SHENZHEN FUTAIHONG PRECISION INDUSTRY CO., LTD AND OTHERS v. BYD CO LTD AND OTHERS

HCA 2114/2007

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NO 2114 OF 2007

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D E C I S I O N

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1.  By 3 summonses dated 12 July 2016 (“Expert Summons”), 1 August 2016 (“Amendment Summons”) and 14 September 2016 (“Costs Summons”) the BYD Parties sought leave to appeal against the decisions of this court

(1)  made on 28 June 2016 and 5 July 2016 (as embodied in an order dated 5 July 2016) concerning the parties’ respective applications for leave to adduce expert evidence (“Expert Evidence Decisions”);

(2)  dated 18 July 2016 granting the Foxconn Parties leave to amend their Re‑Amended Statement of Claim in the manner set out in the draft Re‑Re‑Amended Statement of Claim (“Amendment Decision”);

(3)  dated 31 August 2016 in respect of the costs of the parties’ respective applications for leave to adduce expert evidence and the Foxconn Parties’ application for leave to amend their RASOC (“Costs Decision”).

2.  The BYD Parties’ proposed grounds of appeal are set out in the draft notices of appeal attached to the 3 Summonses.

3.  On 17 February 2017, this court granted leave to the BYD parties to appeal against the Expert Evidence Decisions.

4.  This court will now deal with the leave applications relating to the Amendment Decision and, for completeness, the Costs Decision.

5.  In summary, the gist of the proposed amendments is concerned with:

(1)  The involvement of 3 additional employees of the Foxconn Parties viz Dong Gening, Chen Quan and Akin Wang, and the duties which they each owed to the Foxconn Parties: paragraph 16 (opening paragraph and sub‑paragraphs 10–12) of the proposed amendments.

(2)  The wrongful acts and breaches of duties committed by the 3 additional employees which the Foxconn Parties likewise alleged had been procured and induced by the BYD Parties: paragraphs 26D–26F and Schedules 13A–13C of the proposed amendments.

(3)  The additional confidential information which these 3 employees had wrongfully disclosed to the BYD Parties between 2003 and 2005 and which the BYD Parties obtained for their own use: Schedules 13A–13C of the proposed amendments.

6.  In the Amendment Decision, applying the well‑established 3‑stage test as set out in paragraph 16 therein, this court concluded that:

(1)  For Stage 1: The BYD Parties did have a reasonably arguable limitation defence.

(2)  For Stage 2: The proposed amendments did not introduce new causes of action, but were further instances of the same causes of action or alternatively are further and better particulars of the existing allegations of the wrongdoings of the BYD Parties, and were permissible under the law.

(3)  For Stage 3: Even if the proposed amendments amounted to new causes of action, they arose out of substantially the same facts as were already in the existing claims.

(4)  On the exercise of discretion, this court was not satisfied that that there was undue delay on the part of the Foxconn Parties. Nor was this court satisfied that the BYD Parties had clearly demonstrated the existence of real prejudice which could not be compensated for by an appropriate costs order.

7.  This court has received very detailed oral and written submissions of Mr Yu SC and Mr Wong SC on whether the BYD Parties can demonstrate their appeal has a reasonable prospect of success.  Having carefully considered the matter, this court fully accepts the submissions of Mr Wong SC on Grounds (1) and (2) in the draft notice of appeal pertaining to Stages 2 and 3.  It appears to this court that the BYD Parties were either misinterpreting this court’s approach and reasoning in reaching its conclusions or were merely complaining that this court should not have applied the legal principles to the facts in  favour of the Foxconn Parties without really explaining why that constituted an error.

8.  Regarding Ground (3) in the draft notice of appeal pertaining to undue delay, this court again fully accepts the submissions of Mr Wong SC that the BYD Parties have failed to demonstrate the appeal has a reasonable prospect of success based on that ground.  As this court said in paragraph 67 of the Amendment Decision, given the enormous scale of the BYD Discovery, 14 months are not necessarily an undue amount of time for the Foxconn Parties to formulate the proposed amendments.  In any event, mere delay is not sufficient to bar an application for leave to amend.

9.  However, regarding Ground (3) in the draft notice of appeal pertaining to prejudice, this court takes the view that the BYD Parties have a reasonable argument on whether the proposed amendments would cause real prejudice to them which could not be compensated for by an appropriate costs order and thus on whether the discretion should be exercised in their favour.

10.  In these circumstances, this court should grant leave to the BYD Parties to appeal against the Amendment Decision but only limited to the issue of prejudice and hence the exercise of discretion, and will so order.  Since leave is granted, costs of the Amendment Summons should be in the cause of the intended appeal and this court so orders on a nisi basis.

11.  Regarding the BYD Parties’ Costs Summons, given that leave is given to them to appeal against the substantive Amendment Decision and the Expert Evidence Decision, this court is of the view that it is not necessary to separately give leave to appeal against the Costs Decision.  In the normal course of event, the costs below will be dealt with together with the costs of appeal by the Court of Appeal hearing the substantive appeals.

12.  This court therefore makes no order on the Costs Summons save that, on a nisi basis, orders costs of that summons to be in the cause of the intended substantive appeals.

HCA 2114/2007

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NO 2114 OF 2007

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DECISION ON COSTS

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Amendment Application – Paragraphs 1 and 2 of Foxconn Parties’ Summons dated 30 September 2015

1.  By a Judgment handed down on 18 July 2016, this court granted leave to the Plaintiffs (by original action) (“Foxconn Parties”) to amend their Re-Amended Statement of Claim (“RASoC”) to the full extent proposed.

2.  The application was opposed by the Defendants (by original action) (“BYD Parties”).

3.  In their written submissions on costs dated 1 August 2016, Foxconn Parties, relying on the well established principles in Lessy SAR v Pacific Star Development Ltd [1996] 2 HKLR 1 at 2B-C, submit that

(1)    costs of and occasioned by their amendments should be to BYD Parties in any event;

(2)    costs of the substantive argument on leave to amend, including the hearing before this court on 14 April 2016, should be to Foxconn Parties, the successful party in obtaining leave to amend, with certificate for two counsel.

4.  Foxconn Parties further submit that the court should not readily depart from the general rule that costs should follow the event. Otherwise, it will encourage unnecessary arguments which will itself increase legal costs: Pony HK World Ltd v Vand Petro-Chemicals (BVI) Co Ltd unrep, FACV 4/2013, 18 March 2014, Court of Final Appeal, at [4]. 

5.  BYD Parties, on the other hand, submit that their costs of and occasioned by the amendments shall be borne by Foxconn Parties save that BYD Parties shall pay 50% of Foxconn Parties’ costs of the hearing on 14 April 2016.

6.  BYD Parties submit under the post-CJR regime, the principle that “costs to follow the event” is no longer the prescribed usual order, but is instead just an option in interlocutory proceedings. In this regard, RHC Order 62 r 3(2A) provides:

“(2A) If the Court in the exercise of its discretion sees fit to make any order as to the costs of or incidental to any interlocutory proceedings, it may, subject to this Order, order the costs to follow the event or make such other order as it sees fit.”

7.  RHC Order 62 r 5(1) sets out the circumstances which the Court should take into account in exercising its discretion on costs including, inter alia the “conduct of the parties” and “whether a party has succeeded on part of his case, even if he has not been wholly successful”.  RHC Order 62 r 5(2) further provides that “conduct of the parties” includes:

(a)    whether it was reasonable for a party to raise, pursue or contest a particular allegation or issue;

(b)    the manner in which a party has pursued or defended his case or a particular allegation or issue.

8.  In essence, BYD Parties submit that they ought not be ordered to pay the entirety of Foxconn Parties’ costs of the 14 April hearing since:

(1)   it was not unreasonable for BYD Parties to contest the Amendment Application and to raise the issues it did for the court’s consideration;

(2)   the court did find in favour of BYD Parties in relation to Stage 1 of the test ie BYD Parties have an arguable limitation defence in relation to the new allegations raised in the proposed amendments.

9.  The difference between the parties boils down to whether BYD Parties should pay for all or only part of the costs of the substantive argument.

10.  As far as reasonableness of the parties’ conduct is concerned, while BYD Parties have put forward a number of reasons why their opposition to the Amendment Application should not be regarded as unreasonable, that does not in itself mean Foxconn Parties’ conduct in making the Amendment Application was unreasonable. After all, the application was meritorious and they have managed to persuade the court to grant it to the full extent.

11.  Concerning the point that BYD Parties succeeded in relation to Stage 1 of the test, that is akin to saying that the time and hence costs spent by Foxconn Parties in relation to that issue should not be borne by BYD Parties.

12.  As the Court of Final Appeal said in CIR v HIT Finance[2008] HKEC 1078 at [7], the discretion of the court to deprive a successful party of the whole or part of his costs because he had caused a significant increase in the length or costs of the proceedings by raising issues on which he did not succeed “exists for the purpose of avoiding the rigour of too inflexible an application of the rule that costs generally follow the event.  It is to be approached with due circumspection so as not to undermine the utility of that general rule.”

13.  In Swiss Singapore Overseas Enterprises Pte Ltd v China Citic Bank Corp Ltd, Xiamen Branch, unrep, CACV 197/2013, 29 August 2014,  Kwan JA said at [19]:

“...The matters to be taken into account under [RHC Order 62 rule 5] are not to be applied mechanically. We do not think the court should simply reduce costs with regard to the number of issues raised and lost and the time taken by those unsuccessful issues. There is clearly a discretionary element in making a proportional reduction.” (emphasis added)

14.  Having refreshed its memory of the submissions made in relation to Stage 1 of the test, this court is of the view Foxconn Parties could reasonably have chosen to concede, or at least not contest, Stage 1. If Foxconn Parties had taken that course, the Amendment Application would still have succeeded and not insignificant time and costs could have been saved.

15.  Looking at the matter in the round and exercising its discretion to make a proportional reduction, this court takes the view that BYD Parties should only be required to bear 80% of the costs of the substantive argument and shall so order:

“(1) Subject to (2) below, costs of and occasioned by paragraphs 1 and 2 of Foxconn Parties’ summons dated 30 September 2015 be to BYD Parties.

(2) 80% of the costs of the substantive argument on paragraphs 1 and 2 of Foxconn Parties’ said summons, including the 14 April 2016 hearing, be to Foxconn Parties.

(3) Both parties’ costs to be taxed if not agreed and paid forthwith, with certificate for two counsel for the 14 April 2016 hearing.”

Expert Directions Applications – Paragraphs 3 - 7 of Foxconn Parties’ Summons dated 30 September 2015 and BYD Parties’ Summons dated 29 March 2016(as amended)

16.  The applications for directions on expert evidence (“Expert Directions Applications”) were heard by this court over 2 days on 28 June and 5 July 2016 during which the court gave its oral rulings at various stages of the hearing immediately after the parties’ submissions.   

17.  In Foxconn Parties’ summons, expert evidence and directions were sought in relation to the following three subjects:

(1)   IT forensic analysis.

(2)   PRC laws.

(3)   Taiwanese laws.

18.  On the other hand, in BYD Parties’ summons, expert evidence and directions were sought in relation to the following six subjects:

(1)   Nature of confidential information in the mobile phone market.

(2)   Expansion of the mobile phone industry at the time of the relevant events.

(3)   IT forensic analysis.

(4)   PRC laws.

(5)   Taiwanese laws.

(6)   Quantification of loss and damage.

19.  It can be seen from the above that as far as subjects are concerned, the parties were ad idem on three. As far as the specific questions raised under each of the three agreed subjects, the parties had (as per this court’s direction dated 24 June 2016) helpfully set out their agreement / disagreement over the specific questions raised in each other’s summons. In summary, they were in agreement on the questions raised under IT forensic analysis and differed only over the precise formulation of some of the questions raised under PRC laws and Taiwanese laws. In the end, some time (but not much) was spent at the hearing to sort out the differences between them.

20.  As far as the three disputed subjects are concerned,  quantification of loss and damage fell away after Foxconn Parties indicated that they were contemplating a split trial and hence evidence on quantification of loss and damage was unnecessary. The other two subjects ie (i) nature of confidential information in the mobile phone market, and (ii) expansion of the mobile phone industry at the time of the relevant events, were hotly disputed and took up most of the 2-day hearing.

21.  After hearing the parties, this court granted leave to adduce expert evidence on the following question raised by BYD Parties:

“Whether, in 2007 or at any time before 2007, the alleged information defined in paragraph 11 of the Re-Amended Statement of Claim (“RASOC”) as being the “Confidential Information” and in particular, the information and documents referred to in Schedules 1 to 13 and the second column of Schedule 14 to the RASOC (the “Alleged Information”) (or any part thereof) was available in the public domain, or has been published or disclosed in the public domain, and if so which parts of the Alleged Information were of that nature.”

22.  The above question was the only one allowed by this court out of a total of 10 questions raised in the two subjects in paragraphs 2A and 2B of BYD Parties’ summons as amended.

23.  In these circumstances, and not surprisingly, Foxconn Parties submit that they were on the whole successful in opposing BYD Parties’ application and costs should follow the event. BYD Parties, on the other hand, submit that neither party have been wholly successful – in particular, their formulations of the questions on PRC laws and Taiwanese laws were largely adopted by the court. A fair order would be either no order as to costs or costs in the cause.

24.  The view of this court is as follows.

25.  Regarding Foxconn Parties’ application for expert directions, eventually there was a large measure of agreement by the parties and directions were given accordingly. It cannot fairly be said that either party was wholly or largely successful or unsuccessful. Obviously, if an agreement had come sooner rather than later, time and costs would have been saved. But that is water under the bridge. In the exercise of this court’s discretion on costs, the fairest order would be:

“ Costs of and occasioned by paragraphs 3 to 7 of Foxconn Parties’ summons dated 30 September 2015 be in the cause, with certificate for two counsel for the hearings on 28 June and 5 July 2016.”

26.  Regarding BYD Parties’ application for expert directions, to the extent that they raised the same three subjects as Foxconn Parties did, the application was redundant. If BYD Parties disagreed with Foxconn Parties concerning the precise formulation of the questions under those subjects (or the directions regarding exchange of expert reports and so on), the same could easily have been raised by way of submissions, which was what eventually happened.

27.  To the extent that BYD Parties’ application raised three additional subjects, the one on quantification of loss and damage fell away through no fault of either party. As for the other two (raising a total of 10 questions) which were hotly disputed, it is fair to say Foxconn Parties has been substantially successful in opposing them. This court cannot see any reason why costs should not follow the event.

28.  In the exercise of its discretion, this court hereby orders:

“ Costs of and occasioned by BYD Parties’ summons dated 29 March 2016, as amended, be to Foxconn Parties, to be taxed if not agreed and paid forthwith, with certificate for two counsel for the hearings on 28 June and 5 July 2016.”

29.  Given that part of the hearings on 28 June and 5 July 2016 was spent on paragraphs 3 to 7 of Foxconn Parties’ summons while (a larger) part of them was spent on BYD Parties’ summons, some apportionment is inevitable.  It is up to the parties to come to a sensible agreement on it or go to taxation, as the case may be.

30.  Liberty to apply.

Written Submissions by Mr Wong Yan Lung, SC and Mr Law Man Chung, instructed by Mayer Brown JSM, for the Plaintiffs by original action and the Defendants by counterclaim

Written Submissions by Mr Victor Joffe and Ms Sara Tong, instructed by Skadden, Arps, Slate, Meagher & Flom, for the Defendants by original action and the Plaintiffs by counterclaim

HCA 2114/2007

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NO 2114 OF 2007

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J U D G M E N T

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Introduction

1. By paragraph 1 of their summons dated 30 September 2015, the Plaintiffs (by original action) (“Foxconn Parties”) seek leave to amend their Re–amended Statement of Claim (“RASoC”) in violet (“proposed amendments”).

2. The application is opposed by the Defendants (by original action) (“BYD Parties”).

Foxconn Parties’ present case and proposed amendments

3. In a nutshell, Foxconn Parties’ case is that BYD Parties have wrongfully received and used their confidential information which they had developed for the effective operation of the group’s business.  The confidential information, constituting Foxconn Parties’ “trade secrets”, included inter alia operation manuals and records of suppliers and customers.

4. As far as wrongful receipt is concerned, it is pleaded that, in or around 2005 and 2006, BYD Parties received the confidential information through 9 of Foxconn Parties’ employees.  The 9 employees wrongfully disclosed the confidential information to BYD Parties in breach of their duties, having been induced and procured by BYD Parties to do so.  In relation to each of the 9 employees, their breaches of duties and disclosure of confidential information have been specifically pleaded in paragraphs 20 to 26C of RASoC while the confidential information in question which they had wrongly disclosed is specifically pleaded in Schedules 1–13.  It is further pleaded that BYD Parties knew the information was trade secrets and the employees had breached their duties.

5. As far as wrongful use is concerned, it is pleaded that by about August 2006, BYD Parties had set up a production line highly similar to Foxconn Parties’ production system.  It is also pleaded that BYD Parties have made use of the confidential information and modified it for their own use (RASoC paras 27–32). In this regard, Foxconn Parties set out

(1)   in Schedule 14 various operational and business documents of both parties which are said to bear “striking similarity” (para 27(a)(2) RASoC); and

(2)   in Schedule 15 the confidential information said to have been modified by BYD Parties for their own use (para 29(1) RASoC).

6. On the basis of the aforesaid, Foxconn Parties claim against BYD Parties for:

(1)   breach of their duty of confidence towards Foxconn Parties (“breach of confidence”) (RASoC paras 20–38);

(2)   inducing breach of contractual and fiduciary duties (“inducing breach of duties”) (RASoC paras 39–40);

(3)   conspiracy (RASoC paras 41–43); and

(4)   dishonestly assisting the 9 employees in their breaches of fiduciary duties (“dishonest assistance”) (RASoC paras 44‑47).

7. According to Mr Wong SC, the proposed amendments are intended to plead facts revealed from the discovery given by BYD Parties (“BYD Discovery”) in July 2014[1] and to provide further and better particulars of the existing causes of action already pleaded in the RASoC.  Mr Wong SC told this court the BYD Discovery showed a fuller extent of the wrongful use of Foxconn Parties’ confidential information by BYD Parties, as well as the involvement of some other former employees of his clients in BYD’s wrongful acts.  The BYD Discovery also revealed additional documentsprepared by BYD Parties by reference to comparable operation documents of his clients.  This triggered further investigation resulting in the proposed amendments to Schedules 14 and 15 of RASoC.

8. According to Mr Joffe, most of the proposed amendments are objectionable as they involve various new allegations (“new allegations”):

(1)   The involvement of 3 additional employees of Foxconn Parties viz Dong Gening (“Dong”), Chen Quan (“Chen”) and Akin Wang (“Wang”), and the duties which they each owed to Foxconn Parties: paragraph 16 (opening paragraph and sub–paragraphs 10 – 12) of proposed amendments.

(2)   The wrongful acts and breaches of duties committed by the 3 additional employees which Foxconn Parties likewise allege had been procured and induced by BYD Parties: paragraphs 26D – 26F and Schedules 13A–13C of proposed amendments.

(3)   The additional confidential information which these 3 employees had wrongfully disclosed to BYD Parties between 2003 and 2005 and which BYD Parties obtained for their own use: Schedules 13A–13C of proposed amendments.

