Biel Crystal (HK) Manufactory Ltd v. U Borne Environmental Ltd and Another

HCA 1066/2020

[2021] HKCFI 2097

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NO 1066 OF 2020

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BETWEEN

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Before: Hon Au-Yeung J in Chambers

Date of Hearing: 3 June 2021

Date of Judgment: 16 July 2021

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J U D G M E N T

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Introduction

1.This is the Plaintiff’s application for summary judgment against D1 for breach of contract, conversion and trespass.

2.There is also a belated summons by D1 filed on 4 May 2021 seeking leave to adduce a further affirmation of Chen Wu Bin (“Chen-2^nd”) in opposition to the summary judgment.

3.The Plaintiff is a smartphone screen manufacturer.  It delivered defective cover glasses which contained confidential information (“Glasses”) to D1 for confidential destruction.  In breach of the Confidential Destruction Agreement (“the Agreement”), D1 sold/transferred at least 5 containers of Glasses (“5 Containers”) to third parties (including D2) instead of destroying and landfilling them.

4.It is the Plaintiff’s case that D1 had admitted to the PRC police about the wrongful sale of Glasses.  A third party purchaser had in fact returned one of the 5 Containers to the Plaintiff.

5.The Plaintiff had already obtained default judgment against D2, possessor of 3 Containers.  The Plaintiff now seeks specific performance of the Agreement by D1, an injunction to restrain D1 from using the Glasses, damages for breach of contract, trespass and conversion, and inquiry and account of profits.

6.D1 seeks unconditional leave to defend on the grounds that:

(1) There is significant factual dispute as to whether the Glasses delivered to D1 had been destroyed;

(2) There is significant factual dispute as to whether the 5 Containers were part of those delivered to D1 for destruction and were sold, stolen or transferred by D1 to third parties;

(3) There is significant dispute of law as to whether the Plaintiff has any proprietary right over the physical Glasses, after transfer to D1, to maintain a claim in trespass/conversion;

(4) The Plaintiff seeks equitable relief which is fact sensitive and should not be dealt with summarily; and

(5) The Plaintiff seeks accounts and/or enquiry for damages which should not be dealt summarily.

Background facts

7.The Plaintiff is one of the largest manufacturers of cover glasses for smartphones, notebooks, and other electronic devices worldwide.

8.The Agreement was signed by the Plaintiff and D1 on 23 November 2018.  D1 agreed to provide, and the Plaintiff agreed to pay for, amongst others, confidential destruction services in respect of the Plaintiff’s Glasses at the price of RMB600 per ton for 2 years from 12 November 2018 to 11 November 2020. 

9.The Agreement contained, amongst others, the following terms (the English translation of which is adopted from the submission of Mr Michael Ng, counsel for the Plaintiff):

(1) Disposal location: comminute in Malaysia U-Borne Environmental Limited; after that, dispose of the same in the designated landfill in Malaysia) (preamble).

(2) D1 must ensure that all confidential waste must be thoroughly comminuted, physically destroyed (crushed), and landfilled, the crushed glass should not display any identifiable logo, trademark or confidential information of the Plaintiff’s client) (preamble).

(3) Clause 3 provides that if D1 improperly handles the confidential waste and causes the Plaintiff or its associated companies to incur losses or to face legal claims, D1 agrees to compensate and indemnify the Plaintiff for all losses.

(4) Clause 6 provides that D1 promises to abide by the Plaintiff’s confidential waste disposal requirements and not to disclose any commercial information of the confidential waste to any third party; D1 shall take comprehensive confidentiality measures when crushing and disposing of the confidential waste, and shall not disclose any information and characteristics of the confidential waste to any third party.

(5) Clause 10 provides, amongst others, that once D1 accepts delivery of the confidential waste in Hong Kong, the Plaintiff shall no longer have any responsibility or obligation over the disposal of the confidential waste[1].

10.According to the Plaintiff, D1 was the only agent engaged by the Plaintiff to destroy its Glasses between 12 November 2018 to the end of 2019.

