Centaline Property Agency Ltd v. Hong Kong Property Services (Ic&I) Ltd and Others

DCCJ  4937/2005

IN THE DISTRICT COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

CIVIL ACTION NO. 4937 OF 2005

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BETWEEN

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Coram: Deputy District Judge K.W. Wong in Chambers (open to public)

Dates of Hearing: 25^th and 30^th November 2005

Date of handing down of Decision: 12^th December 2005

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DECISION

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1.There are two matters to be dealt with at this hearing.

2.On 24^th October 2005 I dismissed the 1^st Defendant’s summons to discharge an ex parte order granted by H.H. Judge Lok on 5^th October 2005 as varied by H.H. Judge Chow the following day (collectively the “Anton Pillar Order”). In my written Reasons for Decision handed down on 11^th November 2005 (“my said Decision”), I reserved the question of costs to be dealt with at this hearing. The question of costs is therefore the first matter.

3.The second matter is the 1^st Defendant’s application by way of summons dated 18^th November 2005 for leave to appeal to the Court of Appeal against my decision on the 24^th October 2005, and for a stay of execution of the Anton Pillar Order, pending the disposal of the intended appeal.

Costs

4.It is common ground that costs are in the discretion of the court. However, there is still argument as to the starting point for costs order of application like the present one.

5.Mr. Wright, counsel for the Plaintiff, submits that the general rule is costs to follow the event. This should be the starting point, according to him. Since the 1^st Defendant fails in its attempt to set aside the Anton Pillar Order, unless the 1^st Defendant can demonstrate special circumstances which warrant a departure from the usual rule, the 1^st Defendant has to bear the Plaintiff’s costs of this discharging application. The Plaintiff also asks for costs on a common fund basis and be payable forthwith. A number of authorities such as Re Elgindata [1992] 1 WLR 1207, AXA China Region Insurance Company Limited v Pacific Century Insurance Company Limited unreported, HCA 9093/2000, 22/11/2001 Dep. Judge A. To, and Kickers International SA v Paul Kettle Agencies Limited and Another [1990] FSR 436 were referred to at the hearing.

6.Mr. Whitehead S.C. for the 1^st Defendant opposes the application for costs. He invites the Court to accept that the proper costs order for interlocutory injunction is either costs in the cause or Plaintiff’s costs in the cause. Mr. Whitehead S.C. submits that that is the usual starting point. In the circumstances of this case, he accepts the proper costs order is one of the Plaintiff’s costs in the cause. He refers to paragraph 29/1/44 (Vol. 1) of the Hong Kong Civil Procedure 2004 in which the learned author states that it has been the normal practice for a successful plaintiff granted an interlocutory injunction to be granted costs in the cause, although the rationale of this practice is perhaps not clear.  It is common ground that Anton Pillar is only a special form of injunction.

7.It is contended on behalf of the 1^st Defendant that Kickers represents a departure from the accepted norm and should only be resorted to if the court is satisfied that the 1^st Defendant is not justified in launching the application to discharge and it would be fair for the Plaintiff to have the costs of the application to discharge even if the Plaintiff would lose at the trial.

8.Mr. Whitehead S.C. also refers me to Desquenne et Giral UK Ltd v Richardson [2001] FSR 1 in support. In that case, it was held by the English Court of Appeal that where an injunction was granted or continued on the basis of the balance of convenience in order to hold the ring until the dispute between the parties could properly be decided at trial, it was inconsistent to say that there were successful or unsuccessful parties for the purpose of the rules relating to costs. In that event, the only proper order was that the costs of both parties were to be reserved to the trial judge because only then could it be determined which party was successful and which was unsuccessful. Having considered my said Decision Mr. Whitehead is prepared to suggest the proper order be Plaintiff’s costs in the cause.

9.In Re Elgindata Ltd (No.2), the English Court of Appeal stated that the principles on which costs were to be awarded as follows:

i)	that costs were in the discretion of the court;
ii)	that the costs should follow the event except when it appeared to the court that in the circumstances of the case some other order should be made;
iii)	that the general rule did not cease to apply simply because the successful party raised issues or made allegations that failed, but he could be deprived of his costs in whole or in part where he had caused a significant increase in the length of the proceedings; and
iv)	that where the successful party raised issues or made allegations improperly or unreasonably the court could not only deprive him of the costs but could also order him to pay the whole or part of the unsuccessful party’s costs.

