Giant Electronics Ltd. v. In-tech Electronics Ltd. and Others
Read the full judgment text of HCA 15823/1999 on BabelCite. This High Court CFI judgment was delivered on 22 December 1999.
1. The plaintiff in these proceedings is a company engaged in the development and sale of telecommunications equipment, and in particular of telephones, both cordless and corded. It was established in 1988 and has a factory in Shenzhen employing about 2700 workers. In addition there are about 300 other staff of whom 123 are engaged in research and development.
Cites 1 case
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HCA015823/1999 HCA 15823/1999 IN THE HIGH COURT OF THE HONG KONG SPECIAL ADMINISTRATIVE REGION COURT OF FIRST INSTANCE ACTION NO. 15823 OF 1999 _______________
________________ Coram: Woolley DJ in Chambers Dates of hearing: 6, 7, 8, 9 and 10 December 1999 Date of Judgment: 22 December 1999 _______________ J U D G M E N T _______________ 1. The plaintiff in these proceedings is a company engaged in the development and sale of telecommunications equipment, and in particular of telephones, both cordless and corded. It was established in 1988 and has a factory in Shenzhen employing about 2700 workers. In addition there are about 300 other staff of whom 123 are engaged in research and development. 2. The 2nd to 5th defendants are all ex-employees of the plaintiff, and are now all employed by the 1st defendant, a company engaged in a similar business to that of the plaintiff, who now claims, inter alia, that the defendants are in breach of confidence and fiduciary duties, and have used the plaintiff's trade secrets without their consent, taken away from the plaintiff a number of the plaintiff's documents and converted them for their own use, and infringed their copyright. 3. The 2nd defendant was general manager and a director of the plaintiff and left his employment with them on 15 November 1997. The 3rd defendant was assistant general manager and left on 6 March 1998. The 4th defendant was an engineering manager and left on 25 October 1997. The 5th defendant was an assistant engineering manager and left on 6 July 1998. The 1st defendant was incorporated on 19 September 1997 with a paid up capital of $2.00 which was increased to $25 million on 1 April 1998. At some time after their departure from the plaintiff the 2nd to 5th defendants all became employed by the 1st defendant and, at the same time or subsequently, a number of other former employees of the plaintiff joined them. The 2nd defendant is now a director of the 1st defendant. 4. In 1999 the plaintiff's management believed that they had evidence to show that the 1st defendant was in breach of their copyright and that the other defendants had taken advantage of their employment with the plaintiff to remove when they left sufficient material to enable the 1st defendant to do this. They accordingly made an application ex parte before Mr Justice Suffiad on 5 October 1999 for an Anton Piller order, which was granted, and the following day issued a writ against the defendants. The Anton Piller order was executed the same day, namely 6 October 1999, by two representatives of the plaintiff's solicitors and five from the plaintiff. The supervising solicitor was Miss Rosita Li of Messrs Johnson Stokes & Master. On 7 October the order was varied to reduce the number of representatives from the plaintiff to three, and to make other amendments to parts of the order to which the defendants objected, in particular to the reference in (g) of the listed items to "trade secrets and copyright" which required assumptions to be made relating to the matters in issue. Execution of the order was completed at about 10.55 p.m. that day. 5. I now have before me an application by the defendants to set aside the ex parte order, for delivery up of the of the documents and articles seized under the order, an injunction to restrain the plaintiff from making use of them, and damages. There is also an application by the plaintiff for delivery up of a number of documents they say are in possession of the defendants. 6. The defendants' application is based on (1) that there was insufficient evidence to support an application for Anton Piller relief; (2) material non-disclosure by the plaintiff in making the application for the order; and (3) that the order was executed in a harsh an oppressive manner. 