Shenzhen Futaihong Precision Industry Co., Ltd and Others v. Byd Co Ltd and Others

HCA 2114/2007

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NO. 2114 OF 2007

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Before: Deputy High Court Judge L. Chan in Chambers

Date of Hearing: 13 July 2010

Date of Decision: 24 August 2010

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D E C I S I O N

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1.This is an application by the plaintiffs and the defendants by counterclaim to strike out parts of the counterclaim.

The plaintiffs’ claim

2.The action was brought on 5 October 2007.  The Re-Amended Statement of Claim was filed on 2 September 2009.  The plaintiffs claim that they have, by experience and extensive investments in research and development, developed a set of confidential information for the smooth, efficient and effective running of the group’s business.  The confidential information includes operation manuals that contain operation procedure, various types of production and procedural flow charts, forms and quality control manuals.  The confidential information also includes records of suppliers and customers.  There are pleaded a series of 14 schedules of documents which are included as the confidential information.  The plaintiffs further plead that the confidential information constitutes trade secrets which have been treated by them in a confidential manner.  The staff of the plaintiffs are obliged not to disclose them to any 3rd party even after termination of employment with the plaintiffs

3.However, the 1st defendant has since May 2005 started to entice and recruit senior staff of the plaintiffs and procured such people to disclose the confidential information to the defendants without the knowledge or consent of the plaintiffs.  As a result, the plaintiffs claim that the 1st, 2nd, 6th and 7th defendants are liable to them for breach of the law of the Mainland against unfair competition.

4.The defendants’ group then became a market leader and was in direct competition with the plaintiffs in the sale and production of mobile handsets and components.  The plaintiffs complain that they as a result suffered loss and damage in the costs for producing the confidential information, the compensation paid to others to whom the plaintiffs owed a duty to keep the information confidential and loss of business opportunities to be assessed.  They also seek an account of profits from the defendants.  There are also a claim that the defendants had wrongfully induced the plaintiffs’ former employees to breach their duties not to disclose the confidential information without the consent of the plaintiffs and a claim of conspiracy by the defendants to unlawfully obtain and use the confidential information.

The defendants’ counterclaim

5.The defendants were granted leave on 2 October 2009 to re-amend their defence and to bring in a counterclaim.  They were further granted leave to effect some minor re-re-amendments on 28 December 2009.  The defendants’ counterclaim is directed to the 1st and 2nd plaintiffs and two other companies in the plaintiffs’ group.  They are hereinafter referred to as the defendants by counterclaim. 

6.The defendants plead in the counterclaim that the defendants by counterclaim have since 2006 been unlawfully interfering with the business of the defendants by unlawful means with the object and effect of causing loss and damage to the defendants business.  They say that the defendants by counterclaim have embarked upon a course of conduct of procuring and using false and fabricated evidence or evidence unlawfully obtained to launch proceedings and persecution against the plaintiffs and/or their employees.  The defendants by counterclaim then made and issued false statements of and concerning the defendants to the effect that the defendants and/or their staff had allegedly stolen or misused the confidential information or trade secrets of the defendants by counterclaim.

7.The defendants then plead that the 4th defendant by counterclaim had in about May 2006 unlawfully detained a former employee in an attempt to obtain from this person false evidence of misappropriation and disclosure of confidential information to the defendants (para. 62).  There is a further allegation that the defendants by counterclaim had in about June/July 2006 planted soft copies of documents in a computer and hard copies of documents at the apartment of this person without his knowledge or consent (paras. 63 to 65).  There is another allegation that the 4th defendant by counterclaim had in around October 2006 unlawfully intimidated another former employee to obtain a false confession from her to the effect that she had been procured to divulge confidential information to someone working for the defendants (para. 66).

8.There is then an allegation that the defendants by counterclaim had in about September 2006 paid RMB10 million bribe to the then director of a Judicature Appraisal Centre for Intellectual Properties in Beijing to gain access to and/or tamper with the evidence under examination of the centre (para. 67).  There is then an allegation that the 1st, 3rd and/or 4th defendant by counterclaim had in May/June 2008 paid brides to a then employee of the 7th defendant to induce him to breach his duty of confidence to the 7th defendant by fabricating evidence that certain of the plaintiffs’ documents had been passed amongst or used by some employees of the defendants (para. 68). 

9.The counterclaim contains some particulars of these allegations under paras. 62 to 68.  The defendants also provided some further and better particulars of these allegations on 26 February 2010.

10.The defendants then plead that the defendants by counterclaim did the acts alleged in paras. 62 to 68 to fabricate false evidence to support the various legal proceedings and criminal complaints commenced by the 3rd and 4th defendants by counterclaim (the 1st and 2nd plaintiffs) against the defendants or their employees and to make and publish defamatory statements against the 1st defendant.  All these were done with intent to cause loss to the defendants and to damage their reputation, credibility and relationship with investors and customers and reduce their market share.

11.The defendants then refer to some legal proceedings brought by the defendants by counterclaim against them and a number of public announcements made about them.  They plead in the counterclaim that these announcements were untrue and defamatory of the defendants and had caused loss and damage to the defendants. 