11.Between 27 November 2018 to 31 December 2018, the Plaintiff delivered 400 pallets/27 containers of Glasses to D1 (“1^st Batch of Glasses”) for confidential destruction, and D1 acknowledged receipt of the same.  By bills of lading dated 19 December 2018 and 16 January 2019, the carrier acknowledged receipt of the 1^st Batch of Glasses for shipment to D1’s agent in Malaysia.  On 17 June 2019, the Plaintiff paid a sum of RMB280,058 to D1 for the destruction of this Batch. 

12.Between 24 September 2019 and 24 December 2019, the Plaintiff delivered 327 pallets/23 containers of Glasses owned by the Plaintiff to D1 (the “2^nd Batch of Glasses”) for confidential destruction, and D1 acknowledged receipt of the same.  By bills of lading dated 11 October 2019, 30 November 2019, and 30 December 2019, the carrier acknowledged receipt of the 2^nd Batch of Glasses for shipment to D1’s agent in Malaysia.

13.On 11 January 2020, D1’s agent in Malaysia confirmed that the 2^nd Batch of Glasses was destroyed.  On about 17 January 2020, the Plaintiff paid a sum of RMB237,305 to D1 for destruction of this Batch. 

14.D1, on the other hand, claims that the 2 Batches comprised of 23 and 20 containers respectively because it had repacked the Plaintiff’s containers to save space.  

15.In breach of the Agreement, D1 (i) failed to destroy at least 5 Containers of the 1^st and 2^nd Batches of Glasses (“Subject Glasses”) in accordance with the Agreement; and (ii) sold and/or transferred the Subject Glasses to third party/parties without the Plaintiff’s prior knowledge and/or consent. 

16.In particular, after the investigation by the PRC Customs and Police, the Plaintiff was informed in June 2020 that:

(1) the 5 Containers were imported to the PRC from Hong Kong.  Out of those 5 Containers, (i) at least 3 were in the possession of D2; (ii) one in the custody of the PRC Police in Huizhou has been destroyed; and (iii) 1 has been returned by a third party 叶陈耀 (“Yih”) to the Plaintiff in Hong Kong on 4 December 2020.

(2) D1’s shareholder and director, Chen Wu Bin (“Chen”), admitted to the PRC police that he sold the 5 Containers to Yih; and Yih also confirmed that he purchased the Subject Glasses from D1/Chen. 

17.Examination by a surveyor engaged by the Plaintiff to examine the 5 Containers showed that the contents were defective Glasses produced by the Plaintiff. 

18.On 24 June 2020, the Plaintiff obtained an ex parte injunction restraining D2 from, amongst others, disposing of the 3 Containers in its possession.  The injunction against D2 was continued “until trial or further order” at the return date on 26.6.2020 in the presence of D2’s Counsel.  

19.On 29 January 2021, the Plaintiff obtained default judgment against D2 after it had failed to comply with an unless order to file its defence on 17 December 2020.  However, D2 has been uncontactable and the Plaintiff has not been able to ascertain the whereabouts of the 3 Containers in D2’s possession.  

20.D1’s defence is that despite the Agreement it was agreed that the term of landfilling the waste materials and doing it in Malaysia need not be performed.

21.On 9 February 2021, the Plaintiff issued this Order 14 summons for:

(1) An order that D1 do destroy and/or procure the destruction of both Batches of Glasses in accordance with the terms of the Agreement;

(2) An injunction restraining D1 from using the 2 Batches of Glasses and the confidential information for any purpose other than that for which they were supplied;

(3) An account of profits, alternatively an inquiry as to damages; and

(4) An order for payment to the Plaintiff such sums as found due upon inquiry or account.

D1’s application to adduce a further affirmation

22.The purpose of Chen-2^nd is (i) to justify the source of information for the hearsay evidence in Chen-1^st; (ii) to explain the incident about burial of Glasses in Hong Kong on a prior occasion; and (iii) to explain the record produced by the Plaintiff’s PRC lawyer, concerning D1’s alleged admission of sale of the Subject Glasses in contravention of the Agreement; and (iv) to answer some allegations raised in the reply affirmations of the Plaintiff filed on 30 March and 30 April 2021.