10.No doubt in the case of an injunction where the order is granted on the basis of holding the ring, as in the case of Desquenne et Giral UK Ltd v Richardson and in many other injunction cases, the usual costs order is costs in the cause or be reserved for the trial judge. However, I consider that it is only an application of the general principle, namely, costs are to follow the event to a situation where the successful party cannot be ascertained. In that event the court in exercise of its discretion may order that costs be dependent on the final outcome of the trial when who is the successful party is known. The court is simply applying the general principles as set out in paragraph 9(ii) above.

11.There are other considerations that the court should take into account before exercising its discretion. In AXA (supra), Dep. Judge A. To was then considering the costs of various injunctions and delivering up orders made in favour of the plaintiffs when the defendants’ application to discharge failed. After considering Desquenne et Giral UK Ltd v Richardson, it was held by the learned Deputy Judge in paragraph 8 of his decision that there is no rule of law that interlocutory costs should be in the cause. If the injunction was granted without contest or for the purpose of holding the ring, a costs order of costs in the cause was considered by him to be appropriate. He said that the types of costs order made would depend on circumstances. Furthermore, he considered that in essence, two questions were to be asked: whether it was justified for the defendant to resist the application; and if the answer was no; whether it would be fair for the plaintiff to be awarded interlocutory costs even if he failed at trial. He ruled that since the defendants had traversed outside the American Cyanamid framework by putting up all defences that the defendants could raise in the weighing pan and argued every possible issue which the learned Deputy Judge considered unnecessary, the defendants were to pay costs of resisting the injunctions.

12.In Guangzhou Green-Enhan Bio-Engineering Co Ltd & Ana v Green Power Health Products International Co. Limited & Others unreported, HCA4651/2002,2802/2003 & HCMP74/2004 (consolidated), 8 June 2005, Lam J, the court was then considering what was the proper order for an interlocutory injunction application which was resolved by the plaintiffs accepting speedy trial as opposed to pushing ahead for interlocutory injunctions. Such course taken by the plaintiff in that case was against the background that the hearing of the injunctions could not have been completed within the time available and due to the state of the court’s diary. Lam J stated in paragraph 11 of the said decision that:

“At the interlocutory stage, the court has a number of options in dealing with costs, including but not limiting to the following:

(a)    costs in favour of one party either payable in any event or in an appropriate case, payable forthwith;

(b)   costs of one party be costs in the cause;

(c)    costs of both parties be costs in the cause;

(d)   costs reserved.

These options give the court some flexibility in dealing with costs of interlocutory application to meet justice of the case. If an application is so devoid of the merit that the court considers that it should not have been made at all, the court could exercise its discretion by an order under option (a). On the other hand, if the court is of the view that even if the application fails, the justice of the case demands that then question of costs be decided by reference to the ultimate merits of the case, the court may go for options (b), (c) or (d).”

(my emphasis)

13.Re Elgindata Ltd (No.2), and the two Hong Kong cases stated above obviously showthat the starting point for interlocutory application, including interlocutory injunction, is costs to follow the event and if the application is so without merit, the court can impose a costs order against the applicant, and in the case of Axa, the resisting party.

14.The purpose of an Anton Pillar is to require a defendant to permit a plaintiff or its representative to enter the defendant’s premises to inspect and take away copies that the defendant may wish to destroy in order to frustrate the plaintiff’s claim. Apart from showing a strong prima facie case, a plaintiff has to establish that there is a real risk of destroying incriminating documents. As can be seen in my said Decision which I do not wish to repeat here, the Plaintiff has demonstrated an extremely strong prima facie case. There is very strong evidence of wholesale taking away of confidential information from the Plaintiff’s database by employees of the Plaintiff before they left to join the 1^st Defendant and such information was being used by the 1^st Defendant. Evidence of destruction of incriminating documents is so overwhelming, especially after the Plaintiff has filed and served the affirmation of Fanny Chau dated 11^th October 2005, which provides a detailed account of the highly suspicious large scale disposal of documents exercise which took place on 6^th October 2005, and the affidavit of Lorraine Lee dated 11^th October 2005, which reveals the recovery of three shreds of the Plaintiff’s documents. This affidavit evidence effectively renders any argument on proportionality hopeless. It also seriously undermines any argument on material non-disclosure for the reasons more particularly stated in paragraphs 38 and 39 of my said Decision.

15.So as late as the return date of the summons, the 1^st Defendant should have realized that its chance of a successful discharge will be slim and should have re-assessed its position by either making concession or alternative proposals for preservation of the evidence. None have been forthcoming. It chose to go ahead with the discharging application. I understand the importance of this case to the 1^st Defendant and its holding Midland Group because the relief sought has serious impact on their reputation and business. However, I consider that if they choose to resist in the light of such strong evidence and put the Plaintiff to further costs,  it is only fair for them to shoulder the costs of the Plaintiff incurred in this fight.

