CSAV GROUP (HONG KONG) LTD AND ANOTHER v. JAMSHED SAFDAR

cacv 55/2007

in the high court of the

hong kong special administrative region

court of appeal

civil appeal no. 55 of 2007

(on appeal from DCCJ NO. 586 of 2006)

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J U D G M E N T

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Hon Le Pichon JA:

1.  This is an appeal from the order of HH Judge Chow dated 29 January 2007 (“the 2007 order”) requiring the plaintiffs to file a further and better list of documents containing the 4 items described in the schedule attached to the 2007 order, to verify the list and to file an affidavit stating whether he has had or has had such items in his possession, custody or power, pursuant to Order 20 Rule 7.  At the conclusion of the hearing, judgment was reserved which we now give.

Background

2.  The detailed background appears in the Reasons for Judgment handed down by this court (differently constituted) on 28 April 2006 in an earlier appeal (CACV 133/2006) concerning a preservation order made by HH Judge Chow on 22 March 2006 to which reference should be made.  For the purposes of this appeal, a shortened version of that background would suffice.  In brief, the defendant was the former Head of Marketing of the second plaintiff, a sea container transport company.  The first plaintiff is its Hong Kong service company and with whom the defendant had entered into a contract of employment in 2002.  On 3 January 2006, the defendant gave the plaintiffs one month’s notice of his resignation.  By agreement, his last day in the office was 13 January 2006 although he remained an employee until the expiration of his notice on 2 February 2006.

3.  A few days after the defendant’s departure, the plaintiffs’ IT department examined the plaintiffs’ computers and e-mail system that had been used by the defendant and discovered that between 3 and 13 January the defendant had e-mailed to his personal e-mail address various documents and files belonging to the plaintiffs which the plaintiffs claim to be confidential documents.  Three such documents were identified in paragraph 17 of the statement of claim filed on 7 February 2006.  It was alleged that the defendant had misused or would misuse them and/or had disclosed and/or would disclose them to third parties.  It was further alleged that a further three documents identified in paragraph 20 of the statement of claim had been e-mailed from the plaintiffs’ computer to the defendant’s personal e-mail address and that these were used to assist thus setting up of a competing business.  The relief sought included an order for delivery up of the documents said to be confidential, an order that the defendant account for such confidential information obtained and that he be restrained from using or disclosing the same, an account of profits and damages for breach of contract.

4.  On 7 February 2006, on an ex parte application on notice by the plaintiffs, HH Judge Chua ordered by consent that the defendant’s personal computer and storage devices be kept in the safe custody of the defendant’s solicitors, that a forensic computer expert be agreed to inspect the computer and to make copies and/or forensic images of the same and that the forensic images be kept in the safe custody of the expert until further order.  The judge further ordered, inter alia, that the defendant be restrained from using or disclosing any “information, property, files, documents, or other material belonging to the plaintiffs (“Plaintiffs’ Property”) and that the defendant should serve on the plaintiffs’ solicitors an affirmation specifying whether the Plaintiffs’ Property had been transferred to third parties.

5.  The inter partes summons was heard by HH Judge Chow who made an order on 22 March 2006 (“the preservation order”).  On appeal, on 28 April 2006, this court set aside part of the preservation order that had allowed inspection and limited the effect of another part of the order.

6.  Several months later, on 25 July 2006, the plaintiffs amended their statement of claim.  The substantive amendments related to paragraph 17, enlarging the list of documents belonging to the plaintiffs said to be confidential that the defendant had e-mailed to his personal address after he had tendered his resignation from 3 to 6 and adding a new paragraph 17A identifying 9 documents or classes of documents belonging to the plaintiffs also said to be confidential that the defendant had e-mailed to his personal e-mail address during the 6 months preceding his resignation.

7.  The defendant has expressly admitted sending the e-mails as alleged in the amended statement of claim.  The dispute between the parties is about confidentiality.  In issue is whether any of these documents contained confidential information.

8.  In August 2006, the plaintiffs issued the summons, subsequently amended, culminating in the 2007 order that is the subject matter of this appeal.

This appeal

9.  For the purposes of this appeal, it is necessary to consider each of the 4 items described in the schedule annexed to the 2007 order.