23.Purpose (i) does not provide a good reason because the source of hearsay evidence should have been provided in Chen-1^st.  Purpose (ii) is irrelevant to the issues in the present case.  Purpose (iii) is valid.  D1’s summons was filed about 8 days after the last reply affirmation of the Plaintiff.  Despite the lack of explanation as to why D1 had not responded to the record of the Plaintiff’s PRC lawyer earlier, in the interests of justice, I allow D1 to adduce Chen-2^nd.

Legal principles concerning summary judgment

24.It is for the defendant to show that there are triable issues and the defendant must condescend to particulars.  The mere assertion in an affidavit of a given situation by the defendant does not, ipso facto, ground leave to defend.  The defendant must satisfy the court that his evidence is capable of belief and that on the basis of such evidence, there is a fair or reasonable probability of the defendant having a real or bona fide defence.  See Hong Kong Civil Procedure 2021, Vol 1, §14/4/9.

25.The Court should not embark on a mini-trial on affidavits.  The test at the summary stage is whether the defendant’s assertions are believable: Re Safe Rich Industries Ltd, CACV 81/1994, Bokhary JA (as he then was).

26.However, that does not mean that the Court is obliged to suspend its critical faculties and assume that the defendant’s evidence is accurate.  If having regard to inherent plausibility, inconsistency with contemporaneous documents, and other compelling evidence, the defence is not credible, the court must say so. If the defendant’s defence is incredible in any material respect, it cannot be said that there is a fair or reasonable probability that the defendant has a real or bona fide defence.  See Menfond Electronic v Wong Wang Tat Victor [2013] 2 HKC 259 at [61] per DHCJ Lisa Wong SC (as Lisa Wong J then was)[2].

27.Doubts or suspicion as to the validity of the plaintiff’s case detract from the plaintiff’s right to summary judgment: Unionward investment Ltd v Yeung Foon Tai, HCA 136/2016, 20 April 2017, §§8 & 29, DHCJ Paul Lam SC.  Where there are unexplained features of both the claim and/or the defence which are disturbing, because they bear the appearance of falsity and disreputable business dealings and questionable conduct, the Court should not make tentative assessments of the respective chances of success of the parties but should give unconditional leave to defend: Hong Kong Civil Procedure 2021, Vol 1, §14/4/9B, p332.

28.Where there is a reasonable ground for an inquiry or account to ascertain the amount recoverable, the Court should also give leave to defend: Hong Kong Civil Procedure 2021, Vol 1, §14/4/13, p334.

The claim in breach of contract

29.Firstly, the Glasses were supposed to be shipped to Malaysia for destruction and put into a landfill site in accordance with the law.  Despite a receipt from third party agent of D1 in Malaysia (U-Borne Environmental (Malaysia) Sdn Bhd) that the Glasses had been “disposed of” prior to 11 January 2020, the irrefutable evidence was that 5 Containers were found in the PRC, undestroyed.  The Plaintiff’s own records and investigation through surveyors confirmed that the 5 Containers contained the Plaintiff’s Glasses. These matters are sufficient to show that the D1 is liable for breach of the Agreement.  

30.Secondly, at least one of the 5 Containers had been transferred to a third party, Yih.  Yih had told the PRC police that he purchased the Glasses from D1 at a consideration of RMB780,000 of which RMB200,000 had been paid to D1.  Whether or not the transfer was for money, the Defendant had breached the Agreement. 

31.D1 raised the following defences in respect of breach of contract.

32.Firstly, D1 claimed that the 1^st and 2^nd Batches of Glasses had been destroyed.  Videos of destruction had been sent to the Plaintiff before the Plaintiff paid D1.

33.The Plaintiff claimed that there was only one short video of 14 minutes but D1 claimed that there were more.  However, D1 claimed to have kept video records for only 3 months and so D1 could not produce other videos.  It is noteworthy that D1 could not even produce any record (eg WeChat messages, WhatsApp messages, email or otherwise) showing that the videos had been sent to the Plaintiff.

