Shenzhen Futaihong Precision Industry Co., Ltd and Another v. Byd Co Ltd and Others
Read the full judgment text of HCA 2114/2007 on BabelCite. This High Court CFI judgment was delivered on 27 June 2008.
1. By way of these proceedings issued as of right in Hong Kong, the Plaintiffs allege that the 1 st and 2 nd Defendants (and the other Defendants) had through the Plaintiffs’ former employees misappropriated and exploited the Plaintiffs’ confidential information and trade secrets. The Plaintiffs seek various reliefs against the Defendants.
Cited by 1 case · Cites 5 cases
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HCA 2114 / 2007 IN THE HIGH COURT OF THE HONG KONG SPECIAL ADMINISTRATIVE REGION COURT OF FIRST INSTANCE ACTION NO. 2114 OF 2007 ------------------------ BETWEEN
------------------------ Before: Deputy High Court Judge Au in Chambers Date of Hearing: 11 & 12 June 2008 Date of Handing Down Decision: 27 June 2008
------------------------ DECISION ------------------------
I. Introduction 1. By way of these proceedings issued as of right in Hong Kong, the Plaintiffs allege that the 1st and 2nd Defendants (and the other Defendants) had through the Plaintiffs’ former employees misappropriated and exploited the Plaintiffs’ confidential information and trade secrets. The Plaintiffs seek various reliefs against the Defendants. 2. This is the 1st and 2nd Defendants’ application to stay or dismiss the present proceedings on the ground that the Intermediate People’s Court in Shenzhen (“the Shenzhen Court”) in the Mainland is the forum conveniens for the resolution of the dispute between the parties. 3. In order to better understand the arguments made by the parties, it is necessary for me to first set out below the relevant background. II. Background The dispute 4. The Plaintiffs and the 1st and 2nd Defendants are business rivals, engaging in the business of, inter alia, producing handset components and related products. 5. The 1st and 2nd Plaintiffs are incorporated in the PRC, and are the indirect wholly owned subsidiaries of Foxconn International Holdings Ltd, a listed company in Hong Kong. 6. Over the years, the Plaintiffs have maintained substantial production and manufacturing facilities in the Mainland. It is the Plaintiffs’ case that, for their business purposes, the Foxconn Group of companies (including the Plaintiffs) has developed a set of confidential information (“Confidential Information”) consisting trade secrets and operation manuals accumulated through years of operations, experience and investments into research and development. 7. The Confidential Information is for the Plaintiffs’ internal use only. Under their respective employment contracts and the Plaintiffs’ internal rules, their employees have express duties to keep the information confidential. 8. The 1st Defendant is also incorporated in the PRC but listed in Hong Kong. For that purpose and as required by the listing rules, it is also registered in Hong Kong under Part XI of the Companies Ordinance (Cap 32). 9. The 2nd Defendant is a Hong Kong incorporated company, and is wholly owned by the 1st Defendant. 10. In May 2005, the 1st Defendant recruited one Liu Xiang Jun (“Jun”) (the then handset production quality control engineer and chief operating officer of the 1st Plaintiff) to join the 1st Defendant as one of its staff. 11. In July 2005, one Si Shao Qing (“Si”) (then an officer of the Engineering Standards Department of the 1st Plaintiff) joined the 1st Defendant as its Manager of System Management Office. 12. In April or May 2006, Zhang Jian (“Zhang”) left the 1st Plaintiff and joined the 1st Defendant as one of its staff. 13. It is the Plaintiffs’ case that, Jun, Si and Zhang had divulged parts of the Confidential Information to some of the Defendants, and had procured other employees then still working for the Plaintiffs to pass on some other parts of the Confidential Information to the Defendants. These other employees included Wang Wei (“Wang”) and Yang Na Na. 14. The Plaintiffs further allege that, benefiting from the wrongful use of the Confidential Information so “stolen” from the Plaintiffs, the Defendants have since managed to expand their handset components manufacturing and related production business rapidly. This is reflected by the significant and rapid increase in their revenue generated through these parts of the business, and demonstrated by the facts that the turnover relating to the handset business of the Defendants’ Group recorded a yearly increase of more than 100% per year for 2005, 2006 and 2007. In monetary terms, these represent accrued profits to the 1st Defendant in the tunes of hundreds of millions of dollars. 15. The Plaintiffs say that, in relation to the above wrongful acts:
The present proceedings commenced in Hong Kong 16. The Plaintiffs issued the present proceedings against the Defendants on 5 October 2007. Generally based on the above alleged wrongful acts of misappropriation of the Confidential Information, the Plaintiffs claim against the Defendants for:
17. The Plaintiffs seek the following remedies:
18. By way of the Affirmation of E Weiqun filed herein to support the present applications, the 1st and 2nd Defendants effectively deny all the Plaintiffs’ allegations. Various proceedings in the PRC and in Hong Kong 19. Other than the present proceedings issued in Hong Kong, there are the following various proceedings that had been issued in Hong Kong and the Mainland, which are said by the 1st and 2nd Defendants to be relevant to this stay application. 20. In January 2005, several subsidiaries of the Foxconn Group, including the 2nd Plaintiff herein, brought civil proceedings against the 1st Defendant in the Shenzhen Court (“the 2005 PRC Action”). 21. In the 2005 PRC Action, it was claimed that the 1st Defendant had misappropriated trade secrets from the Foxconn companies, and damages in the sum of RMB 500,000 were claimed. In April 2007, the Shenzhen Court dismissed the claim. In the judgment dismissing the claim, it is stated that the Shenzhen Court by then was only dealing with the claim as an unfair competition dispute, but not a business secrets dispute. It further stated that the business secrets dispute should be resolved through other legal means. In February 2008, the plaintiffs withdrew the appeal lodged against that decision. 22. In June 2006, the Plaintiffs instituted a civil action against the 1st Defendant, Jun and Si in the Shenzhen Court (“the 2006 PRC Action”). The 2006 PRC Action was based on Article 10 (“Article 10”) of the Law of the People’s Republic of China Against Unfair Competition. 23. Article 10 effectively makes it a civil wrong in the PRC of a business operator to obtain, use or disclose another’s business secrets, and regards such a wrongful act as an infringement of business secrets. Article 10 further defines business secrets as any technology information or business information which is unknown to the public, and which can bring about economic benefits to its owner, who has adopted measures to keep it confidential. 24. Under the 2006 PRC Action, pursuant to an ex parte order made by the Shenzhen Court, the Court seized as evidence documents (“the Seized Evidence”) contained in two hard discs of the computers used by Jun and Si. 25. With the Seized Evidence, and after complaints were made by the Plaintiffs to the Public Security Bureau:
26. On 11 June 2007, the Plaintiffs commenced HCA 1246 of 2007 (“the 1st Hong Kong Action”) in Hong Kong against the same Defendants herein. The complaints made, and reliefs asked for, under the 1st Hong Kong Action were similar to those made in the present proceedings. 27. On 5 October 2007, the Plaintiffs discontinued the 1st Hong Kong Action. On the same day, they commenced the present proceedings. The Plaintiffs’ evidence (which is not challenged) is that they decided to withdraw the 1st Hong Kong Action and to issue the present action at the same time, as they did not want to waste further time to pursue their application to amend the statement of claim of the 1st Hong Kong Action, which was opposed by the 1st and 2nd Defendants. III. The relevant legal principles 28. Both parties agree that the overriding principles governing whether or not to stay the proceedings on the ground of forum non conveniens are those stated in Spiliada Maritime Corp v Cansulex Ltd [1987] 1 AC 460 at 467C. That is: whether the court is satisfied that there is an alternative forum in which the case can be tried more suitably for the interests of the parties and for the ends of justice. 29. In adopting and following Spiliada, the Hong Kong Court Appeal in The Adhiguna Meranti [1987] HKLR 904 at 907F-908B further developed the principles into the well-known 3-stage test as follows:
30. Further, under Stage I of the test:
31. Under Stage II, legitimate personal or juridical advantages could include any significant causes of action, substantive remedies or procedures that would not be available in the other forum. However, the mere existence of such juridical advantages in the local forum does not necessary lead to a refusal to stay. Whether a stay will be a granted or not depends on the balancing exercise under Stage III: Spiliada, supra, 482B-D per Lord Goff. 32. Under Stage III, each case must be looked at individually as to whether the deprivation of any or certain of the juridical advantages would result in rendering the plaintiff not having been able to obtain substantial justice in the other forum. There is no hard and fast rule in it, and the Court should look at all the circumstances to come to a view, sometimes an instinctive one, as to whether substantive justice would not be obtained in the foreign forum: de Dampiere, supra, 101E-F per Lord Templeman; The Atlantic Star [1974] AC 436, 468F-H per Lord Wilberforce; The Adhiguna Meranti, supra, 147G-H; Spiliada, supra, 483C-D per Lord Goff. IV. Applying the test to the present case 33. Before I start, I think it is useful for me to first set out what I regard as the principal issues arising in the present proceedings, by reference to the Statement of Claim and the 1st and 2nd Defendants’ general denial. These are:
34. Bearing these issues in mind, I will now go into the 3-stage test. Stage I 35. Mr Pe for the 1st and 2nd Defendants submits that the Shenzhen Court is clearly or distinctly the more appropriate forum than the Hong Kong Court to try the action, as the following factors show that the dispute and its issues are overwhelmingly connected to Shenzhen:
36. Notwithstanding the above submissions, I do not accept that the 1st and 2nd Defendants have discharged their burden to show that the Shenzhen Court is clearly or distinctly the more appropriate forum to try the dispute. My reasons are as follows. Place of incorporation of the parties and their businesses 37. In my view, the facts that PRC is the place of incorporation of the Plaintiffs and the 1st Defendant, and that their main businesses are carried on in the Mainland, have nothing to do with the trial of any of the issues in the present case. This would not have any impact, one way or the other, on whether justice could be obtained by the parties if the trial of the above listed issues is to be held in the Hong Kong Court or the Shenzhen Court. 38. I thus regard this factor is at most neutral to the question of whether the Shenzhen Court is clearly or distinctly a more appropriate forum. Location of the witnesses and senior management personnel 39. I also reject that this is a factor which shows clearly or distinctly that the Shenzhen Court is the more appropriate forum. 40. In this respect, it is perhaps helpful for me to first repeat below Mr Recorder Geoffrey Ma’s observation[1] on the relevance of the location of potential witnesses as a factor in considering where is the more appropriate forum:
41. Further, in Yu Lap Man, supra, it is also observed by Cheung J (as he then was) that in a stay application, it is insufficient for the applicant for a stay to show mere practical convenience for a potential witness to attend trial in the foreign forum. His Lordship explains at 734B-C as follows:
42. In the present case, the 1st and 2nd Defendants have failed to identify in their evidence as to which of these senior management personnel would likely to be called as witnesses at trial, and the prima facie relevance their evidence to any of the identified issues. 43. Further and in any event, even if any of these personnel are to be witnesses at the trial, the evidence is that most of them are located in Shenzhen and that they could come to Hong Kong with a 45 minutes’ journey. There is no suggestion that there is a risk that they could not attend the trial if it is to be held in Hong Kong. 44. In the premises, I accept the submissions of Mr Poon, SC, leading Mr Godfrey Lam SC and Ms Elizabeth Cheung for the Plaintiffs, that the 1st and 2nd Defendants only show that it may be practically more convenient for the potential witnesses to attend a trial in Shenzhen. As such, and applying the principles set out above at paragraphs 40 and 41 above, this does not show that the Shenzhen Court is the more appropriate forum in which the case can be tried more suitably for the interests of the parties and for the ends of justice. 45. Although it is not in the evidence, Mr Pe then submits that, as a matter of common sense, it is unlikely that those former employees of the Plaintiffs, who the Defendants intend to call as witnesses, would be willing to come to Hong Kong to give evidence, as they have been convicted in Shenzhen. Therefore, if the case is to be tried in Hong Kong, serious prejudice would be caused to the 1st and 2nd Defendants if these witnesses refuse to come to Hong Kong. 46. I am unable to accept Mr Pe’s above submissions:
47. In the premises, I do not find that the location of the 1st and 2nd Defendants’ senior management personnel and the Plaintiffs’ former employees, constitutes a factor to support that the Shenzhen Court is clearly or distinctly the more appropriate forum to try the present action. The location of the documents 48. Again, as in the case of the location of witnesses, generally the mere fact of the foreign location of the relevant documents is not necessarily supportive of the proposition that the foreign court is the more appropriate forum to try the case. The applicant for a stay should further show that, for example, there is at least a risk that some of these document may not be made available if the trial is to be conducted locally. See: Rambas, supra, 264B-C. 49. In the present case, although the unchallenged evidence is that the purported related documents are likely to be located in Shenzhen at the 1st and 2nd Defendants’ factories and offices, there is no evidence to suggest that if the trial is to be conducted in Hong Kong, there is a risk that some of these documents may not be made available in Hong Kong. 50. In these circumstances, and given the relatively short journey between Hong Kong and Shenzhen, I similarly do not accept that this is a factor which shows that the Shenzhen Court is clearly or distinctly the more appropriate forum. The substance of the alleged torts were committed in Shenzhen 51. The 1st and 2nd Defendant rely heavily on the case of The Albaforth, supra, to support the proposition that as a general rule, the forum in which the substance tort was committed is the prima facie natural forum to try the dispute. 