12.Finally, they plead that the defendants by counterclaim have from 2006 onwards conspired with each other to injure the defendants.  They had in pursuance of the conspiracy carried out certain acts including those pleaded in paras. 62 to 68 of the counterclaim.

Summons to strike out parts of the counterclaim

13.The plaintiffs and the defendants by counterclaim issued a summons on 21 January 2010 to strike out paras. 62 to 68 on the grounds that they disclose no reasonable cause of action and/or the claims they made are scandalous, frivolous and/or vexatious, may embarrass the fair trial of the action and is otherwise an abuse of process of the court.

14.Regarding the allegation in para. 67, they seek in the alternative to strike out of all references to alleged “tampering” with evidence on the grounds of no reasonable cause of action and/or the claim is scandalous, frivolous and/or vexatious, may embarrass the fair trial of the action or is an abuse of the process of the court. 

15.Regarding the allegation in para. 68, they also seek in the alternative to strike out all references to the alleged “fabrication” of evidence on the ground that such claim is scandalous, frivolous and/or vexatious, may embarrass the fair trial of the action or is otherwise an abuse of process of the court.

16.In the Re-Amended Summons to strike out, they also seek the consequential striking out of references to these allegations as contained in other paragraphs.

The parts of the counterclaim under attack

17.I set out below paras. 61 to 68 of the counterclaim to give a comprehensive view of the paragraphs under attack:

“6.1 From about 2006 onwards, the 1st, 2nd, 3rd and/or 4th Defendants wrongfully and unlawfully interfered with the business and economic interests of the Plaintiff by using unlawful means with the object and effect of causing loss and damage to the business of the Plaintiffs. The matters complained of are set out in paragraphs 62 to 121 below. During the said period, the 1st, 2nd, 3rd and/or 4th Defendants embarked upon a course of conduct of procuring and using false or fabricated evidence and/or evidence unlawfully obtained to launch proceedings and prosecution against the Plaintiffs and/or their staff and employees and then made and issued false statements of and concerning the Plaintiffs to the effect that the Plaintiffs and/or their staff had allegedly stolen or misused Defendants’ confidential information or trade secrets. The unlawful means included unlawful detention, illegal planting of documents, intimidation, uttering and using false, evidence in proceedings, bribery, including bribing the 7th Plaintiff’s employee to act an breach of confidence and steal documents and defamation.

Unlawful detention of Ping

6.2 Song Xufeng (‘Song’) who was an employee and 课长 (supervisor), the person in charge of the security department of the 4th Defendant and was at all material times (acting on behalf of the 4th Defendant), and Wu Guizhou (‘Wu’), who was an employee and the 副理 (assistant manager) of the security department of the 4th Defendant and was at all material times acting on behalf of the 4th Defendant, arranged for Ping to be unlawfully detained in an attempt to obtain false evidence from him that he had wrongfully misappropriated the 4th Defendants’ business secrets and disclosed the same to Jun/the Plaintiffs and/or that Jun/the Plaintiffs had wrongfully misappropriated the 4th Defendants’ business secrets:

PARTICULARS

(1) Ping was an employee of the 4th Defendant from around June 2001 to around May 2006, and an employee of the 1st Plaintiff from around October 2006 to date.

(2) On or about 18 May 2006, the 4th Defendant filed a criminal complaint against Ping that he had wrongfully disclosed and/or misappropriated the 4th Defendant’s business secrets.

(3) Song and Wu (acting on behalf of the 4th Defendant) arranged for Ping to be unlawfully detained at the Foxconn Group’s premises at Shenzhen Baoan District Longhua Eastern Ring Second Road No. 2 深圳宝安区龙华镇东环二路二号 from 18 May 2006 to 22 May 2006.

(4) During the aforesaid period of unlawful detention, Song and Wu acting on behalf of the 4th Defendant attempted to intimidate and/or coerce Ping to confess, inter alia, that he had e-mailed or disclosed the 4th Defendant’s confidential documents to Jun (who was Ping’s brother-in-law).

(5) On or about 26 May 2006, the Shenzhen Public Security Bureau Baoan Branch (‘Baoan PSB’) commenced criminal investigations against Ping for infringement of commercial secrets.

(6) On 31 May 2006, Ping was placed under residential surveillance by the Baoan PSB at 警务处, a sub-station of Yousong Police Station (油松派出所) (which was in the premises of the Foxconn Group) and was released on 1 September 2006 without charge.

Illegal planting of documents in Ping’s Apartment and on Ping’s computer

6.3. In or around June/July 2006, the 1st, 2nd, 3rd and/or 4th Defendants planted the soft copies of the following documents (which have been identified at Schedule 1 of the Re-Amended Statement of Claim on Ping’s computer (‘Ping’s Computer’) located in Ping’s apartment situated at Building 6, No. 701B Meili Jiayuan Bei Qu, Longhua, Zhenzhen (深圳龙华美丽家园北区6栋B单元701号) (‘Ping’s Apartment’), without the knowledge or consent of Ping:

