinator) applies equally in the context of the validity of the covenant against solicitation. 

63.  In any event, even if Degreeasia had anything “protectable” by way of connections or loyalty cultivated by Paules Lee, the ambit of the covenant against solicitation is (although narrower than the covenant against employment) still too wide. 

64.  First of all, in terms of the timing of the restraint it was one year.  The same discussion above as to the unreasonableness of a one year restraint applies equally here. 

65.  Second, under the covenant Paules Lee was restrained from enticing away any client of Degreeasia or any person with whom she has had contact during her employment by Degreeasia.  Even if one were just to confine oneself to “client … with whom [she has] had contact during [her] employment” (assuming for the sake of argument that the words “with whom she has had contact during her employment” qualify the earlier word “client” as well), she could potentially be precluded from enticing a client of Degreeasia with whom she has only had cursory contact during her employment. 

66.  The possibility is not fanciful because she worked on the 7^th floor where the front desk was, and she must have come into contact with many clients of Degreeasia who were not within her main sphere of responsibility.  I cannot re‑write the contract for Degreeasia to limit the clause to students of class A3 only (assuming—and I am not deciding this—that class A3 would otherwise be a reasonable sphere of restraint).  As I said, it is up to the employer to devise an appropriate form of wording to amount to a reasonable form of restraint.  He cannot expect the court to do the work for it.

67.  Nor is it relevant that Dr Wong’s company had once sued Sally Cheng on the basis of Sally Cheng’s restrictive covenant in her contract.  Dr Wong may or may not be right in that other case.  Each case must be judged on its own merits.  In fact that litigation was later settled without any term concerning restraint of trade (see below).

68.  I now turn to the restrictive covenants in Suen’s case.  In his case there is an antecedent issue as to whether the relevant clauses had even been incorporated as part of his employment contract with Degreeasia. 

69.  It will be recalled that the relevant clauses are contained in the unsigned contract dated 1 February 2005.  The parties are not in dispute that Suen had not signed the unsigned contract.  Degreeasia therefore must show that the relevant clauses had been incorporated. 

70.  Degreeasia’s pleading is not clear as to how the clauses had been incorporated into Suen’s employment contract. 

71.  According to Choi’s witness statement (paragraphs 27–31), after the restrictive covenants had been introduced into Degreeasia’s employment contracts, Suen would be explaining the new terms (including the restrictive covenants) to his subordinates and she had explained the contents of the unsigned contract to him.  Suen had also tried to clarify the new commission scheme with her (because the unsigned contract introduced a new commission scheme) and he had been paid in accordance with the new commission scheme.  Paragraph 31 of her witness statement boldly asserts :

“In the circumstances, [Suen] knew, understood and had agreed to the terms of the new employment or [the unsigned contract].”

72.  But she did not say how Suen had agreed.

73.  The parties’ oral evidence on this topic can be summarized as follows :

(1)     According to Suen :

          (a)     He was given a set of new terms in September 2004 by Choi.  This document is not in the trial bundle but it consisted of terms and conditions which are the same as the “Main Terms and Conditions of Employment” at the end of the unsigned contract except that there was (unlike the terms at the end of the unsigned contract) there was no “Part C” (known as “Outsourced Agency Management Fee”).  This set of terms did not contain any restrictive covenants.

          (b)     He noticed two errors in the document namely (i) that in the header of the document he was misdescribed as “Ms” rather than “Mr”; (ii) there was a wrong reference to him as “Senior Education Consultant” as opposed to his correct title of “Program Manager”.  He told Choi about these mistakes but they were not corrected.

          (c)      Then in February 2005 someone gave a copy of the unsigned contract to Suen, together with the “Main Terms and Conditions of Employment” (as in [B1/7]).  Suen could not recall who gave it to him, and he recalled that some time before February 2005 he had already received (from Choi) a draft of the “Main Terms and Conditions of Employment”.  In fact before he received the unsigned contract in February 2005 he has already heard (some time in 2004) that a new set of terms would be introduced containing restraint of trade provisions of one year duration.  He said that some of his colleagues who had long experience in the educational field (such as Sarah Burton and Jenny Ko) had expressed some negative comments about the terms and the duration.

          (d)     Upon receiving the unsigned contract in February 2005, he saw the existence of clauses 5 and 6 in the unsigned contract and he also saw that the previous two mistakes in the “Main Terms and Conditions of Employment” (relating to the description of him as “Ms” and his job title) had not yet been rectified.  He asked Choi about the previous two mistakes, and also whether clauses 5 and 6 applied to him (as a staff who has been with the company since 2003) or whether they only applied to new staff.  He also asked Choi about the commission terms for his team of education consultants. 

          (e)      Choi told him that the employment contract contained in the unsigned contract was a new version and was intended to apply to all staff, and Suen was asked to speak to Mr Yau about his concerns. 

          (f)      Suen tried to speak to Mr Yau and the conversations culminated in a discussion between Mr Yau and Suen when they had drinks after dinner one day in Beijing.  Mr Yau, Suen and Choi were actually in Beijing on a business trip but only Mr Yau and Suen were present on this occasion.  He raised his concerns about clauses 5 and 6 as well as tried to fight for a commission scheme for his team of education consultants.  At the end Mr Yau said that he would take care of the contract.  Suen took that to mean that he need not sign the unsigned contract. 

          (g)     In Suen’s witness statement dated 30 October 2007 at §5 he said that he had raised the issue of the terms in the unsigned contract with Yau and “I firmly recall that he did reply to me that such new employment contract was governed to [sic] all the new staff, not including [sic] myself. 

(2)     According to Degreeasia (whose evidence in this regard was primarily given by Choi and Mr Yau) :

          (a)     Since Choi joined Degreeasia she had been standardizing the terms of the employment contracts.  The contracts of all the staff of Degreeasia would contain provisions similar to clauses 5 and 6. 

          (b)     Suen had not signed back the unsigned contract.  Choi had been asking him when it would be signed back.  She had asked him whether he had any concern and he did not say any.  At that time he was mainly fighting for the commission scheme of his subordinates. 

          (c)      Though Suen had not signed the unsigned contract, he did not say that he was not agreeing to sign.  He said he had not yet signed and had forgotten to sign.  Choi did not recall him pointing out any mistake about “Ms” (as opposed to “Mr.”) as a reason for refusing to sign. 

          (d)     At another part of Choi’s evidence she said that provisions such as clauses 5 and 6 were part of the practice or custom of the trade and all the trade knew that this was the way things were done. 

          (e)      She also said that Suen was supposed to explain the effect of clauses 5 and 6 to his subordinates and she had in fact asked him to (which he did) explain clauses 5 and 6 back to her.

          (f)      She also said that in February 2005 Suen told her that he was very clear about clauses 5 and 6, that he was aware what institutions were Degreeasia’s competitor and that if he were to leave Degreeasia he would not stay in the trade and that Choi need not worry about it. 

          (g)     Mr Yau denied that Suen had spoken to him about concerns on clauses 5 and 6. 

74.  The evidence surrounding the lack of signature on the unsigned contract is extremely unsatisfactory on both sides.  On Degreeasia’s part, there was no clear, firm evidence that somehow Suen had orally agreed to be bound by the provisions of the unsigned contract despite the lack of signature. 

75.  Choi’s evidence is rather nebulous and, at times, wishy washy.  At times it was rather obvious that she was saying what she thoughtshould be the case, rather than what she recalled to be what actually happened as a matter of primary fact.  At one stage (as I have recounted above) she resorted to the notion of a practice, or custom, in the trade.  Leaving aside the fact that “trade custom” has not been pleaded as part of Degreeasia’s case, I am not inclined to accept an off‑the‑cuff, self‑serving remark by Choi as sufficient evidence of a trade custom. 

76.  Choi’s evidence is in any event insufficient to persuade me that Suen had, by what he had (or had not) said, agreed to be bound by clauses 5 and 6.  In fact any suggestion that Suen had expressly said anything to agree to clauses 5 and 6 runs contrary to the plain fact that he had not signed back the unsigned contract.  According to Choi she had chased Suen but every time he just smiled and said that he had forgotten.  I reject such evidence.  Not only was it not foreshadowed in her witness statement, had she regarded it as sufficiently important to chase up on his signature, I find it difficult to see why she could not just ask him to sign back the document on the spot.  In any event even if she had truly chased him up as she had described, the undeniable fact is that he had not signed back the document to indicate his willingness to be bound.  I do not think that by saying “I had forgotten” (if he did say this) Suen can be taken to mean that he had forgotten to sign it as a physical piece of paper but he was otherwise agreeing to be bound by the contents.  It has in any event not been so argued or pleaded and, for the avoidance of doubt, I reject such an argument. 

77.  Mr Yau’s evidence is of no use in this regard because at most he could say that Suen had not discussed his concerns over clauses 5 and 6 with him.  He did not say that Suen agreed with him to be bound. 

78.  On the other hand, I do not accept Suen’s evidence that he had expressly and orally agreed with Yau that clauses 5 and 6 would not apply to him.  Specifically I reject his evidence about the alleged conversation in Beijing.  It had not been foreshadowed in his witness statement.  Mr Yau’s position (as stated to Suen during Suen’s cross‑examination) was that there was indeed a Beijing trip but it was a relaxing trip and not a business trip.  The crux of the matter is, however, that irrespective of how one characterizes the trip, had there been a conversation during such a trip of the nature as Suen alleged, I would have expected him to mention it to his legal advisors and foreshadowed it in one of his witness statements. 

79.  Under cross‑examination he said that he only remembered the Beijing conversation after commencement of trial.  I reject that too.  I can understand that sometimes people could genuinely forget something when preparing witness statements at an earlier stage, and then their memory could be prompted or brought back by something which triggered his memory.  But Suen had not referred to anything of this sort.  I regard his evidence on point as a misguided attempt to embellish his case that he was not bound by clauses 5 and 6.

80.  Miss Cheung submitted that Suen did say at §5 of his witness statement dated 30 October 2007 that Yau had told him that the new employment contract would not apply to him.  This submission was made in an attempt to show that the evidence about the Beijing conversation was not such a “completely new case”, but could be regarded as providing some flesh to a case already stated in his witness statement.  I reject such an argument.  If the content of §5 of his said witness statement was actually intended by Suen to refer to the Beijing conversation I fail see why he could not have easily provided the time and place of the conversation (as one should do when describing an oral agreement in a witness statement : one does not just state blandly that there had been an agreement without providing some detail to inform the other side of the nature of the occasion in question).  The existence of §5 of his 30 October 2007 witness statement does not affect my rejection of Suen’s evidence in this regard.

81.  In fact I go further.  I reject §5 of his 30 October 2007 witness statement.  The absence of details in that paragraph as to the time and place of the alleged conversation seriously affected its credibility.  Furthermore, having gone through the process of revising the written contracts of its staff to include provisions such as clauses 5 and 6, I find it inherently unlikely that Mr Yau would have positively agreed—when asked—to exempt a member of staff (such as Suen) from its coverage.

82.  So one is left with a situation where I have rejected the evidence and argument of both parties on the issue of whether anything has been positively said or done to bind (or not bind) Suen to the unsigned contract.  I do not regard there to be anything odd about such a state of affairs.  It just means that no one could prove any specific conversation or agreement about whether the unsigned contract was binding.  In real life people do not always seek to close every documentary gap in their relationship by pressing for things to be done or for an unsigned document to be signed back.  Very often people allow things to “drift” without positively seeking to press an issue (or “rocking the boat” or upsetting a working relationship which was otherwise proceeding without problem).  Sooner or later people’s attention turned elsewhere and the matter was just not followed up. 

83.  The present case, I believe, is a case where Suen had, for his own reasons (whatever they may be—and I should add that I do not believe Suen’s reason about “Ms” instead of “Mr” : that is too trivial a mistake) decided that he would not sign it.  Degreeasia, on the other hand, was well aware of the absence of signature by Suen and was content to proceed on the basis.  In such a state of affairs one resorts to the “default” position under the law, namely that it is for Degreeasia to demonstrate that Suen had become bound by the provisions of the unsigned contract.  I find that Degreeasia had failed to do so.  Even if (and I do not need to so find) people within Degreeasia had genuinely believed that Suen was bound by the unsigned contract, such belief is legally speaking irrelevant.  If they did indeed so believe, that in law they were wrong in holding such a belief. 

84.  There is one further point that I wish to deal with.  In the course of evidence the point was made that Suen has been receiving commission payments in accordance with the rate provided by the “Main Terms and Conditions of Employment” of 1 February 2005.  However, this does not mean that the provisions of clauses 5 and 6 have been incorporated as part of the contract between Suen and Degreeasia.  The payment of commission to Suen (and his acceptance of the same) in accordance with the “Main Terms” at most meant that those terms about commission had been incorporated by conduct as part of the parties’ contract.  There is nothing to show that the parties have acted so as to incorporate clauses 5 and 6 (contained in the unsigned contract) by conduct as well. 