9. Mr Joffe complains that the new allegations are relied upon by Foxconn Parties as additional basis in support of their claims for breach of confidence, inducing breach of duties, conspiracy and dishonest assistance.

10. For completeness, this court should mention that, in addition to the specific paragraphs and Schedules identified above, Mr Joffe also objects to various bits and pieces of the proposed amendments eg paragraph 11 last sentence, paragraph 27 opening, paragraph 27(b)(2), paragraphs 41–2; paragraphs 44–5 etc which essentially are amendments consequent upon or arising from the new allegations. As this court sees it, these amendments stand or fall with the proposed amendments concerning the new allegations and shall be so treated.

11. At paragraph 3 of his skeleton submissions, Mr Joffe has helpfully summarized his three grounds of objection as follows.

12. First, the proposed amendments have the effect of introducing new causes of action, which are time barred under the Limitation Ordinance, Cap 347 (“LO”).

13. Second, Foxconn Parties have not shown the new causes of action arose out of the same or substantially the same facts as the causes of action already pleaded in the RASoC so as to come within RHC O 20 r 5(5) and sections 35(5) and (6)(a) LO.

14. Third, even if the proposed amendments satisfy the requirements of RHC O 20 r 5(5), the court should not exercise its discretion to allow the amendments as it would not be just to do so, by reason of 

(a)  the extreme delay of Foxconn Parties in introducing the proposed amendments; and

(b)   the serious prejudice to BYD Parties if the amendments are allowed.

Legal Principles – amendments in general

15. The following principles concerning amendments, summarised in Hsu Ming Chi v Lam Shu Chit, unrep, HCCL8 of 2013, 22 October 2014 at [13]–[18] and adopted in Re Hin Pro International Logistics Ltd [2016] 1 HKLRD 1367 at [8], are well–established:

“13. It is a guiding principle of cardinal importance on the question of amendment that generally speaking, all such amendments ought to be made ‘for the purpose of determining the real question in controversy between the parties to any proceedings or of correcting any defect or error in any proceedings’: Re Playmates Investments Ltd [1996] 4 HKC 577 at 582E–H (per Le Pichon J as she then was); Natamon Protpakorn v Citibank NA [2009] 1 HKLRD 455 at para 25 (per Cheung JA); Hong Kong Civil Procedure 2014 Vol 1 para 20/8/6.

14. Leave is readily granted to amend before trial unless it can be shown that the new claim based on the proposed amendment is bound to fail. While the court is entitled to have regard to the merits of the case, it should only do so when the merits are readily apparent, and are so apparent as not to require prolonged investigation: Natamon Protpakornv Citibank NA supra at para 25 (per Cheung JA).

15. If the proposed amendments are bound to fail, no leave to amend should be granted. In this regard, the court will take the applicant’s proposed pleaded case to the highest: Bank of China v Leigh Hardwick unrep., HCA 1110 of 2006, 28 August 2013, per Anthony Chan J at para 2.

16. Absent any real prejudice, an application for amendment, albeit late, must be decided upon the general principle that a court of law seeks to adjudicate on the real issues and disputes between the parties and, if possible, technical and procedural rules should not stand in the way of allowing the parties to raise their real claims or defences before the court for adjudication: VSC Building Products Co Ltd v Kono Insurance Ltd, unrep,HCA 947/2005, 9 September 2009, per A Cheung J (as he then was) at [22].

17. Where prejudice is claimed, the burden is on the party opposing the amendment to show prejudice. There is no injustice to the opposing party if he can be compensated by appropriate orders as to costs: Re Playmates Investments Ltd supra at 582H, 584C (Le Pichon J as she then was).

18.  Lastly, in giving effect to the underlying objectives of the Rules of the High Court, the court shall always recognize that the primary aim in exercising the powers of the court is to ‘secure the just resolution of disputes in accordance with the substantive rights of the parties’: RHC O 1A r 2(2).”

Legal Principles – amendments which raise a limitation issue

16. Where a party raises a limitation objection to proposed amendments to pleadings, it is useful to adopt the “three–stage test” set out in Ballinger v Mercer Ltd [2014] 1 WLR 3597 at [15], as further explained in Michael Agapios Diamandis v Sir David Seton Wills [2015] EWHC 312 (Ch) at [46]:

(1)   Stage 1:   Is it reasonably arguable that the opposed amendments are outside the applicable limitation period? If not, then the amendments fall to be considered in accordance with the general principles governing amendment applications.

(2)   Stage 2:   If the answer to (1) is yes, do the proposed amendments seek to add or substitute a “new cause of action”? If not, then again the amendments fall to be considered in accordance with general principles.

(3)   Stage 3:   If the answer to (2) is yes, does the new cause of action arise out of the same or substantially the same facts as are already in issue in the existing claim? If not, the amendments cannot be allowed.  If yes, then the court retains a discretion to allow or refuse the amendments in accordance with general principles.

Deliberation

Stage 1

17. Owing to the doctrine of “relation back” under section 35(1) of LO, as long as there is a prima facie defence of limitation, the burden is on the plaintiff to show the limitation defence is not reasonably arguable: Global Bridge Assets Ltd v Sin Hung Kai Financial Ltd [2012] 4 HKLRD 474 at [20] – [22]; Ballinger v Mercer supra [25] – [29].

18. The question to ask at this stage is: do BYD Parties have a reasonably arguable limitation defence to the new allegations in so far as they are relied upon to support the claims for breach of confidence, inducing breach of duties, conspiracy and dishonest assistance?

19. As expected, Mr Joffe submits the answer must be yes.  This is because the limitation periods in respect of the claims for breach of confidence, inducing breach of duties and conspiracy are those applicable to claims in tort ie 6 years pursuant to section 4(1)(a) LO. The same 6‑year limitation period also applies to the claim based on dishonest assistance:  Timmerton Company Inc v Equity Trustee Ltd & Anor [2015] 1 HKLRD 247 at [ 9 ] - [10] and [21].  If so, the limitation period in respect of all 4 causes of action against BYD Parties expired 6 years after the material events relied upon, which took place between 2003 and 2005 ie sometime between 2009 and 2011.

20. Mr Wong SC, on the other hand, submits that no limitation period applies to the claim for breach of confidence, which is his clients’ principal claim – the other three claims are merely “peripheral” and “supplementary”.  The reason is that breach of confidence is not a tort and the 6–year limitation period under section 4(1)(a) LO is not applicable.  In support of his submissions, Mr Wong SC relies on Dutton v Spink [1977] 1 All ER 287 at 293 e–f, Kitechnology BV v Unicor GmbH Plastmaschinen [1995] FSR 765 at 777–8 and Burrows, The Law of Restitution 3^rd Ed p 705.

21. In reply, Mr Joffe submits that none of the authorities cited by Mr Wong SC are directly relevant since they are not concerned with whether or not any statutory limitation period applies to a claim for breach of confidence.  In so far some of the statements in them appear to support the proposition that breach of confidence is not a tort, they are either obiter dictum or not supported by any detailed analysis.  Mr Joffe further submits that whether breach of confidence is or is not a tort is an unsettled issue.  He refers this court to Clerk and Lindsell on Torts 21^st Ed para 27–04 which suggests a long–standing uncertainty as to how this cause of action should be categorized.  Several possibilities have been mentioned by the learned editors: equitable principle of good faith, tort, sui generis, and a restitutionary claim for unjust enrichment, all with varying degree of judicial support. 

22. This court agrees with Mr Joffe.

23. It is true that, historically, breach of confidence was developed by the Court of Chancery on the equitable principle of good faith.  However, this court is not convinced that, more than a hundred years after the fusion of law and equity, legal history still dictates the juridical nature of a cause of action.  As far as its classification as a tort is concerned, the learned editors have cited Seager v Copydex (No 2) [1969] 1 WLR 809, 813 and Douglas v Hello ! Ltd [2001] QB 967, 998 & 1000 in support.  Indeed, in Clerk and Lindsell on Torts at para 1–06 fn 28, the learned editors have also cited Campbell v MGN Ltd [2004] UKHL 22 at [14] (per Lord Nicholls) and McKennitt v Ash [2006] EWCA Civ 1714 at [8] (per Buxton LJ) as supporting the proposition that breach of confidence can be regarded as a specie of tort. 

24. For the present purpose, it is unnecessary for this court to finally determine the juridical nature of the claim for breach of confidence.  As far as Stage 1 is concerned, the burden is on Foxconn Parties to persuade the court that there is no reasonably arguable limitation defence to the claim for breach of confidence. As long as it is reasonably arguable that breach of confidence can be classified as a tort, the 6–year limitation period in section 4(1)(a) LO will arguably apply.  While the authorities cited in support of the proposition that breach of confidence is a specie of tort, like the authorities against it, also lack detailed analysis as to the juridical nature of the cause of action (since that was not the direct concern of the Courts in question), they cannot be completely ignored.  Rather, they tend to support Mr Joffe’s point that the issue is far from settled.  If section 4(1)(a) LO can arguably be applicable, the new allegations, in so far as they are relied upon to support the claim of breach of confidence, would have been time–barred years ago, as submitted by Mr Joffe. 

25. In any event, the new allegations are also used to support the other three causes of action ie inducing breach of duty, conspiracy and dishonest assistance.  Whether or not they are “peripheral” or “supplementary” is debatable – what cannot be disputed is that Foxconn Parties have chosen to plead and rely on them in the RASoC. There is no suggestion that the 6–year limitation period does not apply to them.  If so, it is reasonably arguable that a limitation defence would be available to BYD Parties.

26. In view of the above, it is not necessary for Mr Joffe to rely on his fallback argument based on section 4(7) LO.

27. Lastly, this court will briefly deal with the point made[2], albeit not pressed, by Mr Wong SC ie the limitation period does not start to run until after the BYD Discovery in 2014 by reason of BYD Parties’ deliberate concealment of the facts involved in their breach of duty: section 26 LO. 

28. First, as a matter of law, in order to rely on section 26 LO, it is not enough for a plaintiff to establish (i) deliberate concealment of the relevant fact(s) by a defendant and (ii) the time it actually discovered those facts. If a plaintiff could have discovered those facts earlier by the exercise of reasonable diligence, limitation period starts to run from that point of time. This is the only reasonable construction of section 26 which provides that “the period of limitation shall not begin to run until the plaintiff has discovered the … concealment … or could with reasonable diligence have discovered it.” If the plaintiff’s case is that he could not, even with reasonable diligence, have discovered the facts concealed earlier, he has to establish his case, by reference to primary facts or inference from primary facts. A bare assertion does not suffice.

29. Second, Foxconn Parties’ evidence in support of the proposition that they could not have discovered the facts concealed earlier is quite thin. It is akin to saying because the breach of duty by BYD Parties was deliberate and was not done openly, Foxconn Parties could not have discovered the concealment earlier than they actually did ie in or about July 2014.  While this court accepts Foxconn Parties were unlikely to have discovered BYD Parties’ breach of duty at the time it was committed (since it was not done openly), that in itself does not mean the facts involved in that breach could not have been discovered earlier than July 2014.  If Foxconn Parties did find out about the secret “wrongdoings” of the 9 original employees and BYD Parties as early as 2007 when they issued the Writ of Summons in this action, what was their explanation for not having also found out about the 3 additional employees then? There might be a perfectly legitimate explanation but it is not in the evidence before this court.

30. However, it is not necessary for this court to make a definite ruling on the applicability of section 26 LO at this stage. As observed by Lewison J in Fattal v Walbrook Trustees (Jersey) Ltd [2012] Bus LR D7 at [45] (quoted with approval by Kwan JA in Global Bridge Assets Limited v Sun Hung Kai Financial Limited [2012] 4 HKLRD 474 at [25]):

“…The principle is that permission to amend should not be granted where the defendant has a reasonably arguable limitation defence. In a case in which it is obvious that section 32[3] will apply so as to postpone the running of time, then I accept that the court must have regard to that. But in a case in which the application of section 32 is itself disputed, in my judgment the right course is to refuse to allow the amendment…”

31. Given the application of section 26 LO is disputed by Mr  Joffe, and given this court is not satisfied on the evidence that section 26 LO will obviously apply so as to postpone the running of time, this court is of the view BYD Parties do have a reasonably arguable limitation defence.

Stage 2

32. On the law, both parties accept the well–established definition of “cause of action” in Letang v Cooper [1965] 1 QB 232, 242–243 as “simply a factual situation the existence of which entitles one party to obtain from the court a remedy against another person”.  This definition is substantially the same as that adopted decades ago by Lord Esher MR in Coburn v Colledge[4] [1897] 1 QB 702, 706, who defined a cause of action as “every fact which it would be necessary for the plaintiff to prove, if traversed, in order to support his right to the judgment of the court”.  At 707, Lord Esher MR went on to explain what he meant:

“…the plaintiff in order to make out a cause of action must assert certain facts which, if traversed, he would be put to prove… In former times, if he failed to assert any of those facts, his declaration was demurrable as shewing no cause of action.”

33. In Paragon Finance v DB Thakerer & Co [1999] 1 All ER 400, 405 f–g, Millett LJ (as he then was) emphasized that only those facts which are material to be proved, are to be taken into account.  The “addition of further instances or better particulars” do not amount to a distinct cause of action.  Further, the selection of the material facts to define the cause of action must be made at the highest level of abstraction.

34. The question to ask at this stage is: whether the proposed amendments have the effect of introducing new “causes of action”?

35. Mr Joffe submits the answer must be yes.  He emphasizes that Foxconn Parties are seeking to introduce new sets of facts, not pleaded before, pertaining to each of the 3 additional employees.  In particular, Foxconn Parties have sought to plead

(1)   new contractual/fiduciary duties allegedly owed by the 3 additional employees arising from their individual employment relationship with Foxconn Parties pursuant to their specific contracts of employment;

(2)   new alleged breaches of duties by each of the 3 additional employees; and 

(3)   additional confidential information belonging to Foxconn Parties said to have been communicated to BYD Parties by the 3 additional employees.

36. Mr Joffe further submits these new sets of facts relating to the 3 additional employees cannot be regarded as further and better particulars of, or as simply “supplementing”, the facts pleaded in the RASoC since they relate to 3 different individuals from the original 9 mentioned in the RASoC.  Nor can the newly pleaded facts be regarded as merely elaboration on the original causes of action.

37. With respect, this court cannot agree.

38. To begin with, neither the causes of action relied upon nor the relief sought have been revised or expanded upon in the proposed amendments.  Foxconn Parties are seeking the same relief based on the same 4 causes of action as before ie breach of confidence, inducing breach of duties, conspiracy and dishonest assistance.

39. Of course, the fact that a plaintiff is relying on the same cause of action as before per se may not be a complete answer at this stage. 

40. For instance, in Arta Properties Ltd v Li & Ors unrep, HCA2741 of 1998, 5 January 2007, Recorder Shieh SC held it was not good enough for the plaintiff to argue that both the amended Statement of Claim and the proposed re–amended Statement of Claim asserted claims “in contract”.  But the reason why it was not good enough in that case was because the plaintiff was asserting a new contract in the proposed re–amendments.  As explained in paragraph 24 of the judgment:

“24.     In this case, it is not enough to say that both the amended Statement of Claim and proposed re–amended Statement of Claim asserted claims ‘in contract’.  That would be to view the matter at too high a level of generality.  The cause of action pleaded in the amended Statement of Claim is a cause of action in contract, based upon “the 2^nd agreement” which involved events in 1993.  The causes of action pleaded in the re–amended Statement of Claim are (i) a cause of action in contract, based upon ‘the Collateral Agreement’ which involved events in 1996 and (ii) a cause of action based on the inherent right of a property owner (as a result of the assignment of Lot 539 RP to the Plaintiff in 1993).  New material facts (such as the date and place of the agreement and the terms of the agreement) are pleaded and the claim is made on the basis of a new (and different) contract…” (emphasis added)

41. What Recorder Shieh SC was saying amounts to this: if one makes a claim for breach of contract A in the original statement of claim, and by amendment seeks to make a claim for breach of contract B, then the amendment has the effect of introducing a new cause of action since the material facts required to support the two claims, albeit both in contract, are different. 

42. By the same logic and for the same reason, an amendment which makes a new allegation of intentional wrongdoing (where previously no intentional wrongdoing has been alleged) constitutes the introduction of a “new cause of action” since intentional wrongdoing and unintentional wrongdoing give rise to distinct causes of action –the material facts required to support a claim for unintentional wrongdoing are different from those required to support a claim for intentional wrongdoing: Paragon Finance v DB Thakerer & Co supra.

43. The present case is different.  Foxconn Parties’ pleaded case is that BYD Parties were under a duty of confidence towards Foxconn Parties in respect of the latter’s confidential information.  BYD Parties have breached that duty of confidence by unlawfully obtaining it from Foxconn Parties’ employees and exploiting it for their own use.  The other three causes of action are legal variants of the same factual case.  By the proposed amendments, the same factual case remains, with additional facts pleaded.  Importantly, the material facts presently pleaded in the RASoC are already sufficient to support all 4 causes of action relied upon – there is no suggestion by Mr Joffe to the contrary.  Rephrasing what Lord Esher MR said in Coburn v Colledge supra and quoted above, Foxconn Parties have sufficiently pleaded in the RASoC all the material facts which, if not traversed alternatively if proved, are sufficient to support their right to the judgment of the court and their claims are not demurrable. 

44. In the view of this court, by the proposed amendments, Foxconn Parties are not introducing any additionalmaterial facts which are necessary to support 4 causes of action – sufficient material facts are already in the RASoC.  It is true that the allegations introduced by the proposed amendments are new – but not all new allegations are legally objectionable.  Further instances of wrongdoing or further and better particulars of material facts are also new, but they are not objectionable: Paragon Finance v DB Thakerer & Co supra.  Indeed, according to Red Sea Insurance v Bouygues SA [1993] 2 HKLR 161, 167, it is permissible to add a “material averment”[5] by amendment (in order to plug a gap caused by an omission in the original pleading)[6] after the expiry of limitation period, if the claim is substantially the same before and after the amendment.

45. In his skeleton submissions, Mr Wong SC emphasizes that Foxconn Parties’ claims here are all made against BYD Parties – they have made no claims against the original 9 employees for breach of employment contracts or otherwise.  Nor are they, by virtue of the proposed amendments, seeking to make a claim against the 3 additional employees now.  This is an important point. 

46. A cause of action against each of the original 9 employees is obviously different from a cause of action against each of the 3 additional employees.  This is because Foxconn Parties would be alleging breaches of 3 different employment contracts against 3 different defendants.  If a claim for breach of contract A and a claim for breach of contract B against the same defendant(s) are two different causes of action, then, a fortiori, a claim for breach of contract A against defendant A must be a different cause of action from a claim for breach of contract B against defendant B. 

47. But that is not what the proposed amendments are about.  They are about the same claims against the same Defendants viz BYD Parties.  The introduction of the 3 additional employees, their additional wrongdoings and the communication of additional confidential information to BYD Parties are further instances of BYD Parties’ wrongs in (i) receiving and making use of Foxconn Parties’ confidential information, (ii) inducing breach of duties of Foxconn Parties’ employees, (iii) conspiring together to obtain and make use of Foxconn Parties’ confidential information and (iv) dishonestly assisted the breaches of duties of Foxconn Parties’ employees.