（1） ES-MOTOROLA-01R85025D01

（2） ES-MOTOROLA-11R88985N01

（3） ES-MOTOROLA-12G13933A20

（4） ES-MOTOROLA-12M05048A79

（5） ES-MOTOROLA-12M05060A88

（6） QS-06

（7） QS-08

（8） QS-14

（9） QS-18

（10）QS-22

64. Also in or around June/July 2006, the 1st, 2nd, 3rd and/or 4th Defendants planted hard copies of the following documents (being documents belonging to the Plaintiffs) at Ping’s Apartment (the ‘Planted Documents’), without the knowledge or consent of Ping:

(1) MSP08-1-007

(2) MSP08-3-012

(3) MSP08-2-015

(4) MSP08-2-005

(5) MSP08-2-016

65. On or about 6 July 2006, the Baoan PSB conducted a search of Ping’s Apartment. After such search, Ping’s Computer and the Planted Documents were seized by the Baoan PSB. Shortly thereafter, Ping’s Computer was taken away in a vehicle belonging to the 1st, 2nd, 3rd and/or 4th Defendants.

Unlawful intimidation of Zhang

66. In or around October 2006, Wu (acting at all material times on behalf of the 4th Defendant) unlawfully intimated Zhang in order to obtain a false confession from her that Jun had procured and/or induced her to divulge confidential documents of the 4th Defendant to him.

PARTICULARS

(1) Zhang was an employee of the 4th Defendant from around October 2003 to around September 2005, and an employee of the 1st Plaintiff from around April 2006 to around July 2006.

(2) Jun was an employee of the 1st Plaintiff from around April 2005 to date.

(3) On 22 May 2007, Baoan People’s Procuratorate filed a criminal complaint against Zhang that Zhang had wrongfully disclosed and/or infringed the 4th Defendants’ business secrets.

(4) On or around 14 October 2006, Zhang was arrested and detained in Weinan Prefecture, Shaanxi Province by officers of the local Weinan, Shaanxi Public Security Bureau (‘Weinan PSB’), accompanied by officers of the Baoan PSB commanded by one Yang Xiucheng (‘Yang’). At the time of her arrest, Zhang was beaten by the arresting officers.

(5) On or around 17 October 2006, Zhang was taken on a train journey, which lasted approximately 20 hours, from Weinan to Shenzhen.

(6) During the aforesaid train journey, Zhang was at all times accompanied by Wu and was guarded by 3 other male officers of Baoan PSB and 1 female officer of Weinan PSB.

(7) During the course of the aforesaid train journey, Wu and Yang intimidated Zhang to admit and/or confirm that Jun had procured and/or induced her to divulge confidential documents that the 4th Defendant to him and/or the Plaintiffs.

(8) After the train arrived in Shenzhen on or about mid-day on 18 October 2006, Wu arranged for a car marked with the logo of the Foxconn Group and driven by an individual wearing a uniform of the Foxconn Group to take Zhang and the officers of Baoan PSB and Weinan PSB to the Baoan PSB station.

(9) As a result of the intimidation by Wu and Yang, Zhang gave a statement to the Baoan PSB on 23 October 2006 in which she falsely admitted that Jun had procured and/or induced her to obtain/divulge confidential documents of the 4th Defendant to him.

(10) On or about 29 November 2006, Zhang informed the Baoan PSB that her previous admission that Jun had procured and/or induced her to obtain/divulge confidential documents of the 4th Defendant to him was false.

Bribery of Zhao Jun

67. The 1st, 2nd, 3rd and/or 4th Defendants paid bribes to Zhao Jun in order to obtain access and/or to tamper with to evidence being examined by the Beijing JZSC Judicature Appraisal Center for Intellectual Property (北京九州世初知识产权司法鉴定中心)(the ‘Appraisal centre’).

PARTICULARS

(1) In or around September 2007, bribes in the total sum of RMB 10 million were paid by the 1st, 2nd, 3rd and/or 4th Defendants to Zhao Jun (who was at the material time the director of the Appraisal Centre) in order to obtain access to and to tamper with the computer hard disks of Jun and Si which the Appraisal Centre was entrusted by the Supreme People’s Court of PRC to appraise for the purpose of the 2006 PRC Action (referred to in paragraph 73 below).

(2) The aforesaid bribery was arranged to various employees of the 1st, 2nd, 3rd and/or 4th Defendants the identities of whom are not known to the Plaintiffs save that Wang Pengyu, who was at all material times the In-house Legal Counsel of the 3rd and 4th Defendants, the Quality Control and Legal Manager of the 3rd Defendant, the Legal Manager of the 1st Defendant and the Senior Director of the IP Legal Department (Global Legal Division) of the 1st Defendant and the Foxconn Group, as well as Gan Kejian (who was at all material times an employee of the 1st, 2nd, 3rd and/or 4th Defendants), Dong Jianwei and Shen Liangquan (who were both at all material times employees of the 3rd Defendant) were partly involved in arranging the payment of the bribes to Zhao Jun.