“	1.	The hard drive of the Defendant’s home personal computer (“Computer”), as referred to in, inter alia, his Third Affirmation dated 20th April 2006 (“Defendant’s 3rd Affidavit”) and any forensic images of the Computer’s hard drive (including any forensic images of the hard drive and items therein produced by Ernst & Young Transactions Limited).
	2.	All documents (whether in electronic or in documentary form), including the “Freight Rate Report”, “Guest List” and “Press Contact List”, job descriptions, marketing presentations, a “volume report”, a “report on the status of the shipping market” belonging to the Plaintiffs which are presently or were formerly in the Defendant’s personal possession during the last 6 months of the Defendant’s employment with the Plaintiffs save and except any PR Newswire articles.
	3.	All documents (including emails, word processing files, spreadsheets and presentation documents) which the Defendant allegedly produced or amended for the Plaintiffs from the Defendant’s home using the documents sent from the Plaintiffs’ office computer to the Defendant’s personal email account during the last 6 months of the Defendant’s employment with the Plaintiffs.
	4.	All documents relating to a matter in question in the cause (including emails, word processing files, spreadsheets and presentation documents) which the Defendant viewed, created or modified on the Plaintiffs’ office computers which were related to the establishment or operation of companies or businesses in competition with the Plaintiffs.”

10.  Mr Burns SC who appeared for the defendant challenged the relevance of the four items.  He submitted that they are not necessary for the fair disposal of the matters in question.  For convenience, the four items referred to as “the hard drive”, “class 2 documents”, “class 3 documents” and “class 4 documents” respectively, will be considered in turn.

11.  There is a preliminary matter that should be borne in mind.  As explained by Rogers VP at paragraph 12of his judgment in the earlier appeal, the plaintiffs have a better record of documents that had been sent by the defendant to his personal e-mail account using the plaintiffs’ computer than did the defendant.

(1) the hard drive

12.  Mr Burns submitted that the evidence established conclusively that the hard drive did not contain anything that was relevant to the matters in question in the action.  In the defendant’s third affirmation, the defendant had deposed to the fact that he had examined “a soft copy of the contents of his Outlook Express in box, outbox sent items and deleted items folders” under the supervision of his solicitors and found nothing there that fell within paragraphs 1 to 11 of the schedule to the preservation order.  He went on to say this in paragraph 15 of that affirmation:

“I have also instructed my solicitors to engage the services of a forensic expert to ascertain if there are documents which come within the definition of the Schedule which exist on my computer such as deleted files which can only be recovered by a forensic expert.  My solicitors engaged Ernst & Young Transactions Limited to recover deleted documents and files from my personal computer.  None of the documents or files which have been recovered by the forensic experts fall within paragraphs 1-11 of the Schedule to Judge Chow’s Order as amended by the Court of Appeal.”

13.  That, it was said, had to be read together with the second affirmation of Mrs Fewins, his handling solicitor, filed pursuant to an order of the judge made at the hearing on 22 December 2006.  Paragraphs 4 and 5 read as follows:

“4.	The contents of the hard drive had been inspected and I have not been able to identify any documents on the hard drive which are relevant to the issues in question.
5.	One behalf of the [d]efendant, Clyde & Co has instructed forensic accountants Ernst & Young Transactions Limited to recover deleted files from the [d]efendant’s hard drive.  On inspection of the deleted files, I have not found any documents which are relevant to the issues in question.”

Thus the defendant’s hard drive which had been delivered to his solicitors for safe custody had been examined by the defendant with his solicitors in the manner deposed to in the defendant’s third affirmation and had also been subjected to forensic examination.  Forensic experts engaged by the defendant had taken a forensic image (i.e. a copy) of the hard drive and converted the deleted files into readable form.  In addition to the material that was readable by opening the hard drive, Mrs Fewins was also able to read the deleted files.  It was submitted that in those circumstances Mrs Fewins’ affirmation was conclusive and the judge had erred in not appreciating this fact.

14.  At the hearing of this appeal, Mr Strachan who appeared for the plaintiffs produced the third affirmation of Mrs Fewins dated 2 February 2007 in which she explained that Ernst & Young had

“simply carried out the exercise of recovering deleted files from an image of the hard drive.  Further, Ernst & Young did not inspect the hard drive or the recovered deleted files.  I made this inspection myself and informed the court of this at the hearing of 22 December 2006.”