52. In Albaforth, the shipowners was initially granted an ex parte leave to serve out of jurisdiction a writ on a bank in New York and Connecticut, to claim damages for negligent misstatement. The ex parte leave was later set aside by the Court. The shipowners appealed that decision to the Court of Appeal, which allowed the appeal. Ackner LJ expressed at p 94 the view that the jurisdiction in which a tort had been committed was prima facie the natural forum for the determination of that dispute. Robert Goff LJ also said at p 96 as follows:
53. In Esquel Enterprises, supra, the Court of Appeal in Hong Kong adopted the above observations in The Albaforth, and confirmed at paras 13 and 28 the first instance judge’s conclusion that the foreign jurisdiction where the publication of the alleged defamatory material was made, was the prima facie natural forum for the determination of the claim. 54. Relying on these authorities, Mr Pe for the 1st and 2nd Defendants submits that as the alleged wrongs complained by the Plaintiffs in this action are tortuous in nature, and were indisputably committed in Shenzhen, it is clear that the Shenzhen Court is clearly or distinctly the more appropriate forum to try the matter. 55. Mr Poon for the Plaintiffs however submits the following:
56. I agree with Mr Poon’s submissions. 57. First, on a proper reading of the Statement of Claim in the present action, I accept that the claim for breach of confidence is the Plaintiffs’ main cause of action against the Defendants. The other tortuous claims are periphery and supplementary to this principal claim. 58. Secondly, the authorities cited to me do support the proposition that it is at least arguable that the cause of action in breach of confidence should not be categorized as a form of tort. As stated by the learned editors of Clerk and Lindsell on Torts (19th ed) at para 28-03 on the nature of a claim in breach for confidence:
59. Given this uncertainty as to the nature of the action for breach of confidence, I do not think the 1st and 2nd Defendants could demonstrate to me that for the present case, the Shenzhen Court is clearly or distinctly the more appropriate forum simply by relying on the propositions laid down in The Albaforth and Esquel Enterprises. 60. I also accept that even for a claim based on tort, under The Albaforth and Esquel Enterprises, although the place in which the tort was committed is a strong prima facie natural forum for the determination of the dispute, it is by no means conclusive and this presumption is displaceable. I do not think Mr Pe is submitting otherwise. 61. As such, given that (a) the principal cause of action in the present claim is arguably not a form of tort, (b) the other tortuous claims are only supplementary to this principal claim, and (c) the PRC laws governing these tortuous claim are presumed to be the same as Hong Kong, I am satisfied that the presumption on the natural forum advanced in The Albaforth and Esquel Enterprises is displaced, in that this is not a case where it is shown that the Shenzhen Court is clearly or distinctly the natural forum to try the disputes. The relevance of PRC law 62. This can be dealt with shortly. 63. As mentioned above, for the identified issues in this action, the 1st and 2nd Defendants have not adduced any expert evidence to show that any applicable and relevant PRC laws are different from Hong Kong laws. As such, the relevant PRC laws are presumed to be the same as Hong Kong law. 64. In the premises, even if any of the PRC laws is to apply to determine any of the issues, I am of the view that the Hong Kong courts are as equally equipped as the Shenzhen Court to deal with them. 65. Mr Pe for the 1st and 2nd Defendants then refers me to the Plaintiffs’ Statement of Claim, and points out that the Plaintiffs have specifically pleaded Article 10. He submits that the need to determine the meaning and effect of Article 10, being a PRC legal code, points to the Shenzhen Court as the more appropriate forum. 66. For this, Mr Poon for the Plaintiffs confirms that the reference to Article 10 in the Statement of Claim is only for the purpose of satisfying the double actionability test under the Boys v Chaplin principle. The Plaintiffs are not relying on Article 10 as a material part of their claims against the Defendants. Therefore (Mr Poon further submits) no issue arises in the present action on the interpretation and applicability of Article 10. 