Chu Kong v. Wat Fung Ying and Another

HCA 2239/2019

[2020] HKCFI 239

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NO 2239 OF 2019

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Before: Hon Marlene Ng J in Chambers (Open to the Public)

Date of Hearing: 6 December 2019

Date of Decision: 6 December 2019

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D E C I S I O N

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1.This is an action recently commenced by the plaintiff against the defendants for an injunction to restrain use or continued use of “any of the information” of the companies listed in the schedule thereto, to make copies of such information and to incite or procure or instigate others to do such acts. There are also claims for delivery up of the information referred to above, and for damages to be assessed.

2.Whilst the Indorsement of Claim sets out the reliefs sought, it gives no inkling as to the cause of action since it refers to “any of the information” of the companies.  It transpires from the affidavit evidence and the submissions of Mr Hon, counsel for the plaintiff, that the cause of action is based on breach of confidence and that the information to be restrained from use and to be delivered up is not any information but limited to confidential information.

3.On the same day (ie, on 3 December 2019), the Writ of Summons was issued, the plaintiff took out a Summons for interlocutory injunction supported by an affirmation by the plaintiff.  The draft order annexed to the Summons prays for an interlocutory injunction to cover “any of the information” of the companies listed in the schedule to the Writ of Summons and for delivery up of such information, and in the meantime, it also prays for directions for filing and serving affirmation evidence, and also seeks an interim injunction in the same wide terms as the interlocutory injunction until the substantive hearing of the Summons.

4.At the hearing today, upon query by the court, Mr Hon has trimmed down the width of the interlocutory injunction sought to a few categories of alleged confidential information referred to in paragraph 12 of the plaintiff’s affirmation, with proviso that the 1^st and 2^nd defendants be permitted to certain use of such information.  Mr Hon confirms that the plaintiff will not seek delivery up of the information today.

5.I start with the nature of the application before me.  The papers were served on the 1^st and 2^nd defendants only three days before today, and the draft order annexed to the Summons anticipates that the 1^st and 2^nd defendants will file affirmations in opposition within 28 days, with opportunity for substantive arguments.  So the plaintiff must have expected that the 1^st and 2^nd defendants will need that reasonable time to put in evidence in opposition.

6.Nevertheless, the plaintiff asks for an interim injunction until the substantive hearing of the Summons.  In such context, Mr Hon concedes that irrespective whether the application for interim injunction is regarded as ex parte or inter partes, the plaintiff has the duty to give full and frank disclosure, including highlighting potential counter-arguments and defences.

7.I pause here to say that the 1^st and 2^nd defendants have reacted to the plaintiff’s Summons by instructing counsel to appear at the hearing today.  Although the 1^st and 2^nd defendants have not been able to file affirmation evidence as yet, the primary stance of Mr Kok, counsel for the 2^nd defendant, and Mr Wong, solicitor for the 1^st defendant, is that the plaintiff’s Summons for interlocutory injunction must be dismissed, and hence there is no need to consider any interim injunction holding over to the substantive hearing of the Summons.  It is their alternative stance that if the court is not minded to dismiss the plaintiff’s Summons, then directions should be given to prepare for substantive arguments, but still they will resist any grant of interim injunction in the meantime.  Mr Wong adopts Mr Kok’s submissions at the hearing today.

8.Turning to the plaintiff’s cause of action in the present action for breach of confidence, the subject information has to have the necessary quality of confidence about it, and has to be imparted in circumstances importing an obligation of confidence, and unless restrained, there is likely to be unauthorised use of the information to the detriment of the plaintiff.

9.Mr Hon now accepts that for the present purposes, the alleged confidential information is as set out in paragraph 12 of the affirmation of the plaintiff in respect of the companies listed in the schedule.

10.Mr Kok refers to learned text books and authorities to remind the court that, in seeking an injunction for breach of confidence, the information must be clearly identified and particularised, and broad descriptions are inappropriate.  Mr Hon, on the other hand, refers to observations in other authorities to say that in appropriate cases, information and documents need not be individually identified where it will be unnecessary, disproportionate and oppressive.

11.The plaintiff claims he imparted information of the identified companies that he formed to the 1^st defendant, who was employed by the 2^nd defendant, when he asked her to deal with company secretarial and accounting work for him.  All the plaintiff said is that he cannot remember clearly what information was imparted, but he has compiled a list of companies, and the categories of information set out in paragraph 12 of his affirmation are confidential information.