16.Mr. Wright invites me to consider an immediate order for taxation. He relies on Kickers (supra) and summarizes the applicable principle by Hoffman J (as he then was) said at page 439 as follows:

(i)	whether the amount might be too small to justify a separate taxation;
(ii)	whether it may be unfair to order immediate taxation by a party who might, as a result of the trial, become entitled to set off an award for costs in his favour or that the conduct of that party in the action may be hampered because its business has been destroyed; and
(iii)	whether the opposing party might have means to repay the money if there should be a subsequent order against him.

17.I accept these are the considerations which I should take before ordering whether there should be immediate taxation.

18.Obviously for a hearing lasted for seven days with both sides represented by leading counsel, the amount of costs is expected to be substantial and therefore the first ground is satisfied.

19.Turning to the second ground, I do consider the costs for this discharging application a free standing one. This is a reflection of the dissatisfaction of court to the launching of a discharging application, which is so devoid of merit. Although the 1^st Defendant is a 2-dollar company, the matter has all along been proceeded with by the 1^st Defendant as if it is a claim by the Plaintiff against its rival, the Midland Group: see paragraphs 5,6 & 7 of the Affirmation of Fung Ho Shing of the 1^st Defendant dated 10^th October 2005 and paragraph 40 of counsel’s written submission dated 20^th October 2005. There is therefore no question that the 1^st Defendant will be crushed “in the unhatched egg”, to use the description of Mr. Whitehead S.C. in light of the financial background of the holding Midland Group. On the other hand, if there should be a sum to be set off after trial or in any event the Plaintiff is required to repay the taxed costs to the 1^st Defendant, the Plaintiff is unlikely to have any problem given the evidence of means revealed in the Plaintiff’s affidavit evidence. I therefore consider that the second and third consideration above should be resolved in favour of the Plaintiff.

20.There is no authority cited to me in support of the Plaintiff’s application for costs on a common fund basis. I see no reason why I should depart from the usual party and party basis.

Order for costs

21.At the hearing, Mr. Wright has indicated that if the Anton Pillar application is not resisted, the appropriate order should be costs in the cause. That is a sensible position. For reasons which I have stated above, I make the following costs order:

i)

the Plaintiff’s costs in connection with the application before H.H. Judge Lok and the hearing before H.H. Judge Chow be in the cause, with certificate for two counsel;

ii)

the Plaintiff’s costs of and incidental to the 1st Defendant’s summons to discharge, including any costs incurred on 24th and 28th October 2005 for the purpose of further preserving the status quo, pending appeal and the hearing in connection with costs of the discharging application, be paid by the 1st Defendant on party and party basis forthwith, to be taxed, if not agreed with certificate for two counsel. For the purpose of taxation, the hearing on 25th November 2005 is appropriated to the hearing of the question of costs of the discharging application.

Leave to Appeal

22.The principles on which an application for leave to appeal are again, in dispute. The 1^st Defendant relies on the principles set out in Smith v Cosworth Casting Processes Limited [1997] 1 WLR 1538 by Lord Woolf, MR, as follows:

“i)

The Court will only refuse leave if satisfied that applicant has no realistic prospect of succeeding on the appeal. The test is not meant to be any different from that which is sometimes used, which is that the applicant has no arguable case. Why however this court has decided to adopt the former phrase is because the use of the word “realistic” makes it clear that a fanciful prospect or an unrealistic argument is not sufficient.

ii)

the court can grant the application even if it is not satisfied. There can be many reasons for granting leave even if the court is not satisfied that the appeal has any prospect of success. For example, the issue may be one which the court considers should in the public interest be examined by this court or, to be more specific, this court may take the view that the case raises an issue where the law requires clarifying.”

These principles were cited with approval by Leong CJHC in Ma Bik Yung v Ko Chuen, unreported, HCMP4303 of 1999, 8^th September 1999.

23.The Plaintiff, however, contends that Anton Pillar is an injunction granted by the court by exercising its discretion. The proper test of an appeal against an interlocutory injunction is set out in Hadmor Productions Ltd v Hamilton [1983] 1 AC 191 by Lord Diplock at 1046 as follows:

“Since reasons given by judges for granting or refusing interlocutory injunctions may sometimes be sketchy, there may also be occasional cases where even though no erroneous assumption of law or fact can be identified the judge’s decision to grant or refuse the injunction is so aberrant that it must be set aside on the ground that no reasonable judge regardful of his duty to act judicially could have reached it. It is only if after the appellant court has reached the conclusion that the judge’s exercise of his discretion must be set aside for one or other of these reasons that it becomes entitled to exercise an original discretion of its own.”