85.  Lastly, even if (contrary to my holding above) clauses 5 and 6 have been incorporated as part of Suen’s employment contract with Degreeasia, the validity of clause 5 still has to be subject to the same analysis under the restraint of trade principles discussed above in the context of Paules Lee.

86.  In this connection, the nature of Suen’s employment is different from that of Paules Lee’s.  Suen was responsible for getting in new students.  He was in the position of a sales person.  But this does not mean that it is any easier for Degreeasia to justify the sort of restraints (be it in the nature of covenant against employment, or covenant against solicitation) contained in clause 5.  I repeat what I have said above as to the sort of factors which a customer (or a student) would consider when deciding whether to enroll with one institution rather than another.  On the evidence, I reject the suggestion that Suen, a sales officer (which is really what an education consultant was), could command the sort of loyalty from or influence over students so as to confer a protectable asset upon Degreeasia (justifying the imposition of a covenant against employment or covenant against solicitation).

87.  In any event, even if (contrary to my ruling above) some sort of protection against solicitation or employment is regarded as acceptable, Degreeasia has failed to produce any evidence to demonstrate the reasonableness of a duration of one year.  Suen suggested in his evidence that he would accept six months as a reasonable period.  He is not a lawyer and I am not bound by what he says or thinks to be a reasonable period.  But even if six months is a reasonable period, the contractual restriction is longer than six months.  In any event, the burden is not on Suen to suggest a reasonable period or to show the unreasonableness of the contractual period of restraint; the burden is on Degreeasia and Degreeasia has not even attempted to address the issue of duration by any evidence. 

88.  Likewise Degreeasia has not attempted to justify the ambit of the restrictions in clause 5.  The covenant against solicitation in clause 5 restrained Suen from enticing anyone in the habit of dealing with Degreeasia and with whom he has had contact during his employment with Degreeasia.  Like the covenant in Paules Lee’s case, this would potentially catch persons with whom Suen has just had cursory contact during his employment but over whom he has not acquired any influence.  The covenant against employment prohibited employment as a consultant or agent in any company etc in the education or training and development business in Hong Kong.  For reasons similar to those given in Paules Lee’s case, I view this as too wide. 

89.  If I am right in the above, then there is no operative covenant against (i) employment and (ii) solicitation in the employment contracts of both Paules Lee and Suen.  This means that after the termination of their employment with Degreeasia, they were free to be employed by other competitors.  In the course of doing so, they were free to solicit clients of their former employer with a view to persuading them to switch to the new employer (provided that in doing so they do not infringe the law relating to confidential information or trade secrets, which I shall discuss below).  There is nothing startling about the fact that an ex‑employee can compete, or solicit customers of an ex‑employer.  Hong Kong is a small and competitive society.  It strives on competition.  Case law (in Hong Kong and, I should add, in England over a long period and so it is not a new invention by me) has moved towards a particular legal policy the effect of which is to put the burden on an employer to justify restraints.  Of course there can still be legitimate restraint of trade clauses.  But Degreeasia has not proved that its clauses are valid.

90.  There are, however, consequential issues which I still need to deal with :

(1)     In case I am wrong on my holding above as to whether Paules Lee and Suen were subject to any valid restrictive covenants in their employment contract, I have to consider whether they have committed acts which were prohibited by the relevant restrictive covenants (which I have held not to be binding on them).

(2)     The freedom of Paules Lee and Suen to be employed by a competitor of Degreeasia (and to solicit customers of Degreeasia) is subject to the overriding principle that in doing so, a former employee must not utilize his former employer’s trade secrets (within the threefold classification in Faccenda Chicken to which I shall turn shortly) which he has acquired during his former employment; nor is he entitled to utilize confidential information which he had “stolen” or deliberately memorized while he was still employed by his former employer. 

91.  In the context of the former (i.e. factual breach of the restrictive covenants), the allegation is that both Suen and Paules Lee had, after the termination of her employment with Degreeasia, become employed by In Learning and enticed away students (consisting of Lam Yiu, Lam Chi Wai and others) who were enrolled with Degreeasia’s Benedictine College programme. 

92.  In the context of the latter (i.e. misuse of trade secret/confidential information), the allegation is that while Paules Lee was still employed by Degreeasia she had compiled or duplicated a list containing information and particulars about students including their names, contacts, telephone numbers and she had kept it for use when she moved to work for In Learning. 

93.  I shall deal with these two issues in turn.

Factually, were Paules Lee and Suen in breach of restrictive covenants

94.  Factually there cannot be any dispute that both Paules Lee and Suen became employed by In Learning within one year of termination of their respective employment contracts.  In Suen’s case he was employed as an education consultant.  Therefore if clause 5 of the unsigned contract had been part of his employment contract with Degreeasia, there cannot be any argument that he had been in breach of the covenant against employment. 

95.  Also, even on his own evidence he had been responsible for seeing Lam Yiu and her group (and explaining In Learning’s courses to them).  I regard such conduct to be a form of solicitation and enticing because he was trying to get the students interested and to switch over to IAL’s courses. 

96.  In the case of Paules Lee the situation is slightly more complicated.  While there is no dispute that she commenced employment with one of Dr Wong’s companies shortly after the termination of her employment by Degreeasia, there is a dispute as to the identity of her employer and the nature of her employment.  The covenant against employment in clause 5 of the September 2006 contract only restrained her from being employed in any “consultancy position”.  On her case, she was only employed as a receptionist (and only on a part time and temporary basis).  The identity of her employer is relevant because if she was employed by Advanced Learning Limited and not In Learning, then it can be said that by suing In Learning (in the capacity as Paulas Lee’s new employer), Degreeasia had sued the wrong entity.

97.  In this regard, Tenny Lai (Degreeasia’s financial controller) explained that her colleagues Sarah Burton and Choi had conducted an investigation into loss of students for the Benedictine College programme and that Sarah Burton had told her that Paules Lee had gone to work for In Learning. 

98.  Tenny Lai then asked a girl called Carrie, who was the girlfriend of a summer worker at Degreeasia, to go to In Learning’s Wanchai office to see whether Paules Lee was indeed working there.  Carrie subsequently informed Tenny Lai that she went to In Learning’s premises in Wanchai and obtained Paules Lee’s namecard.  Carrie gave the namecard to Tenny Lai.  When she was seeing Paules Lee, Carrie told Paules Lee that she (i.e. Carrie) had not yet decided on whether she should enroll in the Benedictine College programme or any other programme, whereupon Paules Lee told Carrie that the Benedictine College programme was not good and that a lot of Benedictine College students had switched over because the school’s (meaning HKICE) management was bad.

99.  I now turn to Paules Lee’s explanation.

100.  As to the identity of her employer and the nature of her employment, in her first witness statement dated 19 December 2007 Paules Lee said that she was employed by IAL (and she did not mention Advanced Learning Limited).  In her 2^nd witness statement dated 28 September 2009 she stated her employer to be Advanced Learning Limited.  She explained that it was because at the time when she prepared for her 1^st witness statement she was very confused.  She did not read the July 2006 contract before preparing for her 1^st witness statement.  From time to time in her evidence she said that she did not pay attention to the names of companies (I take her to mean that she would not pay attention to names of limited companies—as opposed to the name of the “business” that he worked for).  When she was at work and if she was asked whom she worked for she would say the Chinese name of IAL (香港專上教育學院) because this name appeared on the nameplate at the Tai Sang premises.  Even though the July 2006 contract contained an address at the Ming Tak Building, she did not work there, but worked at the reception desk on 3/F Tai Sang Commercial Building.  According to Dr Wong, the July 2006 contract was drafted by his partner, Elly Tang.

101.  Paules Lee does not dispute that she had been given a namecard or that she had given a namecard to Carrie.  Her explanation was that the namecards were supplied to her by her employer by mistake because she was only employed as a temporary receptionist and she was not supposed to have namecards.  She did not care too much about this and she simply placed the namecards in the drawer at the reception counter. 

102.  As to the circumstances under which she came to hand out her name card to Carrie, she recalled that on the day in question Carrie went up to the place where she worked and made inquiries about courses.  At that time all the education consultants were busy and Paules Lee asked her whether she had made an appointment and told her that if she had not made any appointments then she had to wait for a long time.  She gave a few brochures to Carrie and asked her to read them at home, and to return again if she had any questions.  Carrie refused to leave, and she asked Paules Lee for a namecard.  Paules Lee told her that she was not a consultant and there was no point trying to find her.  Carrie persisted for about ¾ hours and eventually Paules Lee “gave in” and handed a namecard to Carrie because she just wanted Carrie to leave. 

103.  In support of her evidence that the supply of namecards to her was a mistake, Paules Lee said that had she been genuinely employed as an education consultant then she would be fearful of being sued and she would then have changed her name.  She gave two examples of people changing their names when they switched from a “Mr Yau company” to a “Dr Wong company” (or vice versa) : Vanora Au was called Vanora when she was at IAL but she was called Ivy when she worked for HKICE; Sally Cheng was called Sally when she worked at IAL (see her employment contract dated 22 September 2003) and she was called Jasmine when she worked at HKICE (see e.g. her namecard at HKICE).  She also said that she would not want her mobile number to be on the namecard because she would not want to be called up late at night (in her words she would be worried about receiving “午夜凶鈴”). 

104.  Carrie had not been called as a witness and there was no evidence as to whether any steps had been taken to even attempt to obtain a witness statement from her. 

105.  According to Dr Wong, the namecards were mistakenly ordered by a staff member in Tsimshatsui called Sunday.  However, Sunday has not been called to give evidence (the indication is that Sunday was still employed by one of Dr Wong’s companies at the time when the issue about the name card was brought up by Degreeasia in this action because Dr Wong said that after he had seen Degreeasia’s witness statement about the namecard he had caused inquiries to be made and eventually he managed to speak to Sunday, whose answer as “Is that so?” and “I don’t know”). 

106.  Upon a consideration of the evidence on this topic, I have come to the firm view that the namecard was not a mistake and that she was indeed employed as a consultant.  Though Carrie has not been called, it has not been disputed by Paules Lee that she did hand out a copy of the name card.  The absence of Carrie meant that there is no one to contradict Paules Lee’s evidence as to the circumstances under which the name card came to be handed out.  The unexplained failure to call Carrie could also afford grounds for drawing an adverse inference against Degreeasia (who bears the burden).  However, these are not rigid rules.  The court is not bound to believe Paules Lee.  The court is not bound to draw an adverse inference from the failure to call Carrie.  The court is entitled to look at the totality of the evidence as well as the inherent probabilities of the evidence to decide whether to accept the uncontradicted evidence of a witness.

107.  In terms of the credibility of Paules Lee, first the evidence about the “mistake” was unsatisfactory.  I am not talking about mistakes in general—of course mistakes in anything can be made—I am talkingabout the mistake in the present case where namecards were printed for a temporary receptionist (who was not supposed to have namecards).  Sunday has not been called, and I do not have any evidence as to whether the mistake was due to (say) (i) an error in communication to her (in which case I would need to know who was responsible for “miscommunicating” the matter to Sunday and what exactly it was that had been “miscommunicated”), or (ii) a misunderstanding on her part (in which case I would need to know what wording in the instructions had led to her misunderstanding).  This is not about adverse inference; this is simply a case where In Learning has not even produced evidence of the requisite quality to explain what it claims to be a mistake. 

108.  I also find Paules Lee’s evidence as to the circumstances of her handing out the namecard incredible.  Put shortly, however much she was pestered by Carrie (who, according to Paules Lee, was almost making a nuisance of herself in the office), if all that Carrie had wanted to obtain was some means of contacting her, it would have been easy for her to write down her name on a piece of paper and to add the number of the general line.  For someone to insist on getting a “namecard” from Paules Lee (who on her own case was not supposed to have namecards) would have been odd in the extreme, and Paules Lee could simply have insisted that she did not have one. 

109.  I am also extremely skeptical about the July 2006 contract produced as evidence of Paules Lee’s employment relationship with Advanced Learning Limited.  Insofar as it is necessary, I refuse to find that it was a document which genuinely reflected the nature of Paules Lee’s employment.  I find that she was in fact employed by In Learning (which operated IAL).  The name card (which is found to be good evidence as to her employment status) mentioned the name of IAL.  The period of employment was stated to be from 4 July 2006 to 31 August 2006 (a little more than a month) but there are many parts of the contract which did not tie in or make sense with this period of employment at all, such as the references to probation and annual leave. 

110.  All that Dr Wong could say in response was that if it had been a sham it would not have contained so many mistakes.  This is similar to the argument sometimes put forward to the effect that had someone deliberately set out to commit a wrongdoing he would have been more careful and not “left so many marks” so as to be caught out.  But there is a limit to how far a point like this can be taken, because if taken to a logical extreme it would be open to everyone whose wrongdoing was “caught out”.  He was shifty and evasive and I do not think much of Dr Wong’s answer.  And apart from his evidence, there really is no evidence to explain the contents of the contract.  The responsibility of drafting the contract was said by Dr Wong to be Elly Tang, who has not been called as a witness. 