34.Even if the Plaintiff had received videos and was satisfied as to destruction before payment, paragraphs 29 and 30 above are sufficient to contradict D1’s assertion that the 1^st and 2^nd Batches had been destroyed. and to show that the payment was under a mistaken belief that the Glasses were destroyed. 

35.The first line of defence is not capable of belief.

36.Secondly, D1 claimed that after destruction, the Glasses were destroyed but the remains were passed to the Malaysian government for incineration in order to produce energy.  

37.If that was true, it was still in breach of the express term of the Agreement, although I agree with Mr Yiu (counsel for D1) that failure to bury in landfills, in itself, may only amount to breach of warranty and not fundamental breach.

38.Thirdly, D1 claimed that there was an oral agreement whereby the express requirement of landfilling in Malaysia would not be performed. 

39.Although there is dispute as to the existence of this oral agreement, one should not lose sight of the uncontradicted evidence that in the draft Agreement, the specified landfill had been amended from Hong Kong to Malaysia.  If landfilling need not be performed, the term could simply be deleted instead of amended.

40.Post-Agreement, there was an email dated 18 November 2019 from Chen to the Plaintiff complaining that the agreed price of HK$600 per ton was too low.  Transport from Hong Kong to Malaysia cost HK$350/ton.  Malaysia burial fees were HK$300/ton.  Hong Kong-Malaysia operation fees were HK$200/ton.  This email plainly showed that Chen knew that landfilling was part of the contractual obligation.

41.In my view, it could not be said that D1 had a fair or reasonable probability of establishing this defence.

42.Fourthly, D1 denied sale to third parties or theft of the Subject Glasses.  He pointed out, rightly, that the purported record taken of Chen and Yih by the Plaintiff’s lawyers in the PRC was not an official record.  It was not signed by Chen or Yih.  In fact, the PRC lawyer has not filed an affirmation to confirm the correctness of the record.  Further, the PRC police has not, till now, charged D1 with theft.  Therefore, little weight could be placed on that record itself. 

43.It is not necessary to resolve here whether Chen had made admissions to the PRC police under duress, without knowing the contents and whether, on his own admission to the PRC police, D1 had received RMB200,000 from Yih.

44.There is irrefutable evidence that Chen had at least transferred one container to Yih.  Chen also knew that the Subject Glasses had to be exported to Malaysia and nowhere else.  This was because, on one occasion, D1 had destroyed 3 containers of Glasses in Hong Kong.  Upon discovery, by Weixin on 28 December 2018, the Plaintiff insisted that destruction must be in Malaysia.  Chen confirmed on the same day that for safety’s sake, D1 would do export disposal.  Chen simply could not explain why 5 Containers ended up in the PRC if he had not disposed of them in breach of the Agreement.

45.However, there is or genuine factual dispute as to whether D1 had sold the Subject Glasses.  That would not undermine Chen’s liability for breach of contract, but would affect the quantum of profits that D1 had to account to the Plaintiff.

46.Fifthly, D1 queried whether the subject matter of the Surveyor’s Report was the same as the 1^st and 2^nd Batches of Glasses. D1 suggested that the Plaintiff had lost another batch of cover glasses of the same serial numbers or there was a leak from the previous waste disposal company but put the blame on D1.  Such doubt in the Plaintiff’s case should be resolved at trial.

47.There is no substance in this query. The Subject Glasses covered by the Surveyor's Report bore serial numbers identifiable with those in the Plaintiff’s records.

48.Further, there was nothing to contradict the Plaintiff’s case that D1 was the only contractor engaged by the Plaintiff at the material time to do waste disposal.  Insofar as the table annexed to the Surveyor's Report showed the manufacturing date of the Glasses to be 2019 (eg B136-137, 148-149), it was within the period of D1’s engagement. Insofar as the table showed the manufacturing date to be 2018 or before (and this formed the bulk of the table), those Glasses were discovered in the same containers as those manufactured in 2019.  It could hardly be the case that there was somehow a leak of Glasses from the previous waste disposal company which got mixed up with those delivered to D1.