48. To conclude, taking the matter at the highest level of generality, this court is of the view that Foxconn Parties are not seeking to introduce any new causes of action with the proposed amendments at all.  Rather, they are seeking to add further instances of the same causes of action alternatively to add further and better particulars to the existing allegations of wrongdoings by BYD Parties.  That is permissible under the law.

Stage 3

49. In case this court is subsequently held to have erred in ruling the proposed amendments do not have the effect of introducing new causes of action, it will go on to consider the next question (on the assumption that the proposed amendments do have such an effect): do the new causes of action arise out of the same or substantially the same facts as are already in issue in the existing claims?

50. In this regard, the words “arise out of the same or substantially the same facts as are already in issue in the existing claim” are not to be narrowly construed.  Instead, they should be given a broad and liberal interpretation in order to attain the objective of the rules – a court would be construing RHC O 20 r 5(5) too narrowly by focusing attention on the additionalaverments which a plaintiff makes to establish the new cause of action: Leung Kin Fook v Eastern Worldwide Co Ltd (No 2) [1997] 1 HKC 524, at 528C–D.

51. Mr Joffe submits it is plain that the facts Foxconn Parties now seek to introduce are substantially different and distinct from those which have to be proved under the existing pleaded claim.  They relate to different employees, different wrongful acts committed at different times and involve the disclosure of different “confidential information” to BYD Parties.  If the proposed amendments are allowed, BYD Parties will be in a position where they will be obliged to investigate facts and evidence pertaining to the new factual matters which are plainly outside the scope and ambit of and unrelated to the existing claims pleaded in the RASoC. 

52. Mr Joffe further submits it cannot sensibly be said that in investigating the alleged breaches of duties of the original 9 employees, BYD Parties would also have been expected to have carried out investigations in respect of the 3 additional ones.  To require BYD Parties to carry out these investigations now, notwithstanding the expiry of the relevant limitation periods, would be prejudicial to them. 

53. The rationale of the test at Stage 3 is to avoid placing a defendant in a position where he will be obliged, after the expiration of the limitation period, to investigate facts and obtain evidence of matters completely outside the ambit of and unrelated to the facts which he could reasonably be assumed to have investigated for the purpose of defending the unamended claim: Ballinger v Mercer Ltd supra at [34]; Michael Agapios Diamandis v Sir David Seton Wills supra at [49(3)]; WDA Architects Ltd v MHS Planners, Architects & Engineers & Anor, unrep, HCCL 43/2007, 11 March 2014 Bharwaney J at [10][7].

54. In WDA Architects Ltd v MHS Planners, Architects & Engineers & Anor supra at [11], the learned Judge held that,in order to fall within the scope of RHC O 20 r 5(5),

“The new facts pleaded to support the new causes of action must involve something going no further than minor differences from the facts originally pleaded. To safeguard against the unjustified loss of a limitation defence, an amendment to introduce a new claim can only be allowed if it is based on substantially, or essentially, the same facts that had already been pleaded to support the original cause or causes of action. Another way of putting it is that the greater part of the facts in support of the new cause of action, which is sought to be introduced by the amendment, must already have been pleaded in support of the original cause of action.”

55. The learned Judge further elaborated on the matter at [12]:

“Whilst the question, whether the new cause of action arose out of the same, or substantially the same facts, as originally pleaded, is sometimes a matter of impression, particularly in borderline cases, in most cases, the court must adopt an approach that is guided by a large measure of common sense in its analysis of the facts that have been relied upon in support of the new cause of action. The material facts supporting the new cause of action need not be identical to or be a complete overlap with those supporting the originally pleaded cause of action. Thus, the originally pleaded cause of action may rely on material facts A, B and C, and the new cause of action may rely on material facts A, B, C and D. The addition of new fact D does not necessarily mean that the facts in support ofthenew cause of action are not substantially the same as those supporting the old cause of action. That must depend on the nature of the causes of action concerned and the nature and importance of the new facts that have been pleaded. There can be no hard and fast rule.” (emphasis added)

56. Whether the new cause of action arose out of substantially the same facts as originally pleaded, is sometimes a matter of impression (per Bharwaney J quoted above) or, more likely than not, involves a value judgment (per Colman J in BP plc v Aon[8]). In all cases, as Bharwaney J rightly pointed out, the court must be guided by a large measure of common sense.

57. Foxconn Parties’ pleaded case has been sufficiently summarised at paragraph 43 above.  By the proposed amendments, the same factual case remains, with additional facts pleaded.  Assuming such additional facts are pleaded in support of new causes of action, did they arise out of substantially the same facts as are already in issue?

58. In this court’s view, the answer is yes.

59. Foxconn Parties have already pleaded facts based on the wrongdoings of BYD Parties and the original 9 employees.  They now seek to plead facts based on the wrongdoings of BYD Parties and the additional 3 employees.  The present case is comparable to a case where a Plaintiff has pleaded and relied on material facts “A, B and C”, and the new causes of action rely on material facts “A, B, C and D”, “D” being the wrongdoings of BYD Parties vis-à-vis the additional 3 employees.  The addition of new fact “D” does not mean the facts in support of the “new” causes of action are not substantially the same as those supporting the “old” ones.  It depends on the nature of the causes of action concerned.  If, as in the present case, the “new” causes of action are the same 4 “old” causes of action, then that is something which militates against BYD Parties.

60. But that is not all.

61. Mr Wong SC submits the proposed amendments cover matters which would have been investigated by BYD Parties in response to the facts pleaded in support of the original 4 causes of action.  As revealed by the documents in the BYD Discovery,BYD Parties did appear to have made at least some investigation into the dealings of the senior officers and employees mentioned in the RASoC, particularly Liu Xiang Jun (“Jun”) and Si Shao Qing (“Si”), and the information they had obtained from other employees of Foxconn Parties and passed on to BYD Parties.  According to Mr Wong SC, Jun and, to a lesser extent, Si were the “prime mowers” who induced his clients’ employees to wrongfully disclose confidential information to BYD Parties.  This is borne out by the pleas in paragraphs 21A to 26C of the RASoC.  Further, Jun and Si were pleaded in the proposed amendments ie Schedules 13B and 13C as the recipients of confidential information from Chen and Wang.  The investigation which BYD Parties did make and/or can reasonably be assumed to have made resulted in the collation of additional relevant documents found in the BYD Discovery.  These documents included documents said to bear striking similarity with and/or modified from Foxconn Parties’ own documents as well as email exchanges among Jun, Si and other employees of Foxconn Parties.

62. This court accepts Mr Wong SC’s submission.  In this court’s view, this is not a case where BYD Parties will be compelled to investigate facts and obtain evidence of matters completely outside the ambit of and unrelated to the facts which he could reasonably be assumed to have investigated already. Rather, the facts and evidence which BYD Parties will be compelled to investigate and obtain are substantially connected with those they could reasonably be assumed to have investigated or obtained and did, to a considerable extent, investigate or obtain.

63. For these reasons, this court concludes that even if the proposed amendments do have the effect of introducing new causes of action, they arose out of substantially the same facts as are already in issue in the existing claims.  That answers the question at Stage 3.

Exercise of Discretion

64. Given this court’s aforesaid conclusions, the present application falls to be decided on the principles summarized in paragraph 15 above.

65. Mr Joffe submits that the court should exercise its discretion to refuse the proposed amendments. Two grounds have been put forward by him.

66. The first ground put forward is that there has been delay on the part of Foxconn Parties in making the present application.  Mr Joffe submits that although Foxconn Parties had all relevant documents by July 2014 at the latest, no explanation has been provided as to why it took them 14 months to come up with the latest draft statement of claim provided to BYD Parties only on 7 September 2015.  If the proposed amendments are allowed, the trial of the action will be further delayed. BYD Parties complain that such delaying tactics of Foxconn Parties are of great concern to them. 

67. This court is not satisfied that what had happened was part of Foxconn Parties’ delaying tactics in order to “prevent this case from moving forward to trial.” as submitted.[9]  In his 2^nd affirmation, Mr Xiong Yong Ai, for Foxconn Parties, explained how the BYD Discovery had triggered various investigations which eventually led to the proposed amendments. Given the enormous scale of the discovery, it is understandable that the time taken to complete the investigations would be proportionally lengthened. On the evidence, this court is not satisfied that 14 months are necessarily an undue amount of time for Foxconn Parties to formulate the proposed amendments. But even if there was some delay on the part of Foxconn Parties (in the sense they or their legal advisers could have worked faster), mere delay is not sufficient to bar an application for leave to amend: Honey Bee Electronic International Ltd v Golden Lucky Co Ltd [2007] 3 HKLRD 524 at [16]; Topwell Corp Ltd v Kwan Kam Kee [2014] 5 HKLRD 1 at [34].  What is more important is this court must consider what prejudice to BYD Parties, if any, has been or will be caused by the proposed amendments. To that this court must now turn. 

68. The second ground put forward is that BYD Parties will suffer significant prejudice if the proposed amendments are allowed. In this regard, the burden is on BYD Parties to show prejudice and to satisfy this court that such prejudice cannot be compensated by an appropriate order for costs.

69. Mr Joffe submits that, given the passage of such a long time since the newly pleaded events, BYD Parties are likely to be prejudiced in conducting investigations and collating evidence for their defence. In particular, of the 3 additional employees:

(1)   Dong joined BYD Parties in 2003 and is still under their employment. However, given the passage of time, it is unlikely that he would have any worthwhile recollection of the material events.

(2)   Chen was employed by BYD Parties for only 7 days between 19 and 26 September 2005 and BYD Parties have no information on his current whereabouts.  According to a Judgment of the Shenzhen Court, Chen re-joined Foxconn Parties after leaving BYD Parties.

(3)   Wang was never an employee of BYD Parties, but it is thought that he may be employed by Foxconn Parties.

70. Further, given the passage of time, BYD Parties would be severely handicapped in locating other relevant witnesses and/or documentary evidence to rebut the new allegations.

71. As far as Dong and his alleged dimming of memory is concerned, this court agrees with Mr Wong SC that BYD Parties’ bare assertion is unconvincing. As observed by G Lam J in Tsang Foo Keung v Chu Jim Mi Jimmy,unrep, HCA 7140/1995, 12 July 2013 at [80(5)], where the prejudice relied on is the dimming of witnesses’ memories due to lapse of time, a generalized assertion that memories must have grown fainter will usually not be sufficient.

72. In the present case, BYD Parties’ evidence on Dong’s fading memory came not from Dong himself, nor from anyone employed by BYD Parties at the material time. The evidence came from BYD Parties’ current handling solicitor. In this court’s view, very little weight can be placed on the handling solicitor’s evidence as to what Dong can or cannot remember.  Further, since Dong is still in the employ of BYD Parties and the relevant documents pertaining to the new allegations, including in particular, those documents signed and approved by Dong himself, are still available, there is no reason why Dong cannot at least try to refresh his memory by perusing the same.

73. As for Chen and Wang, Foxconn Parties’ case against them is that they had wrongfully disclosed confidential information to BYD Parties via Jun and Si. Such disclosure is documented by 4 emails disclosed by BYD Parties themselves. It was stated in BYD Parties’ Timetabling Questionnaire filed on 22 June 2015 that Jun and Si were among their proposed witnesses. If so, BYD Parties have had and still have the opportunity and could reasonably be expected[10] to obtain evidence from Jun and Si concerning the circumstances under which they exchanged emails with Chen and Wang and what use, if any, they had made of the attachments to the emails.

74. Witnesses’ fading memory is a common occurrence at trials.  Inability to locate some relevant witnesses is also a common occurrence. However, the impact of fading memory and unavailability of witnesses varies from case to case, depending on the significance of the viva voce and documentary evidence deployed by the parties. In the present case, where an abundance of contemporaneous documentary evidence is available, it is all the more important for BYD Parties (the burden being on them) to clearly demonstrate the existence of real prejudice which cannot be compensated by an appropriate costs order. In this court’s view, BYD Parties’ evidence falls far short of demonstrating that.

75. For the above reasons, and in view of the principle of cardinal importance that all amendments ought to be made for the purpose of determining the real question in controversy between the parties, this court shall exercise its discretion in favour of Foxconn Parties and grant leave to amend.

Disposition

76. There shall be an order in terms of paragraphs 1 and 2 of Foxconn Parties’ summons dated 30 September 2015.

77. The question of costs shall be dealt with as indicated at the hearing of expert directions on 5 July 2016.

78. Lastly, I thank counsel for their helpful submissions.

HCA 2114/2007

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NO. 2114 OF 2007

____________

_____________

D E C I S I O N

_____________

1.  This is an application by the plaintiffs and the defendants by counterclaim to strike out parts of the counterclaim.

The plaintiffs’ claim

2.  The action was brought on 5 October 2007.  The Re-Amended Statement of Claim was filed on 2 September 2009.  The plaintiffs claim that they have, by experience and extensive investments in research and development, developed a set of confidential information for the smooth, efficient and effective running of the group’s business.  The confidential information includes operation manuals that contain operation procedure, various types of production and procedural flow charts, forms and quality control manuals.  The confidential information also includes records of suppliers and customers.  There are pleaded a series of 14 schedules of documents which are included as the confidential information.  The plaintiffs further plead that the confidential information constitutes trade secrets which have been treated by them in a confidential manner.  The staff of the plaintiffs are obliged not to disclose them to any 3rd party even after termination of employment with the plaintiffs

3.  However, the 1st defendant has since May 2005 started to entice and recruit senior staff of the plaintiffs and procured such people to disclose the confidential information to the defendants without the knowledge or consent of the plaintiffs.  As a result, the plaintiffs claim that the 1st, 2nd, 6th and 7th defendants are liable to them for breach of the law of the Mainland against unfair competition.

4.  The defendants’ group then became a market leader and was in direct competition with the plaintiffs in the sale and production of mobile handsets and components.  The plaintiffs complain that they as a result suffered loss and damage in the costs for producing the confidential information, the compensation paid to others to whom the plaintiffs owed a duty to keep the information confidential and loss of business opportunities to be assessed.  They also seek an account of profits from the defendants.  There are also a claim that the defendants had wrongfully induced the plaintiffs’ former employees to breach their duties not to disclose the confidential information without the consent of the plaintiffs and a claim of conspiracy by the defendants to unlawfully obtain and use the confidential information.

The defendants’ counterclaim

5.  The defendants were granted leave on 2 October 2009 to re-amend their defence and to bring in a counterclaim.  They were further granted leave to effect some minor re-re-amendments on 28 December 2009.  The defendants’ counterclaim is directed to the 1st and 2nd plaintiffs and two other companies in the plaintiffs’ group.  They are hereinafter referred to as the defendants by counterclaim. 

6.  The defendants plead in the counterclaim that the defendants by counterclaim have since 2006 been unlawfully interfering with the business of the defendants by unlawful means with the object and effect of causing loss and damage to the defendants business.  They say that the defendants by counterclaim have embarked upon a course of conduct of procuring and using false and fabricated evidence or evidence unlawfully obtained to launch proceedings and persecution against the plaintiffs and/or their employees.  The defendants by counterclaim then made and issued false statements of and concerning the defendants to the effect that the defendants and/or their staff had allegedly stolen or misused the confidential information or trade secrets of the defendants by counterclaim.

7.  The defendants then plead that the 4th defendant by counterclaim had in about May 2006 unlawfully detained a former employee in an attempt to obtain from this person false evidence of misappropriation and disclosure of confidential information to the defendants (para. 62).  There is a further allegation that the defendants by counterclaim had in about June/July 2006 planted soft copies of documents in a computer and hard copies of documents at the apartment of this person without his knowledge or consent (paras. 63 to 65).  There is another allegation that the 4th defendant by counterclaim had in around October 2006 unlawfully intimidated another former employee to obtain a false confession from her to the effect that she had been procured to divulge confidential information to someone working for the defendants (para. 66).

8.  There is then an allegation that the defendants by counterclaim had in about September 2006 paid RMB10 million bribe to the then director of a Judicature Appraisal Centre for Intellectual Properties in Beijing to gain access to and/or tamper with the evidence under examination of the centre (para. 67).  There is then an allegation that the 1st, 3rd and/or 4th defendant by counterclaim had in May/June 2008 paid brides to a then employee of the 7th defendant to induce him to breach his duty of confidence to the 7th defendant by fabricating evidence that certain of the plaintiffs’ documents had been passed amongst or used by some employees of the defendants (para. 68). 

9.  The counterclaim contains some particulars of these allegations under paras. 62 to 68.  The defendants also provided some further and better particulars of these allegations on 26 February 2010.

10.  The defendants then plead that the defendants by counterclaim did the acts alleged in paras. 62 to 68 to fabricate false evidence to support the various legal proceedings and criminal complaints commenced by the 3rd and 4th defendants by counterclaim (the 1st and 2nd plaintiffs) against the defendants or their employees and to make and publish defamatory statements against the 1st defendant.  All these were done with intent to cause loss to the defendants and to damage their reputation, credibility and relationship with investors and customers and reduce their market share.

11.  The defendants then refer to some legal proceedings brought by the defendants by counterclaim against them and a number of public announcements made about them.  They plead in the counterclaim that these announcements were untrue and defamatory of the defendants and had caused loss and damage to the defendants. 

12.  Finally, they plead that the defendants by counterclaim have from 2006 onwards conspired with each other to injure the defendants.  They had in pursuance of the conspiracy carried out certain acts including those pleaded in paras. 62 to 68 of the counterclaim.

Summons to strike out parts of the counterclaim

13.  The plaintiffs and the defendants by counterclaim issued a summons on 21 January 2010 to strike out paras. 62 to 68 on the grounds that they disclose no reasonable cause of action and/or the claims they made are scandalous, frivolous and/or vexatious, may embarrass the fair trial of the action and is otherwise an abuse of process of the court.

14.  Regarding the allegation in para. 67, they seek in the alternative to strike out of all references to alleged “tampering” with evidence on the grounds of no reasonable cause of action and/or the claim is scandalous, frivolous and/or vexatious, may embarrass the fair trial of the action or is an abuse of the process of the court. 

15.  Regarding the allegation in para. 68, they also seek in the alternative to strike out all references to the alleged “fabrication” of evidence on the ground that such claim is scandalous, frivolous and/or vexatious, may embarrass the fair trial of the action or is otherwise an abuse of process of the court.

16.  In the Re-Amended Summons to strike out, they also seek the consequential striking out of references to these allegations as contained in other paragraphs.

The parts of the counterclaim under attack

17.  I set out below paras. 61 to 68 of the counterclaim to give a comprehensive view of the paragraphs under attack:

“6.1 From about 2006 onwards, the 1st, 2nd, 3rd and/or 4th Defendants wrongfully and unlawfully interfered with the business and economic interests of the Plaintiff by using unlawful means with the object and effect of causing loss and damage to the business of the Plaintiffs. The matters complained of are set out in paragraphs 62 to 121 below. During the said period, the 1st, 2nd, 3rd and/or 4th Defendants embarked upon a course of conduct of procuring and using false or fabricated evidence and/or evidence unlawfully obtained to launch proceedings and prosecution against the Plaintiffs and/or their staff and employees and then made and issued false statements of and concerning the Plaintiffs to the effect that the Plaintiffs and/or their staff had allegedly stolen or misused Defendants’ confidential information or trade secrets. The unlawful means included unlawful detention, illegal planting of documents, intimidation, uttering and using false, evidence in proceedings, bribery, including bribing the 7th Plaintiff’s employee to act an breach of confidence and steal documents and defamation.