Bribery to Zhang Chaozheng

68. In or around May/June 2008, Wang Pengyu (acting for an on behalf of the 1st, 3rd and/or 4th Defendants) paid bribes to Zhang Chaozheng (who was at the time an employee of 7th Plaintiff) in order to induce him, in breach of his duty of confidence to the 7th Plaintiff, to assist in locating documents from the 1st Plaintiff and the 7th Plaintiff and to fabricate evidence that certain documents belonging to the Plaintiffs (but which the 3rd and 4th Defendants allege belong to them) (the ‘Alleged Plagiarised Documents;) were passed amongst and/or used by certain of the Plaintiffs’ employees:

PARTICULARS

(1) In or around April 2008, Zhang Chaozheng met Wang Pengyu at an internet chat room and Wang Pengyu asked Zhang Chaozheng to make use of his employment position with the 7th Plaintiff to locate documents within the 1st and 7th Plaintiffs for him and to fabricate evidence that the Alleged Plagiarised Documents were passed amongst and/or used by certain of the Plaintiffs’ employees.

(2) In or around late April/early May 2008, Wang Pengyu met with Zhang Chaozheng at Nandu Western Restaurant in Shenzhen, PRC. During the meeting, Wang Pengyu provided a written request to Zhang Chaozhen asking him to, inter alia, locate various documents within the 1st Plaintiff and the 7th Plaintiff for him.

(3) Wang Pengyu further asked Zhang Chaozheng to e-mail the Alleged Plagiarised Documents to the work e-mail address of Sun (who was an employee of the 7th Plaintiff at the time) from another BYD email account.

(4) In return for Zhang Chaozheng’s assistance as pleaded in (2) and (3) above, Wang Pengyu offered monetary rewards to Zhang Chaozheng and also promised him a registered permanent residency (戶口), job opportunities and risk compensation.

（5）Since May 2008, in breach of his duty of confidence to the 7th Plaintiff, Zhang Chaozheng sent to Wang Pengyu copies of various documents and obtained bribes in the total sum of RMB 40,000 from Wang Pengyu in return.”

Legal principles for striking out

18.I remind myself the legal principles governing striking out applications (Hong Kong Civil Procedure 2010, paragraphs 18/19/4, 18/19/8 and 18/19/10).  It is only in plain and obvious cases that the court should exercise the power to strike out.  Disputed facts are taken in favour of the respondent to the application.  Difficult points of law should not be decided in such applications and only claims that are obviously unsustainable and pleadings unarguably bad that they should be struck out. 

19.I am also reminded by leading counsel for the plaintiffs and the defendants by counterclaim of the statement of Barker J in Cheung Chui Sou Ying v the Personal Representatives of Cheung Yuk Luen alias Wilson Cheung deceased and Ors [1981] HKLR 585 at 588:

“But plain is not the same as simple and obvious is not the same as short. Moreover if a careful reading of the Statement of Claim does not indicate clearly what the nature of the Claim is, then a Court can, and probably will order it to be struck out as being embarrassing and vexatious, unless it be capable of amendment.”

The arguments for striking out

20.The plaintiffs and the defendants by counterclaim submit that the matters pleaded in paras. 62 to 68 of the counterclaim do not give rise to any known cause of action against them.  These allegations are therefore irrelevant to any other cause of action currently at issue between the parties.  They are also unsustainable and unarguable.  They further say that the allegations are put in to cause annoyance, abuse, prejudice and unnecessary anxiety, trouble and expense to them.  The allegations are also scandalous, frivolous, vexatious and embarrassing and are abuses of the process of the court.  They should therefore be struck out (Jacob and Goldrein, Pleadings Principles and Practice (1990) at pp. 221 to 224 and 227). 

21.Regarding para. 62, they say that the thrust of this paragraph is the unlawful detention of Ping and an attempt to intimidate or coerce Ping to give false evidence.  They submit that even if the allegations are true and amount to some unlawful acts under Hong Kong law and/or the law of the Mainland, they were only acts against Ping personally or torts of trespass against Ping.  They thus say that the defendants have no cause of action based on these alleged acts.

22.On the tort of unlawful interference as pleaded in para. 61, they say that this plea is also not supported by these allegations.  The essential ingredients of the tort of unlawful interference as set out by Lord Hoffman for the majority view in OBG Ltd & Anor v Allan & Ors [2008] 1 AC 1 at paras. 45 to 47 and summarised in Bullen & Leake & Jacob’s Precedents of Pleadings, 16^th edn., para. 52-08 are:

“52―08 Following the OBG case referred to above, the essential elements of this tort may be identified as follows:

(1) Use by the defendant of unlawful means, thereby

(2) Interfering with the actions of a third party in relation to the claimant.

(3) Intention to cause loss to the claimant.

(4) Damage.

per Lord Hoffman in the OBG case at paras 45-47.”

23.Leading counsel for the plaintiffs and the defendants by counterclaim relies on the speech of Lord Hoffman in the OBG Ltd case and submits that the unlawful means must be actionable by the third party or would have been actionable if the third party had suffered loss.  Lord Hoffman said in para. 49:

“49. In my opinion, and subject to one qualification, acts against a third party count as unlawful means only if they are actionable by that third party. The qualification is that they will also be unlawful means if the only reason why they are not actionable is because the third party has suffered no loss. In the case of intimidation, for example, the threat will usually give rise to no cause of action by the third party because he will have suffered no loss. If he submits to the threat, then, as the defendant intended, the claimant will have suffered loss instead. It is nevertheless unlawful means. But the threat must be to do something which would have been actionable if the third party had suffered loss. Likewise, in National Phonograph Co Ltd v Edison-Bell Consolidated Phonograph Co Ltd [1908] 1 Ch 335 the defendant intentionally caused loss to the plaintiff by fraudulently inducing a third party to act to the plaintiff’s detriment. The fraud was unlawful means because it would have been actionable if the third party had suffered any loss, even though in the event it was the plaintiff who suffered. In this respect, procuring the actions of a third party by fraud (dolus) is obviously very similar to procuring them by intimidation (metus).”