24.Further, the Plaintiff argues that the principles applied in the present case are those well-settled ones, such as those set out in Robb v Green, Yeko Trading and Gilman Engineering, and the 1^st Defendant has not demonstrated that my decision was based on incorrect points of law. So the Plaintiff submits that the heavy burden on the 1^st Defendant has not been discharged and its application for leave should be refused.

25.I have no doubt to accept that Smith v Cosworth sets out the correct general principles applicable to application for leave to appeal. It has been widely applied in leave to appeal applications: for instance, by H.H. Judge Ng in Bowardly Enterprises limited v Millenium Group Limited, unreported, DCCJ3039/2004, 3^rd August, 2005 and by H.H. Judge Muttrie in Unifruit Limited v Capital Years International Limited, unreported, DCCJ5798/2002.  I think Hadmor only sets out a narrow test restricted to appeal against the exercise of discretion.  If the ground of appeal is only restricted to exercise of discretion, one can apply the Hadmor test. If the ground of appeal fails to pass this test, the first limb of the Smith v Cosworth test is not satisfied. However, if the grounds of appeal fall outside the ambit of discretion, Hadmor provides no useful guideline.

26.Mr. Whitehead S.C. indicates that he is not appealing against my exercise of discretion. His initial grounds of appeal are set out in the 3^rd Affirmation of Tse Ka Oi filed herein on the 23^rd November 2005. After reading the said grounds, reading and hearing the submissions made by him, I think the 1^st Defendant’s grounds can be summarized as follows:

i)	whether or not a collocation of non-confidential information already in the public domain and photographs of publicly accessible properties and contacts details of those owners are confidential information belonging to the Plaintiff;
ii)	whether this collocation remains confidential in the hand of a third party;
iii)	I have not taken into account his oral/written submission that the opinion of the Chief Information Officer of the Midland Group on similar information being confidential was irrelevant to whether the information is confidential as a matter of law;
iv)	My finding or inferring of the shredding and disposal of documents by the employees have been carried out “with the consent or at least connivance of the 1st Defendant” was wrong because it is not the only possible inference.

27.Concerning the first ground, I have not been cited with any authorities that the general principles relied on, namely, Robb v Green, Yeko Trading and Gilman Engineering are inapplicable or otherwise overruled. These are well settled general principles for collocation cases.

28.Regarding the second ground, I have asked counsel for the 1^st Defendant whether the case of Spy Catcher (i.e. AG v Guardian Newspapers (No.2) [1990] AC 109) provided a sufficient answer. In reply, it is submitted that in Spy Catcher, the House of Lords was concerned with top secret whereas in the present case the court was concerned with confidential information. With due respect I disagree. In Spy Catcher, Lord Goff stated the principles in general term and there is no specific reference as to whether the information is top secret or confidential information. The relevant extract has been set out in paragraph 90 of my said Decision and I do not repeat the same here. In short, the principle is that a duty of confidence arises when confidential information (no distinction as to whether it is labelled top secret or otherwise) comes to the knowledge of a third party in circumstances where he has knowledge or ought to have knowledge that the information is confidential. Suffice it to say that such principle is not disputed by the 1^st Defendant: see paragraph 86(iii) of my said written Decision. So the question goes back to whether the information now sought to be protected is confidential information protectable in law, and is therefore the first ground. If it is confidential protectable information, Spy Catcher has provided an answer against the 1^st Defendant. I do not consider that the 1^st Defendant has established a realistic prospect under the first two grounds

29.Since there are sufficient grounds to come to the conclusion that the information sought to be protected is confidential information protectable as a matter of law, the 3^rd ground will fall even if the court has ignored his submission in that respect.

30.Regarding the fourth ground, my finding or inferring of the shredding and disposal of documents by the employees having been carried out “with the consent or at least connivance of the 1^st Defendant” is a reasonable and logical conclusion for the reasons set out in my said Decision. It has been stated therein that the alleged disposal took place within a few hours after the Anton Pillar had been served on a director and a senior director of the 1^st Defendant. It is true that in an interlocutory stage, the court cannot come to any conclusion of facts. However, it does not mean the materials before me cannot enable me to form a view as to where the merit lies for the purpose of the interlocutory injunction. My assessment is that the 1^st Defendant does not have a realistic prospect to have the inference overturned. 