49.D1’s suggestion in paragraph 46 above was hearsay.  In fact, Chen himself deposed to the fact that he heard about such possible loss of goods.  He only stated the source of such hearsay in Chen-2^nd.  Such source merely showed his evidence to be hearsay upon hearsay and was speculative.

50.In summary, save for the dispute as to whether D1 had sold the Subject Glasses, none of the defences to breach of contract are triable.

The claim in breach of confidence

51.There are 3 elements to a claim for breach of confidence, namely:

(1) the information in respect of which relief is sought must have the necessary quality of confidence about it;

(2) the information must have been imparted in circumstances importing an obligation of confidence although there is no need for an initial confidential relationship; and

(3) there must be an unauthorized use or disclosure of that information.

See SK Hynix Inc v Vannex International Ltd (15 May 2015, HCA 1473/2014) at §25, per DHCJ Kent Yee.

52.The Subject Glasses clearly have the necessary quality of confidence:

(1) As required by the Plaintiff’s customers, the design, appearance, configurations, material composition, thickness of layers of glasses, and the manufacturing process of the cover glasses had to be kept strictly confidential.  In fact, in §§7(a) & 8(a) of its Defence, D1 expressly admitted the confidential nature of the cover glasses.

(2) The confidential nature of the Subject Glasses was strongly supported by the fact that the Plaintiff found it necessary to engage the professional service of D1, with the specific requirements that the Subject Glasses had to be thoroughly comminuted and put into landfills so that they would be unidentifiable:  SK Hynix Inc, at §35.

(3) The Glasses were repeatedly described as “confidential wastes” in the Agreement.  D1 was bound by such contractual description and was estopped from denying their confidential nature: Asgain Co Ltd v Cheng Ka Yan (No. 2) [2018] 2 HKLRD 641 (CA) at §§11-16, per Lam VP.

53.The Glasses were clearly delivered to D1 in circumstances imparting an obligation of confidence in view of Clause 6.

54.The delivery of the Subject Glasses to D1 was for the express purpose of destruction and burial in landfills.  The transfer of the Subject Glasses to Yih, other third parties or to a place other than Malaysia were clearly unauthorized use or disclosure of confidential information. 

55.There is no defence to this head of claim.

The claim in conversion/trespass

56.Conversion is an interference with the claimant’s possessory title which causes harm to the claimant’s right or title to the goods/chattels.  Trespass to goods is an interference with the claimant’s possession or immediate right to possession of goods: Yifung Properties Ltd v Manchester Securities Corp (17 November 2014, HCA1341 & 1359 of 2014), §127, Au-Yeung J.

57.An action in conversion lies where there was a sale and delivery with intent to pass the property in chattels by a person who is not the true owner and has not got the owner’s authority.  An action in trespass is available where there is any kind of interference in respect of corporeal personal property: Tort Law and Practice in Hong Kong (3^rd ed 2014) at §§7.009 & 7.059.

58.Ownership right is crucial to maintain a claim for trespass or conversion.  The concept of ownership in respect of chattels consists of a number of rights over property, eg the rights of exclusive enjoyment, of destruction, alteration and alienation and of maintaining and recovering possession of the property from all other persons: Halsbury’s Laws of Hong Kong, Personal Property, Vol 42, 2^nd ed, p505.

59.On ownership of rubbish, it was held in Williams v Phillips (1957) 41 Cr App Rep 5 (a case on larceny), at p 8 that:

“If I put refuse in my dustbin outside my house, I am not abandoning it in the sense that I am leaving it for anybody to take it away. I am putting it out so that it may be collected and taken away by the local authority, and until it has been taken away by the local authority it is my property. It is my property and I can take it back and prevent anybody else from taking it away … Once the Corporation come and clear it away, it seems to me that because I intended it to pass from myself to them, it becomes their property. Therefore, there is no ground for saying that this is abandoned property.” (underline added)

60.An owner may abandon his property, without any intention of resuming possession or ownership and as such put an end to their liabilities: The Crystal [1894] AC 508: Lord McNaughten (at 532):

“They [the original owners] had lost possession of the vessel already; all that remained to them was the property in the vessel—that is to say, the right to retake or resume possession of her. This right they abandoned as plainly and as unequivocally as it was possible for them to do, and they abandoned it before the commissioners began their operations or even took possession. They disowned the wreck.”