111.  There is one more unsatisfactory aspect about the written contract: Dr Wong had said that at the time Paules Lee was employed, his schools were expanding.  In that case one would have expected recruitment of long term staff rather than temporary staff.  He was asked why, despite the expansion plans, Paules Lee was still only employed on a temporary basis.  After a few false starts in attempting to answer the question, he shifted the responsibility to Elly Tang again, saying that he did not know what was in the mind of Elly Tang. 

112.  Lastly (though I do not need this factor in coming to my conclusion above, this factor serves to reinforce my conclusion), I am unimpressed by Paules Lee’s manner in explaining the incident.  One can detect a notable change in the tone and manner of her evidence when she came to this part of her testimony.  While in some parts of her evidence she was reasonably clear and articulate, when she came to explain the namecard (in terms of how it came to be printed by mistake and how she came to give it out to Carrie), her manner of giving evidence changed conspicuously.  She began to give her evidence in a very fast, unclear and shifty manner.  I had the distinct impression that she was trying to bamboozle through her evidence so that anyone listening to her evidence would not have the chance to slow down, pause and reflect on whether her evidence made sense.  This reflects adversely on this part of her evidence.

113.  I therefore find that the nature of Paules Lee’s employment was as an education consultant and that her true employer at that time was In Learning, the proprietor of IAL whose name appeared on her name card.  Had clause 5 of the September 2005 contract been valid, she would have been in breach of the covenant against employment contained therein.  I am able to come to this conclusion without having to rule on such issues (raised in cross‑examination) as whether the initials “PL” on the receipts to Lam Yiu and Lam Chi Wai stood for “Paules Lee” (as Degreeasia contended) or “Project leader”; or the intricate issues about the use of the various addresses used by entities owned or operated by Dr Wong.  Cross‑examination on those issues had been inconclusive.  I also find that In Learning, through Dr Wong, was aware of the existence of clauses 5 and 6 in the September 2005 contract.

114.  But I do not think that I have sufficient evidence to find that Paules Lee had (as Tenny Lai described what Carrie told her) “badmouthed” HKICE’s management in front of Carrie.  Carrie has not been called and the hearsay evidence is too flimsy and uncorroborated to be safely acted upon.

Did Paules Lee solicit or entice Lam Yiu and her friends and did she utilize any confidential information or trade secrets in doing so?

115.  I now turn to the case of solicitation against Paules Lee.  I have put this under a separate heading because this should be viewed against the bigger picture of the argument about misuse of trade secret/confidential information because they involve the same underlying factual allegations.

116.  Before I deal with the factual allegations I would first discuss the relevant law about confidential information and trade secrets in an employment context, because this would set the scene for the way I deal with the various issues under this section.

117.  The law in this area is almost too trite to require elaboration.  The modern starting point is Faccenda Chicken v Fowler the first instance decision of which is reported at [1984] ICR 589.

118.  According to Goulding J, information acquired during employment can fall within the following three categories (598F–600D) :

(1)     Information which is trivial, or accessible from public sources :

There is no prohibition against use of such information by the employee, whether during or after employment.

(2)     Information which is confidential, either because the employee was expressly told so, or because of its character, but which once learned necessarily remains in the employee’s head and becomes part of his own skill and knowledge applied in the course of his employer’s business.

          So long as the employment continues, the employee cannot otherwise use or disclose such information without infidelity or breach of contract; but when he is no longer in the same service, he can use his full skill and knowledge for his own benefit in competition with his former employer.  If the employer wants to protect information of this kind, he can do so by an express stipulation restraining the employee from competing with him (within reasonable limits of space and time) after the termination of the employment.

(3)     Specific trade secrets

          Even though they may necessarily have been learned by heart and even though the employee may have left the service, they cannot lawfully be used for anyone’s benefit but the employer’s.

119.  Goulding J’s decision was upheld on appeal ([1987] 1 Ch 117).  The principles were re‑stated as follows (135G–138G) :

(1)     Where the parties are linked by a contract of employment, their obligations are governed by the contract between the employee and the employer.

(2)     In the absence of an express term, the obligations of the employee in respect of the use and disclosure of information are governed by implied terms.

(3)     While the employee remains in the employment of the employer, the implied obligations impose a duty of good faith or fidelity on the employee.  The extent of the duty of good faith will vary according to the nature of the contract.  The duty of good faith will be broken if the employee makes or copies a list of the customers of the employer for use after his employment ends or deliberately memorises such a list, even though (except in special circumstances) there is no general restriction on an ex‑employee canvassing or doing business with customers of his former employer.

(4)     After the termination of employment, the implied obligations becomes more limited in scope.  A former employee is not allowed to use or disclose information which is of a sufficiently high degree of confidentiality so as to amount to a trade secret.  The obligation does not extend to all information obtained during his employment and in particular may not cover information which is only confidential in the sense that unauthorised disclosure of such information to a third party while the employment subsisted would be a breach of the duty of good faith.

(5)     In determining whether any item of information is protected by the implied term after termination of employment, all the circumstances would be taken into account and in particular the following factors would be considered :

          (a)     The nature of the employment—If the employment is in a capacity where confidential material is habitually handled this may impose a high obligation of confidentiality because the employee could be expected to realise the confidential nature of the information.

          (b)     The nature of the information itself—The information is only protected if it can properly be classified as a trade secret or material which is in all the circumstances of such a highly confidential nature as to require the same protection as a trade secret.

          (c)      Whether the employer impressed on the employee the confidentiality of the information.  The attitude of the employer towards the information provides evidence which may assist in determining whether or not the information can properly be regarded as a trade secret.

          (d)     Whether the relevant information can be easily isolated from other information which the employee is free to use or disclose.

120.  The Court of Appeal, however, disagreed with Goulding J that an employer can restrain the use of information in his second category (namely confidential information) by means of a restrictive covenant.  A restrictive covenant will not be enforced unless it is reasonably necessary to protect a trade secret or to prevent some personal influence over customers being abused in order to entice them away, referring to Cross J’s judgement in Printers & Finishers Ltd v Holloway [1965] 1 WLR 1 at 6 as to the way in which an employer can protect himself.

121.  The Court of Appeal’s views on the use of a suitably worded restrictive covenant have been questioned by Scott LJ in Balston Ltd v Headlines Filters Ltd [1987] FSR 330 at 347–348 (see also Wright v Gasweld Pty Ltd [1991] IPR 481). 

122.  However, the view has been expressed that there might not be any difference between the reasoning of Goulding J (in Faccenda at first instance) and Cross J (in Printers, cited by the Court of Appeal), in that both Goulding J and Cross J had in mind the sort of covenants which restrict an ex‑employee from working for a competitor and that such covenants, if not in unreasonable restraint of trade, would be enforceable—see Bingham LJ in Lancashire Fires Limited v SA Lyons Limited [1996] FSR 629 at 666–667.

123.  I would respectfully agree.  Insofar as the Court of Appeal in Faccenda might have thought that Goulding J was suggesting that an employer could restrain an employee from using confidential information (post‑employment) by using a restrictive covenant which targets the confidential information as such, I do not believe that this was what Goulding J meant at all.  In fact from the judgment of Goulding J at 599F–G (where he cited from Bennett J’s judgment in United Indigo Chemical Co. Ltd v Robinson (1931) 49 RPC 178) it is readily apparent that Goulding J was in fact agreeing that one cannot restrain use of confidential information (post‑employment) by the use of an express contractual term.  What he was saying (and this is entirely in line with Cross J in Printers and the Court of Appeal in Faccenda) was that an employer was entitled to protect himself against unfair use of personal connections/influences by a suitably worded restrictive covenant against working for particular persons (or, I would add, in particular localities and within particular timeframes), which might then have the effect of protecting confidential information without targeting such information as such.

124.  During closing submissions Miss Cheung at one stage was inclined to concede that as a matter of law, even for information within the “confidential” category, it was open to an employer restrain its use by a restrictive covenant.  I drew her attention to the passages in the judgments of Goulding J, in the Court of Appeal and in Lancashire (all of which are in the parties’ list of authorities before me).  I asked her whether she wished to maintain her concession (and I am in any event not bound by a concession which I regard to be wrong in law).  She indicated that she could address the matter in writing.  I then gave the parties liberty to address me on this issue within a particular timeframe after 2 November 2009.  No additional submissions had been filed by the parties by the deadline.  I have therefore already given the parties a fair opportunity to address me on the points I mentioned to them.  In any event, the burden is on Degreeasia to persuade me that it is permissible to restrain confidential information as such, after employment, and nothing in Mr Chu’s opening and closing written submissions (both delivered before Miss Cheung’s attempted concession) or his oral submissions (addressed after I had queried Miss Cheung’s attempted concession) could successfully persuade me.

125.  I understand the combined effect of the first instance and Court of Appeal decisions in Faccenda Chicken to be as follows :

(1)     Goulding J’s threefold classification of information has not been disapproved. 

(2)     If information is category (1) then the employee is free to use it whether during or after employment for his own purposes, or to divulge it.  The Court of Appeal did not mention this category at all, probably because by its very nature it is not “protected” information.

(3)     If information is category (2) then the employee is prohibited from using it for his own purposes and from divulging it to third parties during his employment.  He is, however, permitted to use it after the termination of the employment insofar as the information has become part of his skill or knowledge.  I should add (and this is not from Faccenda but from other authorities) that an employee is not allowed to deliberately memorise the information or make copies of such information during employment, for use after termination of the employment : see Robb v Green [1895] 2 QB 1, affirmed [1895] 2 QB 315; Wessex Dairies v Smith [1935] 2 KB 80.

(4)     If information is category (3) then the employee is not permitted to use it for his own purposes or to divulge it, whether during or after the employment, even though it might have become part of the employees’ own skill or knowledge.

(5)     An employer who wishes to prevent an employee from utilizing confidential information to compete with him post employment cannot do so by a clause which targets the information as such, but can do so by a restrictive covenant against competition (suitably worded as to time and space).

126.  With these principles in mind, I now turn to the competing factual cases :

(1)     Degreeasia alleges that Paules Lee had, during her employment, made a copy of Degreeasia’s students’ information including their names, contacts, telephone numbers and addresses and had kept the list when she moved to In Learning (paragraph 17(i) of the re‑re‑amended Statement of Claim actually pleaded that Suen did this also, but there is not an iota of evidence directed against Suen in this regard and I have no hesitation in rejecting the allegation against Suen here). 

(2)     This is denied by Paules Lee.  In particular, although she admits that from time to time she would be given physical copies of students’ lists for the purpose of carrying out her tasks as student services co‑ordinator, she has not kept them.  She admits that she had the telephone numbers of some students in the Benedictine College course (such as Lam Yiu) but she says that she obtained the telephoned numbers as part of normal social intercourse between her and the students, as they had become socially acquainted with one another and had exchanged telephone numbers and they would have social gatherings from time to time.

(3)     Degreeasia further alleges that Paules Lee had solicited Degreeasia’s students who had enrolled in its Benedictine College programme.  Specifically, Degreeasia alleges that Paules Lee had telephoned Lam Yiu and enticed Lam Yiu (and her friends) to enroll at IAL. 

(4)     Paules Lee denies that she had solicited or enticed the students.  She claims that it was Lam Yiu who had taken the initiative of calling her and that while at her arrangement Lam Yiu and a number of her friends did come up to her new workplace to visit her and look around, she had not done anything to “sell” the courses of IAL to them.  Lam Yiu and her friends were handled by other staff of IAL and she had played no part in the process of explanation. 

127.  Analytically the issues interlink in the following manner :

(1)     If the covenant against solicitation is invalid (as I have held), then Paules Lee could only be liable if she had either :

          (a)     utilized Degreeasia’s trade secrets in approaching and soliciting Lam Yiu and her group; or

          (b)     “stolen” Degreeasia’s confidential information during her employment and used it for the purpose of approaching and soliciting Lam Yiu and her group. 

(2)     If (contrary to my ruling above) the covenant against solicitation is valid, then Paules Lee would be in breach of the term if she had solicited Lam Yiu and her group, even if in doing so she had not used any trade secret or confidential information.  The fact of solicitation is enough to constitute breach.

Whether Paules Lee misappropriated or copied any confidential students list

128.  A good deal of evidence has been led on the information system at Degreeasia in relation to the storing of students information.  Specifically, there was a lot of debate as to the way in which confidential data of Degreeasia’s students had been stored in a special database, whether a password was needed to access such a database and whether Paules Lee had access to such information by virtue of her being a student services co‑ordinator.  Paules Lee denies that she had any password to enable her to access the confidential database of agreement. 

129.  For reasons that I shall explain in detail later, very little turns on such evidence because :

(1)     While Paules Lee denies possession of a password, she does not dispute the fact that from time to time she would be given printouts of lists containing the names and contact numbers of students in class A3.  Therefore insofar as the purpose of the evidence is to show that Paules Lee had access to information or documents containing information about students in class A3, Paules Lee has in fact admitted so.