Unlawful detention of Ping

6.2 Song Xufeng (‘Song’) who was an employee and 课长 (supervisor), the person in charge of the security department of the 4th Defendant and was at all material times (acting on behalf of the 4th Defendant), and Wu Guizhou (‘Wu’), who was an employee and the 副理 (assistant manager) of the security department of the 4th Defendant and was at all material times acting on behalf of the 4th Defendant, arranged for Ping to be unlawfully detained in an attempt to obtain false evidence from him that he had wrongfully misappropriated the 4th Defendants’ business secrets and disclosed the same to Jun/the Plaintiffs and/or that Jun/the Plaintiffs had wrongfully misappropriated the 4th Defendants’ business secrets:

PARTICULARS

(1) Ping was an employee of the 4th Defendant from around June 2001 to around May 2006, and an employee of the 1st Plaintiff from around October 2006 to date.

(2) On or about 18 May 2006, the 4th Defendant filed a criminal complaint against Ping that he had wrongfully disclosed and/or misappropriated the 4th Defendant’s business secrets.

(3) Song and Wu (acting on behalf of the 4th Defendant) arranged for Ping to be unlawfully detained at the Foxconn Group’s premises at Shenzhen Baoan District Longhua Eastern Ring Second Road No. 2 深圳宝安区龙华镇东环二路二号 from 18 May 2006 to 22 May 2006.

(4) During the aforesaid period of unlawful detention, Song and Wu acting on behalf of the 4th Defendant attempted to intimidate and/or coerce Ping to confess, inter alia, that he had e-mailed or disclosed the 4th Defendant’s confidential documents to Jun (who was Ping’s brother-in-law).

(5) On or about 26 May 2006, the Shenzhen Public Security Bureau Baoan Branch (‘Baoan PSB’) commenced criminal investigations against Ping for infringement of commercial secrets.

(6) On 31 May 2006, Ping was placed under residential surveillance by the Baoan PSB at 警务处, a sub-station of Yousong Police Station (油松派出所) (which was in the premises of the Foxconn Group) and was released on 1 September 2006 without charge.

Illegal planting of documents in Ping’s Apartment and on Ping’s computer

6.3. In or around June/July 2006, the 1st, 2nd, 3rd and/or 4th Defendants planted the soft copies of the following documents (which have been identified at Schedule 1 of the Re-Amended Statement of Claim on Ping’s computer (‘Ping’s Computer’) located in Ping’s apartment situated at Building 6, No. 701B Meili Jiayuan Bei Qu, Longhua, Zhenzhen (深圳龙华美丽家园北区6栋B单元701号) (‘Ping’s Apartment’), without the knowledge or consent of Ping:

（1） ES-MOTOROLA-01R85025D01

（2） ES-MOTOROLA-11R88985N01

（3） ES-MOTOROLA-12G13933A20

（4） ES-MOTOROLA-12M05048A79

（5） ES-MOTOROLA-12M05060A88

（6） QS-06

（7） QS-08

（8） QS-14

（9） QS-18

（10）QS-22

64. Also in or around June/July 2006, the 1st, 2nd, 3rd and/or 4th Defendants planted hard copies of the following documents (being documents belonging to the Plaintiffs) at Ping’s Apartment (the ‘Planted Documents’), without the knowledge or consent of Ping:

(1) MSP08-1-007

(2) MSP08-3-012

(3) MSP08-2-015

(4) MSP08-2-005

(5) MSP08-2-016

65. On or about 6 July 2006, the Baoan PSB conducted a search of Ping’s Apartment. After such search, Ping’s Computer and the Planted Documents were seized by the Baoan PSB. Shortly thereafter, Ping’s Computer was taken away in a vehicle belonging to the 1st, 2nd, 3rd and/or 4th Defendants.

Unlawful intimidation of Zhang

66. In or around October 2006, Wu (acting at all material times on behalf of the 4th Defendant) unlawfully intimated Zhang in order to obtain a false confession from her that Jun had procured and/or induced her to divulge confidential documents of the 4th Defendant to him.

PARTICULARS

(1) Zhang was an employee of the 4th Defendant from around October 2003 to around September 2005, and an employee of the 1st Plaintiff from around April 2006 to around July 2006.

(2) Jun was an employee of the 1st Plaintiff from around April 2005 to date.

(3) On 22 May 2007, Baoan People’s Procuratorate filed a criminal complaint against Zhang that Zhang had wrongfully disclosed and/or infringed the 4th Defendants’ business secrets.

(4) On or around 14 October 2006, Zhang was arrested and detained in Weinan Prefecture, Shaanxi Province by officers of the local Weinan, Shaanxi Public Security Bureau (‘Weinan PSB’), accompanied by officers of the Baoan PSB commanded by one Yang Xiucheng (‘Yang’). At the time of her arrest, Zhang was beaten by the arresting officers.

(5) On or around 17 October 2006, Zhang was taken on a train journey, which lasted approximately 20 hours, from Weinan to Shenzhen.

(6) During the aforesaid train journey, Zhang was at all times accompanied by Wu and was guarded by 3 other male officers of Baoan PSB and 1 female officer of Weinan PSB.

(7) During the course of the aforesaid train journey, Wu and Yang intimidated Zhang to admit and/or confirm that Jun had procured and/or induced her to divulge confidential documents that the 4th Defendant to him and/or the Plaintiffs.

(8) After the train arrived in Shenzhen on or about mid-day on 18 October 2006, Wu arranged for a car marked with the logo of the Foxconn Group and driven by an individual wearing a uniform of the Foxconn Group to take Zhang and the officers of Baoan PSB and Weinan PSB to the Baoan PSB station.

(9) As a result of the intimidation by Wu and Yang, Zhang gave a statement to the Baoan PSB on 23 October 2006 in which she falsely admitted that Jun had procured and/or induced her to obtain/divulge confidential documents of the 4th Defendant to him.

(10) On or about 29 November 2006, Zhang informed the Baoan PSB that her previous admission that Jun had procured and/or induced her to obtain/divulge confidential documents of the 4th Defendant to him was false.

Bribery of Zhao Jun

67. The 1st, 2nd, 3rd and/or 4th Defendants paid bribes to Zhao Jun in order to obtain access and/or to tamper with to evidence being examined by the Beijing JZSC Judicature Appraisal Center for Intellectual Property (北京九州世初知识产权司法鉴定中心)(the ‘Appraisal centre’).

PARTICULARS

(1) In or around September 2007, bribes in the total sum of RMB 10 million were paid by the 1st, 2nd, 3rd and/or 4th Defendants to Zhao Jun (who was at the material time the director of the Appraisal Centre) in order to obtain access to and to tamper with the computer hard disks of Jun and Si which the Appraisal Centre was entrusted by the Supreme People’s Court of PRC to appraise for the purpose of the 2006 PRC Action (referred to in paragraph 73 below).

(2) The aforesaid bribery was arranged to various employees of the 1st, 2nd, 3rd and/or 4th Defendants the identities of whom are not known to the Plaintiffs save that Wang Pengyu, who was at all material times the In-house Legal Counsel of the 3rd and 4th Defendants, the Quality Control and Legal Manager of the 3rd Defendant, the Legal Manager of the 1st Defendant and the Senior Director of the IP Legal Department (Global Legal Division) of the 1st Defendant and the Foxconn Group, as well as Gan Kejian (who was at all material times an employee of the 1st, 2nd, 3rd and/or 4th Defendants), Dong Jianwei and Shen Liangquan (who were both at all material times employees of the 3rd Defendant) were partly involved in arranging the payment of the bribes to Zhao Jun.

Bribery to Zhang Chaozheng

68. In or around May/June 2008, Wang Pengyu (acting for an on behalf of the 1st, 3rd and/or 4th Defendants) paid bribes to Zhang Chaozheng (who was at the time an employee of 7th Plaintiff) in order to induce him, in breach of his duty of confidence to the 7th Plaintiff, to assist in locating documents from the 1st Plaintiff and the 7th Plaintiff and to fabricate evidence that certain documents belonging to the Plaintiffs (but which the 3rd and 4th Defendants allege belong to them) (the ‘Alleged Plagiarised Documents;) were passed amongst and/or used by certain of the Plaintiffs’ employees:

PARTICULARS

(1) In or around April 2008, Zhang Chaozheng met Wang Pengyu at an internet chat room and Wang Pengyu asked Zhang Chaozheng to make use of his employment position with the 7th Plaintiff to locate documents within the 1st and 7th Plaintiffs for him and to fabricate evidence that the Alleged Plagiarised Documents were passed amongst and/or used by certain of the Plaintiffs’ employees.

(2) In or around late April/early May 2008, Wang Pengyu met with Zhang Chaozheng at Nandu Western Restaurant in Shenzhen, PRC. During the meeting, Wang Pengyu provided a written request to Zhang Chaozhen asking him to, inter alia, locate various documents within the 1st Plaintiff and the 7th Plaintiff for him.

(3) Wang Pengyu further asked Zhang Chaozheng to e-mail the Alleged Plagiarised Documents to the work e-mail address of Sun (who was an employee of the 7th Plaintiff at the time) from another BYD email account.

(4) In return for Zhang Chaozheng’s assistance as pleaded in (2) and (3) above, Wang Pengyu offered monetary rewards to Zhang Chaozheng and also promised him a registered permanent residency (戶口), job opportunities and risk compensation.

（5）Since May 2008, in breach of his duty of confidence to the 7th Plaintiff, Zhang Chaozheng sent to Wang Pengyu copies of various documents and obtained bribes in the total sum of RMB 40,000 from Wang Pengyu in return.”

Legal principles for striking out

18.  I remind myself the legal principles governing striking out applications (Hong Kong Civil Procedure 2010, paragraphs 18/19/4, 18/19/8 and 18/19/10).  It is only in plain and obvious cases that the court should exercise the power to strike out.  Disputed facts are taken in favour of the respondent to the application.  Difficult points of law should not be decided in such applications and only claims that are obviously unsustainable and pleadings unarguably bad that they should be struck out. 

19.  I am also reminded by leading counsel for the plaintiffs and the defendants by counterclaim of the statement of Barker J in Cheung Chui Sou Ying v the Personal Representatives of Cheung Yuk Luen alias Wilson Cheung deceased and Ors [1981] HKLR 585 at 588:

“But plain is not the same as simple and obvious is not the same as short. Moreover if a careful reading of the Statement of Claim does not indicate clearly what the nature of the Claim is, then a Court can, and probably will order it to be struck out as being embarrassing and vexatious, unless it be capable of amendment.”

The arguments for striking out

20.  The plaintiffs and the defendants by counterclaim submit that the matters pleaded in paras. 62 to 68 of the counterclaim do not give rise to any known cause of action against them.  These allegations are therefore irrelevant to any other cause of action currently at issue between the parties.  They are also unsustainable and unarguable.  They further say that the allegations are put in to cause annoyance, abuse, prejudice and unnecessary anxiety, trouble and expense to them.  The allegations are also scandalous, frivolous, vexatious and embarrassing and are abuses of the process of the court.  They should therefore be struck out (Jacob and Goldrein, Pleadings Principles and Practice (1990) at pp. 221 to 224 and 227). 

21.  Regarding para. 62, they say that the thrust of this paragraph is the unlawful detention of Ping and an attempt to intimidate or coerce Ping to give false evidence.  They submit that even if the allegations are true and amount to some unlawful acts under Hong Kong law and/or the law of the Mainland, they were only acts against Ping personally or torts of trespass against Ping.  They thus say that the defendants have no cause of action based on these alleged acts.

22.  On the tort of unlawful interference as pleaded in para. 61, they say that this plea is also not supported by these allegations.  The essential ingredients of the tort of unlawful interference as set out by Lord Hoffman for the majority view in OBG Ltd & Anor v Allan & Ors [2008] 1 AC 1 at paras. 45 to 47 and summarised in Bullen & Leake & Jacob’s Precedents of Pleadings, 16^th edn., para. 52-08 are:

“52―08 Following the OBG case referred to above, the essential elements of this tort may be identified as follows:

(1) Use by the defendant of unlawful means, thereby

(2) Interfering with the actions of a third party in relation to the claimant.

(3) Intention to cause loss to the claimant.

(4) Damage.

per Lord Hoffman in the OBG case at paras 45-47.”

23.  Leading counsel for the plaintiffs and the defendants by counterclaim relies on the speech of Lord Hoffman in the OBG Ltd case and submits that the unlawful means must be actionable by the third party or would have been actionable if the third party had suffered loss.  Lord Hoffman said in para. 49:

“49. In my opinion, and subject to one qualification, acts against a third party count as unlawful means only if they are actionable by that third party. The qualification is that they will also be unlawful means if the only reason why they are not actionable is because the third party has suffered no loss. In the case of intimidation, for example, the threat will usually give rise to no cause of action by the third party because he will have suffered no loss. If he submits to the threat, then, as the defendant intended, the claimant will have suffered loss instead. It is nevertheless unlawful means. But the threat must be to do something which would have been actionable if the third party had suffered loss. Likewise, in National Phonograph Co Ltd v Edison-Bell Consolidated Phonograph Co Ltd [1908] 1 Ch 335 the defendant intentionally caused loss to the plaintiff by fraudulently inducing a third party to act to the plaintiff’s detriment. The fraud was unlawful means because it would have been actionable if the third party had suffered any loss, even though in the event it was the plaintiff who suffered. In this respect, procuring the actions of a third party by fraud (dolus) is obviously very similar to procuring them by intimidation (metus).”

24.  Leading counsel for the defendants however asks me not to overlook the minority speech of Lord Nicholls in this case.  Lord Nicholls said in paras. 149 to 155:

“149. Although the need for ‘unlawful means’ is well established, the same cannot be said about the content of this expression. There is some controversy about the scope of this expression in this context.

150. One view is that this concept comprises, quite simply, all acts which a person is not permitted to do. The distinction is between ‘doing what you have a legal right to do and doing what you have no legal right to do’: Lord Reid in Rookes v Barnard [1964] AC 1129, 1168-1169. So understood, the concept of ‘unlawful means’ stretches far and wide. It covers common law torts, statutory torts, crimes, breaches of contract, breaches of trust and equitable obligations, breaches of confidence, and so on.

151. Another view is that in this context ‘unlawful means’ comprise only civil wrongs. Thus in Allen v Flood itself Lord Watson described illegal means as ‘means which in themselves are in the nature of civil wrongs’: [1898] AC I, 97-98. A variant on this view is even more restricted in its scope: ‘unlawful means’ are limited to torts and breaches of contract.

152. The principal criticism of the first, wider view is that it ‘tortifies’ criminal conduct. The principal criticism of the second, narrower view is that it would be surprising if criminal conduct were excluded from the category of ‘unlawful’ means in this context. In the classical ‘three-party’ form of this tort the defendant seeks to injure the claimant’s business through the instrumentality of a third party. By this means, as Lord Lindley said, the claimant is ‘wrongfully and intentionally struck at through others, and is thereby damnified’: Quinn v Leathem [1901] AC 495, 535. It would be very odd if in such a case the law were to afford the claimant a remedy where the defendant committed or threatened to commit a tort or breach of contract against the third party but not if he committed or threatened to commit a crime against him. In seeking to distinguish between acceptable and unacceptable conduct it would be passing strange that a breach of contract should be proscribed but not a crime. In Rookes v Barnard [1964] AC 1129, 1206-1207, Lord Devlin noted it was ‘of course’ accepted that a threat to commit a crime was an unlawful threat and continued:

‘It cannot be said that every form of coercion is wrong. A dividing line must be drawn and the natural line runs between what is lawful and unlawful as against the party threatened.’

153. These different views are founded on different perceptions of the rationale underlying the unlawful interference tort. On the wider interpretation of ‘unlawful means’ the rationale is that by this tort the law seeks to curb clearly excessive conduct. The law seeks to provide a remedy for intentional economic harm caused by unacceptable means. The law regards all unlawful means as unacceptable in this context.

154. On the narrower interpretation this tort has a much more limited role. On this interpretation the function of the tort of unlawful interference is a modest one. Its function is to provide a claimant with a remedy where intentional harm is inflicted indirectly a distinct from directly. If a defendant intentionally harms a claimant directly by committing an actionable wrong against him, the usual remedies are available to the claimant. The unlawful interference tort affords a claimant a like remedy if the defendant intentionally damages him by committing an actionable wrong against a third party. The defendant’s civil liability is expanded thus far, but no further, in respect of damage intentionally caused by his conduct.

155.     In my view the former is the true rationale of this tort.  The second interpretation represents a radical departure from the purpose for which this tort has been developed. If adopted, this interpretation would bring about an unjustified and unfortunate curtailment of the scope of this tort.”

25.  Leading counsel for the defendants further refers to the speech of Lord Walker in the same case.  Lord Walker suggested that neither of the views of Lord Hoffman and Lord Nicholls would be the last word on this difficult and important area of the law (para. 269).

26.  Leading counsel also refers to Revenue and Customers Commissioners v Total Network SL [2008] 1 AC 1174 at para. 43 where Lord Hope expressed his reservation on Lord Hoffman’s view in OBG Ltd on unlawful means.

27.  Leading counsel submits that the law of unlawful interference is developing and unlawful means should not be limited to actionable wrongs, but should include other wrongful acts like criminal conduct.  Counsel asks me to at least leave this issue for the trial judge who will have the advantage of hearing all the evidence.

28.  Apart from the nature of the unlawful means, the plaintiffs and the defendants by counterclaim also submit that para. 62 of the counterclaim does not allege any loss or damage to the defendants and nothing is pleaded to flow from the detention of Ping.  Para. 62 and its further and better particular also do not suggest that any evidence has in fact been fabricated or obtained.  What is alleged in para. 62 is only an attempt to persuade Ping to give false evidence.

29.  Regarding paras. 63 to 65, para. 63 pleads the planting of soft copies of documents on Ping’s computer, para. 64 pleads the planting of hard copies at his apartment and para. 65 pleads the seizure of the documents by the Baoan PSB.  Counsel however points out the absence of any particulars on how, when and by whom the hard and soft copies were planted. Counsel refers to Caswell v Powell Duffryn Associated Collieries Ltd [1940] AC 152 at 169-170 where Lord Wright said that inference from objective facts had to be distinguished from conjecture or speculation and the method of inference would fail in the absence of positively proved facts.

30.  Counsel also submits that the inferences suggested by the defendants are obviously unsustainable.  Furthermore, the serious nature of the allegation which amount to perverting the course of justice must be supported by particulars from which inference can be drawn. Since the defendants have failed to supply the particulars, the allegation should be struck out.

31.  Counsel further argues that the planting of hard and soft copies of document on Ping does not give rise to a wrong actionable by Ping.  On the majority view in OBG Ltd, these allegations do not support the defendants’ claim of unlawful interference.

32.  Regarding para. 66 of the counterclaim which alleges the unlawful intimidation of Zhang by Wu in October 2006 to obtain a false confession from Zhang that Jun had procured/induced her to divulge confidential information, counsel submits that the allegation contained nothing unlawful and there is no suggestion that Wu and Yang were seeking a knowingly false confession from Zhang.  There is also no allegation that any confession had indeed been obtained from Zhang during the train journey on 17 October 2006.  The alleged confession was only made some six days later to the public security officers.  The defendants could not plead to any link between the alleged intimidation and the false statement given six days later.