7. In support of the ex parte application for the order the plaintiff filed an affidavit of one Liu Kie Hung Joyce (Joyce Liu), the managing director of the plaintiff and the daughter of its chairman, Mr Y L Liu. There have additionally been filed in respect of this hearing no less than 39 further affidavits, including one in support of the application on 7 October for variation, together with some 926 pages of exhibits. It will be apparent from this that a vast amount of evidence before me is disputed, and much of that will have to be dealt with when this matter comes to trial. I do not here, therefore, seek to resolve those disputes without the benefit of oral evidence and a proper assessment of credibility. However, I will deal with the background, and such evidence as is not in dispute, and whatever I can glean from the rest of the evidence to assist in dealing with the applications before me. 8. The 2nd defendant joined the plaintiff in late 1992, and remained in his employment there as general manager until 15 November 1997, having given notice of resignation in September 1997. He was in a responsible and trusted position, with a free hand in running the company and reporting directly to the chairman. Upon leaving, he told the chairman, who he says was not pleased at his departure, that he was going to join a toy manufacturing company. This was not true, as he joined the 1st defendant shortly thereafter. 9. Of the other defendants and employees who left the plaintiff in 1997 and 1998, all of them, except Mr Chim Cheuk Kuen (see below), either did not say where they were going or gave the names of other companies, but not the 1st defendant. However, there is no evidence before me as to precisely when they joined the 1st defendant. 10. These proceedings involve three models of telephones developed by the plaintiff: a 900 MHz cordless telephone under the model numbers 9010 and 9005, the former being for general sale and the latter for a particular customer, Cobra; a cordless telephone under the model number CDL-300A developed for another customer, Audioline; and model number CT1-800 being developed for the European market. It will be convenient to deal with each model and its history separately. 9010/9005 11. The development of this model began in 1997 and the 4th defendant was head of the project team and chief designer. Joyce Liu says in her first affidavit that the development of a new telephone such as this is a long and meticulous process involving many engineers and which takes at least 8 to 9 months. The development cost in man hours and overheads was about $3.20 million, and in March 1997 Cobra authorised the purchase of a large number of components for it. At some stage in 1997 or possibly early 1998 the project was cancelled. There is no clear evidence why. Joyce Liu says in her first affidavit that her father was told in July or August 1997 by Mr Cheung Chung Wai, the assistant general manager (materials), that he (Mr Cheung) had been informed by the 2nd defendant that the project was cancelled. However, at a meeting with Cobra management on 12 November 1997, at which Joyce Liu was present together with other senior staff of the plaintiff, including one Ms Clara Chu who was in charge of marketing, the progress of the project was discussed, even to the extent of pricing, so it was clearly still in hand then. There is no evidence as to what happened to the project after that, although one would expect such information to be available from the plaintiff's own records. 12. In August 1999 the plaintiff became aware that the 1st defendant produced for supply to Cobra in America a 900MHz cordless telephone under model number CP 9135 which had been developed by the 1st defendant in 1998. Joyce Liu says that they could not have developed it in the time available without, in effect, taking a short cut by using the plaintiff's technology, but the evidence as to this is also inconclusive as there is no information as to when the 1st defendant commenced operations, or how many they employed. In any event, the plaintiff's suspicions were aroused and they purchased a model of the 1st defendant's telephone and arranged for their technical director Mr Law Chi Wah (Mr Law) to compare it with their circuit diagrams of the 9010. He found that the similarity between the two was 80% regarding the handset, and 90% for the radio frequency module, and of the 720 components in the plaintiff's telephone, 576 in the 1st defendant's are similar or identical. Joyce Liu goes on to say that they then discovered that they could not locate the project files for the 9005 and that there was no record of their transfer on the departure of the 4th defendant or the 3rd defendant who took over from him. They suspected that they had been removed and clearly at that stage had good reason to suspect that the 1st defendant had copied the plaintiff's work. CDL-300A 13. This was a project commenced in 1997 to develop a cordless telephone for their customer Audioline, intended for the Australian market. As late as November 1997 the purchaser clearly intended to proceed with this project as they gave instructions to commence with the tooling ready for production. However, in December 1997 and January 1998 there was correspondence regarding the design, and in February 1998 the customer cancelled the project, apparently, on the correspondence, on account of pricing. It is not so clear whether tooling had commenced at that stage. In early 1998 the 5th defendant had been appointed to be in charge of the project. 