Case Document

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HCA 1049 /2012

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

HIGH COURT ACTION NO HCA 1049 OF 2012

_________________________

BETWEEN

	HONG KONG CENTRAL CHARITABLE FOUNDATION LIMITED (PREVIOUSLY KNOWN AS HONG KONG INSTITUTE OF CONTINUING EDUCATION LIMITED)	Plaintiff
	and
	KAPLAN HOLDINGS LIMITED	1^st Defendant
	KAPLAN HIGHER EDUCATION (HK) LIMITED	2^nd Defendant
	KAPLAN INSTITUTE LIMITED	3^rd Defendant
	葉翠	4^th Defendant

_________________________

Before: Mr. Registrar K.W. Lung in Chambers (Open to the public)

Date of Hearing: 30 September 2014

Date of Decision: 30 September 2014

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D E C I S I O N

_____________

The applications

1.There are two applications before this Court:-

(1) The defendants’ application by way of summons dated 4^th June 2014 (the “Summons for Specific Discovery”) for specific discovery of documents listed in the schedule thereto (the “Schedule”) pursuant to Order 24 rules 7 and 10; and

(2) The plaintiff’s application by way of summons dated 4^thSeptember 2014 for leave (“Leave Summons”) to file and serve the 9^th Affirmation of Choi Ka Ling as per the draft annexed thereto.

2.The defendants have no objection to the first, the second and the 9^th paragraphs, of the Leave Summons and the plaintiff is content with that suggestion and agrees that the rest of the 9^th affirmation be expunged. I so order. This, as agreed by the defendants, have answered item 5 of the schedule to the Summons for Specific Discovery.

3.I shall now deal with the Summons for Specific Discovery.

4.This application is opposed by the plaintiff. The parties are legally represented.[1]

The factual background

5.I shall summarize the factual background as follows:

a. The plaintiff operated the Hong Kong Central College (“HKCC”), which is an institution in the provision of post-secondary education services. HKCC had received accreditations from the Hong Kong Council for Accreditation of Academic and Vocational Qualifications (“HKCAAVQ”), which is the statutory accreditation body appointed by the Secretary for Education.

b. The 1st to 3rd defendants (collectively “Kaplan”) are related companies and form part of Kaplan Asia Pacific, which is a global provider of education services for individuals, schools and businesses. The 4th defendant was a senior employee of Kaplan.

c. Between 2010 and 2011, there was negotiation for the acquisition of HKCC by Kaplan. As part of the exercise, voluminous documentation regarding HKCC was supplied to Kaplan, including 3 sets of accreditation and 4 sets of revalidation documents, which constitute what the plaintiff says to be confidential information (the “Confidential Information”). For such purpose, a Non-Disclosure Agreement dated 20 December 2010 (“NDA”) was entered into though it is disputed whether the plaintiff is privy to it. However, the defendants admitted the purpose of it was to discuss the possible sale of all or some of the shares in or assets of the plaintiff to Kaplan.[2]

d. Kaplan subsequently decided against concluding the acquisition. Whilst discussion between the parties did not cease forthwith, there is no doubt by August 2011 that the deal fell through.

e. The plaintiff now contends that Kaplan, under the management of the 4th defendant, misused the Confidential Information to start up their own Kaplan Business and Accountancy School (“KBAS”), particularly in formulating and preparing documents (the “KBAS Documents”) to obtain HKCAAVQ accreditation.

f. The plaintiff alleges that the defendants were:-

(1) in breach of the NDA by surreptitiously making use of the Confidential Information or part thereof to prepare the KBAS Documents and/or making copies outside the permitted purpose and scope and/or failing to return or destroy all the Confidential Information;

(2) in breach of their duty of confidence by surreptitiously making use of the Confidential Information or part thereof to prepare the KBAS Documents; and

(3) in infringement of copyright by having reproduced directly, indirectly or in a qualitative manner and/or authorized the reproduction of the Confidential Information or part thereof in the KBAS Documents.

g. The defendants strongly refute all the plaintiff’s allegations of breach or infringement. The defendants specifically deny using the Confidential Information or any part thereof to prepare the KBAS Documents.

h. The defendants put the plaintiff to proof on issues of confidential nature of the information as well as subsistence and ownership of copyright.