33.  Regarding the allegation of bribery in para. 67, counsel says that the defendants want to invite the court to infer that the hard drive had been tampered with.  The defendants’ case as supplemented by the further and better particulars is that there were 17 more documents in the hard drive on 25 February 2008 than on 28 August 2006.  But the defendants have to plead and prove that these documents were added by an employee of the defendants by counterclaim to a USB drive on 29 September 2007 and they were added from the USB drive to the hard drive by employee of the Appraisal Centre.  The defendants also have to plead what documents were in fact added.  Para. 67 therefore failed to plead the necessary facts to make out a case of tampering with evidence.  No inference of actual tampering with evidence by the defendants by counterclaim can be drawn from the allegation.

34.  Counsel also submits that the alleged bribery of Zhao Jun is irrelevant as that did not lead to any consequence that could support a case of unlawful interference by the defendants by counterclaim.

35.  Counsel further submits that in any case, all references to “tampering” should be struck out as being scandalous, frivolous, vexatious and embarrassing and an abuse of the process of the court because necessary facts have not been pleaded.

36.  Finally, regarding the allegation of Wang Pengyu paying bribes to Zhang Chaozheng, the defendants admit that no document was ever sent out by Zhang Chaozheng and no evidence fabricated.  Hence, counsel submits that even if brides had indeed been paid, nothing resulted from them and no consequence was caused to the defendants.  The defendants therefore suffered no detriment or loss.  Without loss or damage to the defendants, there could not be any claim of unlawful interference. 

37.  Alternatively, counsel says all references to “fabrication” should be struck out as being scandalous, frivolous and vexatious and embarrassing and an abuse of the process of the court because the defendants have admitted that no fabrication had occurred.

The defendants’ arguments in opposition

38.  The defendants first explain the structure of the counterclaim of unlawful interference which has been explained above in the introduction of the counterclaim.  Para. 61 is the general allegation that the defendants by counterclaim had since around 2006 embarked upon a course of conduct by unlawful means to cause loss or harm to the business of the defendants.  Paras. 62-68 then provide the material facts of the alleged course of conduct.

39.  Para. 69 repeats the purpose of the course of conduct.  Para. 70 says that the ultimate objective of the course of conduct is to injure and cause loss to the defendants.  Paras. 71 to 84 provide the particulars of the proceedings and prosecutions.  Para. 85 pleads the general particulars of the public statements and announcements.  Para. 86 pleads the loss and damage suffered by the defendants as a result of the course of conduct.

40.  All these paragraphs form part of the counterclaim against the defendants by counterclaim for unlawful interference with the defendants’ business and economic interests.  Paras. 62 to 68 contain the material facts of the alleged course of conduct for procuring false or fabricated evidence. 

41.  Regarding para. 62, the defendants further submit that it pleads the attempt of the defendants by counterclaim to obtain false evidence from Ping by unlawfully detaining him, coercing and intimating him to falsely confess that he had disclosed the confidential document of the 4th defendant by counterclaim to Jun.

42.  The matters pleaded form part of the course of conduct of the defendants by counterclaim as pleaded in para. 61.  This attempt is followed by the allegation of planting of soft and hard copies of documents in Ping’s computer and apartment during the wrongful detention as pleaded in paras. 63 to 65.  The planting of documents resulted in fabrication of evidence against Ping.  It is therefore wrong for the plaintiffs and the defendants by counterclaim to have considered para. 62 in isolation of the other paragraphs and ignored that this paragraph is just part of the course of conduct.

43.  The loss and damage resulting from the course of conduct to the defendants is also pleaded in para. 82.  The quantum is for assessment at the trial.  Therefore, the fact that para. 62 alone does not constitute a cause of action is not a reason for striking it out.  Its allegations are material to the issues between the parties.  The defendants also disagree that the plea in para. 62 is frivolous, vexatious, embarrassing or otherwise an abuse of the process of the court.  They say that the defendants by counterclaim would not be prejudiced by this plea as they can refute the allegations.

44.  Regarding paras. 63 to 65, the allegations are the planting of soft copy documents in Ping’s computer and hard copy documents in his apartment during the period of alleged unlawful detention.  The defendants further plead in the further and better particulars for para. 63 that Ping’s computer had been tampered by an employee of the defendants by counterclaim and documents unrelated to Ping’s work were then found in a drive of Ping’s computer where Ping did not save his documents. 

45.  The defendants also plead in the further and better particulars for para. 64 that an employee of the defendants by counterclaim had remained in Ping’s apartment after Ping and other people had left.  A search of a bookshelf at the apartment was conducted later and this employee went straight to the bookshelf and took out a stack of documents. This person knew exactly where the documents were.  Ping had not seen such documents before.  There was no then further search of the apartment. 

46.  The defendants submit that there is no basis to strike out paras. 63 to 65 when they are read with the further and better particulars.  There is no alternative explanation on why the documents should have appeared in Ping’s computer and his apartment.  The defendants’ contention of planting cannot be said to be unarguable and, if Ping can give credible evidence on this, the court may draw the inference of planting. 

47.  The defendants further point out that the authorities relied on by the other side on drawing of inferences do not relate to striking out.  They are on drawing of inference at the trial. 

48.  The documents alleged to have been planted are those alleged to be confidential information by the plaintiffs and are amongst those in Schedules 1 to 14 of the Re-Amended Statement of Claim.  Hence, the lack of full particulars before discovery and exchange of witness statement should not prejudice the defendants by counterclaim and they cannot be said to have difficulty in pleading their defence.  The particulars of the planted soft copies will also be available once the hard drive of Ping’s computer is released by the Baoan PSB for examination.

49.  Regarding the argument that planting of documents is not an actionable civil wrong at the instance of Ping and hence no claim of unlawful interference can be made by the defendants, the defendants argue that planting of evidence certainly constitutes criminal acts.  Furthermore, other former employees of the defendants by counterclaim can maintain civil actions of malicious prosecutions against the defendants by counterclaim as they have used the planted false evidence to prosecute these former employees.

50.  Para. 66 pleads unlawful intimidation of Zhang to obtain a false confession from her that Jun had procured or induced her to divulge confidential information of the 4th defendant by counterclaim.  The defendants submit that Zhang had been beaten up by the public security officers, taken on a 20-hour train journey from Weinan to Shenzhen in the company of the public security officials and an employee of the 4th defendant by counterclaim.  She was interrogated by a public security official aggressively and with threats to her father too.  As a result of the threats, she yielded and gave a false confession that Jun had asked her to disclose the confidential information of the defendants by counterclaim.  The false admission had also been used to support legal proceedings against Jun and thus caused damage to Jun.  Zhang therefore has a cause of action of intimation against the defendants by counterclaim.  The act of the employee of the 4th defendant by counterclaim also constitutes criminal offences under the laws of Hong Kong. 

51.  Regarding the argument of lack of dispute of causal link raised by the defendants by counterclaim, namely that Zhang only made a confession to the public security officers six days later, the defendants submit that this is a matter for the trial.

52.  Para. 67 pleads the alleged bribery of Zhao Jun by the defendants by counterclaim for access to the computer which was being examined by the Appraisal Centre.  The defendants raised four questions.  They asked why the defendants by counterclaim had bribed Zhao and why they were given access to a USB drive containing documents.  These documents were relevant to the 2006 PRC Action brought by the defendants by counterclaim and they were copied to the hard drive of a computer under examination by the Appraisal Centre by an Employee of the Centre pursuant to Zhao Jun’s instruction.  They also queried why there were 17 additional documents in the folders of Jun and Xi which were not there in August 2006 when the hard drives were first seized.  They further challenged the defendants by counterclaim to explain their withdrawal of the 2006 PRC Action after the defendants had challenged the credibility of the report and suggested that the hard drives had been tampered.  They submit that if there are no plausible explanations to these questions, then the inference argued by the defendants that there was tampering of the hard drive cannot be said to be unsustainable.  In any case, the issue of tampering is a matter for the trial judge. 

53.  They also say that the defendants by counterclaim can plead to this allegation and no prejudice is caused to them by the lack of full particulars before discovery and exchange of witness statement.  The full particulars of the additional documents will be known after the hard drive is a released by the Shenzhen Intermediate People’s Court for forensic examination.

54.  In answer to whether the bribery of Zhao Jun would amount to unlawful means, the defendants argue that the use of the tampered evidence constitute unlawful means as it would support a claim of malicious prosecution and is a criminal act.

55.  Finally, there is the allegation in para. 68 of bribery of Zhang Chaozheng, an employee of the defendants, by the defendants by counterclaim.  The bribes are alleged to induce Zhang to fabricate evidence that certain of the defendants’ documents, which were alleged to belong to the defendants by counterclaim, had been passed amongst and/or used by the employees of the defendants.  Though the defendants say that Zhang had refused to assist the defendants by counterclaim, they say that the matter pleaded is still relevant as it forms an integral part of the course of conduct engaged in by the defendants by counterclaim with the intention of creating false evidence to interfere with the business of the defendants.

Analysis and decision

56.  The approach of the plaintiffs and the defendants by counterclaim is to consider each of paras. 62 to 68 of the counterclaim individually and in isolation of the others.  However, para. 61 of the counterclaim refers to a course of conduct of the defendants by counterclaim.  The course of conduct was of procuring and using false or fabricated evidence and/or evidence unlawfully obtained to launch proceedings/prosecutions against the plaintiffs and/or their staff and to make false public announcements that the defendants and/or their staff had stolen/misused the defendants’ confidential information.  The particulars of the course of conduct is then pleaded in paras. 62 to 68 and the further and better particulars given for them.  Any individual allegation in these paragraphs is a part of the alleged course of conduct and not a self-contained allegation constituting a claim in its own right.

57.  The defendants plead and seek to prove a course of conduct which would support the claims pleaded in para. 61.  It is not necessary for each and every of the pleaded acts to have accomplished its desired result before the course of conduct can be established.  It is therefore inappropriate to consider each individual allegation in isolation from the others.  All allegations in paras. 62 to 68 should be considered together and see if they together can constitute the alleged course of conduct to support the claims pleaded in para. 61.

58.  For the claim of unlawful interference, the majority view in OBG Ltd no doubt requires a wrong actionable by the 3rd party.  However, I cannot overlook the fact that this cause of action is still developing and the reasons of Lord Nicholls in his dissent are indeed powerful.  Lord Hope in Revenue and Customs Commissioners has also expressed his reservation about the majority view of OBG Ltd.  In the light of these, I think it is premature to strike out this claim at this stage just on the ground of absence of an actionable wrong to the 3rd party.  I think this plea should be allowed to develop and be decided by the trial judge who would be able to hear all the evidence of the parties.  Furthermore, the summary of the defendants’ submissions above shows that there are the claims of intimidation and malicious prosecution that are open to some of the former employees of the defendants by counterclaim.  For these reasons, I do not think I should strike out paras. 62 to 68.

59.  Furthermore, regarding para. 62, though no evidence was fabricated or obtained by detaining Ping, it is part and parcel of the defendants’ allegation that the defendants by counterclaim have tried to procure false evidence which included the planting of soft and hard copy documents as pleaded in paras. 63 to 65.  Although para. 62 alone does not constitute a course of action, I do not think it should be strike out.

60.  Regarding paras. 63 to 65, the argument of absence of particulars have been answered by the defendants.  They say that the defendants by counterclaim can plead to the these paragraphs and no prejudice has arisen to them.  Furthermore, the cases relied on by the plaintiffs and the defendants to counterclaim on when inference can be drawn are relevant to the drawing inference at the trial.  I agree with the defendants that their allegations are not so weak that no inference can be drawn even if they can all be proved with credible evidence.

61.  Regarding para. 66, the plaintiffs and the defendants by counterclaim argue that there was no suggestion that Wu and Yang were seeking a knowingly false confession from Zhang.  However, given the circumstances of the alleged detention, intimidation and aggressive interrogation, it was plain to Zhang on what was expected from her.  This issue should be for the trial judge.  The causal link of the confession given by Zhang six days later should likewise be reserved for the trial judge.

62.  Regarding para. 67, the attack on the lack of particulars of the 17 additional documents has been answered by the defendants.  There is also no prejudice to the defendants by counterclaim as they can plead to this allegation.  If the four questions raised by the defendants cannot receive plausible explanations, then there would be the issue of whether any inference, and if so, what inference should be drawn. 

63.  If para. 67 can survive the attack, I also do not see why the references to “tampering” with evidence should be struck out.

64.  Finally, for the alleged bribery of Zhang Chaozheng in para. 68, I also think that this is part of the alleged course of conduct alleged by the defendants and should not be struck out. 

65.  I also do not think I should strike out the references to “fabrication” if I should allow para. 68 to remain.

66.  In the premises, I do not think any part of paras. 62 to 68 should be struck out.  It follows that there is no consequential striking out either.

67.  I therefore dismiss the Re-Amended Summons to strike out issued by the plaintiffs and the defendants by counterclaim.  I also make a costs order nisi that the plaintiffs and the defendants by counterclaim do pay the defendants’ costs of this application.

Please refer to CACV3/2011 for the relevant appeal(s) to the Court of Appeal.

Please refer to CACV3/2011 for the relevant appeal(s) to the Court of Appeal.

Please refer to CACV3/2011 for the relevant appeal(s) to the Court of Appeal.

Please refer to CACV3/2011 for the relevant appeal(s) to the Court of Appeal.

HCA 2114 / 2007

 IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NO. 2114 OF 2007

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DECISION ON COSTS

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I. Introduction

1.  On 27 June 2008, I handed down written judgment (“the earlier judgment”) dismissing the 1^st and 2^nd Defendants’ application for stay of these proceedings on the ground of forum non conveniens.  I further granted a costs order nisi that the 1^st and 2^nd Defendants (collectively “the Defendants”) should pay the Plaintiffs’ costs of the application with certificate for two counsel[1].

2.  By a letter dated 9 July 2008, the Defendants through their solicitors apply to vary the costs order nisi to the extent as follows:

(1) There should not be certificate for two counsel, or alternatively, if one is to be granted, it should be clarified that counsel fees recoverable should be those for one Senior Counsel and one junior Counsel.

(2) There should be a reasonable deduction in the costs recoverable by the Plaintiffs, since the Plaintiffs only confirmed the withdrawal of the 2006 PRC Action (as defined in the earlier judgment) in the beginning of March 2008.

3.  The parties have agreed to dispose of this application by way of written submissions.  The Defendants set out their submissions in their solicitors’ letters dated 9 and 31 July 2008, while the Plaintiffs’ submissions are in their solicitors’ letter dated 14 July 2008.

4.  This decision should be read together with the earlier judgment, and I also adopt in this decision the abbreviations used in the earlier judgment.

II.      The application

Applicable principles

5.  Costs are within the general discretion of the Court, to be exercised judicially:  Hong Kong Civil Procedure 2008, paras 62/2/5 – 62/2/8.

6.  Insofar as whether costs of two counsel should be allowed, such costs are generally recoverable if they are necessarily and properly incurred. Whether the costs incurred are proper or necessary depend on all the circumstances of the case:  Hong Kong Civil Procedure 2008, para 62/App/48.

7.  I consider that following non exhaustive factors are relevant to the exercise of the discretion as to whether costs of two counsel be allowed:

(1) The nature of the case.

(2) The complexity of the case, such as whether it involves difficult question of fact or difficult or novel points of law.

(3) The skill, specialized knowledge or expertise required for the case.

(4) Where money or property is involved, its amount or value.

(5) The importance of the matter to client.

(6) The general importance of the case, for example as affecting other cases;

(7) If a junior counsel has already been instructed, the experience, competency and seniority of that junior.

(8) Whether the other side has instructed a leader.

(9) Whether it is necessary to instruct a junior to assist in carrying out legal research on difficult or novel questions of law.

See: Hong Kong Civil Procedure 2008, para 62/App/48, citing the decision of Master Poon (as he then was) in Xin Juan Trading Co Ltd v NPH Petrochemical Ltd (unrep., HCA 18159/1998 and CACV 276/1998, 25^th September 2000)

The Defendants’ submissions

8.  The Defendants’ submissions in support of the application to vary the costs order nisi can be summarized as follows:

(1) The stay application did not justify the engagement of two counsel or alternatively two senior counsel for the following reasons:

(a) The governing principles on forum non conveniens are well established and settled, and thus the Defendants’ stay application involved no difficult or novel question of law.

(b) It was only an interlocutory application and the evidence of facts involved was contained in a relatively small number of affidavits and exhibits.

(c) The case was not of any general importance.

(d) The Defendants did not instruct counsel at all.

(2) There should be a reduction of the Plaintiffs’ recoverable costs because:

(a) The Defendants had included in their Summons for stay an independent ground based on the existence of the 2006 PRC Action.

(b) Since the Plaintiffs only applied to the Shenzhen Court to withdraw the 2006 PRC Action in February 2008 (which application was allowed in March), the Plaintiffs should only be entitled to their costs relating to the Defendants’ application from the date of the withdrawal of the 2006 PRC action, or alternatively the Plaintiffs’ costs should be reduced by an appropriate percentage.

Discussions

Certificate for two counsel

9.  Having considered all the circumstances of the present case, notwithstanding the Defendants’ submissions, I consider it appropriate to grant certificate for two counsel in relation to the stay application.  My reasons are as follows:

(1) Although the principles on the doctrine of forum non conveniens are generally settled, in the present case, I am of the view that the following issues cannot be said to be simple and well settled: 

(a)  the specific application of these principles to a claim which is based on breach of confidence (which is the main cause of this action), and the interplay between this cause of action and a claim based on tort, and

(b) whether procedural differences in discovery and interrogatories between the two jurisdictions can amount to a juridical disadvantage to be considered under Stage II of the Spiliada test.

(2) In my view, these issues involve a degree of complexity and more extensive legal research.  This could be borne out by my discussions on the issues set out at paragraphs 51 to 61, and 80 to 97 of the earlier judgment.  They justify the engagement of a leading counsel, and a junior counsel to assist.

(3) The evidence involved in the application cannot be described as little.  It was contained in 13 affidavits and affirmations filed by the parties.  It also involved expert evidence on PRC law.  Together with the exhibits, the evidence occupied some five lever arch files.  I found leading counsel’s involvement in addressing the Court on the evidence useful and helpful.

(4) The claim involves a claim for injunction, account of profit and damages (of a substantial amount) against the Defendants for breach of confidence in relation to commercial confidential information.   The matter is clearly important to the Plaintiffs.  This is particularly so as the Defendants are one of their main competitors.   An application to stay the proceedings for the Shenzhen Court is thus similarly important to the Plaintiffs, especially when it is accepted by the Defendants that the remedies of tracing and constructive trust are not available under the PRC legal system.  I therefore regard this a good justification for the Plaintiffs to engage leading counsel with the assistance of a junior.

(5) In light of the above, I do not think the Defendants’ own decision not to engage counsel at all to conduct the application, and that the case may not be of general importance amount to sufficiently weighty factors to justify the disallowance of certificate for two counsel. 