14. In March 1999, Mr Law, while in England at the offices of Audioline, came into possession of the circuit diagrams of a telephone of the 1st defendant with the model number 565 which appeared to him to be similar to that of the CDL-300A, and enquiries revealed that the 1st defendant had launched the 565 as a new telephone towards the end of 1998, with Audioline as their customer. Again, a technical comparison conducted by Mr Law shows that there are considerable similarities between the 565 and the plaintiff's CDL-300A. I put it no higher than that, as whether the similarities are overwhelming, as the plaintiff claims, must be a matter to be determined at trial. It is clear, however, that there was sufficient for the plaintiff to believe that their designs had been copied. CT1-800 15. The CT1 series was a 900 MHz cordless telephone developed for the European market. In 1998 the plaintiff started development of a new 800 series which was to be a cost effective version retaining existing quality and functions. In the final stages of development in early 1999, Mr Chim Cheuk Kuen, an electronic engineer with the plaintiff, was transferred to work on this project. Mr Chim left on 29 May 1999, and told Mr Law of the plaintiff that he was going to join the 1st defendant. However, Joyce Liu says that she was told by another employee that before he left Mr Chim was seen downloading material from a computer not assigned to him late in the evening after most staff had left. In September Audioline told the plaintiff that they were no longer going to order CT1 telephones from the plaintiff, but will order in future from the 1st defendant. The plaintiff suspected from this that the 1st defendant was offering cheaper telephones in this range, and that the only way that they could do that was if Mr Chim had passed to them the plaintiff's confidential information about their development. MERITS OF THE ANTON PILLER APPLICATION 16. It must be accepted that the Anton Piller order is a valuable weapon of a plaintiff in certain circumstances, but it is also a powerful one which is, as Ormrod LJ said in the original action Anton Piller KG v. Manufacturing Processes Ltd and ors. [1976] 1 Ch 55 "at the extremity of the court's powers" which will "rarely be made, and only when there is no alternative way of ensuring that justice is done to the applicant". He then set out the essential pre-conditions for the making of such an order. These are:
17. Lord Denning M R added to this the further provision that such an order for inspection would do no real harm to the defendants or their case. Prima facie case 18. There is no doubt that the plaintiff has at least a strong claim to copyright in respect of its circuit designs, drawn by its employees in the course of developing the plaintiff's products, and any use of those designs by the defendants in producing their own telephones may well constitute a breach of that copyright. The evidence of the plaintiff in the form of Joyce Liu's first affidavit was that the 2nd to 4th defendants had access to the designs of the 9010/9005 and the CDL-300A, that they had joined a company doing similar work and that they had produced and sold telephones with sufficient similarities to the plaintiff's designs that it was likely that the latter had been used to produce them. This takes their case, in my view, beyond mere suspicion in respect of these two projects and provides ample evidence of a strong prima facie case. 19. I cannot say the same of the CT1 800. The only evidence is an account of a possible copying of information, followed by the cancellation of an order, for which it is possible that there were other reasons. There is no evidence that the defendants have used any of the plaintiffs' designs in producing their own. This can only give rise to suspicion and speculation, and, were this the only evidence before the court, would fall far short of a prima facie case. However, the strength of the plaintiff's case on the other two was not affected by the weakness of this. Damage to the plaintiff 20. It does not need a lot of imagination to see that, if technical information has been taken and used by a competitor, the probability of damage to the plaintiff is very high. Although there is little evidence at this stage of loss of business in respect of the 9010/9005 project in view of the lack of information as to why it was cancelled, there is sufficient, in my view, in the cancellation of the CDL-300A alone on the information provided by Joyce Liu at the time of the application to establish this. Subsequent evidence has cast some doubt on the strength of the plaintiff's case on this, which I shall deal with below when I come to the question of non-disclosure. Evidence that documents are in possession of the defendants 21. From what I have said above it is clear that, in respect of the 9010/9005 and the CDL-300A, there was evidence of access and use of the plaintiff's designs. This must amount to evidence that the defendants are in possession of those designs. Possibility of destruction 22. In order to consider this, realistically one must first look at what evidence there is of culpability on the part of the defendants. That is covered in the consideration above of the prima