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.

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

Mr Benjamin Yu SC and Ms Sara Tong (5 January 2017 only), instructed by Herbert Smith Freehills, for the Defendants by Original Action and the Plaintiffs by Counterclaim