(2)     In any event the evidence is insufficient to establish that Paules Lee has in fact misappropriated any students information, whether by surreptitiously retaining a copy of the printout given to her, or by accessing Degreeasia’s database.  The most that can be established on the evidence (as I find) was that Paules Lee had the telephone numbers of some (not all) students of class A3, not through conscious or deliberate copying but because she had become friendly with them and had exchanged telephone numbers for the purposes of arranging social gatherings outside of school.

130.  In terms of evidence about the database within Degreeasia, at first a large number of jargons and loose phrases were liberally sprinkled in the evidence but at the end of the day, Degreeasia’s case was explained by Josephine Choi as follows :

(1)     Each student services co‑ordinator would have a unique password.

(2)     Different staff members of Degreeasia had different “entitlement” to information.  Broadly speaking, the more senior one was, the more information one would be entitled to access.

(3)     All student services co‑ordinators would be entitled to access (among other things) the following categories of information on the computer :

          (a)     Name list of students.

          (b)     Timetable.

          (c)      Handbook and rules.

          (d)     Transcripts and grades.

          (e)      Address and telephone numbers.

          (f)      Interview records.

(4)     On a more technical level, Degreeasia’s information was stored in what was called an “academic database” as well as what was called “the Z drive”.  The academic database was webbased, in the sense that it could be accessed by remote log‑in (say, from the computer in one’s home or in a coffee shop) and would contain information such as transcripts and interview records.  The Z drive could only be accessed through a computer in Degreeasia’s premises and it mainly consists of documents in Word or Excel format (e.g. class schedules, student handbook, payment schedule, costing information, templates etc).  As to contact information such as telephone numbers and e‑mail addresses, these could be found in both the Z drive and the academic database.

131.  Paules Lee says that she worked on the 7^th floor with another student services co‑ordinator called Mabel.  Other staff and student services co‑ordinators worked on the 6^th floor and these included Snowy Lai, Josephine Choi, June, Bee, Cathy, Margaret and Huseina.  She shared a computer with Mabel on the 7^th floor.  She accepts that she and Mabel had a password which enabled them to switch on (or “boot”) their computer but she denies that she had any other password which enabled her to access the Z drive or the company’s server.  She said that there was a desktop shortcut on her computer which she could click to access a students attendance list on which she could mark attendances by ticking next to the students’ names.  She said that she did not need a password to access this list because she only needed to click on the desktop shortcut.  She had not heard of any password to access the webbased database.  There was no need for her or Mabel to access Degreeasia’s server and they had never read any students’ information on their computer. 

132.  According to Choi, Degreeasia has had an IT administrator called John Ho since 2004 and he was still at the company as at the time of the trial.  When Choi was asked (in cross‑examination) whether it was possible to trace from Degreeasia’s computer whether anyone had used his or her password to log on or what he or she had accessed, she said that did not know and that one had to ask John Ho.  However, John Ho has not been called as a witness. 

133.  Paules Lee does accept, however, that from time to time she would be required to contact students in her class (A3).  Snowy Lai would print a document containing the students’ contact details to her and she would return the document to Snowy Lai the next day.  She also accepts that there had been occasions that she had been asked to contact students in the other classes in the same way.  Under cross‑examination she also agreed that as of September 2005 she had a list of contact details of students in class A3 (when confronted with a list of class A3 students together with their contact details—all redacted—attached to an e‑mail sent by her dated 22 September 2005). 

134.  Tenny Lai gave evidence that when Paules Lee was dismissed, she (i.e. Tenny Lai) conducted an exit interview for Paules Lee together with a colleague of the accounts department called Cherry Cheung.  Tenny Lai said that she asked Paules Lee to return the students list in her possession and that Paules Lee said that it was in the computer, that she had not taken it and that everything had been handed back.  Paules Lee denies that anyone had asked her about the students list during the exit interview.  She said that when she left Degreeasia, Hoseina and Joyce saw her pack up her things.  She opened her bag and let them see what was inside. 

135.  At §16 of Choi’s and Tenny Lai’s witness statements, they both referred to the fact that they had been informed by their colleague Miss Sarah Burton that Paules Lee had compiled a list of A3 students with their contact details, and that Josephine Choi had asked Paules Lee to return it but Paules Lee always gave the excuse that she had forgotten about it. 

136.  According to Choi, Sarah Burton left Degreeasia in May 2007 (after the commencement of this action), gave birth to a baby, returned to work for Degreeasia and then left.  However, no witness statement has been obtained or procured from her before she left Degreeasia in 2007 (bearing in mind that this action was started in 2006).

137.  Against the backdrop of the above evidence I have the following comments and findings :

(1)     Paules Lee had, from time to time, been given documents containing students contact information.  That was the case for A3 students, as well as students in the other classes in the Benedictine College programme.  She would return the document to Snowy Lai the next day.

(2)     She was also in possession, at least as at 22 September 2005, of a copy of an A3 student contact list, as evidenced by her e‑mail of that date.

(3)     She therefore had the chance, if she had wanted to, to make copies (whether by photocopying or manual copying or other means) of the content of the contact list.

(4)     For the purpose of proving the opportunity to copy (or access to students contact details), it is therefore irrelevant whether she had access to the academic database or the Z drive through use of the password as described by Choi.  In any event I am not satisfied that Degreeasia has successfully proved that Paules Lee had such access :

          (a)     There is a direct conflict of oral testimony between Choi and Paules Lee as to possession of password and right of access to the academic database/Z drive.  Neither story was inherently more credible than the other.  Though I have taken a dim view of Paules Lee’s demeanour in relation to her evidence as to the nature of her employment with Advanced Learning Limited/In Learning, that does not mean that I should or must disbelieve her denial in all other respects. 

          (b)     Degreeasia appeared to be an organization with some degree of sophistication.  One would reasonably expect things such as computer passwords for staff members to be the subject to some degree of documentation or records.  There was, after all, an IT administrator called John Ho.  However, John Ho has not been called to give evidence. 

(5)     The fact that from time to time Paules Lee has had in her possession of a list of students for her class, however, does not mean that she must therefore have availed herself of the opportunity to copy the list and kept it.  One needs positive evidence that she has done so.  There is no such evidence. 

(6)     Choi’s evidence is that she had asked Paules Lee to return the list and Paules Lee always said that she had forgotten.  But that (even if true) does not mean that Paules Lee had not at some stage returned the list.  What Degreeasia has to prove is that Paules Lee had not returned the list at all (or secretly made a copy and then kept the copy).  Suffice it for me to say that Degreeasia has failed to prove it. 

(7)     I have considered the hearsay evidence from Sarah Burton (to the effect that Paules Lee had compiled a list of A3 students with their contact details) and I place no weight on such evidence.  The evidence is unclear as to when and how a copy was made (e.g. whether the copying consisted of downloading from the computer and printing it out, or making a photocopy of the class lists).  Sarah Burton has not been called to give evidence and so her evidence has not been tested by cross‑examination.  I am not prepared to act on such untested evidence in the circumstances of this case on this issue.

138.  I therefore firmly (and have no hesitation in doing so) reject Degreeasia’s extravagant and ambitious claim that there has been wholesale copying of any lists of students and their information by Paules Lee.  On the evidence I am only prepared to find that Paules Lee did have in her possession the telephone number of Lam Yiu, Lam Chi Wai and a number of class A3 students (in fact on the facts of the present case it was only Lam Yiu’s telephone number that was relevant because there was no evidence that she has had telephone conversations with anyone other than Lam Yiu).  This is not because she had in any way “stolen” or deliberately memorized any student list (as Degreeasia had asserted on very flimsy evidence).  This is simply because (which is common ground, even on the evidence of Lam Yiu, who had given evidence for Degreeasia on subpoena) Paules Lee has become friendly with a group of class A3 students and that she had exchanged telephone numbers in private with some of them (including Lam Yiu).  Paules Lee would have lunch with those students and they would hang around after school.  According to Paules Lee (whose evidence on this point I accept) there would be telephone contacts between her and the students outside school hours.

139.  I then have to decide the status of Lam Yiu’s telephone number and how it fits into the Faccenda framework.  Depending on such classification, Paules Lee may or may not be subject to any restraint as to its use after the termination of her employment (there is of course a further issue as to whether she has in fact so used Lam Yiu’s telephone number at all, on which see below).

140.  If such telephone numbers had been “trade secrets” within the Faccenda threefold classification, then Paules Lee would not have been entitled to use it for her purpose or the purpose of her new employment after her employment with Degreeasia (e.g. for the purpose of initiating a call to the students with a view to persuading them to switch away from Degreeasia). 

141.  If such telephone numbers had been “confidential information” (so that disclosure or use thereof during employment would amount to a breach of implied term), Paules Lee would not be in breach of her employment contract if she were to use the telephone after termination of employment.  Clause 6 of the September 2005 contract made no difference, because of my earlier determination that it was not open to an employer to restrain use of confidential information (falling short of trade secrets) post‑employment by the use of a restrictive covenant. 

142.  If such telephone numbers had been neither trade secrets nor confidential information, then Paules Lee would have been free to use them at any time, whether during employment or after. 

143.  In my view the telephone numbers of the students who had given their numbers to Paules Lee was not in the nature of trade secrets.  The point is really too simple and obvious for elaboration.  Though trade secret is not limited to things such as a secret trade process or formula, I refuse to accept any suggestion that it could cover a telephone number (which belongs to the owner of the telephone, not to Degreeasia) which the owner thereof is free to give out to other people.

144.  Nor is the information in the nature of confidential information either.  There have been cases which have held that a systematic arrangement and collection of data such as a table or list or database of names of customers, telephone numbers and the like (which are otherwise not confidential and in fact readily available) can, in some cases, qualify as confidential information deserving some degree of protection under Faccenda.  This is because the law regards the time, efforts and analysis that had gone into such compilation (and the way in which the data is organized) to be something of value and worthy of protection.  However, I have already rejected the suggestion that Paules Lee had made wholesale copying of an entire list.  The information was acquired by her in circumstances described above.  The few isolated telephone numbers were given to her in a social context by students who were sufficiently acquainted with her to be willing to be in contact with her in a social setting.  They are information which is readily available to someone who had asked the students (and to whom the students were prepared to give their numbers).  It is true that her employment with Degreeasia provided the background and context against which the students came to give their telephone numbers to her, but this fact does not, in my judgment, cloak the telephone numbers with the status of confidential information. 

145.  In any event, even if Lam Yiu’s telephone number is an item of confidential information, since we are talking post‑employment use, Paules Lee was free to use it after termination of employment.  Paules Lee had not used it unlawfully even if she had taken the initiative to call Lam Yiu by utilizing the telephone number given to her by Lam Yiu (as it will be seen, it was a factual issue in dispute between the parties as to who took the initiative to call the other).

Circumstances of Lam Yiu’s contact with Paules Lee, and Dr Wong’s discussion with Lam Yiu and Lam Chi Wai

146.  In case I am wrong in the above, and in case it is held that somehow Paules Lee was subject to a restriction (whether under the general law or under clauses 5 or 6) against (i) using Lam Yiu’s telephone number after termination of her employment with Degreeasia or (ii) soliciting or enticing students away from Degreeasia after termination of her employment (with or without using Lam Yiu’s telephone number), I now proceed to consider the evidence as to how Paules Lee came into contact with Lam Yiu and how Lam Yiu and her friends ended up switching over to In Learning.  In the course of doing so, I will also address the topic of what Paules Lee and Dr Wong are alleged to have said to Lam Yiu and her friends.  Such alleged conversations also formed part of Degreeasia’s pleaded case of wrongdoing against the defendants. 

147.  On behalf of Degreeasia, Lam Yiu and Lam Chi Wai testified on the above matters.  The combined effect of their evidence was (disregarding immaterial variations between their evidence) :

(1)     Both of them were enrolled in the Benedictine College programme offered by Degreeasia.  Prior to enrolling in the course, Lam Yiu actually worked at HKICE by way of summer job in 2005.  She was responsible for making “cold calls”. 

(2)    The Benedictine College course was a two year course for Lam Yiu and her friends, the first year was 2005 to 2006.  They were expected to obtain their associate degree after that, and then proceed to their bachelor’s degree in the next year.

(3)     Lam Yiu and Lam Chi Wai were in class A3.  Paules Lee was their classmistress.  A number of class A3 students had got quite friendly with Paules Lee and had exchanged telephone numbers with Paules Lee (including Lam Yiu). 

(4)     Some time in July 2006 Lam Yiu stopped seeing Paules Lee at work.  Then Paules Lee called her and during their conversation Lam Yiu learned that Paules Lee had left Degreeasia.  Lam Yiu also learned that Paules Lee was working for IAL.  Paules Lee asked Lam Yiu whether she knew that the ranking of Benedictine College had dropped to third tier. 

(5)     Before the telephone call, Lam Yiu had already learned (through the media) a lot of adverse news and publicity about the Benedictine College programme. 

(6)     Paules Lee asked Lam Yiu to consider other schools and decide what their plans were.  She mentioned IAL and asked Lam Yiu to go to IAL to try to understand more. 