facie case and evidence that the defendants have documents in their possession. Once a strong likelihood of culpability is established, it is a short step to imagine what someone in the defendants' place would do if given advance warning that their premises will be searched, or that an injunction will be applied for requiring delivery up of incriminating material. There must at the very least be a risk of destruction or concealment. Harm to the defendants 23. Again I can deal with this comparatively briefly. The order only provided for the search for documents and material of the plaintiff. There is inevitably a degree of disruption to any business premises in the execution of such an order. However, there was, at the time of making the order, no reason to suppose that any harm would be caused to the defendants out of proportion to the legitimate object of the order, and I find that this ground too must fail. WAS THERE MATERIAL NON-DISCLOSURE? 24. There are a number of matters which have been put forward by Mr Garland on behalf of the defendants which he says amount to material non-disclosure by Joyce Liu on the application for the order. I will deal with these in turn. Removal of 9010/9005 files 25. The plaintiff relied on the two matters as grounds for their belief that the defendants had taken the files for this project. The first was that they could not be located in the plaintiff's premises, and the second that the defendants could not have designed their CP 9135 model for production and supply in the time available to them. Joyce Liu said that it took at least 8 to 9 months to do so and, as the 1st defendant was offering their model in the American market in mid-1998, they must have started to ship in the first quarter of 1998, which would not have allowed enough time to develop the product unless the development had already been done by the plaintiff and copied by the defendants. 26. The 1st defendant was only incorporated on 19 September 1997. Even if they had commenced work immediately thereafter, it is hardly fanciful to assume that a considerable amount of preparation is necessary to set up such a company before it is in a position to even offer its products on the market. Office and factory premises must be found and equipped, staff must be recruited and trained, and, particularly if starting from scratch, research and development must be undertaken. Yet on the defendants' own evidence, they were being considered as a supplier of the 900 MHz telephones to Cobra in early December 1997, and were sufficiently advanced for Cobra to be able to say in an e-mail of 10 December that they had heard that the defendants' design was good. As against that, apart from the 2nd defendant saying that development of the CP 9135 had commenced in January 1998, and the first shipment in October 1998, and that the first model, the 9105 had commenced development in November 1997, there is no evidence from them as to how and when they started operations. Given the time scale for development of such telephones, which has not been denied, there was ample reason for the plaintiff to believe that a short cut had been taken by the defendants and that it was their material which had provided it. There is certainly no non-disclosure. Cancellation of the 9005/9010 project 27. As I have said above, the evidence about the cancellation of this project is far from clear. What is clear is that, whether or not Mr Cheung had been told of its cancellation in August 1997, it was still an active project in November of that year and at a very advanced stage. Cobra had authorised the purchase of components, and at the November meeting pricing was one of the topics discussed. Joyce Liu says that she did not mention that meeting in her affidavit as the purpose as far as she was concerned was to meet the new President of Cobra. This left the only evidence that Cobra had cancelled the order her statement of what her father was told by Mr Cheung. Mr Garland has pointed out that there seems to have been no effort to make enquiries about this cancellation. I agree. It is inconceivable that a project such as this, apparently confirmed as late as November 1997, just before the 2nd defendant left the plaintiff, should disappear into thin air. There must have been some record which could have shed some light on it, or other employees, such as Clara Chu, who could have told her. Yet this cancellation was relied on by Joyce Liu as evidence that the 1st defendant offered their trade secrets to Cobra. 28. This I consider amounts to non-disclosure which is also material. Loss of the CDL-300A order from Audioline 29. Joyce Liu's evidence as to this was to the effect that the order was cancelled suddenly in February 1998, again at an advanced stage of the project. She said that she had a very good relationship with Audioline, and tooling for the project had been completed. The defendants say that it was untrue that there was a good relationship with the customer, and the cancellation was not sudden, but after correspondence and because the plaintiff could not make a design which was satisfactory to Audioline. 