GAMING PARTNERS INTERNATIONAL CORPORATION v. PAULO DA SILVA

HCMP 3354/2015

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

MISCELLANEOUS PROCEEDINGS NO. 3354 OF 2015

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DECISION

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Introduction

1.  This is an application for leave to appeal against my decision made on 19 February 2016 (“the Decision”) whereby I dismissed Mr Da Silva’s application made in paragraph 2 of his summons dated 11 February 2016 (D’s Summons”) for a stay of certain parts of the ex parte orders granted by this court on 17 December 2015 (“the Ex-parte Orders”). The Ex-parte Orders consist of an Anton Piller order (“the APO”) and an interim injunction order.

2.  Mr Kwok appeared for Gaming Partners International Corporation (“GPIC”) and Mr Lin appeared for Mr Da Silva at the hearing before this court on 19 February 2016 (“the 19.2 Hearing”). The Decision being made orally, for easy understanding of this decision, it is necessary for me to first give a brief summary of the background facts before I deal with the substantive grounds of the intended appeal.

3.  The Ex-parte Orders were sought on the same day when these proceedings were commenced for interim relief in aid of proceedings to be commenced in the High Court of Chalon-sur-Saone, France under section 21M of the High Court Ordinance, Cap. 4 (“HCO”).

4.  GPIC is a company incorporated in the US. It made the ex parte application on the basis that Mr Da Silva was the former employee of its subsidiary in France and now he misuses the documents containing GPIC’s trade secrets and confident information for the purpose of his new employer, Dolphin Products Ltd. (“Dolphin”), a Hong Kong company and one of its business competitors.

5.  Both GPIC and Dolphin carry on the business in the manufacture and trading in casino currency such as chips and plaques and related products. On the evidence of GPIC, there are only a few manufacturers of such gaming accessories in the world and GPIC has a market share of 80% - 90% for chips and plaques worldwide sales.    

6.  GPIC has four operating subsidiaries and one of them is Gaming Partners International SAS (“GPI SAS”), which is based in France. GPI SAS employed Mr Da Silva as Production Manager and he was dismissed on 2 April 2014 after entering a severance agreement with GPI SAS on 13 February 2014.

7.  The manufacture of casino chips and plaques being convertible into legal tender involves a secretive process. Among the 600 employees of GPIC, only 4 employees had access to the manufacturing trade secrets and confidential information. Mr Da Silva was one of them.

8.  The alleged misdeed of Mr Da Silva was made known by one Mr Wong who was formerly a mechanical engineer of Dolphin. He disclosed to GPIC that Dolphin had long attempted to find out the manufacturing process of GPIC’s chips and plaques through reverse engineering by in vain.     

9.  Alarmingly, Mr Wong disclosed that Dolphin had a 3-week service of Mr Da Silva as a consultant to improve its manufacturing process commencing 11 August 2015. Then, Mr Wong worked closely with Mr Da Silva, who told him that he had in his possession a USB containing voluminous information of GPI which he was prepared to share with Dolphin. Consequently, Mr Da Silva disclosed to Mr Wong a lot of confidential information of GPIC including its plaques manufacturing method/process and the identities of GPIC’s suppliers. Mr Wong also managed to produce to GPIC a number of documents printed on GPIC’s letterhead containing the trade secrets of GPIC and a document entitled “Actions Plan” prepared by Mr Da Silva which contained detailed references to GPIC and its secretive manufacturing process.

10.  At last, Dolphin replaced Mr Wong with Mr Da Silva on 25 September 2015. Not surprisingly, Mr Wong was unhappy with the termination of employment and made all the foregoing disclosure to GPIC on 8 October 2015.

11.  Based on such information, on 30 November 2015, GPIC SAS obtained from the High Court of Chalon-sur-Saone a search and seizure order (the French counterpart of an Anton Piller Order) (“the French Order”) against Mr Da Silva’s residence in France. The French Order had however not been executed pending Mr Da Silva’s return to France from Hong Kong.  

12.  This court applied the two-stage test, i.e., first, whether the facts of the case warrant the grant of interim relief if substantive proceedings were brought in Hong Kong in the context of Hong Kong law and second whether the fact that the court has no jurisdiction apart from section 21M makes it unjust or inconvenient to grant the interim relief sought: Compania Sud Americana De Vapores S.A. v Hin-Pro International Logistics Ltd [2015] 2 HKLRD 458.