24.Leading counsel for the defendants however asks me not to overlook the minority speech of Lord Nicholls in this case.  Lord Nicholls said in paras. 149 to 155:

“149. Although the need for ‘unlawful means’ is well established, the same cannot be said about the content of this expression. There is some controversy about the scope of this expression in this context.

150. One view is that this concept comprises, quite simply, all acts which a person is not permitted to do. The distinction is between ‘doing what you have a legal right to do and doing what you have no legal right to do’: Lord Reid in Rookes v Barnard [1964] AC 1129, 1168-1169. So understood, the concept of ‘unlawful means’ stretches far and wide. It covers common law torts, statutory torts, crimes, breaches of contract, breaches of trust and equitable obligations, breaches of confidence, and so on.

151. Another view is that in this context ‘unlawful means’ comprise only civil wrongs. Thus in Allen v Flood itself Lord Watson described illegal means as ‘means which in themselves are in the nature of civil wrongs’: [1898] AC I, 97-98. A variant on this view is even more restricted in its scope: ‘unlawful means’ are limited to torts and breaches of contract.

152. The principal criticism of the first, wider view is that it ‘tortifies’ criminal conduct. The principal criticism of the second, narrower view is that it would be surprising if criminal conduct were excluded from the category of ‘unlawful’ means in this context. In the classical ‘three-party’ form of this tort the defendant seeks to injure the claimant’s business through the instrumentality of a third party. By this means, as Lord Lindley said, the claimant is ‘wrongfully and intentionally struck at through others, and is thereby damnified’: Quinn v Leathem [1901] AC 495, 535. It would be very odd if in such a case the law were to afford the claimant a remedy where the defendant committed or threatened to commit a tort or breach of contract against the third party but not if he committed or threatened to commit a crime against him. In seeking to distinguish between acceptable and unacceptable conduct it would be passing strange that a breach of contract should be proscribed but not a crime. In Rookes v Barnard [1964] AC 1129, 1206-1207, Lord Devlin noted it was ‘of course’ accepted that a threat to commit a crime was an unlawful threat and continued:

‘It cannot be said that every form of coercion is wrong. A dividing line must be drawn and the natural line runs between what is lawful and unlawful as against the party threatened.’

153. These different views are founded on different perceptions of the rationale underlying the unlawful interference tort. On the wider interpretation of ‘unlawful means’ the rationale is that by this tort the law seeks to curb clearly excessive conduct. The law seeks to provide a remedy for intentional economic harm caused by unacceptable means. The law regards all unlawful means as unacceptable in this context.

154. On the narrower interpretation this tort has a much more limited role. On this interpretation the function of the tort of unlawful interference is a modest one. Its function is to provide a claimant with a remedy where intentional harm is inflicted indirectly a distinct from directly. If a defendant intentionally harms a claimant directly by committing an actionable wrong against him, the usual remedies are available to the claimant. The unlawful interference tort affords a claimant a like remedy if the defendant intentionally damages him by committing an actionable wrong against a third party. The defendant’s civil liability is expanded thus far, but no further, in respect of damage intentionally caused by his conduct.

155.     In my view the former is the true rationale of this tort.  The second interpretation represents a radical departure from the purpose for which this tort has been developed. If adopted, this interpretation would bring about an unjustified and unfortunate curtailment of the scope of this tort.”

25.Leading counsel for the defendants further refers to the speech of Lord Walker in the same case.  Lord Walker suggested that neither of the views of Lord Hoffman and Lord Nicholls would be the last word on this difficult and important area of the law (para. 269).

26.Leading counsel also refers to Revenue and Customers Commissioners v Total Network SL [2008] 1 AC 1174 at para. 43 where Lord Hope expressed his reservation on Lord Hoffman’s view in OBG Ltd on unlawful means.

27.Leading counsel submits that the law of unlawful interference is developing and unlawful means should not be limited to actionable wrongs, but should include other wrongful acts like criminal conduct.  Counsel asks me to at least leave this issue for the trial judge who will have the advantage of hearing all the evidence.

28.Apart from the nature of the unlawful means, the plaintiffs and the defendants by counterclaim also submit that para. 62 of the counterclaim does not allege any loss or damage to the defendants and nothing is pleaded to flow from the detention of Ping.  Para. 62 and its further and better particular also do not suggest that any evidence has in fact been fabricated or obtained.  What is alleged in para. 62 is only an attempt to persuade Ping to give false evidence.