15.  It is not apparent from Mrs Fewins’ affirmations whether she possesses any expertise in the examination of hard drives or, indeed, how computer literate she is.  In the absence of any evidence as to the methodology employed in the examination of the hard drive to identify all relevant documents, the conclusiveness of the evidence is open to question.  For example, there is no mention of any attempt to verify if any ‘hidden’ files existed and, if so, whether any attempt was made to open them and to read them. I apprehend that the settings of the computer in question would be relevant on that issue.  Although the forensic experts retrieved deleted files, the evidence does not address the question of ‘hidden’ files.

16.  That aside, there is the very curious feature that on Mrs Fewins’ evidence the hard drive not only did not contain any of the documents identified in paragraph 17 and 17A of the amended statement of claim which the defendant admitted to having sent to his personal e-mail address, it also did not contain any information as to whether and when any of the e-mails the defendant admitted to having deleted in his affirmations was deleted.  The hard drive would normally contain information as to when a document had been deleted, printed or forwarded by e-mail.

17.  Mr Burns’ answer was that an e-mail sent to the defendant’s e-mail address would not get into his hard drive if it had been read remotely and deleted.  He invited the court to infer from the fact that Mrs Fewins had not been able to locate any of those e-mails on the hard drive or from the deleted files that that was what must have happened.  But the thrust of the defendant’s evidence was that he had sent e-mails from the plaintiff’s office to his netvigator account in order to work on them from home.  The natural inference is that he would have opened them on his home computer.  Moreover, it has not hitherto been suggested that he had accessed these e-mails remotely and had never opened any from his own computer.  That he might have done so in relation to the odd e-mail might not beggar belief.  But to accept that all the e-mails in question must have been opened remotely is an entirely different matter.  It is an extrapolation that is premised on the conclusiveness of Mrs Fewins’ evidence, a premise that is open to question.  For my part, I have considerable reservations as to the conclusiveness of Mrs Fewins’ evidence.

18.  Mr Strachan maintained that the hard drive and the forensic images are relevant.  But as noted earlier that the plaintiffs are hardly in the dark as to what documents have been e-mailed by the defendant from the plaintiffs’ computers to the defendant’s personal e-mail address.  They know exactly what has been sent.  Moreover, the defendant does not dispute the fact that these had been sent by him.  What then is the relevance of the defendant’s hard drive?  What purpose would its discovery serve?

19.  Mr Strachan submitted that the hard drive is necessary because it would reveal when a particular file was opened, deleted or forwarded to third parties.  That may be so but it is not apparent what relevance the date a particular e-mail was opened is.  The same may be said of the date a particular e-mail was deleted.  As to whether a particular e-mail had been forwarded to third parties, whilst that may be relevant to the issue of misuse of documents, the defendant has already been required by court orders to file evidence as to what he has done with the e-mails forwarded to his personal e-mail address.  It may be that having that information from the hard drive could be useful when it comes to cross examining the defendant, but quite apart from the fact that discovery solely as to credit will not be ordered, it is difficult to see how it would advance the matters in question given what this litigation is all about, namely, whether any of the documents identified in the amended statement of claim contained confidential information.

20.  In this connection, it should not escape attention that the 3 documents claimed to contain confidential information identified in paragraph 17 of the statement of claim as originally drafted and upon which this action as well as the preservation order including injunctive relief was grounded were considered in the earlier appeal.  See paragraphs 3 and 17 of the judgment of Roger VP in the earlier appeal.  It would be fair to say that this court was somewhat sceptical of the confidentiality claim.  It is true that the statement of claim has since been amended in the manner described in paragraph 6 above and a further 12 documents or classes of documents are relied on, but the fact remains that the amendment was only made some five and half months after the specially endorsed writ had been issued on the basis of which the preservation order including injunctive relief was obtained and well after the hearing of the appeal challenging the scope of the preservation order.  It would be surprising indeed if the later additional documents could significantly strengthen the plaintiffs’ case.