61.However, abandonment requires evidence.  In Robot Arenas Ltd v Waterfield [2010] EWHC 115 (QB), at §88, Edelman QC, it was held that once the claimant has proved its ownership of the equipment, the burden of proving abandonment as a defence to a claim in conversion must be on the defendants and, in that case, the defendants have not discharged the burden of proving on the balance of probabilities that the claimant had the necessary subjective intent to abandon whatever remained in the object.

62.Furthermore, where the species of a thing has changed and/or is no longer identifiable, the owner’s title is divested and destroyed.  In Borden (UK) Ltd v Scottish Timber Products Ltd [1981] Ch 25,  the parties’ common intention was that the defendants were at liberty to use the resin in the manufacture of chipboards. The Court of Appeal held that the process of working the resin (with other ingredients) into the chipboards meant that for all practical purposes the resin had ceased to exist and so had the ownership in the resin.

63.There may be important issues of law on abandonment which may justify a trial.  In Obegi Melissa v Vestwin Trading Ptd Ltd [2008] SGCA 4, the plaintiff disposed of confidential documents as waste.  The defendant retrieved the plaintiff’s discarded documents for its own use. The plaintiff sought summary judgment, relying on conversion and breach of confidence.  The Singaporean Court of Appeal overturned the summary judgment decision and held that this case involved important issues of law that required full examination of all the relevant facts at trial:

“41. To elaborate, the law on abandonment has not been settled in Singapore. There is no legislation, case law or authoritative academic view on title to or possession of items which have been disposed of as rubbish. In particular, there is no recent English jurisprudence on this area of the law, and comparative common law decisions provide little by way of consensus or guidance. The positions vary across different jurisdictions, with the courts in Australia, Canada and the US generally recognising, but applying differently, the concept of “divesting abandonment” – ie, the abandonment of both ownership as well as possession.

42. Rubbish disposal – the paradigmatic example of “divesting abandonment” – is a necessary and common occurrence in daily life. It is usually regarded as a mundane matter and is taken for granted until a case like the present suit arises. The disposal of rubbish may also raise, as demonstrated by the facts of this case, the issue of protecting the privacy of individuals and business entities. This is a matter of considerable public importance and should not be decided summarily. Furthermore, there are, in our view, several important findings of fact that need to be made before the respondents’ claim against the appellants can be properly determined ...”

64.Applying the Crystal, Mr Yiu contends that the Plaintiff had always treated the 2 Batches of Glasses as waste materials to be disposed of.  As such, the Plaintiff had given up the exclusive right of possession and of destruction upon transferring the Glasses to D1.  He queried whether the Plaintiff retained ownership of the Glasses so as to maintain the claims in conversion or trespass.  In other words, there is no right for the Plaintiff to order D1 to return the physical Glasses to them. Mr Yiu also relies on Clause 10 of the Agreement.

65.Further, applying Borden, Mr Yiu submits that once the Glasses have been destroyed, the Plaintiff’s title is divested and destroyed.  If they were sent for incineration, the Plaintiff no longer has a claim to ownership in the absence of an express clause. 

66.Applying Obegi v Melissa, Mr Yiu submits that as there are issues of fact and law involved, the Court should decline summary judgment.  He concedes, though, that this line of defence has neither been pleaded nor raised in the affirmations of D1.  He submits that this is all a matter of law which he can make submissions on. 

67.With respect, this is not just a matter of law but the question of abandonment requires evidence. The lateness in raising the issue has denied the Plaintiff the opportunity of filing rebuttal evidence.  Mr Ng submits that the Plaintiff had no intention to abandon until after destruction because of the confidential information attached to the Glasses.

68.In my view, Clause 10 does not assist D1 as it only refers to the Plaintiff divesting itself of responsibility or obligation but not its rights. 