10.  On the other hand, I accept the Defendants’ submissions that only the fees of Mr Poon, SC and a junior counsel should be recoverable under the certificate for two counsel, as I do not think the application justifies the engagement of two senior counsel.  Given the Plaintiffs’ submissions that Mr Lam SC had been involved in the matter as a junior before he took silk this year, it is up to them to satisfy the taxing master that Mr Lam’s fee incurred during the preparation for the stay application was so incurred as junior counsel, andbefore Ms Cheung’s involvement.  To avoid any doubt, I would also direct that, insofar as the briefs and refreshers for the actual hearing are concerned, it is only those of Mr Poon, SC and Ms Cheung that are recoverable under the costs order.

Withdrawal of the 2006 PRC Action

11.  For the following reasons, I also do not see any basis for any reduction in the costs recoverable by the Plaintiffs by reason of the their withdrawal of the 2006 PRC action in March 2008:

(1) Although the existence of 2006 PRC Action was raised as an independent ground in the Defendants’ Summons to stay the proceedings, in the Plaintiffs’ evidence filed in opposition, matters relating to the 2006 PRC Action constitutes only an insignificant part. 

(2)  Further, in the Plaintiffs’ skeleton, submissions made in relation to the issue of the existence of the 2006 PRC Action, as an independent reason for staying the proceedings, constitutes also an insignificant proportion. 

(3)  Given that the 2006 PRC Action had been withdrawn, at the hearing, practically no time was spent on dealing with this as an independent ground in support of the stay application. 

(4)  In light of the above observations, I do not think it has been demonstrated to me that any of the Plaintiffs’ costs  (since we are now dealing with the recoverability of the Plaintiffs’ costs) have been substantially or appreciably increased by reason of the independent issue relating to the 2006 PRC Action.   In other words, no appreciable extent of the Plaintiffs’ costs has been incurred solely for this issue. 

(5)  In the premises, I do not see any reason to justify the reduction of any parts of the Plaintiffs’ costs, simply because this issue was no longer live in the stay application as a result of the Plaintiffs’ withdrawal of the 2006 PRC Action. 

III.    Conclusion

12.  For the above reasons, I vary the costs order nisi to the extent that the certificate for two counsel granted covers only the fees of Mr Poon SC and a junior counsel, and subject to my directions set out at paragraph 10 above.  The costs order nisi as varied is also hereby made absolute.

13.  To avoid any doubt, it must be emphasized that nothing said in this decision are intended to (and should not be read as to) limit or restrict the taxing Master’s power and discretion to tax the costs in accordance with the basis and principles of taxation.

14.  I further order that costs of this application be part of the costs of the stay application.

HCA 2114 / 2007

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NO. 2114 OF 2007

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DECISION

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I.       Introduction

1.  By way of these proceedings issued as of right in Hong Kong, the Plaintiffs allege that the 1^st and 2^nd Defendants (and the other Defendants) had through the Plaintiffs’ former employees misappropriated and exploited the Plaintiffs’ confidential information and trade secrets.  The Plaintiffs seek various reliefs against the Defendants.

2.  This is the 1^st and 2^nd Defendants’ application to stay or dismiss the present proceedings on the ground that the Intermediate People’s Court in Shenzhen (“the Shenzhen Court”) in the Mainland is the forum conveniens for the resolution of the dispute between the parties.

3.  In order to better understand the arguments made by the parties, it is necessary for me to first set out below the relevant background.

II.      Background

The dispute

4.  The Plaintiffs and the 1^st and 2^nd Defendants are business rivals, engaging in the business of, inter alia, producing handset components and related products.   

5.  The 1^st and 2^nd Plaintiffs are incorporated in the PRC, and are the indirect wholly owned subsidiaries of Foxconn International Holdings Ltd, a listed company in Hong Kong.   

6.  Over the years, the Plaintiffs have maintained substantial production and manufacturing facilities in the Mainland.  It is the Plaintiffs’ case that, for their business purposes, the Foxconn Group of companies (including the Plaintiffs) has developed a set of confidential information (“Confidential Information”) consisting trade secrets and operation manuals accumulated through years of operations, experience and investments into research and development.

7.  The Confidential Information is for the Plaintiffs’ internal use only.  Under their respective employment contracts and the Plaintiffs’ internal rules, their employees have express duties to keep the information confidential.

8.  The 1^st Defendant is also incorporated in the PRC but listed in Hong Kong.  For that purpose and as required by the listing rules, it is also registered in Hong Kong under Part XI of the Companies Ordinance (Cap 32). 

9.  The 2^nd Defendant is a Hong Kong incorporated company, and is wholly owned by the 1^st Defendant. 

10.  In May 2005, the 1^st Defendant recruited one Liu Xiang Jun (“Jun”)  (the then handset production quality control engineer and chief operating officer of the 1^st Plaintiff) to join the 1^st Defendant as one of its staff.

11.  In July 2005, one Si Shao Qing (“Si”) (then an officer of the Engineering Standards Department of the 1^st Plaintiff) joined the 1^st Defendant as its Manager of System Management Office.

12.  In April or May 2006, Zhang Jian (“Zhang”) left the 1^st Plaintiff and joined the 1^st Defendant as one of its staff.

13.  It is the Plaintiffs’ case that, Jun, Si and Zhang had divulged parts of the Confidential Information to some of the Defendants, and had procured other employees then still working for the Plaintiffs to pass on some other parts of the Confidential Information to the Defendants.  These other employees included Wang Wei (“Wang”) and Yang Na Na.

14.  The Plaintiffs further allege that, benefiting from the wrongful use of the Confidential Information so “stolen” from the Plaintiffs, the Defendants have since managed to expand their handset components manufacturing and related production business rapidly.  This is reflected by the significant and rapid increase in their revenue generated through these parts of the business, and demonstrated by the facts that the turnover relating to the handset business of the Defendants’ Group recorded a yearly increase of more than 100% per year for 2005, 2006 and 2007.  In monetary terms, these represent accrued profits to the 1^st Defendant in the tunes of hundreds of millions of dollars.  

15.  The Plaintiffs say that, in relation to the above wrongful acts:

(1)  In April 2007, Wang pleaded guilty and was convicted by the Shenzhen court of infringing the Plaintiffs’ business secrets.

(2)  In July 2007, the Shenzhen court also convicted Zhang of infringing the Plaintiffs’ business secrets.

(3)  In March 2008, Si was similarly convicted of infringing the Plaintiffs’ business secrets

The present proceedings commenced in Hong Kong

16.  The Plaintiffs issued the present proceedings against the Defendants on 5 October 2007.  Generally based on the above alleged wrongful acts of misappropriation of the Confidential Information, the Plaintiffs claim against the Defendants for:

(1)  Breach of confidence.

(2)  Inducing, and dishonestly assisting, the breach of contractual and fiduciary duties by the Plaintiffs’ former employees.

(3)  Conspiracy to injure.

17.  The Plaintiffs seek the following remedies:

(1)  Damages (including exemplary damages) to be assessed.

(2)  Declaration of constructive trusteeship over the profits made by the Defendants through the use and misappropriation of the Confidential Information, an account of such profits, to be aided by the necessary inquiries and tracing.

(3)  Injunction to (a) restrain the Defendants from continuing and repeating the wrongful conducts, and (b) require the Defendant to deliver up all infringing materials.

18.  By way of the Affirmation of E Weiqun filed herein to support the present applications, the 1^st and 2^nd Defendants effectively deny all the Plaintiffs’ allegations.

Various proceedings in the PRC and in Hong Kong

19.  Other than the present proceedings issued in Hong Kong, there are the following various proceedings that had been issued in Hong Kong and the Mainland, which are said by the 1^st and 2^nd Defendants to be relevant to this stay application.

20.  In January 2005, several subsidiaries of the Foxconn Group, including the 2^nd Plaintiff herein, brought civil proceedings against the 1^st Defendant in the Shenzhen Court (“the 2005 PRC Action”).

21.  In the 2005 PRC Action, it was claimed that the 1^st Defendant had misappropriated trade secrets from the Foxconn companies, and damages in the sum of RMB 500,000 were claimed.  In April 2007, the Shenzhen Court dismissed the claim.  In the judgment dismissing the claim, it is stated that the Shenzhen Court by then was only dealing with the claim as an unfair competition dispute, but not a business secrets dispute.  It further stated that the business secrets dispute should be resolved through other legal means.  In February 2008, the plaintiffs withdrew the appeal lodged against that decision.

22.  In June 2006, the Plaintiffs instituted a civil action against the 1^st Defendant, Jun and Si in the Shenzhen Court (“the 2006 PRC Action”).  The 2006 PRC Action was based on Article 10 (“Article 10”) of the Law of the People’s Republic of China Against Unfair Competition. 

23.  Article 10 effectively makes it a civil wrong in the PRC of a business operator to obtain, use or disclose another’s business secrets, and regards such a wrongful act as an infringement of business secrets.  Article 10 further defines business secrets as any technology information or business information which is unknown to the public, and which can bring about economic benefits to its owner, who has adopted measures to keep it confidential. 

24.  Under the 2006 PRC Action, pursuant to an ex parte order made by the Shenzhen Court, the Court seized as evidence documents (“the Seized Evidence”) contained in two hard discs of the computers used by Jun and Si. 

25.  With the Seized Evidence, and after complaints were made by the Plaintiffs to the Public Security Bureau:

(1)  Criminal prosecutions were brought against Jun, Wang and Si.  As mentioned above, they were eventually convicted for the offence of infringement of business secrets.

(2)  In about March 2008, criminal investigation was commenced against the 1^st Defendant for infringement of business secrets.  No criminal prosecution has yet been brought.

26.  On 11 June 2007, the Plaintiffs commenced HCA 1246 of 2007 (“the 1^st Hong Kong Action”) in Hong Kong against the same Defendants herein.  The complaints made, and reliefs asked for, under the 1^st Hong Kong Action were similar to those made in the present proceedings. 

27.  On 5 October 2007, the Plaintiffs discontinued the 1^st Hong Kong Action. On the same day, they commenced the present proceedings.  The Plaintiffs’ evidence (which is not challenged) is that they decided to withdraw the 1^st Hong Kong Action and to issue the present action at the same time, as they did not want to waste further time to pursue their application to amend the statement of claim of the 1^st Hong Kong Action, which was opposed by the 1^st and 2^nd Defendants.  

III.    The relevant legal principles

28.  Both parties agree that the overriding principles governing whether or not to stay the proceedings on the ground of forum non conveniens are those stated in Spiliada Maritime Corp v Cansulex Ltd [1987] 1 AC 460 at 467C.  That is: whether the court is satisfied that there is an alternative forum in which the case can be tried more suitably for the interests of the parties and for the ends of justice.

29.  In adopting and following Spiliada, the Hong Kong Court Appeal in The Adhiguna Meranti [1987] HKLR 904 at 907F-908B further developed the principles into the well-known 3-stage test as follows:

“	(I)	Is it shown that Hong Kong is not only not the natural and appropriate forum for the trial, but that there is another available forum which is clearly or distinctly more appropriate than Hong Kong (p. 986H).  The evidential burden is here upon the applicant.  The emphasis is upon ‘appropriate’ rather than ‘convenient’ because this is not simply a matter of practical convenience.  The purpose is to identify the forum ‘with which the action has the most real and substantial connection’ per Lord Keith in the Abidin Daver [1984] AC 398.  The principal factors are enumerated at p. 987D.  Failure by the applicant at this stage is normally fatal.
	(II)	If the answer to (I) is yes, will a trial at the other forum deprive the plaintiff of any ‘legitimate personal or juridical advantages’? (pp. 987F, 991-3).  The evidential burden here lies on the plaintiff (pp. 986A and 987G).
	(III)	If the answer to (II) is yes, a court has to balance the advantages of (I) against the disadvantages of (II) … Deprivation of one or more personal or juridical advantages will not necessarily be fatal to the applicant provided that the court is satisfied that notwithstanding such loss ‘substantial justice will be done in the available appropriate forum’ … Proof of this, which can fairly be called the ultimate burden of persuasion, rests upon the applicant for the stay.  By these means he establishes that on balance the other forum is more suitable ‘for the interests of all the parties and ends of justice’.  This may be another way of saying that the plaintiffs’ choice of forum has been shown to be so inappropriate as to deserve the pejorative description of  ‘forum shopping’ and to be retrained accordingly …’ (emphasis added)

30.  Further, under Stage I of the test:

(1)  The burden is on the applicant for a stay to show that there are factors and reasons that make the alternative forum clearly or distinctly the more appropriate forum than the local forum to try the action for the interests of the parties to obtain justice.   The focus is therefore on the trial of the action.  It is insufficient to demonstrate merely some factors pointing to better convenience for the parties to conduct the trial in the alternative forum.  See: Rambas Marketing Co LLC v Chow Kam Fai David [2001] 3 HKC 250, 255A-F per Recorder Ma, SC (as he then was).

(2)  In considering whether the factors raised by the defendant can show that the alternative forum is clearly or distinctly a more appropriate forum, the Court should bear in mind that the plaintiff has found his action as of right in this jurisdiction, and such a right should not be lightly disturbed: Pei Zheng Middle School, supra, para 19; Yu Lam Man v Good Investment Ltd [1998] 1 HKC 726, 734B-E, following the Court of Appeal’s decision in The Kapitan Shvetsov [1997] 1 HKC 485 at 491G-H; Banco Atlantico v BBME [1990] 2 LLR 504, 508 per Bingham LJ (as he then was).

(3)  The mere fact that there are concurrent proceedings in the alternative forum alone is generally not a relevant factor to be considered.  The rationale is that a plaintiff is entitled to choose the forum he has found as of right in which he prefers to litigate the matter: Pei Zheng Middle School v China Pui Ching Education Foundation Ltd (unrep., CACV 262/2005, Cheung and Yeung JJA, 21 February 2006), para 25; Nan Tung Bank Ltd v Wangfoong Transportation Ltd [1999] 2 HKC 606, 610 per Liu JA, adopting The Abidin Daver [1984] 1 AC 398 at 409B per Lord Diplock.  However, the existence of such proceedings may, depending on the circumstances, be relevant to the inquiry:  de Dampierre v de Dampierre [1988] 1 AC 92, 108B-E per Lord Goff.

31.  Under Stage II, legitimate personal or juridical advantages could include any significant causes of action, substantive remedies or procedures that would not be available in the other forum.  However, the mere existence of such juridical advantages in the local forum does not necessary lead to a refusal to stay.  Whether a stay will be a granted or not depends on the balancing exercise under Stage III:  Spiliada, supra, 482B-D per Lord Goff.

32.  Under Stage III, each case must be looked at individually as to whether the deprivation of any or certain of the juridical advantages would result in rendering the plaintiff not having been able to obtain substantial justice in the other forum.  There is no hard and fast rule in it, and the Court should look at all the circumstances to come to a view, sometimes an instinctive one, as to whether substantive justice would not be obtained in the foreign forum:  de Dampiere, supra, 101E-F per Lord Templeman; The Atlantic Star [1974] AC 436, 468F-H per Lord Wilberforce; The Adhiguna Meranti, supra, 147G-H; Spiliada, supra, 483C-D per Lord Goff.

IV.    Applying the test to the present case

33.  Before I start, I think it is useful for me to first set out what I regard as the principal issues arising in the present proceedings, by reference to the Statement of Claim and the 1^st and 2^nd Defendants’ general denial.  These are:

(1) Whether the Confidential Information amounts to information of confidence and would be protected by the law of confidence.

(2) Whether the identified former employees of the Plaintiffs owed to the Plaintiffs at the material times contractual and/or fiduciary duty of confidence.

(3) Whether the complained acts of these former employees of the Plaintiffs did occur, and if so, whether they were carried out in breach of their fiduciary and/or contractual duty of confidence.

(4) Whether the Defendants (including the 1^st and 2^nd Defendants) had induced or were fully aware of these alleged wrongful acts of these former employees of the Plaintiffs, and if so, whether the Defendants are liable for breach of confidence, the tort of inducement of breach of contract and/or fiduciary duty, and conspiracy to injure.

(5) If so, whether by reason of the above alleged wrongful acts, the Defendants have obtained profits, and/or whether the Plaintiffs have suffered loss and damage.  If so, what is the respective quantum of profits and/or damages.

(6) If so, as a matter of remedies:

(a) whether prohibitory and/or mandatory injunctions should be granted against the Defendants to respectively (a) restrain them from continuing and repeating the wrongful conducts, and (b) require the Defendant to deliver up all infringing materials.

(b) whether constructive trust should be imposed on the Defendants’ assets or profits derived from their wrongful acts in favour of the Plaintiffs;

(c) whether the Defendants should be ordered to account for the profits;

(d) whether the Defendants should be subject to tracing inquiries.

(e) whether the Defendants are liable for damages, including exemplary damages.

34.  Bearing these issues in mind, I will now go into the 3-stage test.

Stage I

35.  Mr Pe for the 1^st and 2^nd Defendants submits that the Shenzhen Court is clearly or distinctly the more appropriate forum than the Hong Kong Court to try the action, as the following factors show that the dispute and its issues are overwhelmingly connected to Shenzhen:

(1)  The Plaintiffs and the 1^st Defendant are companies incorporated in the PRC and run their businesses there.

(2)  All persons potentially related to the case (meaning the senior executive management personnel of the parties and their employees), and the potential witnesses, including the Plaintiffs’ former employees who are alleged to have been in breach of their duties, are located in Shenzhen or elsewhere in the Mainland.

(3)  All the related documents are located in Shenzhen or elsewhere in the Mainland.

(4)  The substance of the torts complained of by the Plaintiffs were committed in Shenzhen, and as such the jurisdiction in which the torts were committed (i.e., Shenzhen) is prima facie the natural forum for the determination of the dispute: The Albaforth [1984] 2 Lloyd’s Rep 91 at 94 per Ackner LJ; Esquel Enterprises Ltd v TAL Apparel Ltd [2006] 2 HKLRD 363, paras 13, 28 (pp. 369E, 371C-D) per Tang JA.

(5)  It is likely that the substantive law governing the majority if not all of the issues in the present claims is PRC law.  This is so because (a) the employees were employed by PRC companies, and their employment contracts were governed by PRC law, and (b) the Plaintiffs have pleaded Article 10 in the present proceedings.  

36.  Notwithstanding the above submissions, I do not accept that the 1^st and 2^nd Defendants have discharged their burden to show that the Shenzhen Court is clearly or distinctly the more appropriate forum to try the dispute.  My reasons are as follows.

Place of incorporation of the parties and their businesses

37.  In my view, the facts that PRC is the place of incorporation of the Plaintiffs and the 1^st Defendant, and that their main businesses are carried on in the Mainland, have nothing to do with the trial of any of the issues in the present case.  This would not have any impact, one way or the other, on whether justice could be obtained by the parties if the trial of the above listed issues is to be held in the Hong Kong Court or the Shenzhen Court. 

38.  I thus regard this factor is at most neutral to the question of whether the Shenzhen Court is clearly or distinctly a more appropriate forum.

Location of the witnesses and senior management personnel

39.  I also reject that this is a factor which shows clearly or distinctly that the Shenzhen Court is the more appropriate forum.

