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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D E C I S I O N

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1.  This is an application for leave to appeal against my order made on 24 August 2010. I dismissed the application by the plaintiffs by original action and defendants by counterclaim (hereinafter collectively called “the Foxconn Parties”) to strike out various paragraphs of the counterclaim by the defendants by original action and plaintiffs by counterclaim (hereinafter collectively called “the BYD Parties”).

2.  This application is made under section 14AA of the High Court Ordinance and O.59 r.2B of the Rules of the High Court.  Section 14AA(4) provides that:

“(4) Leave to appeal for the purpose of subsection (1) shall not be granted unless the court hearing the application for leave is satisfied that –

(a) the appeal has a reasonable prospect of success; or

(b) there is some other reason in the interests of justice why the appeal should be heard.”

The parties agree that a reasonable prospect of success under sub-section 4(a) means a prospect that is more than fanciful but without having to be probable (see SMSE v KL [2009] 4 HKLRD 125 at para. 17).

3.  The application by the Foxconn Parties was to strike out paras. 62 to 68 of the counterclaim of the BYD Parties.  The cause of action pleaded by the BYD Parties in these paragraphs is unlawful interference with business by the Foxconn Parties.  Various allegations are pleaded against the Foxconn Parties.  The allegations say that the Foxconn Parties had undertaken a course of conduct in procuring and using fabricated evidence or using evidence unlawfully obtained to launch proceedings against them or their employees.  They also say that the Foxconn Parties had on the basis of such evidence issued false statements of and concerning the BYD Parties to the effect that the BYD Parties and/or their staff had stolen or misused the confidential information or trade secrets of the Foxconn Parties.

4.  The alleged course of conduct included the wrongful detention by the Foxconn Parties of an ex-employee in an attempt to obtain from him false evidence of misappropriation and disclosure of their confidential information and the planting of soft and hard copies of documents in the computer and residence respectively of this ex-employee.  Another allegation is the unlawful intimidation by the Foxconn Parties of another ex-employee to obtain a false confession that she had been procured to divulge their confidential information to someone working for the BYD Parties.  There is also an allegation that the Foxconn Parties had bribed a director of the Judicature Appraisal Centre for Intellectual Properties in Beijing for the purpose of gaining access to and/or tempering with the evidence under examination. There is then a further allegation that the Foxconn Parties had bribed an employee of the BYD Parties to induce his breach of confidence to claim that some of the Foxconn documents had been passed among and used by some BYD employees.  Some of the allegations say that the Foxconn Parties had achieved the results they desired and some say that they did not.

5.  In the application to strike out, the Foxconn Parties argued that these allegations do not disclose a course of action of unlawful interference with business.  I took the view that the law of this cause of action was developing and I did not strike out this counterclaim.  I preferred to allow the matter to go to trial so that all the relevant evidence would be adduced and the law could be considered and developed.  I still hold the same view despite submissions by leading counsel for the Foxconn Parties that this counterclaim is not fact sensitive and it is not necessary to wait for the trial.

6.  For the allegations which did not say that the Foxconn Parties had achieved fruitful results from certain conduct, the Foxconn Parties seek to strike them out on the ground that they do not disclose any course of action and are useless.  The BYD Parties however argued that these allegations could show the whole course of conduct by the Foxconn Parties.  I allowed these allegations to remain as I thought that they could bring out the whole picture.  I still think so despite the same arguments of the Foxconn Parties being rehearsed again.

7.  The Foxconn Parties also submitted that the allegations are too vague and insufficient so that no inference could possibly be drawn against them.  I disagreed.  I still think the matter should proceed to trial and for the trial judge to consider if any inference could be drawn.

8.  There is however the question of whether any damage would be caused by the allegedly unlawful conduct to the BYD Parties that has caused me to doubt.  If the alleged course of conduct shall not result in loss or damage to the BYD parties, then they cannot maintain the claim of unlawful interference.  In para. 43 of my decision, I referred to para. 86 of the counterclaim (wrongly typed as para. 82) which pleaded that the BYD Parties had suffered loss and damage including loss of business and business opportunities (to be assessed).  I had not in my decision considered what loss, if any, could have been occasioned by the alleged course of conduct to the BYD Parties.