(7)     After the call, Lam Yiu told her friends about what Paules Lee had told her about the dropping in rank.  They all felt concerned.  Through the arrangement of Lam Yiu (who, in her own words, was acting like a co‑ordinator), 7 people (including Lam Yiu and Lam Chi Wai) went up to IAL’s premises in Wanchai. 

(8)     That was to be the first of a number of visits.  There were subsequent visits, and there were visits which were only attended by Lam Yiu and Lam Chi Wai.  There was some uncertainty about the number of times (or the dates) the students had gone to IAL’s premises in Wanchai.  During the course of the evidence there were attempts to prompt their memories by referring to certain enrolment and registration documents dated 1 August 2006, 10 August 2006 and 15 August 2006 but the resulting evidence was still unclear and unsatisfactory.  At the end of the day I do not think it is necessary for me to make any specific findings as to the precise dates and number of times the students had gone up, as I do not think that determination of this case really turns on that.

(9)     During the visits by the students, Paules Lee did not say anything to them by way of promoting or “selling” the courses of IAL.  Nor has she ever handed out any name cards to them. 

(10)   On the first occasion they looked around and they saw Suen there.  On another (probably the second) occasion Paules Lee took them to a room and left, and they were then handled by another staff member of In Learning (Lam Yiu could not recall whether that was Suen).  Lam Yiu also saw Ivy Au (also known as Vanora Au), formerly a consultant at HKICE, but she had forgotten whether Ivy Au had explained the University of Canberra or USU courses (both offered by IAL) to them. 

(11)   The students later met with Dr Wong.  There are variations between the evidence of Lam Yiu and Lam Chi Wai as to the persons (on the students’ side) who took part in these meetings but at least Lam Yiu and Lam Chi Wai had met Dr Wong.  Lam Chi Wai recalled that Paules Lee was present whereas Lam Yiu was not as clear.  These are however not too relevant in my view.

(12)   According to Lam Yiu and Lam Chi Wai, the key points (so far as material for this case) made by Dr Wong are :

          (a)     He said that Benedictine College had dropped in its ranking to third tier.

          (b)     Both Lam Yiu and Lam Chi Wai recalled Dr Wong showing two books to them containing University rankings.  The impression they got (their evidence in this regard was very unsatisfactory and I shall not attempt to set out the detailed variations in their recollection) was that Benedictine College had dropped from a better ranking (in the Midwest region) to the third tier and that USU had a better ranking than Benedictine College.  They said that Dr Wong did not explain to them the difference between a regional ranking and a nationwide ranking. 

          (c)      He challenged the level of acceptance of a Benedictine College degree, in the sense that the degree offered by Benedictine College was called a degree in General Studies and in Hong Kong such a degree would not be regarded by people as sufficiently professional, and people might think that the degree holder had not studied anything.

          (d)     He said that the civil service and the Police did not recognize Benedictine College degrees (Lam Chi Wai was clearer on this point; Lam Yiu was not too clear on this point). 

          (e)      Also according to Lam Chi Wai, Dr Wong had said that the Benedictine College course was not as organized and that the USU course was better, and that there was no need to worry about ranking.  There was also no need to worry to worry about the institution or organization closing down.

          (f)      He said that the student ID cards of Benedictine College contained the students’ HKID number and that was not good because of privacy concerns. 

(13)   Lam Yiu and Lam Chi Wai (and other class A3 classmates) decided to switch to the USU programme.  But after a while Lam Yiu and Lam Chi Wai were dissatisfied because the facilities were not good and the courses were not too different from those at Benedictine College. 

(14)   There is one further reason.  According to Lam Yiu, when Dr Wong introduced the USU course to them he said that the degree would be called “BSc in Interdisciplinary Studies in Information Technology and International Economics” and not “BSc in Interdisciplinary Studies with focus on International Technology and International Economics” (though according to Lam Chi Wai, Dr Wong did mention that the degree name was “BSc in Interdisciplinary Studies with focus on International Technology and International Economics”). 

(15)   I would add that the significance of this is that in due course both Lam Yiu and Lam Chi Wai sought to pull out of the USU course and they switched back to the Benedictine College programme, and when they pulled out of the USU programme they wrote a letter to Dr Wong (with the assistance of Sarah Burton of Degreeasia) alleging that when they signed up for the US course it was on the basis that the degree parchment would state the degree name of “BSc in Interdisciplinary Studies in Information Technology and International Economics” but later they learned that the degree parchment would only show the name of “BSc in Interdisciplinary Studies”.  This was alleged to have been a misrepresentation by Dr Wong on behalf of In Learning to Lam Yiu and Lam Chi Wai pursuant to a conspiracy among Paules Lee, In Learning and Suen. 

(16)   Both Lam Yiu and Lam Chi Wai made claims against In Learning in the Small Claims Tribunal.  Lam Chi Wai did not pursue his claim, whereas Lam Yiu settled with In Learning by making a payment.  The details do not matter, except as potentially affecting the credibility of Lam Yiu and Lam Chi Wai because they had both been in disputes with In Learning.  I have taken this (and other things potentially having an adverse impact on their credibility, such as Lam Yiu’s previous working experience with Degreeasia and the fact that Sarah Burton, a Degreeasia staff, actually helped them draft a letter to In Learning making allegations that they had been misled) into account in assessing their credibility.

148.  On In Learning’s side, Dr Wong gave evidence.  Suen and Paules Lee also gave evidence which touched on the above subject matter.  The combined effect is (again disregarding immaterial variations between them, and subject to what has already been mentioned above when I described Paules Lee’s and Suen’s evidence in other contexts) :

(1)     Paules Lee maintained that it was Lam Yiu who called her one day after she had started her new job at Advanced Learning Limited.  She denied that she called Lam Yiu. 

(2)     Lam Yiu asked her how she had been doing, where she was working and they chatted about what had happened and other “girlie” talks. 

(3)     Lam Yiu told Paules Lee that she had heard a lot of adverse news about HKICE, and Paules Lee responded that she had heard too, and that she had heard from other students that the ranking of Benedictine College had dropped, and she asked Lam Yiu to check. 

(4)     They also discussed Lam Yiu’s finances and Lam Yiu wanted to take on one more part time job.  Paules Lee said to her that if she wanted a part time job she (i.e. Lam Yiu) could go up to her new place of work in Wanchai to see if she could find anything suitable.

(5)     One day Lam Yiu called her and arranged to visit her in the Wanchai office. She went alone that day, and she met Vanora Au (who was working there as an educational consultant).  Lam Yiu chatted with Vanora Au.  Then Lam Yiu left.

(6)     A few days later Lam Yiu called Paules Lee again and made arrangements for a visit to her office.  A few more days later Lam Yiu and six other friends went up to Paules Lee’s office.  Paules Lee took them around and showed them some brochures.  They came up again on a subsequent occasion and Paules Lee arranged for them to meet Suen.  She was in the same meeting room but left after a while. 

(7)     Later Paules Lee heard from Lam Yiu that Lam Chi Wai wanted to see Dr Wong, but since by that time Degreeasia has already commenced litigation against her, she did not concern herself too much with this matter and she asked Vanora Au to handle the matter. 

(8)     Suen admits that he had explained the USU course to Lam Yiu and her group.

(9)     According to Dr Wong, either Vanora Au or Suen arranged for him to meet some students in the Benedictine College course.  They were interested in the USU programme.  He met Lam Yiu and Leung Yau Sing.  Lam Chi Wai was not in the first meeting.  He went to see Dr Wong later, on a separate occasion. 

(10)   Materially, Dr Wong told the students (I deal with the visits collectively) :

          (a)     The USU programme offered by In Learning was “BSc in Interdisciplinary Studies, with emphasis on International Technology and International Economics”.

          (b)     He said, in response to a question about “level of recognition” of a course (which he took to mean whether the Hong Kong Government would “recognize” a course), that for all overseas degree (even from Harvard) the Hong Kong Government would not allow them to say whether it was “recognized” by it.  Therefore in response to a question by the students whether the Benedictine College degree was “recognized”, he corrected them and said that one could not say that. 

          (c)      He showed the students some letters showing that some graduates had gone into local Universities such as City University, Polytechnic University or Chinese University, but he did not show them any letters from employers; nor did the students said that they wanted jobs with the Police or the Government. 

          (d)     He said that letters of admission, student ID card, transcripts and degree certificates were all issued in the USA and would not contain any “Hong Kong” wording. 

          (e)      He showed Lam Yiu and Lam Chi Wai a degree certificate from USU (exhibit D5) with the title “Bachelor of Science—Interdisciplinary Studies” only.

          (f)      The students asked about ranking.  Dr Wong showed them the 2004 edition and 2005 edition of a publication called “US News”.  He explained that in the US News there were two categories of rankings: the national rankings (“Best National Universities”) and the regional rankings (“Best Universities—Master’s (by region”). 

          (g)     Schools such as Harvard, Yale, MIT and Princeton were all in the national category and those in this category could offer degrees up to PhD level.  There were only about 500 schools in this category.  For schools in this category, the top ones would first be ranked numerically (e.g. according to the 2004 edition, Harvard and Princeton were joint first followed by Yale) but up to a certain stage they would no longer be ranked numerically but would all be placed under something called “third tier” (there was no “second tier” for the nationwide category) and within third tier the schools would not be individually ranked but only listed out alphabetically (in the 2004 edition of US News, under the “third tier” heading it was indeed stated that “schools ranked 127 through a tie at 186 are listed here alphabetically”, and the schools had no numerical ranking next to their names).  USU appeared in the third tier.  He told the students that one could only say that USU was ranked “100 odd” in the national category but one could not pinpoint a particular rank.

          (h)     He further told the students that if a school was not in the “national ranking” then it would be in the “regional rankings”, within one of four regions in the United States.  If a school had been listed in the national rankings it would not appear in the regional rankings.  The regional rankings were called “Master’s (by region)” in the publication because Universities ranked in the regional rankings could only offer up to Master’s level and not PhD.  He told the students that Benedictine College was listed in the Midwest region.  In 2004 it was in the second tier (not individually ranked, but described as “schools ranked 39 through a tie at 69 are listed here alphabetically” and so one would know that it would be ranked between those numbers but would not know the exact numerical ranking). 

          (i)      He then showed the students the 2005 edition of US News and went through the same way of explanation.  He explained that USU was still in the third tier in the national category (stated as schools ranked 130 through a tie at 181).  As to Benedictine College he showed the students the relevant page which placed Benedictine College in the third tier in the Midwest section of the regional category ( headed “schools ranked 73 through a tie at 103”).  He denied that he had actually said to the students that Benedictine College had dropped to the third tier in 2005.  He maintained that he had just shown them the page. 

          (j)      A student called Leung Yau Sing took out his student ID card at HKICE and HKID card and showed them to Dr Wong.  Dr Wong saw that the student ID card number was the same as his HKID card number and he remarked that if the card had been issued in the USA it would not have contained such personal and private information.  The focus of that discussion was on the place where the student ID card might have been issued.

(11)   He denied that :

          (a)     he had criticized the administration of HKICE, or

          (b)     he had criticized HKICE’s practice of using the students’ HKID number on their students ID card; or

          (c)      he had said that the Benedictine College programme was not recognized by the Hong Kong Government, or

          (d)     he had told the students that the ranking of Benedictine College had dropped to 3,000 and that they should considering transferring to USU because some students had already done so.

(12)   He said that he was worried that the students might be “snakes” (in the sense of people sent by a competitor to prompt him to say the wrong thing) because previously he has encountered “snakes”.  The implication was that he would be careful in what he chose to say to the students.

149.  On the question of the contents of US News, Choi also gave some evidence on behalf of Degreeasia :

(1)     She noted that there were differences between the 2004 and2005 editions, in that in the 2005 edition the regional “second tier” had disappeared.  Some schools which were in the second tier in 2004 became first tier, or third tier, schools. 

          (I should add that, strictly speaking, for both 2004 and 2005 there were no formal designation of “first tier” regional schools in the extracts of US News placed before me.  I have taken any references to “first tier” as a handy reference to those schools which were individually ranked and which appeared before the numbered tiers.  For example, for the 2004 edition, the first 1–38 schools for “Midwest” were individually ranked (four schools were tied in 35 place) but there was no formal designation of “first tier” for these schools.  There was a formally designated “second tier” which (as I said above) was stated to cover schools from 39 through a tie at 69, but within the tier the schools were not individually ranked. 

(2)     Benedictine College became a first tier school in the regional category in 2008.

(3)     She was rather coy and reluctant in expressly accepting the indisputable fact that Benedictine College was listed under the “third tier” category in 2005.  She made a number of points such as that in 2004 the first tier in Midwest covered schools ranked 1–35, that a number of schools were “tied” in 2005, that one would not know the sort of criterion adopted by people in ranking the schools.  None of these had any relevance to the simple point (put by Miss Cheung for In Learning and Suen) that in 2005 Benedictine College was placed in a tier which covered schools ranked between 73‑103 and that (disregarding the formal “numbered tier” a school was placed) this must have been lower than the accomplishment in 2004, which was in a tier which covered schools ranked between 39 to 69. 