40.  In this respect, it is perhaps helpful for me to first repeat below Mr Recorder Geoffrey Ma’s observation[1] on the relevance of the location of potential witnesses as a factor in considering where is the more appropriate forum:

“In application for a stay based on forum non conveniens, it is often desirable for the parties first to identify the relevant witnesses who will be required to give evidence at trial, the number involved and then state the reasons why in any particular jurisdiction it would be more convenient for such witnesses to give evidence.  It is important to make a distinction between those witnesses who will more likely be required to give disputed evidence and whose testimony is not likely to cause controversy.  In the case of the latter, unless there is shown a likelihood that their attendance at trial is required, the fact that they are resident in any particular country will not normally be of any significance.  Thus, while the court is not at this stage concerned about the merits of the action, it is nevertheless incumbent on the parties to set out their respective cases in sufficient detail so as to identify those issues likely to be in controversy at trial.  Only then would the location and convenience of witnesses be seen in its proper context.”

41.  Further, in Yu Lap Man, supra, it is also observed by Cheung J (as he then was) that in a stay application, it is insufficient for the applicant for a stay to show mere practical convenience for a potential witness to attend trial in the foreign forum.  His Lordship explains at 734B-C as follows:

“…Regarding the connecting factors with China and the availability of witness in China, Mr Wu has merely shown that the courts in PRC are equally appropriate as the Hong Kong courts to deal with this case.  There certainly is no evidence that the witnesses could not come to Hong Kong.  The burden on the defendant is not to show mere practical inconvenience, but whether there is another available forum which is clearly or distinctly more appropriate than the one chosen by the plaintiff…”

42.  In the present case, the 1^st and 2^nd Defendants have failed to identify in their evidence as to which of these senior management personnel would likely to be called as witnesses at trial, and the prima facie relevance their evidence to any of the identified issues. 

43.  Further and in any event, even if any of these personnel are to be witnesses at the trial, the evidence is that most of them are located in Shenzhen and that they could come to Hong Kong with a 45 minutes’ journey.  There is no suggestion that there is a risk that they could not attend the trial if it is to be held in Hong Kong. 

44.  In the premises, I accept the submissions of Mr Poon, SC, leading Mr Godfrey Lam SC and Ms Elizabeth Cheung for the Plaintiffs, that the 1^st and 2^nd Defendants only show that it may be practically more convenient for the potential witnesses to attend a trial in Shenzhen.   As such, and applying the principles set out above at paragraphs 40 and 41 above, this does not show that the Shenzhen Court is the more appropriate forum in which the case can be tried more suitably for the interests of the parties and for the ends of justice. 

45.  Although it is not in the evidence, Mr Pe then submits that, as a matter of common sense, it is unlikely that those former employees of the Plaintiffs, who the Defendants intend to call as witnesses, would be willing to come to Hong Kong to give evidence, as they have been convicted in Shenzhen.  Therefore, if the case is to be tried in Hong Kong, serious prejudice would be caused to the 1^st and 2^nd Defendants if these witnesses refuse to come to Hong Kong.

46.  I am unable to accept Mr Pe’s above submissions:

(1)  I accept Mr Poon’s submissions that, as a matter of common sense, it is more likely than not that these former employees will be less willing to give any evidence in Shenzhen than in Hong Kong, if the evidence they are to give is to contradict their convictions.  Thus, a trial in Hong Kong would in fact provide a better chance to secure their attendance, if ever needed, than if it is to be conducted in Shenzhen.  No injustice therefore is likely to be caused to the 1^st and 2^nd Defendants as submitted.

(2)     Further, I have read the witness statements of these employees, which have led to their conviction.  I also note that Wang’s conviction was in fact made on her guilty plea.

(3)     Given this present state of the evidence, it is difficult for me to see at this stage what would be the likely controversy over the evidence of these convicted employees (if they are to be called as witnesses) in relation to what they had done vis-à-vis the Confidential Information.  I note that the Plaintiffs’ averments against them in Statement of Claim are substantially based on the matters stated in their statements.   In the circumstances, the 1^st and 2^nd Defendants have also failed to satisfy me how the attendance of these employees at trial is likely to be of significance. See: Recorder Ma’s observation quoted at paragraph 40 above.

47.  In the premises, I do not find that the location of the 1^st and 2^nd Defendants’ senior management personnel and the Plaintiffs’ former employees, constitutes a factor to support that the Shenzhen Court is clearly or distinctly the more appropriate forum to try the present action.

The location of the documents

48.  Again, as in the case of the location of witnesses, generally the mere fact of the foreign location of the relevant documents is not necessarily supportive of the proposition that the foreign court is the more appropriate forum to try the case.  The applicant for a stay should further show that, for example, there is at least a risk that some of these document may not be made available if the trial is to be conducted locally.  See:  Rambas, supra, 264B-C.  

49.  In the present case, although the unchallenged evidence is that the purported related documents are likely to be located in Shenzhen at the 1^st and 2^nd Defendants’ factories and offices, there is no evidence to suggest that if the trial is to be conducted in Hong Kong, there is a risk that some of these documents may not be made available in Hong Kong.

50.  In these circumstances, and given the relatively short journey between Hong Kong and Shenzhen, I similarly do not accept that this is a factor which shows that the Shenzhen Court is clearly or distinctly the more appropriate forum. 

The substance of the alleged torts were committed in Shenzhen

51.  The 1^st and 2^nd Defendant rely heavily on the case of The Albaforth, supra, to support the proposition that as a general rule, the forum in which the substance tort was committed is the prima facie natural forum to try the dispute. 

52.  In Albaforth, the shipowners was initially granted an ex parte leave to serve out of jurisdiction a writ on a bank in New York and Connecticut, to claim damages for negligent misstatement.  The ex parte leave was later set aside by the Court.   The shipowners appealed that decision to the Court of Appeal, which allowed the appeal.  Ackner LJ expressed at p 94 the view that the jurisdiction in which a tort had been committed was prima facie the natural forum for the determination of that dispute.  Robert Goff LJ also said at p 96 as follows:

“…If the substance of an alleged tort is committed within a certain jurisdiction, it is not easy to imagine what other facts could displace the conclusion that the Courts of that jurisdiction are the natural forum.” 

53.  In Esquel Enterprises, supra, the Court of Appeal in Hong Kong adopted the above observations in The Albaforth, and confirmed at paras 13 and 28 the first instance judge’s conclusion that the foreign jurisdiction where the publication of the alleged defamatory material was made, was the prima facie natural forum for the determination of the claim.

54.  Relying on these authorities, Mr Pe for the 1^st and 2^nd Defendants submits that as the alleged wrongs complained by the Plaintiffs in this action are tortuous in nature, and were indisputably committed in Shenzhen, it is clear that the Shenzhen Court is clearly or distinctly the more appropriate forum to try the matter.

55.  Mr Poon for the Plaintiffs however submits the following:

(1)  The main thrust of the Plaintiffs’ claim in the present action is based on breach of confidence, which is not a specie of tort as recognized by the common law.  Mr Poon relies on the Court of Appeal’s decision^[2] in Douglas v Hello!Ltd (No 3) [2006] QB 125 at 160B-C.  He therefore says that the observations in The Albaforth and Esquel Enterprises do not apply directly to such a claim. 

(2)  Further, what The Albaforth and Esquel Enterprises say in this respect is only that the prima facie natural forum to try a tortuous claim is the jurisdiction where the tort was committed.  This is not conclusive and can still be displaced by other factors.  Mr Poon then relies on the decision in Berezosky v Michaels [2000] 1 WLR 1004 at 1014C-D per Lord Steyn.

(3)  In the present case, the only tortuous claims against the Defendants in the present action are the torts of inducement of breach of contractual or fiduciary duties of confidence by Plaintiffs’ former employees and conspiracy to injure.  These causes of action are only periphery to the main claim for breach of confidence.  On the other hand, in The Albaforth and Esquel Enterprises, the primary cause of action involved respectively in them was in tort.

(4)  Further, there is no evidence to suggest that the PRC laws (being the law of the place of the torts, governing the torts) in relation to the contractual and fiduciary duties of these former employees are different from Hong Kong laws. They should therefore be presumed to be the same as Hong Kong laws. 

(5)  In the premises, even in light of these tortuous claims, insofar as the trial of entire present action is concerned, the natural forum presumption set out in The Albaforth and Esquel Enterprises should be displaced in favour of the Hong Kong forum.

56.  I agree with Mr Poon’s submissions. 

57.  First, on a proper reading of the Statement of Claim in the present action, I accept that the claim for breach of confidence is the Plaintiffs’ main cause of action against the Defendants.   The other tortuous claims are periphery and supplementary to this principal claim.

58.  Secondly, the authorities cited to me do support the proposition that it is at least arguable that the cause of action in breach of confidence should not be categorized as a form of tort.  As stated by the learned editors of Clerk and Lindsell on Torts (19^th ed) at para 28-03 on the nature of a claim in breach for confidence:

 “Juridical basis of the action  There has been a long-standing uncertainty as to how this action [action for breach of confidence and privacy] should be categorized… though there is some judicial support for its recognition as a tort, the most favoured basis for the action to date is that of an equitable principle of good faith.  However, because of its close relationship with other torts this chapter on breach of confidence is included in this work.” (emphasis added)

59.  Given this uncertainty as to the nature of the action for breach of confidence, I do not think the 1^st and 2^nd Defendants could demonstrate to me that for the present case, the Shenzhen Court is clearly or distinctly the more appropriate forum simply by relying on the propositions laid down in The Albaforth and Esquel Enterprises.

60.  I also accept that even for a claim based on tort, under The Albaforth and Esquel Enterprises, although the place in which the tort was committed is a strong prima facie natural forum for the determination of the dispute, it is by no means conclusive and this presumption is displaceable.  I do not think Mr Pe is submitting otherwise.

61.  As such, given that (a) the principal cause of action in the present claim is arguably not a form of tort, (b) the other tortuous claims are only supplementary to this principal claim, and (c) the PRC laws governing these tortuous claim are presumed to be the same as Hong Kong, I am satisfied that the presumption on the natural forum advanced in The Albaforth and Esquel Enterprises is displaced, in that this is not a case where it is shown that the Shenzhen Court is clearly or distinctly the natural forum to try the disputes.

The relevance of PRC law

62.  This can be dealt with shortly.  

63.  As mentioned above, for the identified issues in this action, the 1^st and 2^nd Defendants have not adduced any expert evidence to show that any applicable and relevant PRC laws are different from Hong Kong laws.  As such, the relevant PRC laws are presumed to be the same as Hong Kong law.

64.  In the premises, even if any of the PRC laws is to apply to determine any of the issues, I am of the view that the Hong Kong courts are as equally equipped as the Shenzhen Court to deal with them. 

65.  Mr Pe for the 1^st and 2^nd Defendants then refers me to the Plaintiffs’ Statement of Claim, and points out that the Plaintiffs have specifically pleaded Article 10.  He submits that the need to determine the meaning and effect of Article 10, being a PRC legal code, points to the Shenzhen Court as the more appropriate forum.

66.  For this, Mr Poon for the Plaintiffs confirms that the reference to Article 10 in the Statement of Claim is only for the purpose of satisfying the double actionability test under the Boys v Chaplin principle.  The Plaintiffs are not relying on Article 10 as a material part of their claims against the Defendants.  Therefore (Mr Poon further submits) no issue arises in the present action on the interpretation and applicability of Article 10.

67.  Given Mr Poon’s confirmation, I am satisfied that if the trial of the action is to be conducted in Hong Kong, it is not necessary to determine the meaning and effect of Article 10 under PRC law.

68.  Further, even if I were wrong above, and the issue of the meaning and effect of Article 10 under PRC law did arise in the trial, the expert evidence before me is to the effect that the interpretation and effect of Article 10 under PRC law is not controversial.  As such, I am also satisfied that Hong Kong courts are still competently equipped to deal with this issue.  As said by Cheung JA in Pei Zheng Middle School, supra, at para 20, Hong Kong courts are generally highly competent to deal with any legal or factual issues with a Mainland element.

69.  For these reasons, I am not persuaded that, even with the potential relevance of PRC law in the trial of the present proceedings, the Shenzhen Court is clearly or distinctly the more appropriate forum.

Conclusion under Stage I

70.  For the above reasons, the 1^st and 2^nd Defendants have failed to show that the Shenzhen Court is clearly or distinctly the more appropriate forum to try the present action. 

71.  On this basis alone, I would dismiss the 1^st and 2^nd Defendants’ stay application.

72.  However, if I were wrong in the above, I will deal with the arguments under Stages II and III as follows.

Stage II

73.  The Plaintiffs say that they would be deprived of the following personal or juridical advantages if the action is to be stayed for the Shenzhen Court:

(1)  A compulsory and more extensive discovery procedure and the right to administer interrogatories.

(2)  A higher level of recoverable damages.

(3)  A wider and more effective form of injunction.

(4)  The remedies of constructive trust and tracing.

(5)  The award of exemplary damages.

(6)  The award of costs on an indemnity basis.

Constructive trust, tracing and indemnity costs

74.  As a start, Mr Pe for the 1^st and 2^nd Defendants effectively and fairly accepts that under the PRC legal system and jurisprudence, the remedies of (a) constructive trust and tracing, (b) exemplary damages, and the award of costs on an indemnity basis are not available. 

75.  Notwithstanding the concession, Mr Pe submits that, given the state of the pleading and the evidence before the Court, it is highly unlikely that the Plaintiffs would be able to obtain these reliefs and indemnity costs even if the trial is to be conducted in Hong Kong.  As such, the so-called deprivation of the advantages is more apparent than real. 

76.  I am unable to accept Mr Pe’s submissions. 

77.  In an application for stay on the ground of forum non conveniens, the Court is not to be concerned with, nor is it appropriate for it to deal with, the substantive merits of the claim.  See:  Pei Zheng Middle School, supra, at paras 16-18.  In particular, when it is not the 1^st and 2^nd Defendants’ submissions that any parts of the Statement of Claim are liable to be struck out.

78.  In the circumstances, I do not think I can say at this stage that it is highly unlikely that the Plaintiffs, if successful at trial, would not be granted the relief of constructive trust, tracing and an award of costs on an indemnity basis.   These matters should only be fully canvassed at trial.

79.  As a result, I would accept for the present purpose that, if the action is stayed for the Shenzhen Court, the Plaintiffs would be deprived of these potential juridical advantages.

Discovery and interrogatories

80.  From the PRC law expert evidence adduced by both parties, it is common ground that the major difference between the discovery procedure in Hong Kong and the civil evidence gathering procedure in the Mainland can be described as follows:

(1)  Under the Hong Kong discovery, the parties are obliged to even discover documents which are detrimental or unfavourable to them.   

(2)  On the other hand, under the PRC procedure, a party is initially only required to disclose documents which it wants to rely on to support its case.

81.  It is so accepted by the 1^st and 2^nd Defendants that, there is no procedure under the PRC legal system similar to that of the administration of interrogatories as available in Hong Kong.

82.  Mr Poon for the Plaintiffs submits that the compulsory and more comprehensive discovery in Hong Kong, coupled with and the interrogatories procedure, clearly constitute a juridical advantage for the Plaintiffs.  The advantage will be lost if the case is to be stayed for the Shenzhen Court.

83.  Mr Pe for the 1^st and 2^nd Defendants submits otherwise.  

84.  First, Mr Pe relies on the observation of Lord Goff in Spiliada at 482F to 483B, and submits that it is established that the concept of “legitimate personal or juridical advantage” does not include any of the special features of an extensive discovery such as the one available in Hong Kong.   Thus, as submitted by Mr Pe, there is simply no question of there being a juridical advantage in relation to the Hong Kong discovery and interrogatories procedures.

85.  Secondly, as a matter of evidence, Mr Pe says that the PRC civil procedures do provide a rather similar and comprehensive evidence disclosure system.   The two procedures are therefore not significantly different.   He relies on the following evidence:

(1)  According to the unchallenged expert evidence, under the various articles of the Civil Procedure Law of the People’s Republic of China, if the Plaintiffs can show that the 1^st and 2^nd Defendants are in possession of certain relevant evidence, they can apply to the court to ask the court to investigate, and collect the evidence, and even to preserve evidence.

(2)  Further, as confirmed by the experts on both sides, under Article 75 of the Civil Procedure Law of the People’s Republic of China, if a party refuses to provide the evidence when so asked by the court, it can be inferred as established that such evidence is not favourable to that party possessing the evidence.

86.  Mr Pe therefore submits that, under the relevant PRC procedural laws, it is not the case that there is no procedure to allow the Plaintiffs to seek further evidence from the 1^st and 2^nd Defendants, even if they are against the 1^st and 2^nd Defendants’ case.  Quite to the contrary, the procedures set out above are comprehensive and effective, as they even provide for a detrimental presumption against a party who refuses to disclose certain evidence when asked by the court to do so.  There is therefore again (Mr Pe so further submits) no question of a juridical advantage vis-à-vis the discovery and interrogatories procedures.

87.  I do not accept Mr Pe’s submissions.

88.  I will deal with Mr Pe’s submissions on the law first.    When discussing the test in relation to the loss of legitimate personal or juridical advantage, Lord Goff in Spiliada made the following observations at 482B-483C:

“8) Treatment of ‘a legitimate personal or juridical advantage’

Clearly, the mere fact that the plaintiff has such an advantage in proceedings in England cannot be decisive. As Lord Sumner said of the parties in the Société du Gaz case, 1926 SC (HL) 13, 22:

‘I do not see how one can guide oneself profitably by endeavouring to conciliate and promote the interests of both these antagonists, except in that ironical sense, in which one says that it is in the interests of both that the case should be tried in the best way and in the best tribunal, and that the best man should win.’

Indeed, as Oliver L.J. [1985] 2 Lloyd's Rep. 116, 135, pointed out in his judgment in the present case, an advantage to the plaintiff will ordinarily give rise to a comparable disadvantage to the defendant; and simply to give the plaintiff his advantage at the expense of the defendant is not consistent with the objective approach inherent in Lord Kinnear's statement of principle in Sim v. Robinow, 19 R, 665, 668.

The key to the solution of this problem lies, in my judgment, in the underlying fundamental principle. We have to consider where the case may be tried ‘suitably for the interests of all the parties and for the ends of justice.’ Let me consider the application of that principle in relation to advantages which the plaintiff may derive from invoking the English jurisdiction. Typical examples are: damages awarded on a higher scale; a more complete procedure of discovery; a power to award interest; a more generous limitation period. Now, as a general rule, I do not think that the court should be deterred from granting a stay of proceedings, or from exercising its discretion against granting leave under R.S.C. Ord. 11, simply because the plaintiff will be deprived of such an advantage, provided that the court is satisfied that substantial justice will be done in the available appropriate forum. Take, for example, discovery. We know that there is a spectrum of systems of discovery applicable in various jurisdictions, ranging from the limited discovery available in civil law countries on the continent of Europe to the very generous pre-trial oral discovery procedure applicable in the United States of America. Our procedure lies somewhere in the middle of this spectrum. No doubt each of these systems has its virtues and vices; but, generally speaking, I cannot see that, objectively, injustice can be said to have been done if a party is, in effect, compelled to accept one of these well-recognised systems applicable in the appropriate forum overseas. In this, I recognise that we appear to be differing from the approach presently prevailing in the United States: see, e.g., the recent opinion of Judge Keenan in Re Union Carbide Corp. (1986) 634 F.Supp. 842 in the District Court for the Southern District of New York, where a stay of proceedings in New York, commenced on behalf of Indian plaintiffs against Union Carbide arising out of the tragic disaster in Bhopal, was stayed subject to, inter alia, the condition that Union Carbide was subject to discovery under the model of the United States Federal Rules of Civil Procedure after appropriate demand by the plaintiff. But in the Trendtex case [1982] AC 679, this House thought it right that a stay of proceedings in this country should be granted where the appropriate forum was Switzerland, even though the plaintiffs were thereby deprived of the advantage of the more extensive English procedure of discovery of documents in a case of fraud. Then take the scale on which damages are awarded. Suppose that two parties have been involved in a road accident in a foreign country, where both were resident, and where damages are awarded on a scale substantially lower than those awarded in this country. I do not think that an English court would, in ordinary circumstances, hesitate to stay proceedings brought by one of them against the other in this country merely because he would be deprived of a higher award of damages here.