13.  The evidence against Mr Da Silva appeared to be strong and this court was convinced that there is, to say the least, a good arguable case of breach of confidence actionable in Hong Kong warranting a grant of interim relief. Quite apart from there being any judicial conflicts, the French Order further convinced me that it would be just and convenient to grant the Ex-parte Orders. This court was well aware of the draconian and intrusive nature of the APO and of course, this court was also satisfied that there was sufficient urgency and secrecy for the application to be made on an ex parte without notice basis given Mr Da Silva’s cynical disregard of the confidence reposed in him in his employment. As a result I exercised my discretion to grant the Ex-parte Orders against Mr Da Silva.

14.  The APO was executed on 19 December 2015 in the presence of Mr Da Silva and his legal advisors at his serviced apartment in Ma On Shan. In accordance with its terms, Ms Susan Kendall who is the handling solicitors of GPIC in this matter, together with three of her colleagues at Baker & McKenzie, accompanied by a computer forensic specialist gained entry of the unit of Mr Da Silva. The interim injunction order was served on Mr Da Silva at the same time. The parties agreed to copy all the data of the computer devices of Mr Da Silva to a portable hard drive (“the Hard Drive”). The Hard Drive was on the spot sealed pending agreement on the terms of inspection by the parties. I was told at the hearing that the Hard Drive is now still under seal and in the safe custody of the computer expert of GPIC absent any agreement as to the terms of inspection.

15.  Immediately after the grant of the Ex-parte Orders, GPIC took out a summons to continue certain part of the APO and the interim injunction order until final determination of its Originating Summons (“the Continuation Summons”). The Continuation Summons will be heard by Lok J on 4 May 2016.

16.  On the return day, DHJC Wilson Chan made an order by consent (“the Consent Order”) whereby directions for filing evidence were given and the Continuation Summons in respect of the APO be adjourned for arguments. The deputy judge further extended the time for Mr Da Silva to file his affidavit under the APO and ordered that the Hard Drive should remain sealed pending the terms of inspection to be agreed by 18 January 2016 and inspection to commence on or before 1 February 2016, with liberty to apply.

17.  As regards the interim injunction order, upon the undertaking given by Mr Da Silva in similar terms of those prohibitive parts thereunder, by virtue of the Consent Order, it was discharged and replaced by certain directions ensuring Mr Da Silva’s compliance with the usual disclosure, delivery up and destroying obligations under the interim injunction order (“DDD Obligations”).

18.  In January 2016, this court made two orders, among other things, granting Mr Da Silva further time to comply with his DDD Obligations and the parties further time to complete the inspection of the Hard Drive.

19.  On 11 February 2016, Mr Da Silva took out a summons (“D’s Summons”) to apply for (1) an order that the interim injunction order and the APO be set aside with costs to Mr Da Silva (“the Discharge Application”) and (2) an extension of time for the compliance with the outstanding directions under the interim injunction order and the APO until 21 days after the final determination of the D’s Summons (“the EOT Application”). The Continuation Summons and D’s Summons will be heard at the same time by Lok J.

20.  At the 19.2 Hearing, beside refusing the EOT Application, this court also set a new timetable to make sure that the parties do complete inspection and file their evidence in good time before the substantive hearing of D’s Summons. The Decision is the subject matter of the intended appeal of Mr Da Silva.

21.  Lastly, I should mention that Dolphin apparently applied to join as a Third Party and Lam J ordered that in respect of those data copied from its laptop computer in the possession of Mr Da Silva on the day of the execution of the APO should be excluded from inspection by the parties.

Applicable principles

22.  This is an interlocutory appeal against the Decision wherein I exercised my discretion against the EOT Application. The following established principles are applicable to this kind of applications.

23.  Section 14AA(4)(a) of the HCO is the governing provision and leave to appeal shall not be granted unless the court is satisfied that the appeal has a reasonable prospect of success or there is some other reason in the interests of justice why the appeal should be heard.

24.  Mr Da Silva does not need to show that his intended appeal will probably succeed but he has to show that it has merits and ought to be heard: SMSE v KL [2009] 4 HKLRD 125 at §17, Wynn Resorts (Macau) SA v Mong Henry [2009] 5 HKC 515 at §19. 