30. While it is apparent that there had been several incidents of discord during the plaintiff's working relationship with Audioline, and in particular with Mr Harry Moss who controlled the company, the evidence shows that the plaintiff had a long, and continuing, business relationship. Mr Moss was clearly outspoken in his complaints on a number of occasions, but this did not seem to affect the long-term business between them. In the case of the CDL-300A, there is clear evidence that Audioline had given approval for tooling to commence, and by a fax in January 1998 Mr Moss had enquired when it would start. Although there had been initial disapproval of the design by Mr Moss, by the same fax on 30 January 1998 he had pronounced himself satisfied with it. It was then in February 1998 that it was cancelled, and, on the evidence available, over the question of pricing. This was not mentioned by Joyce Liu who said that "Audioline suddenly informed Giant that they intended to cancel its order ..." and "This was very odd and seldom happens." Possibly so, but there is the plaintiff's own correspondence which gives a reason why the order was cancelled, and she does not mention it. It is clearly material and was not disclosed. 31. I am not prepared to criticize Joyce Liu for the failure to reveal the matters over which there had been disputes with Audioline, particularly as these do not appear to have changed their business relationship in other areas where the value of business done has increased from 1997 to 1999 from a little over US$2 million annually, to nearly US$8 million. Her omission of these matters in her evidence on the cancellation does not in my view amount to non-disclosure. Circumstances of obtaining the defendants' 565 circuit diagrams 32. The allegation by the defendants here is that the plaintiff failed to disclose that the Mr Law, while in England to try to correct faults in one of the plaintiff's models at Audioline, was given the defendants' circuit diagrams as a reference. However, the importance of the evidence regarding these diagrams is their similarity to the plaintiff's. How they came into their possession is of lesser importance, unless, of course, they had been provided by the defendants themselves. They were not. They were given them by a mutual customer. If it is a failure to disclose, it is not in my view material. Cancellation of CT1-800 33. Joyce Liu's evidence as to this is that the CT1 project was cancelled by Audioline who told the plaintiff that they would in future order these from the 1st defendant. She deduced from this that they had been offered a product at a lower price which she suspected was being developed from the plaintiff's designs. She did not mention the problem with delivery which appears from the correspondence to have been the reason, nor that the project had been put on hold by the plaintiff earlier in the year, for reasons which have not been explained. I have already found that there was insufficient evidence in any event to support an application on the basis of the CT1 project alone, but I agree with Mr Garland that had the further information here been disclosed, it would have shed a very different light on the matter. Copyright in 9005/9010 34. The defendants maintain that the circuit diagrams are not original work as the plaintiff had used a 900 MHz model made by V-Tech Communications Ltd, model number ADL 910 as a reference when designing the 9010/9005, and Mr Garland contends that this information is extremely relevant as to the scope of any copyright, where even if only part of the V-Tech design had been used, it would inevitably affect the extent to which the plaintiff can claim copyright in their own design, and whether sufficient independent skill and labour to justify copyright protection had been expended. 35. This may be right, but this is a matter which will be for consideration at trial. At present the plaintiff says that the V-Tech model was for reference only, and by their own comparison show that they did not copy it. Indeed, it cannot be unusual for anyone developing a new product to obtain a sample of their competitors' to, as the 4th defendant says "establish the performance parameters". It may be a matter which Joyce Liu might have mentioned, but in the context of the overall development of this project over a number of months and at a not inconsiderable cost, the failure to disclose it can only be innocent and questionably material. Comparison between CDL-300A and the defendants' 565 36. The defendants' complaint here is that the comparison is misleading and contain errors, that some of the components are commonly used in all or most cordless telephones, and that there is bound to be some similarity by reason of the use of the same proprietary application circuits. I do not propose to embark here on a analysis of the technical aspects of these designs. This is a matter for trial. I am satisfied that the degree of similarity put forward for the purpose of this order was adequate and justified. EFFECT OF NON-DISCLOSURE 37. It will be apparent from the above that I am satisfied that there was material non-disclosure was in respect of the cancellation of the 9005/9010 project, and of that of the CDL-300A. The non-disclosure in respect of the CT1 800 project, while putting a different light on the matter, was not material, in view of my finding that there was no substance for this being a basis for the application. If an allegation is not sufficient to justify an order being made, then it must follow that a non-disclosure in respect of it is not material, as it is no longer a matter relevant to the application. 