150.  On the basis of the evidence I have the following comments and findings :

(1)     I have already found as a fact that Paules Lee and some students (specifically, Lam Yiu) had exchanged their telephone numbers in a social context.

(2)     I find that the contacts leading to Lam Yiu (and her friends) going up to IAL’s premises were made between Lam Yiu and Paules Lee.  There is no evidence that Paules Lee has called any other students in Lam Yiu’s group or that any of them had called Paules Lee.  Lam Yiu co‑ordinated her friends.

(3)     I find that during the phone call Paules Lee mentioned to Lam Yiu that the ranking of Benedictine College had dropped to the third tier and that she (i.e. Lam Yiu) should check that and look around.  Paules Lee mentioned to Lam Yiu that she was at that time working at IAL and asked Lam Yiu to consider its courses. 

(4)     At that time Lam Yiu had already heard adverse news about ICE, but I do find that Paules Lee’s words acted as a catalyst for Lam Yiu to actively pursue and explore other alternatives. 

(5)     As to the factual issue of whether Paules Lee called Lam Yiu first or Lam Yiu called Paules Lee first, I am inclined to prefer Lam Yiu’s evidence over Paules Lee’s.  In the material regards, Paules Lee’s evidence was rambling, unfocussed and suffered from the problem (which I had identified before) of appearing to want to bamboozle her way quickly out of a tricky situation by uttering a mass of words very quickly without allowing the listener any time to pause and digest her evidence.  I regard this as a sign of evasiveness.  Lam Yiu was able to describe the focus of the conversation clearly.  Also, Paules Lee’s explanation as to how she came to ask Lam Yiu to go to IAL (namely to explore employment prospects there because Lam Yiu had previously “moaned” to her about her dire financial circumstances and had expressed a desire to look for part time jobs) was contrived in the extreme.  Given Paules Lee’s admission that she did bring up the topic of Benedictine College’s fall in ranking and that she had asked Lam Yiu to go up to IAL, it was inherently more likely for Paules Lee to be the person who had taken the initiative to call Lam Yiu with a view to (perhaps subtly) tell Lam Yiu about the drop in ranking and tell Lam Yiu go explore courses at IAL.

(6)     I do not think I can make specific findings as to the exact number of times when the students went up to IAL’s premises or who went on what occasion.  But I do not think I have to, save for the fact that at the very least Lam Yiu and Lam Chi Wai had gone on more than one occasion, and both of them had met Dr Wong.

(7)     I find that Paules Lee had not said anything by way of active promotion of In Learning’s courses.  But I find that she was present in a meeting room where Suen explained the USU course to Lam Yiu and her friends.  Vanora Au has also been involved.  After all, her name appeared on some of the receipts.

(8)     Against the backdrop of the above findings, if (contrary to my finding above) the covenant against solicitation been valid then Paules Lee had breached it.  Even though she had not actively “promoted” any courses to the students in IAL premises, I regard what she had said to Lam Yiu over the phone (irrespective of who called first) about the fall in ranking and her invitation to Lam Yiu to consider IAL courses as sufficient acts of enticement and solicitation within the prohibition.  Also if (contrary to my finding above) there was a valid post‑employment restraint against use of Lam Yiu’s telephone number I find that Paules Lee had breached it by using it to call Lam Yiu with a view to enticing her.

(9)     Moving on, I find that Dr Wong did show the students copies of US News 2004 and 2005 and explained orally to them the meanings of the tiers and rankings in terms I described above, save and except that I reject his self‑serving denial that he had told the students that Benedictine College had fallen in its ranking from second tier (2004) to third tier (in 2005).  The 2004 and 2005 editions of US News plainly showed a fall in ranking (though one cannot tell the precise numerical ranking of Benedictine College) and in tier for Benedictine College.  I refuse to believe that Dr Wong would simply (as he alleged) show the pages to the students.  Dr Wong gave me the impression of being a shrewd and sharp operator.  I am not so naïve as to believe that in a competitive market as the one in which the parties compete, someone in the position of Dr Wong would not seize the golden opportunity to tell the students the effect of what was printed in black and white, namely that the ranking of Benedictine College had dropped. 

(10)   I also find Dr Wong’s description of the effect of the 2004 and 2005 editions of US News to be correct and that there were no mis‑statements about Benedictine College’s ranking.  Choi made some protestations about the criterion for ranking the schools, but that is not the point.  Degreeasia’s complaint is that Dr Wong has made mis‑statements about HKICE’s course and about Benedictine College’s ranking, and the issue is whether it is a mis‑statement to say that Benedictine College had dropped in its ranking between 2004 and 2005.  The trial is not about the reliability of the ranking system generally (which, as one well knows, always depends on how the goalposts, meaning the weightings given to different criterion, are set from year to year) or whether Benedictine College is a good school.  Choi said that Benedictine College entered the first tier in a later year, but that did not render Dr Wong’s statement about 2004 and 2005 a mis‑statement.  Degreeasia may have some misgivings about Dr Wong’s reference to the drop in Benedictine College ranking in this “technically correct” way, but it is not for a court of law to pass judgment on the propriety on such conduct.

(11)   Insofar as the evidence of Lam Yiu and Lam Chi Wai might suggest that Dr Wong had made some “qualitative” adverse comments against HKICE (such as—non‑exhaustively—the “level of recognition” of Benedictine College degrees, criticism of HKICE’s practice of use of HK card numbers in their student ID cards, that USU had a “better” ranking than Benedictine College; other people’s possible perception of Benedictine College’s degree in General Studies), the evidence is too flimsy and uncorroborated for me to place any weight.  For some of these topics, Dr Wong had given his explanation of what he had said.  On his version of what he had said, what he said was technically correct (or at least had not been proved to be wrong).  I cannot say that Dr Wong’s evidence was incredible.  It is perfectly possible for the listeners of Dr Wong’s explanations or answers to have formed their own interpretation or extrapolations of what Dr Wong had said and then treated their own understanding as beingthe words used by Dr Wong.  That said, even on his own evidence, Dr Wong was sailing very close to the wind (for example by offering to comment on the number on the student ID card).

(12)   I find that Dr Wong described the USU course as “BSc in Interdisciplinary Studies with emphasis on International Technology and International Economics”.  This was Dr Wong’s own evidence and this was also Lam Chi Wai’s evidence.  Lam Yiu’s evidence is different but given that even Lam Chi Wai recalled Dr Wong’s words differently from her, I do not think I can safely place weight on her evidence.  Nor do I place weight on the letter written by Lam Yiu and Lam Chi Wai to Dr Wong when they tried to pull out of the course.  That letter was written with the help of someone from Degreeasia (namely Sarah Burton) and, against the way the forensic battlelines are drawn in this litigation, the credibility of the assertion in that letter is questionable. 

(13)   Specifically I reject the plea in paragraph 21 of the re‑re‑amended Statement of Claim that any of the “representations” (defined therein) have been made. 

151.  Insofar as it is necessary for me so to do, and insofar as any part of Degreeasia’s case on economic torts (variously pleaded as “conspiracy” or “interference with business” in the re‑re‑amended Statement of Claim) involved proving a predominant purpose or motive to injure Degreeasia, I reject such allegation.  Even if any of the alleged acts (wrongful or otherwise) have been committed by any of the defendants, the predominant purpose or motivation would most likely be to benefit themselves.  The fact that in the course of doing so they would harm Degreeasia is only an incidental by product. 

The Cheng Man Kit e‑mail

152.  Cheng Man Kit is Sally Cheng’s younger brother.  He was enrolled as a student in the IU programme, offered in Hong Kong through HKICE.  By an e‑mail dated 30 October 2003 to IU purportedly from Cheng Man Kit, a number of questions were raised with IU.  The questions raised in this e‑mail (“the Cheng Man Kit e‑mail”) could, on one view, be taken as raising complaints about the way in which the IU course had been handled in Hong Kong.  Degreeasia complained that Cheng Man Kit had, put bluntly, been sent or deployed by In Learning to enroll on the IU programme as a “mole” and that the Cheng Man Kit e‑mail had been composed not by him, but by someone else in In Learning. 

153.  The e‑mail of the sender of the Cheng Man Kit e‑mail was [email protected].

154.  Before I address the evidence, I should first state my view as to why, even if Degreeasia’s factual assertions are true, they do not support or give rise to any remedy.

155.  The Cheng Man Kit e‑mail was pleaded as an aspect of Degreeasia’s claims of “unlawful interference with business” and conspiracy (see §§18 and 21 of re‑re‑amended Statement of Claim).  However, the pleading has not precisely identified what “unlawful act” the Cheng Man Kit e‑mail gave rise to.  It is not a civil wrong to ask someone to enroll for a course (even if “pretentiously”, to use the language of the pleading).  Paragraph 18(f) (which pleaded the Cheng Man Kit e‑mail) pleaded the words “malicious and injurious” but there was no plea of falsity (the word “fake” originally existed but was deleted by amendment).  Therefore one can rule out malicious falsehood as the relevant “unlawful act” required for an economic tort.  There was a reference to “causing injury on the reputation” of Degreeasia but there was no plea as to the actual words used or any alleged defamatory meaning the words carried, and so there was no valid plea of “defamation” as a relevant “unlawful act”.  No submission has been made as to what unlawful act that could amount to.  And I further find that even if the alleged acts had been committed, they were (as is plain common sense) done for the predominant purpose of benefitting In Learning (rather than harming Degreeasia, even though that may be by‑product of the act).  In any event no loss has resulted to Degreeasia because there is no evidence that IU terminated its relationship with Degreeasia because of the Cheng Man Kit e‑mail.  Nor is there any claim for an injunction to prevent any of the defendants to repeat the act again. 

156.  That strictly speaking would be enough to dispose of this part of the claim but in case I am wrong and this case shall go further, I now examine the evidence in detail. 

157.  Cheng Man Kit did not testify.  Instead, his sister Sally Cheng did.

158.  Sally Cheng worked at HKICE between 2005 and 2008.  Then she left work to give birth to her child.  She then resumed work.  At the time of the trial she was no longer working for HKICE.  Before  2005 she worked at IAL as a programme consultant (then senior programme consultant, then assistant programme manager).  When she worked at IAL she used the English name Sally but when she worked at HKICE she used the English name Jasmine.  The use of different English names in different employers no doubt reflected the fact that these two institutions were “at each other’s throat” and so when employees switch from one to the other, they would camouflage themselves by changing their names so as to avoid being “caught out” by their former employers (who may pursue them). 

159.  After Sally Cheng had joined HKICE, In Learning commenced litigation against her for one month’s salary in lieu of notice and an injunction restraining her from competing with IAL based on a restrictive covenant in her contract of employment.  The matter was eventually settled by her payment of HK$15,000 into court (representing one month’s basic salary) plus costs.  The settlement did not involve any injunction not to work for a competitor. 

160.  Her defence of this lawsuit was funded by Degreeasia.  There was a good deal of evidence on the conduct of Sally Cheng in the context of the termination of her employment with IAL (and the ensuing lawsuit) as well as Dr Wong’s conduct against Sally Cheng and Thomas Leung (who was at one time an employee of IAL and who later started his own company and became a contractor: the details do not matter here).  Both sides had tried to portray the other side’s conduct in a bad light.  At the end of the day the evidence goes only to credit.  Sally Cheng did “walk out” on her employment without giving the requisite notice.  Dr Wong had conducted litigation aggressively, and he himself had been criticized by the judge in DCCJ3768 and 3769 of 2006 as having been guilty of material non‑disclosure in litigation against Thomas Leung. 

161.  I have borne those matters in mind in assessing their credibility.  But one cannot take these matters too far because many of them are in the nature of general “character‑blackening”, and the court is of course accustomed to prejudicial “mud‑slinging” carried out in the guise of “evidence going to credit”. 

162.  Cheng Man Kit took his HKCEE in 2003.  Afterwards he enrolled in a business course run by Royal Brisbane International College (“RBIC”), which was offered in Hong Kong through IAL.  At that time Sally Cheng was still working at IAL.  She introduced the course to him.  He started the course in September 2003 and continued till June 2004. 

163.  On 8 September 2003 Cheng Man Kit submitted an application form to enroll in a programme operated by IU (and offered in Hong Kong through HKICE).  Sally Cheng recognized the handwriting on the application as that of his brother’s.  The address stated on the application form was not the one he lived.  Sally Cheng did not know whose address that was.  She was not sure about the e‑mail address on the form, but the telephone number on the phone was the correct phone number of Cheng Man Kit.  The date of birth was also correct. 

164.  While there was a good deal of vacillation in her evidence and a lot of “guarded” phrases such as “should be”, “my impression was”, “I do not recall clearly”, certain key points did emerge from her evidence namely that :

(1)     Some staff members of IAL have been doing market research (about other people’s courses) through the internet and phone inquiries. 

(2)     At the time IAL wanted to obtain some information about the IU course, its contents and admission requirements.  Either Dr Wong asked Cheng Man Kit to make an application to IU with a view to obtaining some materials about the course, or Dr Wong asked Sally Cheng to ask his brother to do so. 