The issues for trial

6.The defendants state that the issues for the trial are as follows:

(1)   Whether the defendants have breached their duty of confidence either imposed by the NDA or in law. This necessitates an enquiry as to whether the Confidential Information, in whole or in part, has the necessary quality of confidence and whether owned by the plaintiff.

(2)   Whether the defendants have infringed the plaintiff’s copyright in the Confidential Information. Again this is dependent upon whether the Confidential Information, in whole or in part, is subject to copyright and whether owned by the plaintiff.

(3)   The appropriate amount of damages to be awarded in case the defendants are held liable for any breach or infringement. (This however, may be debatable as the plaintiff prays for account enquiry, which will be after the finding of liability.)

The relevant legal principles

7.The relevant legal principles for this application are succinctly set out by the Court of Appeal in Deak and Company (Far East) Ltd. v N.M. Rothschild and Sons Limited & Others [1981] HKC78 per Barker JA. At page 3 of the judgment, the Court of Appeal said:

“Thus in order to obtain an order for discovery under Order 24 rule 7 the party seeking it has to make out a prima facie case:

(a) that there is in existence a specified document or class of documents;

(b) that the party against whom the order is sought has or had the document in his possession, custody or power;

(c) that the document or class of document relates to a matter in question in the action; and

(d) that discovery thereof is necessary either for disposing fairly of the cause or matter or for saving costs.”

At page 5 of the judgment, the Court of Appeal said:

‘Moreover, it has to be remembered that, even if existence, possession etc. and relevancy are established, discovery will still only be granted if it is necessary for fairly disposing of the cause or matter: of Lord Wilbeforce in Science Research Council v Nasse (3) at page 1066 where he said:

"The ultimate test in discrimination (as in other proceedings) is whether discovery is necessary for disposing fairly of the proceedings."

And in deciding that question one of the matters which a Court has to bear in mind is whether it would be oppressive to order discovery - that is oppressive on the party required to give it. What is oppressive must depend upon the particular circumstances of each case.’

8.The above legal principles have not changed after the CJR. See Tullett Prebon (Hong Kong) Ltd. v Chan Yeung Fong Nick & Others HCA2197/2009, To J. (unreported) 9 June 2011 at §§11-12.

9.Bearing in mind the issues in dispute and the legal principles, the defendants’ application can be disposed of quickly.

10.It is unnecessary to set out the full details of the schedule which runs up to four pages.

Requests Nos 1 and 2

11.By requests 1 and 2 of the schedule, the defendants say that the purpose is to have the plaintiff to prove its own case and the defendants to test the pleaded case.[3]

12.I have to make clear that this morning there has been an extensive discussion on whether the Confidential Information as pleaded and claimed by the plaintiff for damages covers the same information that Kaplan had signed the NDA. Mr. Zimmern submits that they are different. He is unable to show to me in what respect they were different other than submitting that they were given by the plaintiff to the defendants under different understanding or agreement. Having considered the pleadings, in particular, the definition of Confidential Information of the NDA as pleaded in paragraph 30 of the Statement of Claim, I am quite sure that the Confidential Information defined in the NDA covers the Confidential Information that the plaintiff now claims against the defendants.

13.The crux of the issues in dispute is whether the documents and information supplied by the plaintiff to Kaplan is confidential and whether Kaplan had used the Confidential Information. I agree with Mr. Ko that the issue of quantum, as pleaded in the Statement of Claim, is to be dealt with after the finding of liability. It is unnecessary to deal with it at this stage. One has to bear in mind that the plaintiff has prayed for the accounts to be taken, which cannot be dealt with by way of discovery at this stage.