38. The principles by which the court should be guided in deciding what consequences it should attach to any failure to comply with the duty to make full and frank disclosure are usefully summarised by Ralph Gibson L.J. in Brinks Mat Ltd v. Elcombe [1988] 1 W.L.R. 1350. For the purposes of this case I need only refer to the following, at p. 1356:
39. I have already found that the failure to disclose the full facts relating to the cancellation of the 9010/9005 project was a material non-disclosure, and it is clear from (3) above that there was a duty on the applicant here to make proper inquiries, which again I have found were not made, and could well have been. This is not a situation where I can look at what was not disclosed, and then use my discretion to decide whether it was of sufficient materiality, as there is no evidence at all of the true facts of the cancellation. No inquiries appear to have been made and the court is left not knowing what the undisclosed facts are. 40. This was an important part of the plaintiff's case, as it supported their contention that the files had been removed and the project usurped by the defendants with the same customer. The suggestion, now shown to be wrong, that it was the 2nd defendant who gave the information that the project had been cancelled in July or August 1997, was one of the central planks on which their case on this project rested. The similarity of designs themselves may well not have been sufficient on their own, given that, as we now know, they are very much in dispute. 41. It is accordingly clear that the plaintiff failed to make proper inquiries, and so not only failed to give the whole picture, but stated a fact which is almost certainly wrong. 42. Should the effect of this be to discharge the order? 43. The court has, of course, a discretion not to do so when considering the whole of the facts now before the court, and in this respect Miss Eu for the plaintiff has invited me to look at the documents seized in execution of the order, what is now called the yield. However, I am satisfied that the yield cannot be used to rescue an order obtained by material non-disclosure. The authorities on this are clear, starting with WEA Records v. Visions Channel 4 Ltd [1984] FSR 404 where, at p. 411, Dunn LJ said:
44. The same conclusion was arrived at in Guess? Inc v. Lee Seck Mon [1987] FSR 125, and in Hoechst U.K. Ltd v. Chemiculture Ltd [1993] FSR 270, where Morritt J said:
45. I am far from satisfied that this order would have been made had there been proper disclosure of all facts known to the plaintiff, or facts which could have been discovered but in respect of which no attempt appears to have been made to do so. It would not therefore be right to exercise my discretion in favour of the plaintiff where their principal case is built on, albeit possibly well-founded, suspicion, but suspicion nevertheless, and facts which are clearly very much in dispute and which will have to be considered at trial. 46. In the circumstances I think the correct course is to discharge the order. THE FORM OF THE ORDER AND THE MANNER OF ITS EXECUTION Form of the Order 47. Objection to the form of the order was not one of the grounds originally stated in the defendants' summons, however Mr Garland has put it forward as one of the reasons why the order should not have been made so I will deal with it briefly. 48. The objection is principally to the wording which in Schedule 2, to the words "or copies thereof" in (a) to (e), which apparently caused some confusion, a reference in (f) to "the opinion" of the supervising solicitor, and in (g) the reference to "All documents ....... using the trade secrets and copyright of the intended plaintiff ...." 