(3)     In cross‑examination she was asked whether it could be her team leader Frankie that asked her to do so, but her evidence was that it should not be Frankie.  Though she was not 100% sure that it was Dr Wong who asked, she agreed that the chances would be 50% or thereabouts. 

(4)     Dr Wong knew Cheng Man Kit because before he enrolled for the RCIB course he had been helping out in IAL’s office in the summer of 2003 (since Sally Cheng worked there too). 

(5)     Cheng Man Kit paid application fees for the IU course and took a couple of lessons.  But he did not continue with the course.  He had not paid the full tuition fee for IU.  Sally Cheng had not paid the fee for him (whereas he did finish the RBIC course and Sally Cheng did repay the government loan for Cheng Man Kit relating to his RBIC studies).  She did not regard there to be a high chance that Cheng Man Kit would want to explore some other, or other better, courses other than RBIC.  According to her, Cheng Man Kit was lazy. 

(6)     Cheng Man Kit’s English standard was not good enough to be able to compose the Cheng Man Kit e‑mail. 

(7)     Dr Wong had asked her to open an e‑mail account using Cheng Man Kit’s name (I should add that on the evidence there is no e‑mail account of the type chengmankit@... but it is trite that e‑mail addresses can consist of one’s English name, or part of a name, or a completely fictitious name—in this case according to Sally Cheng, Cheng Man Kit used to be called Jason, but in the IU application form he put in an e‑mail address with the English name of “Jaap”, and so “Jason” and/or “jaap” would be possible candidates of such an account).  At one time she said that she was not clear whether the account (which she opened) was the Jason_jaap account (from which the Cheng Man Kit e‑mail was sent).  But at another point in time she said that the Jason_jaap account should be the one created by her. 

(8)     She said that the purpose of opening the account was to ask questions about the IU programme.  She gave the account name and password to Dr Wong after opening the account.  She did not draft or prepare the Cheng Man Kit e‑mail. 

(9)     After she had joined HKICE, Mr Yau had raised the question of the Cheng Man Kit e‑mail with her.  She might have told Yau that Cheng Man Kit was her brother.  Her evidence as to how this conversation arose had been extreme coy.  I shall have more to say about this later.

(10)   After she had joined HKICE, she received an e‑mail from Dr Wong dated 6 August 2005.  It was addressed to her in her “new name” of Jasmine Cheng.  It was entitled “Legal Action” and it attached a photograph of her (taken of her without her consent) working in a room in HKICE.  Sally Cheng interpreted that as a threat that she would be sued for having joined HKICE.  She recalled that she had passed this e‑mail to Yau and it could be because of this e‑mail and she had a conversation with Yau during which she mentioned that Cheng Man Kit was her brother. 

165.  Dr Wong’s evidence is, broadly, to the following effect :

(1)     He denied that he had asked Sally Cheng’s brother to apply to IU.

(2)     He denied that he had asked Sally Cheng to open an e‑mail account in her brother’s name.

(3)     No one had told him that the brother of one of his (then) staff had been sent to apply for an IU course.

(4)     At the material time he would not speak a lot to his consultants (of which Sally Cheng was one).  A staff called Frankie Tang would be responsible for talking to his own team (which included Sally Cheng).  But it was no longer possible for Dr Wong to ask his staff about Cheng Man Kit because after Sally Cheng had left IAL, a lot of other staff also left and by 2006 all his staff members were new. 

(5)     He had no knowledge of the Cheng Man Kit e‑mail until he saw it in this action. 

(6)     Sally Cheng made allegations against her in this action because she was sued by him and 2005 and she was fearful of him. 

(7)     He accepted that, based on the HKCEE results of Cheng Man Kit (which has been adduced in evidence and which I shall not repeat in this judgment) he should not have been able to write the Cheng Man Kit e‑mail and it was possible that someone wrote it for him.

(8)     Cheng Man Kit did complete the RBIC course at IAL.

166.  There was some evidence as to what happened in relation to another student called Brandon Lee.  A number of very hostile and aggressive e‑mails had been sent in the name of this person making numerous complaints about HKICE.  However, the Brandon Lee saga has not been pleaded.  The evidence at most goes to propensity, and operated as some sort of “similar fact evidence”.  The suggestion was that Dr Wong was behind the Brandon Lee e‑mails as well.  I have considered the evidence.  It is a collateral issue.  It is not crucial to my determination of the dispute between the parties and I need make no findings on them.  I have not relied on them in making my findings. 

167.  Upon considering the evidence I have the following comments and findings :

(1)     Cheng Man Kit’s HKCEE results have been adduced in evidence.  Without going into details, I think it is sufficient to say that it has not been seriously disputed (and I so find) that he was not the author of the Cheng Man Kit e‑mail.  Someone else drafted it.

(2)     Cheng Man Kit did not complete the course at IU.  He only attended a couple of classes. 

(3)     It is not disputed that he did complete the RBIC course at IAL.  I accept Sally Cheng’s evidence that Cheng Man Kit was unlikely to genuinely want to “branch out” or explore the IU programme when he made the IU application in September 2003.  Also I bear in mind the fact that Cheng Man Kit’s sister was at that time working at IAL which was a competitor of HKICE, and it would be rather odd for Cheng Man Kit to want to undertake the IU course (operated by HKICE).  It would, after all, be Sally Cheng who would be paying for his school fees. 

(4)     I therefore find that Cheng Man Kit had no real interest or intention of pursuing the full course at IU when he made the application. 

(5)     Someone must have been “pulling the strings” behind (i) Cheng Man Kit’s act in applying for the IU programme and (ii) the act of sending the Cheng Man Kit e‑mail.  The question is who.  The compelling inference is also that this person/entity had paid the fees for enrollilng in the IU course.

(6)     Sally Cheng gave her evidence under sub‑poena and in a guarded manner.  Many answers were prefaced by “should be” and “looks like” or “I do not recall clearly”.  I have examined her evidence critically.  I am not impressed by her evidence about how she came to discuss the Cheng Man Kit e‑mail with Mr Yau and how she came to tell Mr Yau that Cheng Man Kit was her brother. She was extremely coy about the matter and the impression I got was that she was not willing to (rather than not able to) tell me the full reason and circumstances as to how Mr Yau came to know that Cheng Man Kit was her brother.  She definitely knew and recalled more than what she was prepared to tell me. 

(7)     There were some hesitation and ambiguities in her evidence as to whether the individual in question was Dr Wong (and it will be recalled that at one stage she agreed that the probability of it being Dr Wong would be about 50% and it could be said that 50% was not sufficient to prove on a balance of probabilities).  The conduct she described was, irrespective of strict arguments of lawfulness, so shady that it is not the sort of thing that one could lightly forget.  I refuse to accept that she had genuinely failed to recall the identity of the person involved.  Her repetition of “not recall” or “should be” was repeated so often and mechanically that it almost became a knee jerk reaction.  She sounded extremely reluctant to specifically point her finger at someone.  This could be due to a number of reasons, some of which consistent with Dr Wong being the person concerned and some of which consistent with it being someone else.  I do not wish to speculate.  In my judgment even though she named Dr Wong in parts of her evidence, the force of her evidence has been “watered down” by the extremely unsatisfactory and guarded way in which she had always sought to “qualified” her answers.  I do not feel that I can safely find on a balance of probabilities that the individual involved was Dr Wong.

(8)     Even though I had declined to accept her evidence about the identity of the individual involved, I think I am still entitled to act on the broad thrust of her evidence and take the view that whoever the individual may be, he or she must have been associated with IAL.  In my judgment Sally Cheng’s evidence, insofar as it suggests that the person behind the saga was from In Learning, is entirely consistent (indeed supported) by the circumstances and inherent probabilities in the sense that In Learning “fits the bill” as being the more likely entity behind the above acts.  Cheng Man Kit had no axe to grind himself.  His sister worked for IAL at that time.  Cheng Man Kit had also worked at IAL for a while in summer 2003.  He himself actually studied at IAL at the material time for the RBIC course.  The scene was all set for Cheng Man Kit to be “recruited” by someone in In Learning to be the person making the application. 

(9)     I accept Sally Cheng’s evidence that she had created an e‑mail account in her brother’s name.  She did say that she gave the details of the account to Dr Wong and she was able to name Dr Wong with less vacillation.  However, looking at her evidence in the round and taking into the account the unsatisfactory way in which she had attempted to implicate Dr Wong in the other part of her evidence (i.e. that relating to asking Cheng Man Kit to make the IU application), I am not inclined to find that she had given the details to Dr Wong.  I find that she gave the details to someone in IAL.  The Cheng Man Kit e‑mail was composed by someone in IAL and sent to IU, using the account created by Sally Cheng. 

(10)   There had been suggestions that there were other competitors of IAL apart from HKICE.  Such suggestions were made no doubt to pave the ground for the argument that there could well have been other competitors (apart from In Learning) behind the IU application and the e‑mail.  But even assuming that In Learning did not just have Degreeasia as its competitor and that there could be other competitors out there, there is no suggestion as to how Cheng Man Kit could have been “recruited” by such a competitor.  If Cheng Man Kit was indeed recruited by such a competitor to submit the application to IU, then it must have been an extremely remarkable and unfortunate coincidence that the person so recruited (i.e. Cheng Man Kit) happened to have such close connections with IAL in the sense that his sister worked there, that he himself had worked there before and he was studying there as well.  I decline to accept that there had been such an unfortunate coincidence. 

(11)   Dr Wong has been in the educational field for some time.  He must have been familiar with the sort of “commercial tactics” or “tricks” engaged by competitors in the trade.  His own ex‑employee and contractors had walked out on him before and he himself had engaged private detectives to track down what he perceived to be unlawful activities.  It is plain as a pikestaff that he was not a “babe in the woods”.  Yet he had not suggested how it was possible for a “competitor” to recruit a “mole” who “coincidentally” was so closely related to his institution. 

(12)   The surrounding circumstances and inherent probabilities therefore strongly support Sally Cheng’s evidence insofar as it implicates someone in IAL.  Notwithstanding the guarded and (at times) coy nature of Sally Cheng’s evidence, I am of the view that she was a reliable witness in this aspect of her evidence. 

(13)   I therefore find that the individual who asked Cheng Man Kit to make the IU application (whether directly, or through Sally Cheng) and to whom Sally Cheng gave the e‑mail details was someone connected with IAL.  However, since Degreeasia has not pleaded any alternative case as to who such an individual might be and the evidence does not enable me to positively find who he or she was, I do not make any findings as to who he or she was, whether he or she was an employee or contractor, or whether his or her conduct was with the instructions or connivance of Dr Wong.  These simply do not form part of Degreeasia’s pleaded case. 

168.  But all the above must be read against the background of my earlier ruling that even if the acts in question were attributed to In Learning, they gave rise to no actionable cause of action for Degreeasia.  The relevant claims of Degreeasia are therefore dismissed. 

The attempted diversion of phone calls

169.  This is a puzzling part of Degreeasia’s claim.  Degreeasia’s case, stripped to its basics, is that after Suen had left the employment of Degreeasia he telephoned Degreeasia and asked a staff member of Degreeasia (Crystal Au) to divert Degreeasia’s telephone line to Suen so that Suen could then entice away students/customers of Degreeasia.  But the fact is that Crystal Au did not do as requested by Suen and therefore whatever improper diversion which Suen might have intended never materialized or occurred. 

170.  Therefore no possible damage could have occurred as a result of this failed attempt.  Degreeasia has not sought an injunction which restrains Suen from doing the same act and in any event there cannot possibly be the slightest possibility that Suen would do it again (assuming that he had indeed done so in the past, as alleged by Degreeasia).  Even if he were to try to do it again there is no possibility of him ever succeeding.  Therefore even if an injunction had been sought I would have refused it.  This part of the claim can therefore give rise to no meaningful remedy in favour of Degreeasia.  In any event I cannot see what “unlawful act” this conduct can amount to. 

171.  However, in case I am wrong in my view and it is considered that Degreeasia’s complaint can give rise to some remedy in law or equity, I now go on to consider the evidence led on the topic. 

172.  Degreeasia’s allegation is based on the evidence of Crystal Au, a consultant who had worked at Degreeasia since June 2005.  According to her :

(1)     Suen was her superior at the material time.

(2)     Suen left Degreeasia in around January/February 2006. 

(3)     In fact before Suen’s departure she had heard someone in the office (who was a close friend of Suen—and later Crystal Au added that this person was someone called Jacqueline Law) say that he would be leaving on a particular day in either January or February.  Crystal Au said that she thought that maybe Suen wanted to let her (i.e. Crystal Au) know indirectly through Jacqueline Law that he was leaving but she did not know why he had to do it so indirectly like this.

(4)     Suen indeed has not turned up at work that day.  She then formed the conclusion that Suen had left Degreeasia’s employment.

(5)     After a few days, she was informed by her new superior, one Mr Terence Pang, that she would report to him. 