14.In the assessment of Confidential Information, which is very much a finding of the fact by the Court, the Court will take the following undisputed facts into account:

a. That the defendants admitted having received the documents pleaded as Confidential Information in paragraph 15 of the Statement of Claim as answered by the defendants at paragraph 12 of their Amended Defence from the plaintiff in the negotiation for the acquisition of the plaintiff’s HKCC, although the defendants had made no admission that the documents are confidential information;

b. That the defendants do not dispute that the HKCC Confidential Information was prepared by Professor Jack Caldwell, whose evidence supports the plaintiff’s claims;

c. That the defendants admitted that Kaplan had signed the NDA, the purpose of which is clearly to protect the confidentiality of the information supplied by the plaintiff or HKCC to Kaplan; the Confidential Information being defined in paragraph 30 (a) of the Statement of Claim. The fact that the plaintiff might not be the party signing the NDA does not affect the position that the defendants had, by signing this NDA, admitted that the information they were given were confidential information as defined in the NDA;

d. Whether or not the defendants had used the Confidential Information without the consent of the plaintiff is another factual issue to be determined by the Court.

15.I do not support the submissions of Mr. Zimmern: “In order to carry out an assessment as to the quality and nature of the accreditation and revalidation documents, the Court will have to consider the primary source from which they are derived.”[4]. In my view, it is unnecessary for the Court to make reference to the quality and nature of the accreditation and revalidation documents, particularly in view of the above admissions by the defendants.

16.As to copyright issue, I do not accept that the Court has to refer to the amount of skill, judgment or intellectual effort in creating the work.[5] It is the originality and creativity that count as Mr. Zimmern has, in his written submissions, referred to Copinger & Skone James on Copyright (16^th ed.), para. 3-130 at pp.141-142. In the middle of that paragraph, the learned author further said: “There is no guiding principle as to the quantum of labour, skill or judgment required. It is a question of fact and degree and thus has to be determined on the facts of the particular case.” The author referred to the authorities set out in the footnotes.

17.It is therefore clear that these items are not relevant for the resolution of the issues in dispute, much less necessary for saving costs or for a fair trial.

Request No.3

18.Request No. 3 asks for documents in connection with the employment and/or engagement of Professor Caldwell, members of his work team and other supporting writers.

19.By the same reasons above, this item is not relevant. Mr. Zimmern submits that it is for the plaintiff to prove that Professor Caldwell and his team-mates were at the relevant times the plaintiff’s employees. The defendants do not dispute that Professor Caldwell was the designer of the Confidential Information. If there is dispute over the ownership of the copyright, it is for the owner of the copyright to claim against the plaintiff. Now Professor Caldwell, the owner of the copyright, supports the plaintiff’s claim. This item is unnecessary and should be dismissed.

Request No. 5

20.Request 5 has been dealt with by the plaintiff’s 9^th affirmation although it is my view that this item will not add much to the issues in dispute in this matter.

Conclusion

21.It is patently clear that the discovery should not have been raised. It covers massive documents and information of over 5 years for no practical purpose for the fair resolution of the disputes as identified by the defendants themselves, supra. Such discovery will only muddle the issues and cause wastage of costs and time for the parties and for the Court as well.

22.The Summons for Specific Discovery is dismissed except for item 5 which has been conceded by the plaintiff.

23.As to the costs of the Summons for Specific Discovery, the costs should follow the event. Although two requests had been met, I consider that globally, the plaintiff should have the costs of this application, including the hearing today (with counsel’s certificate). But the costs for the 8^th and 9^th affirmations of the plaintiff should be disregarded as each side had succeeded on part of them. The costs are assessed under O.62, r.9A at $105,000 to be paid by the defendants to the plaintiff within 14 days from the date hereof.

Case Management Conference

24.I shall now deal with the Case Management Conference here. As the parties agree that the matter is, after the disposal of this application, ready for trial, I shall now give leave to the plaintiff to, within 42 days from the date hereof, set this matter down for a 10-day trial before a Judge alone in the fixture list in consultation with counsel’s diaries. There will be a pre-trial review for 30 minutes on a date 12 week before trial before the trial judge where the parties shall confirm the length of the trial or bring up the issue of recusal, if any. The costs of the Case Management Conference (30 minutes) be in the cause.