29.Regarding paras. 63 to 65, para. 63 pleads the planting of soft copies of documents on Ping’s computer, para. 64 pleads the planting of hard copies at his apartment and para. 65 pleads the seizure of the documents by the Baoan PSB.  Counsel however points out the absence of any particulars on how, when and by whom the hard and soft copies were planted. Counsel refers to Caswell v Powell Duffryn Associated Collieries Ltd [1940] AC 152 at 169-170 where Lord Wright said that inference from objective facts had to be distinguished from conjecture or speculation and the method of inference would fail in the absence of positively proved facts.

30.Counsel also submits that the inferences suggested by the defendants are obviously unsustainable.  Furthermore, the serious nature of the allegation which amount to perverting the course of justice must be supported by particulars from which inference can be drawn. Since the defendants have failed to supply the particulars, the allegation should be struck out.

31.Counsel further argues that the planting of hard and soft copies of document on Ping does not give rise to a wrong actionable by Ping.  On the majority view in OBG Ltd, these allegations do not support the defendants’ claim of unlawful interference.

32.Regarding para. 66 of the counterclaim which alleges the unlawful intimidation of Zhang by Wu in October 2006 to obtain a false confession from Zhang that Jun had procured/induced her to divulge confidential information, counsel submits that the allegation contained nothing unlawful and there is no suggestion that Wu and Yang were seeking a knowingly false confession from Zhang.  There is also no allegation that any confession had indeed been obtained from Zhang during the train journey on 17 October 2006.  The alleged confession was only made some six days later to the public security officers.  The defendants could not plead to any link between the alleged intimidation and the false statement given six days later.

33.Regarding the allegation of bribery in para. 67, counsel says that the defendants want to invite the court to infer that the hard drive had been tampered with.  The defendants’ case as supplemented by the further and better particulars is that there were 17 more documents in the hard drive on 25 February 2008 than on 28 August 2006.  But the defendants have to plead and prove that these documents were added by an employee of the defendants by counterclaim to a USB drive on 29 September 2007 and they were added from the USB drive to the hard drive by employee of the Appraisal Centre.  The defendants also have to plead what documents were in fact added.  Para. 67 therefore failed to plead the necessary facts to make out a case of tampering with evidence.  No inference of actual tampering with evidence by the defendants by counterclaim can be drawn from the allegation.

34.Counsel also submits that the alleged bribery of Zhao Jun is irrelevant as that did not lead to any consequence that could support a case of unlawful interference by the defendants by counterclaim.

35.Counsel further submits that in any case, all references to “tampering” should be struck out as being scandalous, frivolous, vexatious and embarrassing and an abuse of the process of the court because necessary facts have not been pleaded.

36.Finally, regarding the allegation of Wang Pengyu paying bribes to Zhang Chaozheng, the defendants admit that no document was ever sent out by Zhang Chaozheng and no evidence fabricated.  Hence, counsel submits that even if brides had indeed been paid, nothing resulted from them and no consequence was caused to the defendants.  The defendants therefore suffered no detriment or loss.  Without loss or damage to the defendants, there could not be any claim of unlawful interference. 

37.Alternatively, counsel says all references to “fabrication” should be struck out as being scandalous, frivolous and vexatious and embarrassing and an abuse of the process of the court because the defendants have admitted that no fabrication had occurred.

The defendants’ arguments in opposition

38.The defendants first explain the structure of the counterclaim of unlawful interference which has been explained above in the introduction of the counterclaim.  Para. 61 is the general allegation that the defendants by counterclaim had since around 2006 embarked upon a course of conduct by unlawful means to cause loss or harm to the business of the defendants.  Paras. 62-68 then provide the material facts of the alleged course of conduct.

39.Para. 69 repeats the purpose of the course of conduct.  Para. 70 says that the ultimate objective of the course of conduct is to injure and cause loss to the defendants.  Paras. 71 to 84 provide the particulars of the proceedings and prosecutions.  Para. 85 pleads the general particulars of the public statements and announcements.  Para. 86 pleads the loss and damage suffered by the defendants as a result of the course of conduct.

40.All these paragraphs form part of the counterclaim against the defendants by counterclaim for unlawful interference with the defendants’ business and economic interests.  Paras. 62 to 68 contain the material facts of the alleged course of conduct for procuring false or fabricated evidence. 

41.Regarding para. 62, the defendants further submit that it pleads the attempt of the defendants by counterclaim to obtain false evidence from Ping by unlawfully detaining him, coercing and intimating him to falsely confess that he had disclosed the confidential document of the 4th defendant by counterclaim to Jun.

42.The matters pleaded form part of the course of conduct of the defendants by counterclaim as pleaded in para. 61.  This attempt is followed by the allegation of planting of soft and hard copies of documents in Ping’s computer and apartment during the wrongful detention as pleaded in paras. 63 to 65.  The planting of documents resulted in fabrication of evidence against Ping.  It is therefore wrong for the plaintiffs and the defendants by counterclaim to have considered para. 62 in isolation of the other paragraphs and ignored that this paragraph is just part of the course of conduct.