31.Even if I were wrong and, as contended by the 1^st Defendant in paragraph 3.2.1. of the draft grounds of appeal, and the Court should have come to an equally reasonable inference that it was the ex-employees who might have so acted in the destruction of documents in view of the litigation or potential litigation and such destruction was without the consent or connivance of the 1^st Defendant, will the outcome of the application be different?  Is it not the purpose of an Anton Pillar to preserve evidence which is likely to be destroyed? If there is a real risk that evidence will be destroyed in the premises under the control of the 1^st Defendant, be it by the 1^st Defendant or its employees without its consent, certainly justice requires the order be granted in order to preserve the evidence.

32.In paragraph 19 of the 1^st Defendant’s written submission, the 1^st Defendant intends to raise the argument as to the applicability of the principle in Faccenda Chicken (Faccenda Chicken Limited v Fowler [1986] FSR 291) to confidential information (not amounting to trade secret) in the form of a database used by an employee after the termination of employment. With the greatest respect to counsel for the 1^st Defendant, the present case is concerned with the “surreptitiously filching” (to use the description of the Plaintiff) of confidential information by employees while they were still under the employ of their former employer for use after they have left to join their new employer, which is different from Faccenda Chicken. I fail to see why the Faccenda Chicken classification is helpful.

33.In so far as the second limb of Smith v Cosworth is concerned, the 1^st Defendant considered that the legal issues in this case are pre-eminently suitable to be considered by the Court of Appeal. It is submitted on behalf of the 1^st Defendant that it is not uncommon for employees in Hong Kong to leave one employer for another and take with them information considered by ex-employer to be confidential. The extent to which the new employer is bound under the law of confidence is a question the Court of Appeal will wish to consider. However, evidence on the prevalence of such alleged incidents has not been shown. Furthermore, as can be seen from my said Decision, the affidavit evidence reveals that confidential information has been taken away and sent to the new employer while an employee is still under employ of his old employer. It is not a case where the employee uses confidential information that he acquires in the course of employment of the old employer and necessarily takes away such information in his brain. The present case is a case of employees deliberately taking away information before they left. The law on the extent to which the new employer is bound in fact is quite settled. As I have stated above, the House of Lords in the Spy Catcher case has set out definitive statements of law on duty of confidence on a third party. I do not consider that the 1^st Defendant has sufficiently raised a case of public interest nor impressed this Court that the law in this area requires clarification.

34.In Lock v Beswick [1989] 1 WLR 1268, Hoffmann J (as he then was) stated at 1281 that there should be proportionality between the perceived threat to the plaintiff’s right and the remedy granted. The learned judge stated that it was a concept borrowed from the jurisprudence of the European Community. It is therefore the 1^st Defendant’s contention that the Court of Appeal may wish to consider the impact of Anton Pillar in the light of the new constitutional arrangement after the change of sovereignty on 1^st July 1997. With the greatest respect to counsel for the 1^st Defendant, even though this may be a question that the Court of Appeal may wish to consider, since there is very strong evidence of document destruction in the face of a court order, I simply fail to see how the 1^st Defendant can persuade the court that the present case is a proper one for such constitutional consideration.

35.By reasons of the above, I do not consider that the 1^st Defendant will have any realistic prospect of success nor has it raised any question or issue caught by the second limb of Smith v Cosworth. I dismiss the 1^st Defendant’s application for leave to appeal accordingly with costs to the Plaintiff, with certificate for two counsel, to be taxed if not agreed, and such costs be payable forthwith.

Stay of Execution of the Anton Pillar Order

36.It is the 1^st Defendant’s application that, if leave to appeal is not granted, it will immediately apply for the same to the Court of Appeal, and pending such application, apply for an interim stay of execution of the Anton Pillar Order otherwise the application to the Court of Appeal would not be rendered nugatory.  The Plaintiff has indicated that it will not oppose such stay provided appropriate undertakings to preserve the status quo are given.

37.I have not heard submissions on those undertakings. In facts counsel for both parties have worked out a mutually acceptable form of order with appropriate undertakings for my approval on 1^st November 2005 pending my said Decision to be handed down and I expect them to do the same this time. I therefore grant an interim stay of execution of the Anton Pillar Order for 21 days or until further order and in the meantime, the parties do submit an agreed draft order on the undertakings for the Court’s approval, or failing agreement on the draft within these 21 days, apply to me for further directions. There be liberty to apply generally for those directions.

Mr. Colin Wright & Miss Shannon Leung, instructed by M/s Cheung & Choy for the Plaintiff.

Mr. Robert Whitehead S.C. & Mr. Steven Kwan, instructed by M/s Iu, Lai & Li for the 1^st Defendant.