12.Mr Hon submits these named classes of information are sufficiently clear, and they have the quality of confidence because they are information concerning offshore companies with no public registers.  I have raised query whether the classes of information in paragraph 12 of the plaintiff’s affirmation which relate to corporate information of the named companies are owned by such companies rather than by the plaintiff.  After all, the mere fact that the plaintiff is the one who formed these companies does not make the information of the companies (for example, financial information of the companies and their investors) any less that of the companies themselves.  Indeed, for the majority of the companies not mentioned in the body of the plaintiff’s supporting affirmation, it is not even known whether the plaintiff is a director or shareholder of those companies.  However, Mr Hon submits that it is sufficient for a claimant to impart confidential information to the defendant in circumstances which import a duty of confidence, and it is the breach of that duty that grounds the cause of action, rather than actual ownership of the information.

13.Based on the above, in the absence of affirmation evidence in opposition, I accept there is a serious question to be tried that the information identified by the plaintiff is confidential, and there is a duty of confidence when the plaintiff imparted such information to the 1^st defendant (and presumably from the 1^st defendant to the 2^nd defendant because of their “close proximity”).

14.But to sustain a cause of action for breach of confidence, that is not enough and there must be breach of confidence itself.  Mr Hon, in his reply submissions, put the plaintiff’s claim on the basis the 1^st defendant has imparted confidential information to the 2^nd defendant and the 2^nd defendant has retained that information, which will be enough basis for establishing breach of confidence.

15.But even if there is arguable basis for such contention, to sustain an interim injunction or an interlocutory injunction, there must be threat of misuse by disclosure to others (particularly in this case when it is not disputed that the 1^st defendant was 2^nd defendant’s employee, and when the plaintiff knows that the 2^nd defendant contends he is the co‑owner of Pacific Logistics CN-Net Limited (“CN-Net”), which is now the subject of litigation in HCA2065/2019 between the plaintiff herein and the 2^nd defendant herein).  But if it were a mere matter of disclosure to the 2^nd defendant who has retained the information, then it will be a matter of litigation between the parties with no justification for interim or interlocutory injunction.

16.But here, we are not merely looking at HCA2065/2019.  The majority of the named companies are not even mentioned in the plaintiff’s supporting affirmation, other than the plaintiff recalls such companies and has compiled a list of such companies.  It is unclear how confidential information of the plaintiff, in respect of such companies, have been misused, and whether and how there is threatened misuse of alleged confidential information of such companies.  They are not referred to in the 2^nd defendant’s email of 12 June 2014, nor in the Statement of Claim in HCA2065/2019.

17.As for CK Assets Limited, Appendix II of the order of DHCJ Saunders dated 17 July 2018 refers to discovery of documents ordered against the plaintiff in his action in HCA227/2017 in relation to a claim by the 2^nd defendant (in this action) for alleged misappropriation of funds by the plaintiff (in this action).  Here, the plaintiff’s supporting affirmation and Mr Hon’s written submissions do not particularise publication or threatened publication of any confidential information of CK Assets Limited.  This raises two questions at this stage in relation to the alleged confidential information relating to CK Assets Limited: (a) where is the misuse or threatened misuse that will sustain the claim for breach of confidence? (b) how could any publication or threatened publication defeat the order by DHCJ Saunders?  These considerations apply to the named companies other than CN-Net as well.

18.Turning to CN-Net, it is evident from inter‑solicitors’ correspondence in HCA2065/2019 that since 2014, if not earlier, the 2^nd defendant has asserted that this company has been co‑owned by the plaintiff and the 2^nd defendant.  It may well be that the plaintiff’s case is that such company has nothing to do with the 2^nd defendant, but the plaintiff should have highlighted the 2^nd defendant’s case of co‑ownership of the company being an answer or a potential answer to any alleged breach of confidence in relation to this company.  This has not been done in the body of the plaintiff’s affirmation or in Mr Hon’s written submissions.  It is no answer for Mr Hon to say that the potential defence is somehow tucked away in the exhibits to the plaintiff’s affirmation, the exhibits are not too bulky, and he will orally supplement his written submissions at the hearing.

19.It is also not easy to see how the 2^nd defendant’s email to the plaintiff on 12 June 2014 will assist.  Mr Hon informs the court that although the plaintiff includes such email as part of his cause of action for breach of confidence, the plaintiff will not rely on such email as an act of breach of confidence, but only as part of the contextual background for the purpose of the present application for interlocutory or interim injunction.  It is not hard to understand Mr Hon’s stance because even if such email amounts to a threat of misuse of confidential information, a subject to which I will return later, the plaintiff’s affirmation is silent on what has happened after June 2014, either as to any implementation of such threat, if at all, or explanation as to why no action has been taken by the plaintiff since 2014, ie, for more than 5 years.  It must be noted that it has been claimed, on behalf of the plaintiff, in the inter-solicitors’ correspondence, that the plaintiff believes there has been actual misuse, but there is no affirmation evidence as to what has happened between 2014 and 2019.  The only inference must be that the threat, if any, has been spent, and is not regarded as sufficient to justify action by the plaintiff, whether by application for injunction or otherwise.