9.  The BYD Parties pleaded in para. 69 of the counterclaim that the alleged unlawful acts of the Foxconn Parties were carried out to fabricate false evidence against the BYD Parties for supporting two legal actions in the Mainland, two legal actions in this court and a criminal complaint.  Such evidence was also used to support the publication of various announcements and statements that are defamatory of the BYD Parties.

10.  Of the two actions in the Mainland, the first one was commenced by Foxconn Parties in 2005.  It was dismissed by the Shenzhen Court in April 2007 and the appeal was withdrawn in February 2008.  The second one was commenced in June 2006 but was withdrawn in March 2008.

11.  Regarding the two actions in Hong Kong, the first one in HCA 1246/2007 was commenced in June 2007 but was discontinued in October 2007.  

12.  Hence, the BYD Parties have not suffered any loss of damage by reason of use of false evidence, if any, by the Foxconn Parties in these three legal actions.  These three actions or the use of allegedly false evidence by the Foxconn Parties in them are irrelevant to the counterclaim of the BYD Parties of unlawful interference with business.

13.  The 2nd action in Hong Kong is the present action.  If the Foxconn Parties are going to prosecute this action with evidence allegedly collected through and thus tainted by the alleged course of conduct, the BYD Parties can no doubt defend this action by establishing the course of conduct.  If BYD can establish the course of conduct and satisfy the court of the wrongfulness of the evidence so gathered, then the Foxconn Parties cannot succeed to the extent that it may have to rely on such evidence.  In that event, the BYD Parties will not suffer any loss or damage by the use of such evidence by the Foxconn Parties.  They then cannot maintain the counterclaim of unlawful interference.

14.  If the BYD Parties either cannot establish the course of conduct or should fail to satisfy the court that such evidence is wrongful or wrongfully obtained and hence should not be relied on, then the BYD Parties may be found liable to the Foxconn Parties in this action.  However, the BYD Parties’ liability under the judgment will not be caused by any unlawful interference by the Foxconn Parties, but by the properly admissible evidence adduced by them.  The BYD Parties also cannot maintain the counterclaim of unlawful interference.

15.  Thus, regardless of whether the BYD Parties can successfully defend this action, it cannot in any event say that it will suffer any loss or damage by reason of the course of conduct or the evidence collected by it.

16.  Regarding the criminal complaint that is allegedly supported by the false evidence, it was lodged by the Foxconn Parties in February 2008 against a member of the BYD Parties and their chairman Mr Wang.  I would apply the same analysis and reasoning above to this complaint. I also say that regardless of the outcome of the investigation and/or prosecution of this complaint, the BYD Parties cannot say that it will suffer any loss or damage by reason of the course of conduct or the evidence collected by it.

17.  In the premises, the Foxconn Parties may well argue on appeal that there cannot be any basis for the BYD Parties to make a counterclaim of unlawful interference by reason of the use by the Foxconn Parties of the allegedly false evidence collected in the alleged course of conduct in prosecuting the above mentioned four legal actions and criminal complaint.

18.  I now turn to the counterclaim of unlawful interference with the business of the BYD Parties by the use by the Foxconn Parties of allegedly false evidence collected in the alleged course of conduct to support the publication of the various announcement and statements that are said to be defamatory of the BYD Parties.

19.  The BYD Parties are already counterclaiming in this action for damages for libel and slander in relation to these announcement and statements.  If the BYD Parties can succeed in this counterclaim, then it will be compensated for the loss of damage caused by the use of the allegedly false evidence in these announcement and statements.  If it should lose this counterclaim, then there will be no reason why it should succeed on the counterclaim of unlawful interference as both counterclaims are based on the attack on the allegedly false evidence of the Foxconn Parties. 

20.  On this analysis, it is apparent that the counterclaim of unlawful interference in relation to the announcements and statements is a duplicate of the counterclaim for damages for libel and slander in relation to the same announcements and statements.  The Foxconn Parties may well argue on appeal that the BYD Parties are not entitled to bring a counterclaim of unlawful interference as a duplicate of the counterclaim of damages for libel and slander.

21.  For the above reasons, I think the appeal by the Foxconn Parties has a reasonable prospect of success.  I would grant leave to the Foxconn Parties to appeal against my decision of 24 August 2010.  I also make a costs order nisi that the costs of this application be in the appeal.