43.The loss and damage resulting from the course of conduct to the defendants is also pleaded in para. 82.  The quantum is for assessment at the trial.  Therefore, the fact that para. 62 alone does not constitute a cause of action is not a reason for striking it out.  Its allegations are material to the issues between the parties.  The defendants also disagree that the plea in para. 62 is frivolous, vexatious, embarrassing or otherwise an abuse of the process of the court.  They say that the defendants by counterclaim would not be prejudiced by this plea as they can refute the allegations.

44.Regarding paras. 63 to 65, the allegations are the planting of soft copy documents in Ping’s computer and hard copy documents in his apartment during the period of alleged unlawful detention.  The defendants further plead in the further and better particulars for para. 63 that Ping’s computer had been tampered by an employee of the defendants by counterclaim and documents unrelated to Ping’s work were then found in a drive of Ping’s computer where Ping did not save his documents. 

45.The defendants also plead in the further and better particulars for para. 64 that an employee of the defendants by counterclaim had remained in Ping’s apartment after Ping and other people had left.  A search of a bookshelf at the apartment was conducted later and this employee went straight to the bookshelf and took out a stack of documents. This person knew exactly where the documents were.  Ping had not seen such documents before.  There was no then further search of the apartment. 

46.The defendants submit that there is no basis to strike out paras. 63 to 65 when they are read with the further and better particulars.  There is no alternative explanation on why the documents should have appeared in Ping’s computer and his apartment.  The defendants’ contention of planting cannot be said to be unarguable and, if Ping can give credible evidence on this, the court may draw the inference of planting. 

47.The defendants further point out that the authorities relied on by the other side on drawing of inferences do not relate to striking out.  They are on drawing of inference at the trial. 

48.The documents alleged to have been planted are those alleged to be confidential information by the plaintiffs and are amongst those in Schedules 1 to 14 of the Re-Amended Statement of Claim.  Hence, the lack of full particulars before discovery and exchange of witness statement should not prejudice the defendants by counterclaim and they cannot be said to have difficulty in pleading their defence.  The particulars of the planted soft copies will also be available once the hard drive of Ping’s computer is released by the Baoan PSB for examination.

49.Regarding the argument that planting of documents is not an actionable civil wrong at the instance of Ping and hence no claim of unlawful interference can be made by the defendants, the defendants argue that planting of evidence certainly constitutes criminal acts.  Furthermore, other former employees of the defendants by counterclaim can maintain civil actions of malicious prosecutions against the defendants by counterclaim as they have used the planted false evidence to prosecute these former employees.

50.Para. 66 pleads unlawful intimidation of Zhang to obtain a false confession from her that Jun had procured or induced her to divulge confidential information of the 4th defendant by counterclaim.  The defendants submit that Zhang had been beaten up by the public security officers, taken on a 20-hour train journey from Weinan to Shenzhen in the company of the public security officials and an employee of the 4th defendant by counterclaim.  She was interrogated by a public security official aggressively and with threats to her father too.  As a result of the threats, she yielded and gave a false confession that Jun had asked her to disclose the confidential information of the defendants by counterclaim.  The false admission had also been used to support legal proceedings against Jun and thus caused damage to Jun.  Zhang therefore has a cause of action of intimation against the defendants by counterclaim.  The act of the employee of the 4th defendant by counterclaim also constitutes criminal offences under the laws of Hong Kong. 

51.Regarding the argument of lack of dispute of causal link raised by the defendants by counterclaim, namely that Zhang only made a confession to the public security officers six days later, the defendants submit that this is a matter for the trial.

52.Para. 67 pleads the alleged bribery of Zhao Jun by the defendants by counterclaim for access to the computer which was being examined by the Appraisal Centre.  The defendants raised four questions.  They asked why the defendants by counterclaim had bribed Zhao and why they were given access to a USB drive containing documents.  These documents were relevant to the 2006 PRC Action brought by the defendants by counterclaim and they were copied to the hard drive of a computer under examination by the Appraisal Centre by an Employee of the Centre pursuant to Zhao Jun’s instruction.  They also queried why there were 17 additional documents in the folders of Jun and Xi which were not there in August 2006 when the hard drives were first seized.  They further challenged the defendants by counterclaim to explain their withdrawal of the 2006 PRC Action after the defendants had challenged the credibility of the report and suggested that the hard drives had been tampered.  They submit that if there are no plausible explanations to these questions, then the inference argued by the defendants that there was tampering of the hard drive cannot be said to be unsustainable.  In any case, the issue of tampering is a matter for the trial judge. 

53.They also say that the defendants by counterclaim can plead to this allegation and no prejudice is caused to them by the lack of full particulars before discovery and exchange of witness statement.  The full particulars of the additional documents will be known after the hard drive is a released by the Shenzhen Intermediate People’s Court for forensic examination.

54.In answer to whether the bribery of Zhao Jun would amount to unlawful means, the defendants argue that the use of the tampered evidence constitute unlawful means as it would support a claim of malicious prosecution and is a criminal act.

55.Finally, there is the allegation in para. 68 of bribery of Zhang Chaozheng, an employee of the defendants, by the defendants by counterclaim.  The bribes are alleged to induce Zhang to fabricate evidence that certain of the defendants’ documents, which were alleged to belong to the defendants by counterclaim, had been passed amongst and/or used by the employees of the defendants.  Though the defendants say that Zhang had refused to assist the defendants by counterclaim, they say that the matter pleaded is still relevant as it forms an integral part of the course of conduct engaged in by the defendants by counterclaim with the intention of creating false evidence to interfere with the business of the defendants.