49. The matter of the copies in my view is minor and does not seem to have been an insuperable difficulty. The two last objections were dealt with the next day when the order was amended. The order might have been more happily worded, and I agree that the reference to trade secrets and copyright was unfortunate in that these are the very matters in issue in the proceedings. Having said that, they are not matters which now lead me to say that the order should not have been made, and they were rectified sufficiently swiftly so that little damage was done. 50. One other objection mentioned by Mr Garland was the number of representatives from the plaintiff allowed to take part. Again, this was something amended more to the satisfaction of the defendants the next day, but to some extent it is relevant in considering the next ground upon which this application is made. Manner of execution 51. One of the necessary evils of the Anton Piller order is that, in order that someone is present who is able to identify technical documents and articles which the plaintiff claims are their trade secrets or copyright, which lawyers unfamiliar with that business may not be able to, there must in most cases be present representatives of the plaintiff. This means that the order permits the plaintiff to see the confidential documents of a competitor. The order itself recognizes this danger by informing the defendants that they are entitled to insist that there is nobody present who could gain commercially from anything he might read or see on their premises. However, this right is in most cases, as here, immediately negated by listing those from the plaintiff who are allowed to enter. There is therefore a very real danger that one of the conditions mentioned by Lord Denning in the Anton Piller case for the grant of such an order, that inspection would do no real harm to the defendant or his case, may not be met. This is a sensible and necessary condition to the making of an order as harsh and intrusive as this. As Sir Nicolas Browne-Wilkinson VC said in Tate Access Floors Inc. v. Boswell [1991] Ch. 512 at p. 533:
52. The defendants objection was initially that no less than five of the plaintiff's representatives were allowed by the original order to attend on the execution. While this is possibly more than was strictly necessary, it would not otherwise have been objectionable had the execution been scrupulously conducted, and in any event the matter of the numbers was corrected the next day. However, the behaviour of those representatives at the execution is the principal ground of complaint here. 53. The plaintiff's representatives had been briefed by their solicitor prior to the execution of the scope of the order and the way the search should be carried out, in particular that they could only do what was permitted by the order, and they could not make notes of anything they saw. In spite of this, Joyce Liu on the first day was seen taking notes. She was warned and agreed not to do it again. The following day the notebooks of Joyce Liu and two others of the plaintiff's representatives were checked, and it was found that all three had made notes of matters not covered by the order including sensitive information on pricing. Mr Garland says that this is an abuse of the court's process and a dishonest attempt to take advantage of what is, after all, an extraordinary right given to them by the court. I agree. There can be no excuse for behaviour such as this, and to be fair, they offer none, only an apology. I regret that this is not enough, and I consider that this alone would be sufficient to justify immediate discharge of this order. 54. It has also been submitted on behalf of the defendants that the plaintiff is in breach of the order in not providing the defendants with a list of the items removed from the premises prior to their removal under paragraph 2(6) of the order. 55. The evidence points to a somewhat chaotic scene at the conclusion of the search, with the plaintiff's solicitors trying to tie up loose ends with time fast running out. Nevertheless, they knew well that it was required to provide a list and allowed the time to run out without having properly done so. This is a clear breach of the order, and in other circumstances might well be a ground for its discharge. However, the evidence here shows that there had been considerable discussions as the search went on between the plaintiff's and the defendants' representatives, and lists were prepared, but not finalized nor signed by both parties as they should have been. I therefore consider that, although it is a matter of adverse comment that the plaintiff's solicitors did not conduct the execution as it should have been in this regard, this is not on its own a ground on which I would consider it appropriate to discharge the order. THE PLAINTIFF'S SUMMONS 56. By their summons of 6 October 1999 the plaintiff company seeks an order for delivery up by the defendants of a number of documents found in the possession of the defendants in the course of the execution. These have now been detailed by Miss Eu as (i) those which the defendants admit are the property of the plaintiff, and (ii) those which are presently in dispute, there now being only five groups of these which the defendants say they can locate. Mr Garland has indicated that the defendants have no objection to an order in respect of the former, but resists an order for the latter. 57. The first question here is the use that I can make, if any, in deciding whether such an order should be made, of the yield. 