(6)     One day when Suen was no longer working for Degreeasia (but Crystal Au could not recall whether this was before, or after, Terence Pang had told her to report to him) Suen called Crystal Au and told her that a student would be looking for him in those couple of days and he (i.e. Suen) asked Crystal Au to divert the company telephone hotline (31150101) to him. 

(7)     Crystal Au told Suen that she did not have the password to divert the hotline and Suen asked Crystal Au to ask Mr Yau’s personal assistant, Vicki (Suen knew Crystal Au to be a good friend of Vicki), for the password.  Crystal Au asked Vicki for the password and Vicki said she could not give the password to Crystal Au. 

(8)     A day or two later Suen called again to ask whether the line had been transferred yet, and Crystal Au told her that Vicki would not give the password and Suen hung up upon hearing this. 

173.  Suen denies this.  According to him :

(1)     31150101 (the number which he was accused of asking Crystal Au to divert) was a number that Degreeasia has always kept but not for external use. 

(2)     Then in about October 2005 (when it was quiet season) he suggested that Degreeasia should start some short courses for mature students and the telephone number of 31150101 was printed in the flyers and handbills as the contact hotline of Degreeasia.  The official company telephone number was 26729977.  This number (i.e. 26729977) was also used in some regular marketing literature of Degreeasia such as advertisements in Recruit. 

(3)     After the 31150101 number began to be used in flyers and handbills, Degreeasia obtained a new mobile phone SIM card and three colleagues namely Crystal Au, Jacqueline Law and Ivy would take turns to keep (and answer) the mobile phone (with the new SIM card number) to which the 31150101 number would be diverted. 

(4)     Sometimes, while he was still employed by Degreeasia, he would ring up one of these three (usually Jacqueline, and if he could not find her, then either Crystal or Ivy) to remind them to divert the 31150101 line to the designated mobile number.  This was because if the line was not so diverted, then “by default” the telephone line in Degreeasia’s office would ring and the call could be picked up by any random person from the staff (if picked up at all) who did not know how to respond to such calls made to the hotline. 

(5)     Even then, he would never have asked people to divert 31150101 to him.  After he left Degreeasia, he had not made any such calls for the purpose of reminding people to divert the line at all (whether to himself, or to the designated mobile number).  After he had left Degreeasia, he would only have contact with Jacqueline over questions of payment of school fees by students and commission.  He would not call Crystal Au.

174.  The witnesses are in direct dispute over this issue.  I find the evidence of both witnesses not entirely satisfactory.

175.  I comment first on Crystal Au.  One of the essential ingredients of Degreeasia’s complaint is that Suen attempted to ask Crystal Au to divert the telephone line after he had left the employment of Degreeasia.  On this issue of timing, Crystal Au said that when she received the alleged phone call, Suen had already left the employment of Degreeasia.  According to her, Suen had not told her in advance that he was going to leave and her evidence was very muddled as to when and how she learned of Suen’s departure.  After she had finished her evidence, an e‑mail was produced by Suen which was dated 27 January 2006 (sent to a number of persons—including Crystal Au—at 1314 hrs), in which Suen said farewell to his colleagues and stated that it was his last day at Degreeasia.  Suen did not go to work the next day.  Chinese New Year day fell on Sunday 29 January 2006.  27 January 2006 was therefore, factually, Suen’s last day at work and he made no secret about it.  He sent an e‑mail to a lot of people, including Crystal Au.  In fact in his evidence he added that Crystal Au was present at a farewell lunch for him at Hang Fuk Lau Restaurant. 

176.  All this evidence (i.e. the e‑mail and the suggestion that Crystal Au was present at the farewell lunch with Suen) was adduced after Crystal Au has already testified.  In terms of the late suggestion that Crystal Au was present at the farewell lunch, the fact that it came out so late (and has not been put to Crystal Au in cross‑examination) affects its credibility and for present purposes I place no weight on this evidence.  However, the e‑mail dated 27 January 2006 was a piece of evidence the authenticity of which has not been challenged.  While in cross‑examination it has been suggested to Suen that it was possible that Crystal Au had only received it after Chinese New Year (thereby suggesting that she might not have seen it on 27 January 2006), there was no application to recall Crystal Au to give positive evidence on the matter.  In any event the e‑mail does show that Suen had communicated his departure to his colleagues (when Crystal Au first saw it is beside the point here) and this sits uncomfortably with her suggestion that she only learned of Suen’s departure as a result of being told by Terence Pang and being told (indirectly) by Jacqueline and not seeing Suen at work for a few days.  Generally Crystal Au’s evidence as to her knowledge of Suen’s departure had a very coy, ambiguous and evasive air about it and this severely affected the reliability of her evidence.  She gave me the impression that she knew more about Suen’s departure (and the timing thereof) but for some reason was extremely coy and unwilling to tell me about it.  Since the timing of Suen’s departure (in particular whether she received Suen’s call after his departure) is of importance, her coyness and unsatisfactory evidence in this regard dents her credibility.

177.  Further, I find the request (described by Crystal Au) extremely bizarre.  If (as Crystal Au suggests) Suen had already left at the time and all he said he wanted was to receive the call of a student who might call him, there was no need to ask for the diversion of the line to him.  All that was needed was for him to ask someone at Degreeasia to ask the relevant student, if he or she called, to call him at a particular number.  To ask for the diversion of a number would mean that all calls to that number (intended as a hotline for Degreeasia) would be diverted wholesale to an ex‑employee.  That is absolutely non‑sensical.  Of course it could be said that if Suen chose to make a request that made no sense, there is nothing that Degreeasia could do about it and it is not for Degreeasia to explain away the reasoning of a request that Crystal Au allegedly received.  But the fact that the request, as alleged by Degreeasia, made no sense at all is something that goes to the credibility of it having been made in the first place. 

178.  Suen’s explanation of the practice of diversion of lines during his employment was not entirely satisfactory either.  The practice (it will be recalled) was provided by him as an explanation of why sometimes during the time of his employment he might have to call Jacqueline, Crystal or Ivy to remind them to divert 31150101 to the mobile SIM card number.  Implicit within this explanation is the premise that, having been diverted to the new SIM card number, sometimes the 31150101 number would become “undiverted” and calls would go to the telephones in Degreeasia’s office.  However, if (as he suggested) the number 31150101 was diverted to the new SIM card number and the phone was kept by one of the three staff he mentioned, it could simply remain “diverted” in that way and there should be no need to “undivert” it back to the office number.  However, Degreeasia has not tested Suen on this point by way of cross‑examination and I cannot rule out the possibility of sensible explanations being offered about the office practice. 

179.  Standing back, Degreeasia bears the burden of proof.  Even if there may be unsatisfactory features in Suen’s evidence, it is not for him to prove his innocence.  In any event the unsatisfactory part of Suen’s evidence goes to his explanation of an office practice before he left Degreeasia’s employment.  His evidence as to what happened after his employment remains one of denial.  It is true that his evidence about the practice during employment was given with a view to suggesting that Crystal Au might have been mistaken, but even if one discounts that explanation, the fact remains that he has denied making the phone call to Crystal Au after his employment.  There is nothing in the surrounding circumstances or contemporaneous documents to discredit or cast doubt on such a denial.  At one time during Suen’s cross‑examination it was suggested that Suen’s denial meant that Crystal Au was lying.  But arguments such as “are you saying that my witness lied?” do not take a party’s case very far because they can very easily be met by an equivalent rhetorical argument that “are you saying that my denial is a lie?”  Issues of disputed fact are resolved in a disciplined way, not by reference to rhetorics like that.  In my view in the absence of any contemporaneous documents or facts in this case which add to the credibility of Crystal Au or discredits Suen’s denial, Degreeasia has failed in discharging its burden of proof.

180.  I therefore reject Degreeasia’s assertion of fact in this regard.

181.  I should add that there is an issue over the circumstances over which a consent summons and certain documents were signed on behalf of Degreeasia and by Suen.  They broad effect of the documents is the Degreeasia and Suen had, at one time (when Suen was unrepresented) tried to conclude a “side deal”: judgment would be entered against Suen in favour of Degreeasia by consent but Degreeasia would not enforce the judgment against him.  A draft affirmation of Suen (in which allegations were made against In Learning and Dr Wong) was also produced in this process but was eventually unsigned.

182.  I find the evidence about this saga unsatisfactory and unhelpful.  Degreeasia has not filed the consent summons to obtain a judgment.  The explanations given to me by both Mr Yau (for Degreeasia) and Suen about how this saga developed were most unsatisfactory.  Suen’s evidence is full of holes and gaps.  Mr Yau’s evidence is confusing and incoherent.  I do not think that either of them has told me the whole truth about the matter.  I therefore do not feel that I can safely place any weight on these documents. 

Damages

183.  It follows from the above discussion that I reject all of Degreeasia’s complaints against all the defendants.  Its claims shall all stand dismissed.

184.  However, in case the matter proceeds further and the question of damages shall become relevant, I should indicate my views on the matter.  In order not to unduly prolong what is already a very long judgment, I shall keep my comments within proportionate limits.

185.  Despite the amount of time and evidence devoted to the issue, the bottomline is that it is Degreeasia’s case that as a result of the events complained of in this case (in particular the phone call between Lam Yiu and Paules Lee which led to the various meetings in IAL), a number of students left its courses. 

186.  Degreeasia had compiled a list of 33 students who had previously been enrolled in the Benedictine College course and who have been “lost”.  Of these 33, 9 switched to USU and the destination of the rest were stated to be “others”. 

187.  I reject Degreeasia’s extravagant claim that damages should be measured on the basis that all 33 departures were attributable to the defendants’ wrongful acts and that all 33 would otherwise have stayed with Degreeasia. 

188.  There is no evidence that, apart from the 7 students (including Lam Yiu) who had gone up to IAL, any other students had been prompted to leave the Benedictine College course because of anything said or done by Paules Lee.  I am prepared to accept that her conversation with Lam Yiu was a contributing factor in the “deflection” of the seven students to USU.  I am even prepared to proceed on the basis that the loss of all nine students (as opposed to merely seven, which was the number that went up to IAL) on the “lost students” list who had moved to USU were caused by Paules Lee’s conversation with Lam Yiu (on the basis that they might have heard about the USU course through the grapevine of Lam Yiu and her friends).  But of these nine, two switched back to Benedictine College (namely Lam Yiu and Lam Chi Wai) and so only seven students can be said to have moved to a course offered by IAL.  That is the number of students by reference to which damages should be assessed. 

189.  I refuse to accept that the remaining students (destination said to be “others”) have left because of any wrongdoing by the defendants, or that any of them had (contrary to what they might have told Degreeasia) secretly switched to IAL’s courses as well.  Degreeasia bears the burden and it cannot base its case on guesswork or self‑serving assumptions. 

190.  I am prepared to proceed on the basis that those seven students would otherwise have remained with Benedictine College for the next year.  But it does not follow that Degreeasia will obtain, by way of damages, the tuition fees that these seven students would pay for the next year.  This is because there is no evidence as to the outlay that Degreeasia had to incur in providing the course.  It was suggested by Mr Yau in evidence that Degreeasia only had to pay a fixed sum to Benedictine College, but that was a mere say‑so by Mr Yau.  One expects that matters such as fee structure and arrangement with Benedictine College to be documented.  Degreeasia bears the burden of proof.  Degreeasia has not produced the underlying documents to prove that there was indeed a fixed‑fee arrangement.  It cannot be said that these are “commercial secrets” and Degreeasia does not want to divulge these in a litigation with a competitor.  Degreeasia is the plaintiff and chose to sue.  If it wanted to sue it should be prepared to disclose these documents (and it will have been advised of the implied undertaking in discovery).  I find that Degreeasia had failed to prove its loss.

191.  If I am wrong on that, then damages will be assessed on the basis of the annual tuition fee for the Benedictine College course, multiplied by seven.

192.  In Degreeasia’s closing submissions it was submitted (at paragraph 35) that damages should be calculated on the same basis as that claimed by Dr Wong in his evidence in DCCJ4196/2005 (which was the claim against Sally Cheng) namely for the “lost fees” for all students who had left the institution over a particular period.  As an intellectual exercise I have no hesitation in rejecting that outright.  Degreeasia’s claim has to be assessed in its own legal and evidential merits.  The way In Learning chose to make its claim in DCCJ4196/2005 is irrelevant.  The claim by In Learning in the District Court was speculatively and extravagantly made.  Degreeasia cannot take a “tit for tat” approach and make an equally extravagant claim.

193.  To recap, the simple order that I make in this action is that all of Degreeasia’s claims are dismissed, with a costs order nisi in favour of all defendants.

194.  By way of endnote, I should say this.  From time to time I have endeavoured to set out what I regard to be the more salient features of the oral evidence given by the witnesses.  The summary I have given in the course of the judgment does not purport to be an exhaustive account of what they had said.  To do so would have added to the length of this judgment.  The fact that I have not made reference to a number of points made by the witnesses does not mean that I have not had regard to them.  It is simply the case that I do not regard those points as having any significant effect on (or detracting from) my findings of fact.