69.Borden v Scottish Timber does not assist D1 either as the 5 Containers of Glasses have not been mixed with any other materials to change their identity.

70.Obegi v Melissa is distinguishable as the issue of protecting confidential information had been expressly provided for in the Agreement.

71.That said, the 5 Containers have left the Plaintiff for about 6 months since the last Batch was delivered to D1.  There may not be inconsistency between the Plaintiff abandoning the physical Glasses but retaining the confidential information in them.  In any case, the confidential information (not being tangible assets) cannot form the subject matter of conversion: Clerk and Lindsell on Torts, 23^rd ed, §§16-35 to 16-36.

72.The Plaintiff has indicated that if there is any doubt as to the causes in trespass/conversion, it is prepared to abandon them.  I consider this to be a proper move, as any relief arising from such causes will be covered by those for breach of contract and breach of confidence anyway.

Judgment on merits

73.Having considered the evidence, save for conversion/trespass, and whether D1 had sold the Subject Glasses, I am not satisfied that any of the defences raised is triable.  As the Plaintiff has abandoned the claim in conversion/trespass, there should be judgment on liability in favour of the Plaintiff for breach of contract and breach of confidence.

Reliefs

74.The Plaintiff seeks the reliefs in paragraph 21 above.  Mr Yiu contends that where the plaintiff seeks equitable relief, summary judgment may not be appropriate even if there is no defence, as the question of whether the Court should grant equitable relief may depend on fact-sensitive issues: Hong Kong Civil Procedure 2020, Vol 1, §14/4/9B, p 332.

75.The Subject Glasses contain confidential information.  An award of damages may not adequately compensate the Plaintiff for the loss of confidentiality.  However, as Mr Yiu submits, equity does not act in vain.  The remaining 3 containers are in the possession of D2 and it is not clear if D1 is in a position to perform the obligation under the Agreement, or procure D2 to do so; specific performance will not be ordered: Tony Investments Ltd v Fung Sun Kwan [2006] 1 HKLRD 835, §44, DHCJ To (as he then was). 

76.As for injunction, it is well established that it may be granted as relief in an action for breach of confidence: The University of Hong Kong v Hong Kong Commercial Broadcasting Co Ltd & anor [2016] 4 HKLRD 113 at §52, Godfrey Lam J (as he then was). Again, as the Subject Glasses contain confidential information, an award of damages cannot adequately protect the Plaintiff against loss.  An injunction should be granted.

77.Damages to be assessed are an appropriate remedy.  There should also be an inquiry and account of profits for breach of confidence (including eg the RMB200,000 received by D1) in order to ascertain the amount recoverable.

Conclusion

78.I give leave to D1 to file Chen-2^nd within 7 days.  On a nisi basis, costs should be to the Plaintiff.

79.With regard to the Order 14 summons:

(1) There be interlocutory judgment on liability against the 1^st Defendant;

(2) The 1^st Defendant, whether by itself, its servants, its agents or otherwise howsoever, be restrained from using the 1^st and 2^nd Batches of Glasses and the Confidential Information (or any part thereof) for any purpose other than for the purpose for which it was supplied;

(3) There shall be unconditional leave to defend on the other appropriate reliefs to be granted, including specific performance, damages to be assessed for breach of contract and/or breach of confidence, and account and inquiry.

(4) Within 56 days, the parties shall submit a joint memorandum of directions as to further conduct of this case, including directions for the filing of points of pleading, statement of damages/answer, filing of affidavits or witness statements, as may be appropriate.

80.On a nisi basis, the Plaintiff should have costs of this Action (including the application for injunction, D1’s summons to adduce Chen-2^nd and any costs reserved up to now) to be summarily assessed on an indemnity basis pursuant to Clause 3 of the Agreement and to be paid forthwith:  Save that costs for preparing the costs statement are disallowed, costs are summarily assessed and allowed at $800,000.

81.I thank counsel for their assistance.

Mr Michael Ng, instructed by Holman Fenwick Willan, for the Plaintiff

Mr Austin Yiu, instructed by Patrick Mak & Tse, for the 1^st Defendant