Analysis and decision

56.The approach of the plaintiffs and the defendants by counterclaim is to consider each of paras. 62 to 68 of the counterclaim individually and in isolation of the others.  However, para. 61 of the counterclaim refers to a course of conduct of the defendants by counterclaim.  The course of conduct was of procuring and using false or fabricated evidence and/or evidence unlawfully obtained to launch proceedings/prosecutions against the plaintiffs and/or their staff and to make false public announcements that the defendants and/or their staff had stolen/misused the defendants’ confidential information.  The particulars of the course of conduct is then pleaded in paras. 62 to 68 and the further and better particulars given for them.  Any individual allegation in these paragraphs is a part of the alleged course of conduct and not a self-contained allegation constituting a claim in its own right.

57.The defendants plead and seek to prove a course of conduct which would support the claims pleaded in para. 61.  It is not necessary for each and every of the pleaded acts to have accomplished its desired result before the course of conduct can be established.  It is therefore inappropriate to consider each individual allegation in isolation from the others.  All allegations in paras. 62 to 68 should be considered together and see if they together can constitute the alleged course of conduct to support the claims pleaded in para. 61.

58.For the claim of unlawful interference, the majority view in OBG Ltd no doubt requires a wrong actionable by the 3rd party.  However, I cannot overlook the fact that this cause of action is still developing and the reasons of Lord Nicholls in his dissent are indeed powerful.  Lord Hope in Revenue and Customs Commissioners has also expressed his reservation about the majority view of OBG Ltd.  In the light of these, I think it is premature to strike out this claim at this stage just on the ground of absence of an actionable wrong to the 3rd party.  I think this plea should be allowed to develop and be decided by the trial judge who would be able to hear all the evidence of the parties.  Furthermore, the summary of the defendants’ submissions above shows that there are the claims of intimidation and malicious prosecution that are open to some of the former employees of the defendants by counterclaim.  For these reasons, I do not think I should strike out paras. 62 to 68.

59.Furthermore, regarding para. 62, though no evidence was fabricated or obtained by detaining Ping, it is part and parcel of the defendants’ allegation that the defendants by counterclaim have tried to procure false evidence which included the planting of soft and hard copy documents as pleaded in paras. 63 to 65.  Although para. 62 alone does not constitute a course of action, I do not think it should be strike out.

60.Regarding paras. 63 to 65, the argument of absence of particulars have been answered by the defendants.  They say that the defendants by counterclaim can plead to the these paragraphs and no prejudice has arisen to them.  Furthermore, the cases relied on by the plaintiffs and the defendants to counterclaim on when inference can be drawn are relevant to the drawing inference at the trial.  I agree with the defendants that their allegations are not so weak that no inference can be drawn even if they can all be proved with credible evidence.

61.Regarding para. 66, the plaintiffs and the defendants by counterclaim argue that there was no suggestion that Wu and Yang were seeking a knowingly false confession from Zhang.  However, given the circumstances of the alleged detention, intimidation and aggressive interrogation, it was plain to Zhang on what was expected from her.  This issue should be for the trial judge.  The causal link of the confession given by Zhang six days later should likewise be reserved for the trial judge.

62.Regarding para. 67, the attack on the lack of particulars of the 17 additional documents has been answered by the defendants.  There is also no prejudice to the defendants by counterclaim as they can plead to this allegation.  If the four questions raised by the defendants cannot receive plausible explanations, then there would be the issue of whether any inference, and if so, what inference should be drawn. 

63.If para. 67 can survive the attack, I also do not see why the references to “tampering” with evidence should be struck out.

64.Finally, for the alleged bribery of Zhang Chaozheng in para. 68, I also think that this is part of the alleged course of conduct alleged by the defendants and should not be struck out. 

65.I also do not think I should strike out the references to “fabrication” if I should allow para. 68 to remain.

66.In the premises, I do not think any part of paras. 62 to 68 should be struck out.  It follows that there is no consequential striking out either.

67.I therefore dismiss the Re-Amended Summons to strike out issued by the plaintiffs and the defendants by counterclaim.  I also make a costs order nisi that the plaintiffs and the defendants by counterclaim do pay the defendants’ costs of this application.

Mr Winston Poon, SC, Mr Godfrey Lam, SC and Mr Elizabeth Cheung, instructed by Messrs Mayer Brown JSM, for the Plaintiffs by Original Action and the Defendants by Counterclaim

Mr Benjamin Yu, SC and Ms Sara Tong, instructed by Messrs Orrick, Herrington & Sutcliffe, for the Defendants by Original Action and the Plaintiffs by Counterclaim

Please refer to CACV3/2011 for the relevant appeal(s) to the Court of Appeal.

Please refer to CACV3/2011 for the relevant appeal(s) to the Court of Appeal.

Please refer to CACV3/2011 for the relevant appeal(s) to the Court of Appeal.

Please refer to CACV3/2011 for the relevant appeal(s) to the Court of Appeal.