67. Given Mr Poon’s confirmation, I am satisfied that if the trial of the action is to be conducted in Hong Kong, it is not necessary to determine the meaning and effect of Article 10 under PRC law. 68. Further, even if I were wrong above, and the issue of the meaning and effect of Article 10 under PRC law did arise in the trial, the expert evidence before me is to the effect that the interpretation and effect of Article 10 under PRC law is not controversial. As such, I am also satisfied that Hong Kong courts are still competently equipped to deal with this issue. As said by Cheung JA in Pei Zheng Middle School, supra, at para 20, Hong Kong courts are generally highly competent to deal with any legal or factual issues with a Mainland element. 69. For these reasons, I am not persuaded that, even with the potential relevance of PRC law in the trial of the present proceedings, the Shenzhen Court is clearly or distinctly the more appropriate forum. Conclusion under Stage I 70. For the above reasons, the 1st and 2nd Defendants have failed to show that the Shenzhen Court is clearly or distinctly the more appropriate forum to try the present action. 71. On this basis alone, I would dismiss the 1st and 2nd Defendants’ stay application. 72. However, if I were wrong in the above, I will deal with the arguments under Stages II and III as follows. Stage II 73. The Plaintiffs say that they would be deprived of the following personal or juridical advantages if the action is to be stayed for the Shenzhen Court:
Constructive trust, tracing and indemnity costs 74. As a start, Mr Pe for the 1st and 2nd Defendants effectively and fairly accepts that under the PRC legal system and jurisprudence, the remedies of (a) constructive trust and tracing, (b) exemplary damages, and the award of costs on an indemnity basis are not available. 75. Notwithstanding the concession, Mr Pe submits that, given the state of the pleading and the evidence before the Court, it is highly unlikely that the Plaintiffs would be able to obtain these reliefs and indemnity costs even if the trial is to be conducted in Hong Kong. As such, the so-called deprivation of the advantages is more apparent than real. 76. I am unable to accept Mr Pe’s submissions. 77. In an application for stay on the ground of forum non conveniens, the Court is not to be concerned with, nor is it appropriate for it to deal with, the substantive merits of the claim. See: Pei Zheng Middle School, supra, at paras 16-18. In particular, when it is not the 1st and 2nd Defendants’ submissions that any parts of the Statement of Claim are liable to be struck out. 78. In the circumstances, I do not think I can say at this stage that it is highly unlikely that the Plaintiffs, if successful at trial, would not be granted the relief of constructive trust, tracing and an award of costs on an indemnity basis. These matters should only be fully canvassed at trial. 79. As a result, I would accept for the present purpose that, if the action is stayed for the Shenzhen Court, the Plaintiffs would be deprived of these potential juridical advantages. Discovery and interrogatories 80. From the PRC law expert evidence adduced by both parties, it is common ground that the major difference between the discovery procedure in Hong Kong and the civil evidence gathering procedure in the Mainland can be described as follows:
81. It is so accepted by the 1st and 2nd Defendants that, there is no procedure under the PRC legal system similar to that of the administration of interrogatories as available in Hong Kong. 82. Mr Poon for the Plaintiffs submits that the compulsory and more comprehensive discovery in Hong Kong, coupled with and the interrogatories procedure, clearly constitute a juridical advantage for the Plaintiffs. The advantage will be lost if the case is to be stayed for the Shenzhen Court. 83. Mr Pe for the 1st and 2nd Defendants submits otherwise. 84. First, Mr Pe relies on the observation of Lord Goff in Spiliada at 482F to 483B, and submits that it is established that the concept of “legitimate personal or juridical advantage” does not include any of the special features of an extensive discovery such as the one available in Hong Kong. Thus, as submitted by Mr Pe, there is simply no question of there being a juridical advantage in relation to the Hong Kong discovery and interrogatories procedures. 85. Secondly, as a matter of evidence, Mr Pe says that the PRC civil procedures do provide a rather similar and comprehensive evidence disclosure system. The two procedures are therefore not significantly different. He relies on the following evidence:
86. Mr Pe therefore submits that, under the relevant PRC procedural laws, it is not the case that there is no procedure to allow the Plaintiffs to seek further evidence from the 1st and 2nd Defendants, even if they are against the 1st and 2nd Defendants’ case. Quite to the contrary, the procedures set out above are comprehensive and effective, as they even provide for a detrimental presumption against a party who refuses to disclose certain evidence when asked by the court to do so. There is therefore again (Mr Pe so further submits) no question of a juridical advantage vis-à-vis the discovery and interrogatories procedures. 87. I do not accept Mr Pe’s submissions. 88. I will deal with Mr Pe’s submissions on the law first. When discussing the test in relation to the loss of legitimate personal or juridical advantage, Lord Goff in Spiliada made the following observations at 482B-483C:
89. In my view, Lord Goff’s above observation deals more with the proposition as to whether the deprivation of a juridical advantage would invariably lead to the denial of substantial justice. His Lordship came to the view that it is not necessary the case. He then cited the examples of the differences between the discovery procedures and the different levels of recoverable damages in two different jurisdictions to say that, the deprivation of such “juridical advantages” generally would not lead to the denial of substantial justice to the party who seeks to rely on a more extensive discovery procedure or higher level of damages available in the local jurisdiction. 90. However, I do not think Lord Goff waslaying down a generally applicable principle or proposition that, in every forum non conveniens case, the deprivation of a more extensive discovery procedure, or a higher level of recovery damages in the local jurisdiction, would not constitute a “legitimate personal or juridical advantage” and would never lead to the conclusion that the plaintiff would not be able to obtain substantial justice in the other forum. Each case must be decided on its own circumstances. That is why, after setting out his general observations, Lord Goff emphasized at 483D that “…these considerations may lead to a different conclusion in other cases”. 91. I therefore do not accept that there is any established legal proposition that differences in the discovery procedures or levels of damages in two different jurisdictions can never amount to a juridical advantages or would never constitute a valid consideration to refuse to stay the proceedings on the ground of forum non conveniens. Each case must be looked at individually with reference to its own nature and circumstances. 92. Thus, in Beecham Group PLC v Norton Healthcare Ltd [1997] FSR 81, 99, a case where the plaintiffs claimed against the defendant for breach of confidence, Jacobs J in granting leave to the plaintiff to serve outside jurisdiction under O. 11, accepted that the more extensive discovery and interrogatories provided by the English procedure, together with other factors, constituted legitimate juridical advantages, and militated “in favour of the United Kingdom being a forum conveniens for the trial of breach of confidence” against the foreign corporate defendant in Slovenia. 93. In relation to Mr Pe’s second point, with the expert evidence now placed before the Court, and for the following reasons, I am satisfied that there are significant differences between the discovery procedures in Hong Kong and the evidence gathering procedures in the Mainland. 94. As rightly pointed out by Mr Poon, in order to invoke the various articles under the PRC procedure law as suggested by the 1st and 2nd Defendants’ expert, it is necessary for the Plaintiffs to be able to first demonstrate to the Shenzhen Court (a) the existence of those documents, and (b) that the 1st and 2nd Defendants are in possession of them. 95. However, without the automatic and compulsory Hong Kong discovery and interrogatories to provide the initial “paper trail”, especially for documents which are detrimental or unfavourable to the 1st and 2nd Defendants’ own case, it is very difficult (if not impracticable) for the Plaintiffs to identify the existence of these further documents, so as to invoke those articles under the PRC procedure law. 96. This is particularly so in the present case, which is primarily premised on the Defendants’ breach of confidence and wrongful use of the Confidential Information. For cases like this, most of the relevant evidence concerning the breach, the wrongful use and the extent of the said use of the Confidential Information, is likely to be only within the Defendants’ own knowledge and possession. Therefore, without the initial paper trails and information that would have been created by the compulsory and comprehensive discovery and interrogatories procedures, it would be even more difficult for the Plaintiffs to satisfy the preconditions under the PRC procedure law to invoke the relevant articles to invite the Shenzhen Court to demand the disclosure of unfavourable evidence and documents from the Defendants. 97. I therefore accept that there is an appreciable and significant difference between the two discovery procedures in Hong Kong and the Mainland. For the purpose of this particular case, this could be properly regarded as a legitimate juridical advantage that is available to the Plaintiffs if the proceedings are to remain in Hong Kong. Damages 98. The Plaintiffs’ evidence (inclusive of the evidence of the Plaintiffs’ PRC law experts, Mr Li and Mr Dicks) suggests the following:
99. In light of the above evidence, it is Mr Poon’s submissions that the damages that the Plaintiffs could recover, if the action is to be tried in the Shenzhen Court, are likely to be limited and be substantially below what they could recover in Hong Kong. 100. In this respect, the 1st and 2nd Defendants’ expert in PRC law, Mr Liu, agrees with the Plaintiffs’ views on the PRC law stated at paragraph 98 above. However, Mr Liu is of the opinion that given the criminal prosecution that may be commenced against the 1st Defendant in the PRC, and if the prosecution is successful, the Plaintiffs would then be entitled to commence what is described as the “ancillary civil action” against the 1st Defendant to claim for further damages. He further opines that in similar ancillary civil actions, the PRC courts have awarded damages exceeding RMB100 million. In light of this part of the unchallenged evidence, Mr Pe for the 1st and 2nd Defendants submits that there could be no “real” deprivation of the alleged juridical advantage in damages as suggested by the Plaintiffs. 101. In relation to the “ancillary civil action”, the unchallenged evidence of the Plaintiffs’ experts however shows that this procedure is entirely dependent upon the successful criminal prosecution of the 1st Defendant, which is beyond the Plaintiffs’ own control. The procedure is also not well suited to more complex litigation. Further, Mr Poon submits that, without the discovery procedure and tracing remedy provided under common law, any claim for damages in such an “ancillary civil” action is also unlikely to be fruitful due to the lack of means on the plaintiffs’ part to prove the Defendants’ illegal gains under the relevant PRC law. As such, Mr Poon further says the Plaintiffs do stand the loss of a realistic juridical advantage in having a lower level of recoverable damages if the action is to be tried in the Shenzhen Court. 102. I accept Mr Poon’s submissions. Coupled with the absence of the compulsory and comprehensive discovery procedure and the tracing remedy under PRC law, I am satisfied that the “ancillary civil action” available to the Plaintiffs is unlikely to be effective to enable them to recover substantial damages in the Shenzhen Court. 103. In the circumstance, I am prepared accept to that the Plaintiffs would practically suffer a juridical disadvantage in the form of a lower level of recoverable damages if this action is stayed for the Shenzhen Court. Injunction 104. It is not disputed that under PRC law, there is no relief in the form of a mandatory injunction to require the Defendants to disclose their infringing use. Mr Poon at paragraph 55 of his skeleton says the Plaintiffs have asked for such a relief in the present claim. 105. At first blush, I have hesitation as to whether the Plaintiffs have asked for such an order under their pleaded prayers for injunctive relief, which are as follows:
106. However, on a closer reading of the pleaded prayers as a whole, I accept that they could include an order of such a nature. 107. In the circumstances, the existence of this form of the mandatory injunction in this jurisdiction is clearly a juridical advantage for the Plaintiffs. 108. In relation to the relief of restraining the Defendants from continuing and repeating the wrongful acts using the Confidential Information, the evidence shows that the Shenzhen Court can order “cessation of infringement”, which includes the prohibition of disclosure of the Plaintiffs’ trade secrets. However, it is pointed out by the Plaintiffs’ experts, which is not challenged by the 1st and 2nd Defendants, that the enforcement of such an order has to be achieved by the ordinary process of civil execution, and this can be a lengthy process. 109. As such, Mr Poon for the Plaintiff submits that, the existence of a more expedient way of enforcing a prohibitory injunction under Hong Kong law[3] again amounts to a juridical advantage for the Plaintiffs, if the action is to be tried in Hong Kong. 110. I do not accept Mr Poon’s submissions. Albeit it may have to take longer for the Plaintiffs to enforce a prohibitory form of injunctive relief in Shenzhen or the Mainland, the fact is that they can obtain such a relief. There is no evidence before me to show what is the likely length of time to enforce such an order by way of civil execution. As such, the mere fact that such an execution process can be lengthier than that in Hong Kong does not satisfy me that this Hong Kong procedure therefore constitutes a juridical advantage for the Plaintiffs under the purview of forum non conveniens. I repeat Lord Goff’s observations in Spiliada quoted at paragraph 88 above. Conclusion under Stage II 111. Under stage II, I therefore conclude that the Plaintiffs would potentially be deprived of the following juridical advantages, if the case is to be stayed for the Shenzhen Court:
Stage III 112. The Plaintiffs’ claim is premised primarily on the breach of confidence, and the wrongful use of the Confidential Information by the Defendants to their benefit, and to the detriment of the Plaintiffs. In such a claim, as rightly submitted by Mr Poon, substantial portions the evidence which is relevant to the alleged wrongful infringing conducts on the parts of the Defendants, and the extent of the use of the Confidential Information, is likely to be only within the Defendants’ own knowledge and possession. 113. In the circumstances, I accept that the deprivation of the compulsory and comprehensive discovery and the procedure for the administration of interrogatories would constitute a prejudice to the Plaintiffs in obtaining relevant evidence to advance their claim. I therefore further accept that the lack of these procedures under the PRC legal system would result in real risk that the Plaintiffs may not be able to obtain substantial justice if the matter is to be tried in the Shenzhen Court instead of here. 114. Similarly, given the nature of the Plaintiffs’ claim, and given that the volume of the subject business turnovers for both parties are substantial, it is essential to the Plaintiffs to be granted remedies that would (a) adequately compensate their loss (if found) by way of damages (including exemplary damages) or an account of profit, and (b) effectively prevent the Defendants from continuing the breaches or wrongful use of the Confidential Information. In the premises, I also accept that the absence of the relief and remedy in constructive trusteeship, tracing, mandatory injunction and a higher level of damages, collectively looked at, would result in the risk that Plaintiffs would not be able to obtain substantial justice if the case is to be tried in the Shenzhen Court. 115. The 1st and 2nd Defendants however submit that, as observed by Lord Goff in Spiliada (as quoted in paragraph 88 above), the different level of damages within the two different jurisdictions should seldom lead to the conclusion that substantial justice would not be obtained in the foreign forum. It therefore should not be a ground to refuse a stay. 116. I do not accept this submission:
117. The 1st and 2nd Defendants also submit that, in performing the balancing exercise to decide whether the Court should refuse to stay for forum non conveniens, the Court should take into account of (a) the various civil proceedings that had been commenced by the Plaintiffs in Shenzhen, and (b) the criminal proceedings prompted by the Plaintiffs against the 1st Defendant in Shenzhen. This is because (as submitted by Mr Pe) in issuing and triggering these proceedings in Shenzhen, the Plaintiffs must have regarded that they would be able to obtain substantial justice in that jurisdiction. 118. However, even taking these various Shenzhen proceedings into account, I do not think it would in any material way affect my above conclusions that it would be unjust to deprive the Plaintiffs’ those Hong Kong juridical advantages if the proceedings are stayed for the Shenzhen Court. My reasons are as follows:
119. In the premises, under stage III, I conclude that the 1st and 2nd Defendants have failed to show that, notwithstanding the deprivation of the above juridical advantages, substantial justice would still be done for the interests of the parties if the case is to be tried in the Shenzhen Court. V. Conclusion 120. For the reasons set out above, the 1st and 2nd Defendants have failed to show that the Shenzhen Court is clearly or distinctly the more appropriate forum than the Hong Kong Court to try the present case more suitably for the interests of the parties and for the ends of justice. 121. I therefore dismiss the 1st and 2nd Defendants summons for a stay or dismissal of the present proceedings on the ground of forum non conveniens. 122. I further make an order nisi that costs of this application be to the Plaintiffs, to be taxed if not agreed, with certificate for two counsel. Unless any of the parties applies in writing to vary the same, this order will be made absolute 14 days after this judgment.
Mr. Winston POON, SC, leading Mr. Godfrey LAM, SC & Ms. Elizabeth CHEUNG, instructed by Messrs JSM, for 1st & 2nd Plaintiffs. Mr. Robert Pe of Messrs Coudert Brothers for 1st & 2nd Defendants. [1] Rambas, supra, at 261 to 262A [2] Although the Court of Appeal’s decision went eventually to the House of Lords, Mr Poon submits that the House of Lords’ decision does not touch upon this aspect of the Court of Appeal’s decision. [3] By way of a committal for contempt and the issue of a writ of sequestration, |
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