21.  Moreover, a pertinent consideration is the fact that the document sought undoubtedly contains much material that is personal to the defendant, that has nothing to do with this litigation.  Clearly the defendant needs to be protected from unnecessary intrusion into his personal affairs.  Even if (which is not the present case) relevance had been established, it seems to me quite wrong to order that the hard drive be listed in the defendant’s list of documents, at any rate, without qualification.  Where relevance is at best peripheral, the question of imposing qualifications would not even arise.  In any event, it should not be considered except in a clear case (i.e. where relevance has been established) since it would inevitably entail the engagement of forensic experts, which would add considerably to the costs.  Quite apart from the question of relevance, I am of the view that discovery of the hard drive is not necessary either for disposing fairly of the action or for saving costs.

(2) class 2 documents

22.  This category (which excludes PR Newswire articles which, in the earlier appeal, have been held not to be confidential) extends beyond documents in the electronic form that are or have been in the defendant’s possession.  But, there is no allegation that the defendant had taken any document belonging to the plaintiffs otherwise than by e-mailing the same to his personal e-mail account.  In so far as documents in the electronic form are concerned, as noted earlier, the plaintiffs have a better record of what had been sent from an examination of their own computer system than the defendant.

23.  Mr Strachan sought to justify the width of the class 2 documents.  He submitted that had the defendant been apprehended by the plaintiffs leaving the office on 13 January 2006 carrying a briefcase filled with documents belonging to the plaintiffs, there would be no question but that the plaintiffs would be entitled to require discovery going outside the particular documents they have managed to identify.  It was submitted that this is therefore the kind of case where the plaintiffs are entitled to require disclosure of all documents containing confidential information obtained by the defendant in the course of his employment and is not limited to the documents identified in paragraphs 17 and 17A of the amended statement of claim.  I do not agree.  The case against the defendant is put squarely on documents sent by him from the plaintiff’s computers to his personal e-mail address.  It is not about the defendant physically taking documents belonging to the plaintiffs away with him.  In my view, this is nothing short of a ‘fishing expedition’ and should not be allowed.

(3) class 3 documents

24.  These are documents “allegedly produced or amended” by the defendant for the plaintiffs using the documents sent from the plaintiffs’ office computer to the defendant’s personal e-mail account.  There is no issue relating to the documents sent by the defendant to his personal e-mail account.  The defendant’s explanation for doing so was in order to work on the documents from home.  If he had worked on them, it stands to reason that he would have sent such documents back to the office, i.e. the plaintiffs’ e-mail account.  The plaintiffs would therefore already have a record of such documents if they exist.

25.  The judge ordered discovery on the basis that the defendant’s reason for deleting the e-mails (because of the limited storage space on his e-mail account) is not a defence to discovery of these documents.  But what was not addressed was the relevance and/or need of discovery of the class 3 documents.  The defendant’s own copies (assuming they had not been deleted) would, at best, be of marginal relevance to the main issue between the parties which is whether any of the documents identified in the amended statement of claim contains confidential information.  In my view, discovery of these documents is not necessary: it is neither for fairly disposing of the action nor for saving costs.

(4) class 4 documents

26.  It is not readily apparent what documents this class is meant to cover.  As to the three documents identified in paragraph 20 of the amended statement of claim there is no issue as the defendant has already admitted to sending them.  It is not alleged that other documents exist and, in any event, no basis for their existence has been made out.  In the circumstances, I agree that as formulated this class of documents is too wide, vague and unspecific.  Moreover, being documents “viewed, created or modified on the plaintiffs’ office computers”, they must necessarily already be in the plaintiffs’ possession if they exist.  I am therefore not convinced that this discovery is necessary.

Conclusion

27.  For the reasons stated above, I would allow the appeal.  I would also propose that there be an order nisi that the costs here and below be to the defendant.

28.  Finally, I have the following observations to make on the progress of this action.  Since its commencement in February 2006, the parties have been locked in interlocutory skirmishes necessitating no less than two appeals to this court.  Little progress has been made to advance the real issue in dispute.  This is a prime example of unnecessary satellite litigation which ought to be strongly discouraged.  This case calls for strong case management so that the real issue between the parties, namely that relating to confidentiality, should be resolved without wasting further time and resources on irrelevant and unnecessary discovery.

Hon Sakhrani J:

29.  I agree.