20.But more importantly, I turn to the contents of the email.  It is common ground that the plaintiff and the 2^nd defendant have an ongoing dispute since 2014, if not earlier, as to the ownership of CN-Net.  The plaintiff claims he is the sole beneficial owner of the company, but the 2^nd defendant claims he is a 50 per cent beneficial owner, with entitlements and rights in such company.  In such context, the email by the 2^nd defendant demands the plaintiff to explain why he asserts CN-Net’s investments in the Portnet project is his sole investment, and complains that the plaintiff has not given explanation up to the date of the email.  The 2^nd defendant goes on to say that if the plaintiff does not give explanation within 7 days, the 2^nd defendant will, inter alia, instruct solicitors to make open inquiries with Dailan and Singapore port authorities and with the Singaporean shareholders about the background and related documents as to the negotiations and agreement at the material time.

21.As Mr Kok points out, the gist of the so‑called “threat” in the email by the 2^nd defendant is to make enquiries with the port authorities and other shareholders, and there is no express threat in the email that any confidential information will be disclosed.  Mr Hon does not point to any, and has no answer to this in his reply submissions.  There is no serious question to be tried for actionable breach of confidence in relation to such email, and as said, the plaintiff only relies on such email as context for the present purpose.

22.As pointed out, the plaintiff’s affirmation is silent on what has transpired from the time of the email until the Writ of Summons and the Statement of Claim in HCA 2065/2019.  Mr Hon accepts that the 2^nd defendant’s instigation of this new action against the plaintiff is not an act of breach of confidence, despite allegations in the plaintiff’s affirmation that the Statement of Claim amounts to publication of confidential information in relation to CN-Net.  It must also be accepted that, by virtue of the revised form of the draft order, the 2^nd defendant must be free to prosecute his claim in the new action to the effect that he had 50 per cent ownership in CN-Net, and to plead his claim and seek the reliefs that he thinks fit.  Indeed, if it is said that the 2^nd defendant’s such claim is wrongly made and without merit as it amounts to misuse of confidential information, then it is something to be raised as a defence, or as an application to strike out and/or to dismiss the claim in that action, and not by satellite litigation by way of separate proceedings.  A litigant cannot, by way of separate proceedings, take steps to stifle averments and evidence in another action - the way to do so is to face such matter upfront in the subject litigation and make appropriate application.  It is open to the plaintiff herein to ask for the Writ of Summons and the Statement of Claim in HCA2065/2019 not to be searched by others without the plaintiff herein being notified and without leave of the court if there is concern about publication to third parties (but of course, it will be a matter for the court seized of the matter to consider whether such relief is appropriate), but so far there is no evidence and no suggestion before me that such application has been made in that action.

23.So this leaves Mr Hon’s point that because the 2^nd defendant has unnecessarily pleaded reference to the port authorities and the Singaporean shareholders in the Statement of Claim in HCA2065/2019 and these parties are not named as defendants in that action, the 2^nd defendant’s conduct in pleading the Statement of Claim in that action in such manner and in the context of the email of June 2014 amounts to a recent implicit threat of publication of confidential information of CN-Net to third parties.

24.First, I cannot see how it can be said that the reference to the port authorities and the Singaporean shareholders in the Statement of Claim in HCA2065/2019 to be unnecessary.  The fact that they are not named as defendants do not debar them from being featured as part of material facts to be pleaded.  It is not for the plaintiff (in this action) to dictate how the 2^nd defendant (in this action) should frame his case in HCA2065/2019.  The concession in the draft order that the 2^nd defendant can deploy the so‑called confidential information for use in HCA2065/2019 speaks for itself.

25.Further, having read the Statement of Claim in HCA2065/2019, I am unable to see how it can be said that the reference to the Singaporean shareholders and the port authorities is “unnecessary”. In fact, the genesis of CN-Net is the investment opportunity that involves the port authorities, and it is part of the 2^nd defendant’s explanation of why he is a 50 per cent beneficial owner, even though he is not a legal shareholder.  Those other parties also have to be named because there has been eventual change in shareholding and also sale of the CN-Net’s interest in Dailan Portnet Co Ltd, which gives rise to the prayer of relief for accounts and inquiries, and also other reliefs.  In my view, they appear to be material facts to the 2^nd defendant’s claim in HCA2065/2019.

26.Secondly, I have explained why the email of June 2014, as properly read, is not a threat of publication of confidential information of CN-Net, and in any event, it must be regarded as being spent for the purpose of any application for interlocutory injunction after more than 5 years when the earlier inter‑solicitors’ correspondence has alluded to the plaintiff’s belief that there has been actual misuse.

27.Whether or not the 2^nd defendant has made the inquiries that he has said he would carry out in the email, apparently the 2^nd defendant by now is ready to commence action against the plaintiff to assert his rights in relation to CN-Net.  I cannot see how the pleadings in this new action in HCA2065/2019 amount to a renewed threat.  Indeed, given that it is accepted that the 2^nd defendant is entitled to plead his case as he thinks fit, I find it strange that a lawful act can amount to a threatened breach of confidence.