58. It cannot be denied that the result of the execution of the order were very successful from the plaintiff's point of view. The documents which the defendants admit belong to the plaintiff are themselves extremely incriminating. In particular, the bundle of documents which the 2nd defendant prepared for his handover on leaving the plaintiff contains a large amount of commercially sensitive information, some clearly marked "confidential" and including forecasts, a project development schedule, the plaintiff's quality manual, detailed plans and flow charts, all of which may be useful to a competitor. He had no right to retain such documents on leaving, particularly when joining such a competitor. There are a number of other documents, engineering standards, which may well be obtainable elsewhere, but are still the property of the plaintiff and have been removed, employees' insurance documents, circuit diagrams of the plaintiff's Mondex telephone and of the 9010, the latter found in working files and for which the defendants could offer no explanation, rather lamely saying that they did not know how they got there. 59. The disputed items include a number of diagrams and drawings, some of which the defendants claim were given to them by the parties' joint customer Audioline. This does not help them in my view. Audioline can have no right to pass on the plaintiff's documents to a competitor, and the defendants can hardly claim a right to retain them when they are discovered, which, to be fair, they have not tried to do. 60. Were I to consider the yield in deciding the matter of the plaintiff's summons, I would have to look at the results of an order which I have already found should not have been made, or would not, had the court had the benefit of full disclosure and enquiries by the plaintiff. Not to do so however, in the light of the apparent iniquity on the part of the defendants, would appear to deny justice to the plaintiff. 61. In considering this question in Guess ? Inc, Cons VP said that the yield should only be taken into account if there are "good and compelling reasons" but that it is necessary to balance the severity of the non-disclosure against the iniquity revealed by the execution of the order. In short, it is clearly incumbent upon me to look at all the circumstances of the matter, and see where the interests of justice lie. 62. The non-disclosure here, while of sufficient materiality to justify discharge of the order, does not amount to mala fides. The plaintiff left undone those things which it ought to have done, but not, I believe, through ill will or a desire to damage the defendants. Putting against that the damning results of the execution, it would be inequitable to now ignore those results. I accordingly consider that there are good and compelling reasons why I should now take the yield into account in looking at the plaintiff's summons. 63. On that basis, I see no reason why they should not have their order, both in respect of the documents which the defendants agree belong to the plaintiff, but also of those in the disputed list, namely items 1, 2, 12, 13, 14, 15, 18, 19, 23, 24, 25, 26, 27, and 28. I accordingly make an order in terms of paragraph 1 of the plaintiff's summons, limited to those documents listed above, with an order nisi for costs to be taxed. THE DISCHARGE ORDER 64. I accordingly order that the Anton Piller order be discharged and that all copies of documents seized under the order in the hands of the plaintiff or their solicitors, with the exception of those included in the order on the plaintiff's summons above, all lists, with the exception of those relating to the "agreed documents" and the disputed list in exhibit JL-21, and any notes, and copies thereof, of information obtained as a result of the execution of the order except in so far as they relate to the documents the subject of my order above, be returned forthwith to the defendants. 65. I further make an order restraining the plaintiff from making use of any of the documents seized or listed, other than those in the above order, for the purpose of these proceedings. 66. I do not consider this to be a case where I should order an immediate enforcement of the undertaking in damages. This is, of course, a separate question from that of whether the order should be discharged, and in a case such as this, the damage suffered by the defendants, if any, will only be apparent after consideration of all the issues at trial. This is not the kind of straightforward case that calls for an immediate enforcement, and I think it proper that this application be adjourned to be dealt with by the judge at trial. 67. I make an order nisi for costs in favour of the defendants on their application, to be taxed on a party and party basis. There will also be liberty to apply in respect of the carrying out of the terms of these orders, or for further orders in respect of the discharge.
Representation: Miss Audrey Eu, SC and Mr Colin Shipp, instructed by Messrs Wilkinson & Grist, for the plaintiff Mr Peter Garland, SC and Miss Winnie Tam, instructed by Messrs Baker & McKenzie, for the defendants |
Cases cited in this judgment
Further hearings and rulings under HCA 15823/1999