But the underlying principle requires that regard must be had to the interests of all the parties and the ends of justice; and these considerations may lead to a different conclusion in other cases.”  (emphasis added)

89.  In my view, Lord Goff’s above observation deals more with the proposition as to whether the deprivation of a juridical advantage would invariably lead to the denial of substantial justice.  His Lordship came to the view that it is not necessary the case.  He then cited the examples of the differences between the discovery procedures and the different levels of recoverable damages in two different jurisdictions to say that, the deprivation of such “juridical advantages” generally would not lead to the denial of substantial justice to the party who seeks to rely on a more extensive discovery procedure or higher level of damages available in the local jurisdiction.

90.  However, I do not think Lord Goff waslaying down a generally applicable principle or proposition that, in every forum non conveniens case, the deprivation of a more extensive discovery procedure, or a higher level of recovery damages in the local jurisdiction, would not constitute a “legitimate personal or juridical advantage” and would never lead to the conclusion that the plaintiff would not be able to obtain substantial justice in the other forum.  Each case must be decided on its own circumstances.  That is why, after setting out his general observations, Lord Goff emphasized at 483D that “…these considerations may lead to a different conclusion in other cases”.

91.  I therefore do not accept that there is any established legal proposition that differences in the discovery procedures or levels of damages in two different jurisdictions can never amount to a juridical advantages or would never constitute a valid consideration to refuse to stay the proceedings on the ground of forum non conveniens.  Each case must be looked at individually with reference to its own nature and circumstances. 

92.  Thus, in Beecham Group PLC v Norton Healthcare Ltd [1997] FSR 81, 99, a case where the plaintiffs claimed against the defendant for breach of confidence, Jacobs J in granting leave to the plaintiff to serve outside jurisdiction under O. 11, accepted that the more extensive discovery and interrogatories provided by the English procedure, together with other factors, constituted legitimate juridical advantages, and militated “in favour of the United Kingdom being a forum conveniens for the trial of breach of confidence” against the foreign corporate defendant in Slovenia.

93.  In relation to Mr Pe’s second point, with the expert evidence now placed before the Court, and for the following reasons, I am satisfied that there are significant differences between the discovery procedures in Hong Kong and the evidence gathering procedures in the Mainland.

94.  As rightly pointed out by Mr Poon, in order to invoke the various articles under the PRC procedure law as suggested by the 1^st and 2^nd Defendants’ expert, it is necessary for the Plaintiffs to be able to first demonstrate to the Shenzhen Court (a) the existence of those documents, and (b) that the 1^st and 2^nd Defendants are in possession of them. 

95.  However, without the automatic and compulsory Hong Kong discovery and interrogatories to provide the initial “paper trail”, especially for documents which are detrimental or unfavourable to the 1^st and 2^nd Defendants’ own case, it is very difficult (if not impracticable) for the Plaintiffs to identify the existence of these further documents, so as to invoke those articles under the PRC procedure law.  

96.  This is particularly so in the present case, which is primarily premised on the Defendants’ breach of confidence and wrongful use of the Confidential Information.  For cases like this, most of the relevant evidence concerning the breach, the wrongful use and the extent of the said use of the Confidential Information, is likely to be only within the Defendants’ own knowledge and possession.   Therefore, without the initial paper trails and information that would have been created by the compulsory and comprehensive discovery and interrogatories procedures, it would be even more difficult for the Plaintiffs to satisfy the preconditions under the PRC procedure law to invoke the relevant articles to invite the Shenzhen Court to demand the disclosure of unfavourable evidence and documents from the Defendants.

97.  I therefore accept that there is an appreciable and significant difference between the two discovery procedures in Hong Kong and the Mainland.   For the purpose of this particular case, this could be properly regarded as a legitimate juridical advantage that is available to the Plaintiffs if the proceedings are to remain in Hong Kong.

Damages

98.  The Plaintiffs’ evidence (inclusive of the evidence of the Plaintiffs’ PRC law experts, Mr Li and Mr Dicks) suggests the following:

(1)  Under PRC law, the Plaintiffs were required to specify in the claim document the amount of damages claimed. 

(2)  Under PRC law, although a plaintiff can ask to revise the quantum of damages initially claimed, this is generally not allowed after the expiry of the time for the production of evidence.

(3)  Moreover, according to the expert opinions, the PRC courts rarely award damages beyond RMB500,000 in cases of infringement of business secret.

(4)  As the Plaintiffs were at this stage unable to provide sufficient evidence on the amount of profits gained by the 1^st Defendant through the unlawful use of the Confidential Information, at the suggestion of the Shenzhen Court, the Plaintiffs had to reduce in their writ of the 2006 PRC Action the claimed amount of damages from RMB70 million to RMB5 million.

(5)  Further, since the time for the production of evidence under the 2006 PRC Action had already expired, the Shenzhen Court had in fact disallowed the Plaintiffs’ subsequent application to increase the amount of damages claimed.

99.  In light of the above evidence, it is Mr Poon’s submissions that the damages that the Plaintiffs could recover, if the action is to be tried in the Shenzhen Court, are likely to be limited and be substantially below what they could recover in Hong Kong.

100.  In this respect, the 1^st and 2^nd Defendants’ expert in PRC law, Mr Liu, agrees with the Plaintiffs’ views on the PRC law stated at paragraph 98 above.  However, Mr Liu is of the opinion that given the criminal prosecution that may be commenced against the 1^st Defendant in the PRC, and if the prosecution is successful, the Plaintiffs would then be entitled to commence what is described as the “ancillary civil action” against the 1^st Defendant to claim for further damages.  He further opines that in similar ancillary civil actions, the PRC courts have awarded damages exceeding RMB100 million.  In light of this part of the unchallenged evidence, Mr Pe for the 1^st and 2^nd Defendants submits that there could be no “real” deprivation of the alleged juridical advantage in damages as suggested by the Plaintiffs.

101.  In relation to the “ancillary civil action”, the unchallenged evidence of the Plaintiffs’ experts however shows that this procedure is entirely dependent upon the successful criminal prosecution of the 1^st Defendant, which is beyond the Plaintiffs’ own control.  The procedure is also not well suited to more complex litigation.  Further, Mr Poon submits that, without the discovery procedure and tracing remedy provided under common law, any claim for damages in such an “ancillary civil” action is also unlikely to be fruitful due to the lack of means on the plaintiffs’ part to prove the Defendants’ illegal gains under the relevant PRC law.  As such, Mr Poon further says the Plaintiffs do stand the loss of a realistic juridical advantage in having a lower level of recoverable damages if the action is to be tried in the Shenzhen Court.

102.  I accept Mr Poon’s submissions.   Coupled with the absence of the compulsory and comprehensive discovery procedure and the tracing remedy under PRC law, I am satisfied that the “ancillary civil action” available to the Plaintiffs is unlikely to be effective to enable them to recover substantial damages in the Shenzhen Court.   

103.  In the circumstance, I am prepared accept to that the Plaintiffs would practically suffer a juridical disadvantage in the form of a lower level of recoverable damages if this action is stayed for the Shenzhen Court.

Injunction

104.  It is not disputed that under PRC law, there is no relief in the form of a mandatory injunction to require the Defendants to disclose their infringing use.  Mr Poon at paragraph 55 of his skeleton says the Plaintiffs have asked for such a relief in the present claim.

105.  At first blush, I have hesitation as to whether the Plaintiffs have asked for such an order under their pleaded prayers for injunctive relief, which are as follows:

“AND the Plaintiffs claim against the Defendants for:-

(1)           … An Order restraining the Defendants and each of them whether by themselves, their servants or agents or otherwise howsoever from using the Confidential Information of the Plaintiffs, including in particular the documents set out in Schedules 1 to 7 thereto…

(2)           …delivery up of all documents and materials which are in the possession, power, custody or control of any of the Defendants, their agents or servants the use or disclosure of which would offend the order made in (1) above”

106.  However, on a closer reading of the pleaded prayers as a whole, I accept that they could include an order of such a nature. 

107.  In the circumstances, the existence of this form of the mandatory injunction in this jurisdiction is clearly a juridical advantage for the Plaintiffs.

108.  In relation to the relief of restraining the Defendants from continuing and repeating the wrongful acts using the Confidential Information, the evidence shows that the Shenzhen Court can order “cessation of infringement”, which includes the prohibition of disclosure of the Plaintiffs’ trade secrets.  However, it is pointed out by the Plaintiffs’ experts, which is not challenged by the 1^st and 2^nd Defendants, that the enforcement of such an order has to be achieved by the ordinary process of civil execution, and this can be a lengthy process.  

109.  As such, Mr Poon for the Plaintiff submits that, the existence of a more expedient way of enforcing a prohibitory injunction under Hong Kong law[3] again amounts to a juridical advantage for the Plaintiffs, if the action is to be tried in Hong Kong. 

110.  I do not accept Mr Poon’s submissions.  Albeit it may have to take longer for the Plaintiffs to enforce a prohibitory form of injunctive relief in Shenzhen or the Mainland, the fact is that they can obtain such a relief.  There is no evidence before me to show what is the likely length of time to enforce such an order by way of civil execution.  As such, the mere fact that such an execution process can be lengthier than that in Hong Kong does not satisfy me that this Hong Kong procedure therefore constitutes a juridical advantage for the Plaintiffs under the purview of forum non conveniens.   I repeat Lord Goff’s observations in Spiliada quoted at paragraph 88 above.

Conclusion under Stage II

111.  Under stage II, I therefore conclude that the Plaintiffs would potentially be deprived of the following juridical advantages, if the case is to be stayed for the Shenzhen Court:

(1)  A more comprehensive and extensive compulsory discovery procedure and the right to administer interrogatories.

(2)  A likely higher level of recoverable damages.

(3)  The remedy and relief of (a) constructive trusteeship, (b) tracing, (c) exemplary damages, and (c) mandatory injunction requiring the Defendants to disclose infringing use.

(4)  Indemnity costs to be awarded.

Stage III

112.  The Plaintiffs’ claim is premised primarily on the breach of confidence, and the wrongful use of the Confidential Information by the Defendants to their benefit, and to the detriment of the Plaintiffs.  In such a claim, as rightly submitted by Mr Poon, substantial portions the evidence which is relevant to the alleged wrongful infringing conducts on the parts of the Defendants, and the extent of the use of the Confidential Information, is likely to be only within the Defendants’ own knowledge and possession. 

113.  In the circumstances, I accept that the deprivation of the compulsory and comprehensive discovery and the procedure for the administration of interrogatories would constitute a prejudice to the Plaintiffs in obtaining relevant evidence to advance their claim.  I therefore further accept that the lack of these procedures under the PRC legal system would result in real risk that the Plaintiffs may not be able to obtain substantial justice if the matter is to be tried in the Shenzhen Court instead of here.

114.  Similarly, given the nature of the Plaintiffs’ claim, and given that the volume of the subject business turnovers for both parties are substantial, it is essential to the Plaintiffs to be granted remedies that would (a) adequately compensate their loss (if found) by way of damages (including exemplary damages) or an account of profit, and (b) effectively prevent the Defendants from continuing the breaches or wrongful use of the Confidential Information.  In the premises, I also accept that the absence of the relief and remedy in constructive trusteeship, tracing, mandatory injunction and a higher level of damages, collectively looked at, would result in the risk that Plaintiffs would not be able to obtain substantial justice if the case is to be tried in the Shenzhen Court.

115.  The 1^st and 2^nd Defendants however submit that, as observed by Lord Goff in Spiliada (as quoted in paragraph 88 above), the different level of damages within the two different jurisdictions should seldom lead to the conclusion that substantial justice would not be obtained in the foreign forum.  It therefore should not be a ground to refuse a stay. 

116.  I do not accept this submission:

(1)  As I concluded at paragraphs 90 and 91 above, Lord Goff’s speech should not be read as laying down a general proposition that the absence of a higher level of damages in the foreign forum would never amount to a good ground to refuse stay for forum non conveniens.  This should be decided on a case by case basis. 

(2)  As a matter of fact, in The Adhiguna Meranti, the Court of Appeal refused to stay the proceedings for the Indonesian courts, as it was of the view that in the circumstances of that case, it would be unjust to deprive the plaintiff a higher level of recoverable damages that they could obtain in Hong Kong.

(3)  For the reasons already set out above and with reference to the nature and the circumstances of the present claim, I am satisfied that the potential deprivation of a higher level of recoverable damages in Hong Kong constitutes one of the factors in the balancing exercise to suggest that substantial justice may not be obtained by the Plaintiffs if the matter is to be tried in the other forum.

117.  The 1^st and 2^nd Defendants also submit that, in performing the balancing exercise to decide whether the Court should refuse to stay for forum non conveniens, the Court should take into account of (a) the various civil proceedings that had been commenced by the Plaintiffs in Shenzhen, and (b) the criminal proceedings prompted by the Plaintiffs against the 1^st Defendant in Shenzhen.   This is because (as submitted by Mr Pe) in issuing and triggering these proceedings in Shenzhen, the Plaintiffs must have regarded that they would be able to obtain substantial justice in that jurisdiction.

118.  However, even taking these various Shenzhen proceedings into account, I do not think it would in any material way affect my above conclusions that it would be unjust to deprive the Plaintiffs’ those Hong Kong juridical advantages if the proceedings are stayed for the Shenzhen Court.  My reasons are as follows:

(1)  As fairly accepted by Mr Pe, he is not suggesting that, by reasons of these various proceedings commenced in Shenzhen, it can be said that the Plaintiffs are forum shopping.  As such, the 1^st and 2^nd Defendants fail to discharge what was described in The Adhiguna Meranti as the ultimate burden of proof that the Plaintiffs’ choice of this forum is so inappropriate as to deserve the pejorative description of “forum shopping” and to be retrained accordingly.

(2)  As set out in paragraph 31(3) above, it is established that the mere fact that there are concurrent proceedings in the alternative forum alone is generally not a relevant factor to be considered for an application to stay on the ground of forum non conveniens.  In my view, this is particularly so in the present case since, as of now, there are no similar civil proceedings pending in the Mainland or Shenzhen.

(3)  Insofar as the criminal proceedings are concerned, I do not think they are relevant to the present consideration as well, since the Plaintiffs are fully entitled to make their complaints to the relevant authorities in Shenzhen if it is suspected that certain criminal offences under the PRC criminal codes have been committed.  This can hardly be a reason to support the restraint of the Plaintiffs from proceeding with their civil claim in Hong Kong, which was issued as of right.

119.  In the premises, under stage III, I conclude that the 1^st and 2^nd Defendants have failed to show that, notwithstanding the deprivation of the above juridical advantages, substantial justice would still be done for the interests of the parties if the case is to be tried in the Shenzhen Court.

V.      Conclusion

120.  For the reasons set out above, the 1^st and 2^nd Defendants have failed to show that the Shenzhen Court is clearly or distinctly the more appropriate forum than the Hong Kong Court to try the present case more suitably for the interests of the parties and for the ends of justice.

121.  I therefore dismiss the 1^st and 2^nd Defendants summons for a stay or dismissal of the present proceedings on the ground of forum non conveniens.

122.  I further make an order nisi that costs of this application be to the Plaintiffs, to be taxed if not agreed, with certificate for two counsel.  Unless any of the parties applies in writing to vary the same, this order will be made absolute 14 days after this judgment.

[1] Rambas, supra, at 261 to 262A

[2] Although the Court of Appeal’s decision went eventually to the House of Lords, Mr Poon submits that the House of Lords’ decision does not touch upon this aspect of the Court of Appeal’s decision.

[3] By way of a committal for contempt and the issue of a writ of sequestration,

HCA 2114/2007

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NO. 2114 OF 2007

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J U D G M E N T

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1.  This is an application in which the plaintiff seeks an order preserving evidence.  The plaintiff and the defendants are in litigation both in the PRC and in Hong Kong.  The plaintiff has made a decision that it is going to discontinue the proceedings in the court in Shenzhen, in the PRC.  It is an inevitable consequence of that discontinuance that crucial evidence, presently held by that court, will be within the released by that court. 

2.  The order sought by the plaintiffs is to decide to preserve that evidence for use in the Hong Kong proceedings.  At the same time, the defendants have filed an application to stay the Hong Kong proceedings and they say that would come on before Deputy High Court Judge Gill in about the middle of this year.  The point Mr Mok makes is that if the stay application is successful and the plaintiff has already discontinued its proceedings in the PRC, a great deal of cost in expense would have been wasted.

3.  Mr Mok makes a point that in the PRC, a defendant in his client’s situation cannot recover costs on the discontinuance in the way they can in Hong Kong.  Mr Mok frankly concedes that there will be no prejudice to his clients as a result of an order preserving the evidence.  He says that the prejudice that will arise will be the prejudice suffered as a result of the increased, costs involved should the plaintiff have discontinued in the PRC, the defendants be successful in the stay action in Hong Kong and the PRC proceedings have to be started again.

4.  In my view, this application to preserve evidence must stand on its own, to be judged in the light of the clear decision by the plaintiff to discontinue in the PRC.  That is a decision it is entitled to make and although that may be seen by Mr Mok to be to his clients disadvantage, that is a consequence that the defendants will have to live with.  The tactical circumstances Mr Mok relies on are in my view insufficient to militate against the making of the order.

5.  I am satisfied I have jurisdiction to make the order in the light of the location and Hong Kong base of the defendant companies.  I am satisfied the evidence held by the Shenzhen Court is material evidence. 

6.  I am satisfied that there is a real risk of the destruction of the evidence.  In that respect I rely that on the matter which sets out in paragraph 25 of Mr Poon’s submission. 

7.  It weighs against Mr Mok’s position that his client is unwilling to give an undertaking to preserve the evidence.  That is particularly so in the light of emails which demonstrated at least someone in the defendants’ organisation has it in mind to destroy evidence.  It is also relevant that it appears to be the situation that after the hard disks were copied by the PRC police, documents and information were deleted from a computer in the possession of one of the defendants’ employees.

8.  For these reasons, I am satisfied this is a proper case in which an order sought in terms should be made.  There will be an order accordingly.  I note that the plaintiff offers, and he will be required to give, the undertaking in damages.

9.  If the formulation of the order creates a problem in relation to procedure in the PRC, and if an agreement cannot be reached, come back to the Court.  Leave was reserved to apply accordingly.  Costs of and incidental to the application are in the cause.  There will be a certificate for two counsel.