28.Thirdly, when pressed on whether there is anything more beyond the Statement of Claim in HCA2065/2019 that speaks of imminent risk of publication of confidential information to third parties, all Mr Hon is able to refer me to is paragraph 35 of the plaintiff’s affirmation. But that paragraph is more concerned with the impact on the plaintiff upon actual publication and misuse of information about CN-Net, rather than with the anterior question of whether there has been any imminent threat of misuse.  That paragraph also focuses on the 2^nd defendant’s alleged publication of information about CN-Net concerning the Singaporean shareholders, but the only such publication alluded to in the plaintiff’s affirmation is the Statement of Claim in this HCA2065/2019, which is now conceded not to be an act of breach of confidence for the present purpose.

29.That being the case, I am not persuaded that the plaintiff has shown any threat of misuse of confidential information in relation to CN-Net that ought to be restrained, whether at the interim or interlocutory stage.  If there is any issue about use of information inter se between the plaintiff and the 2^nd defendant, it must be dealt with in HCA2065/2019 and not in these satellite proceedings.  As regards concern with disclosure to third parties, there is quite simply no evidence that after 5 years there has been any fresh threat of disclosure by the 1^st defendant, and I have already dealt with the position vis-à-vis the 2^nd defendant.

30.As for the timing of the present application, even assuming that the June 2014 email amounts to threat of misuse of confidential information, which I have found it not to be, it is far too late to ask for interlocutory or interim injunction given the lapse of time.  CN-Net was formed in 2014.  It is said that the other companies were formed since 2003, although there is no information when the other named companies were actually formed.  It is also said that since then, the 1^st defendant has helped the plaintiff with secretarial work for these companies and has had access to so‑called confidential information, and that there is proximity between the 1^st defendant and the 2^nd defendant.  But even assuming the June 2014 email amounts to threat of misuse of confidential information, the 1^st and 2^nd defendants have explained in inter‑solicitors’ correspondence as early as in June to August 2014 that the 2^nd defendant asserts rights and interests in the company.  There is no suggestion of any action taken by the plaintiff in respect of the such threatened misuse, even though the inter-solicitors’ correspondence claims the plaintiff believes there has been actual misuse.  No explanation has been given for inaction until now.  More importantly, there is no evidence of any new confidential information after 2014 that has been imparted to the 1^st defendant and/or the 2^nd defendant that gives rise to concern.

31.In light of all the above, the balance of convenience must be against the granting of interlocutory or interim injunction.  I need not deal with the matter of full and frank disclosure, but I have touched on the nature Appendix II of the order of DHCJ Saunders in relation to CK Assets Limited, which has not been properly featured or addressed in either affirmation or submissions of the plaintiff, and also touched on the absence of information as to what has happened between 2014 and the commencement of new action in HCA2065/2019.

32.Given all the above considerations, I dismiss the plaintiff’s Summons.

(Submissions by counsel on the issue of costs)

33.The 1^st and 2^nd defendants ask for costs on indemnity basis.  Mr Hon does not resist costs, accepting that costs should follow the event, but says costs should be awarded on party and party basis.

34.Mr Kok says the plaintiff’s claim should not have been brought in the first place because the present litigation is a satellite litigation and is doomed to fail.  But here I have found that there is a serious question to be tried, as to whether the categories of information as trimmed down by Mr Hon are confidential and whether there is a duty of confidence when such information was imparted.  The plaintiff also says there is arguable basis to sustain the cause of action in that he has imparted the information to the 1^st defendant in circumstances in which there is a duty of confidence, the 1^st defendant has imparted such information to the 2^nd defendant.  On that basis it is said the cause of action is not doomed to fail.

35.Rather, in this case, the plaintiff’s application for interlocutory or interim injunction has its own inherent difficulties which cannot be overcome by the plaintiff’s affirmation evidence and/or Mr Hon’s submissions.  My decision has focused on that, and the plaintiff’s Summons has fallen down on that basis.  In the circumstances, I consider that it is only appropriate to apply the usual cost standard, which is party and party basis.

(Discussion re summary assessment of costs)

36.So the 1^st and 2^nd defendants are to lodge and serve statement of costs within 3 days, each not exceeding one page.  The plaintiff is to lodge and serve statements of objections to the 1^st and 2^nd defendants’ respective statement of costs, each not exceeding one page.  Summary assessment of costs will be by paper disposal.

Mr Kevin Hon, instructed by Sit, Fung, Kwong & Shum, for the plaintiff

Mr Jonathan Wong, of Zhong Lun Law Firm, for the 1^st defendant

Mr Martin Kok, instructed by DLA Piper Hong Kong, for the 2^nd defendant