25.  To assess whether his intended appeal has any merits, this court should bear in mind the threshold to meet set out in the following oft-cited passage in the judgment of Lord Diplock in Hadmor Productions Ltd v Hamilton [1983] 1 AC 191 at p.220B-F:

“The function of the appellate court is initially one of review only. It may set aside the judge’s exercise of his discretion on the ground that it was based upon a misunderstanding of the law or of the evidence before him or upon an inference that particular facts existed or did not exist, which, although it was one that might legitimately have been drawn upon the evidence that was before the judge, can be demonstrated to be wrong by further evidence that has become available by the time of the appeal; or upon the ground that there has been a change of circumstances after the judge made his order that would have justified his acceding to an application to vary it. Since reasons given by judges for granting or refusing interlocutory injunctions may sometimes be sketchy, there may also be occasional cases where even though no erroneous assumption of law or fact can be identified the judge’s decision to grant or refuse the injunction is so aberrant that it must be set aside upon the ground that no reasonable judge regardful of his duty to act judicially could have reached it. It is only if and after the appellate court has reached the conclusion that the judge’s exercise of his discretion must be set aside for one or other of those reasons, that it becomes entitle to exercise an original discretion of its own.”

26.  It should be noted that this is not really an application to discharge the Ex-Parte Orders though I have heard detailed submissions of Mr Sussex SC appearing with Mr Lin for Mr Da Silva about the merits of the Discharge Application. It is an intended appeal against my decision not to stay the remaining parts of the Ex-Parte Orders. Guided by these principles, the issue in this application should be whether I exercised my discretion wrongly on a misunderstanding of the law or the evidence before me and/or my refusal to stay the remaining parts of the Ex-Parte Orders is manifestly wrong.

27.  At the outset of the 19.2 Hearing, I referred the parties to an extract from Steven Gee QC, Commercial Injunctions, 5^th edn., §§6.011-6.012. It concerns compliance with disclosure orders pending application to set aside the interim relief. I found the following extract to be particularly apposite for present purposes:

“… If a stay was not granted the effect would be that the disclosure orders would have to be complied with before the defendants were heard on their application to set them aside. It is, of course, possible for a court to order that a mandatory interim order for disclosure of information is to have effect before a defendant can be heard on a discharge application. This is so with Anton Piller relief. It gives the claimant the information before the defendant is heard on whether the claimant should have it. But this involves an infringement of the principle audi alterem partem which is one of basic justice. It is because once the disclosure is given it cannot be reversed.

The answer is that although this principle is very important it is not absolute. The fundamental principle is that whichever course is adopted by the court it should carry the lower risk of injustice if it should turn out to be wrong.”

28.  I agree that this is essentially a balancing exercise to weigh the potential injustice to GPIC if a stay is granted against the potential injustice if the privacy of Mr Da Silva is intruded without justification.

29.  The learned author refers to two authorities of the English Court of Appeal, namely, Grupo Torras v Sheikh Al-Sabah [2014] 2 CLC 636 and Motorola Credit Corporation v Cem Cegiz Uzan [2002] EWCA Civ 989.

30.  In Grupo Torras, which Mr Kwok relies on, Waller J (as he then was) refused to discharge a disclosure order ancillary to a worldwide Mareva injunction against Sheik Fahad, the defendant, pending a decision on his challenge to the jurisdiction of the English court. The defendant appealed. Upholding the judge’s decision, Steyn LJ said,

“Undoubtedly, if the plaintiffs ultimately lose the jurisdictional battle, there is some prejudice to Sheik Fahad in that it will then not be possible to undo the invasion of his privacy. While this prejudice is real it is of a lesser order than the prejudice that Grupo Torras may suffer if it is unable to police the Mareva injunction for some time… The balance tilts decisively in favour ”

31.  Neither Waller J nor Steyn LJ said anything about the merits of the challenge of Sheik Fahad in their judgments. It is plain that the court merely undertook the balance exercise to ensure lower risk of injustice.

32.  The majority of the Court of Appeal in Motorola Credit Corporation v Cem Cegiz Uzan and Ors. [2002] C.P. Rep.69 followed the approach of Steyn LJ. In that case, a worldwide freezing order was made against the first and fourth defendants in the Commercial Court in aid of proceedings already commenced in the US. The defendants made an application to the Commercial Court to set aside the freezing order in respect of the ancillary disclosure orders. In the meantime, the 1^st defendant applied to David Steel J for a stay but in vain. He appealed to the Court of Appeal. Waller LJ (with whom the Lord Chief Justice agreed) first set out the reasons of David Steel J appearing in the transcript of the judgment:

“I cannot accede to those submissions. It is notable that it is accepted in principle that the freezing order itself should stand pending the outcome of the inter partes hearing and the requirement for disclosure is a standard and, in my judgment, important part of the order. It is prima facie inappropriate to carve the order up in a way which the defendants seek to invite the court to do, so as to allow what might be described as the restraints to stand but the mandatory requirements for disclosure to be put on hold. In any event the submission that the passage of time since the application for a domestic order was first made in January would have allowed the Defendant, if so disposed, to dissipate or hide his assets seems to me to fortify the proposition that the Claimants may sustain irreparable harm if matters are allowed to go into limbo pending a judgment on the inter partes hearing or indeed judgment on any appeal from that hearing. Whether or not he is in fact minded to obey the existing order for disclosure, from the court’s perspective it must assume that there will be a proper, full and frank response by the first defendant and that if, given what the New York judge has concluded about the propensity of the Defendant and his colleagues, then it may well be that funds have been transferred, dissipated, hidden or otherwise rendered more difficult to trace. In my judgement the sooner the matter is put clear on paper the better.”

33.  Waller LJ finally concluded that David Steel J’s exercise of the discretion should not be interfered with by reason of three factors (at §§29-30). First, Waller LJ agreed that although it was an invasion of privacy to force any party to disclose assets, a freezing order in normal circumstances required that disclosure to be policed and to be effective. Second, it might be that the defendants had an arguable case for setting aside the worldwide order, the claimant clearly had a strong case that a fraud had been committed showing that dissipation was a serious risk. Lastly, the defendants’ failure to give security to lift the injunction caused concern.

34.  Lord Woolf agreed with Waller LJ and added (at §40) that when dealing with interim applications for stays a broad-brush approach has to be taken, otherwise on the application for a stay the court will be determining the very issues which are to be determined later. Lord Woolf went on to observe that adopting such a broad-brush approach, although prejudice could be caused to the defendants, the likelihood is that greater prejudice would be caused to the claimants if a stay was granted.  

This application

35.  In this application, Mr Sussex does not really focus on how I misdirected myself in law or evidence in my refusal to grant a stay or how my exercise of the discretion was plainly wrong. His primary submission is that if the Discharge Application is successful, GPIC has no right to inspect the Hard Drive and Mr Da Silva does not have to comply with the DDD Obligations. GPIC should not be allowed to enjoy the fruits of the Ex-Parte Orders before their validity is confirmed after an inter partes hearing. Thus, to maintain the status quo pending the determination of his Discharge Application given the Hard Drive is under seal, this court should grant the stay, which in substance is a suspension of the remaining obligations of the APO and the interim injunction order. This is particularly so when Mr Da Silva appears to have a good case of discharge and that the refusal of the stay sought would render his success application nugatory.

36.  Mr Sussex highlights that the Discharge Application would be heard very soon and so the stay would not last long meaning that minimum prejudice would be caused to GPIC in the interim. However attractive this submission may sound, I doubt in reality whether or not the final determination of the Discharge Application would be available soon.

37.  On the merits of his Discharge Application, the arguments of Mr Sussex are centred on two major grounds, viz, the inapplicability of section 21M and to a lesser extent the lack of locus standi of GPIC. The former was not argued before I made the Decision and it is a new argument.

38.  Pausing here, it is pertinent to take heed of the foregoing dicta of Lord Waller and Lord Woolf in Motorola Credit Corporation. This court should only take a broad-brush approach and refrain from resolving the two arguments, which is a matter to be dealt with in the Discharge Application. Indeed it is one of the grounds of appeal of Mr Da Silva that this court prejudged the locus standi issue prematurely in the stay application.

39.  In my judgment, the apparent strength of his Discharge Application is one of the factors this court should take into account only when it can be clearly shown that the Discharge Application is bound to be allowed or rejected. This court should not go into the merits of his grounds of discharge at great length.

40.  The nub of the inapplicability argument is that an Anton Piller order does not fall within the meaning of “interim relief” in section 21M of the HCO on its proper construction. Mr Sussex argues that by these proceedings GPIC is effectively seeking oral and documentary evidence from Mr Da Silva by way of the APO in aid of French proceedings to be commenced and this is not one of express purposes of section 21M of the HCO to start with. He further points out that only statutory mechanism for providing assistance in obtaining evidence for civil proceedings in a foreign court is embodied in section 75 of the Evidence Ordinance, Cap.8 (“the EO”). His argues that the APO could not be made unless it is made in the context of an application under section 75 of the EO.

41.  I am not convinced by this submission. There is no definition of “interim relief” in section 21M of the HCO and section 21M(7) merely makes it clear “interim relief” includes an interlocutory injunction referred to section 21L(3), which can enjoin a person not domiciled, residing or being present in Hong Kong from removing or dealing with his assets in the jurisdiction.

42.  I have little doubt that an Anton Piller order is an interim relief to, among other things, preserve evidence likely to be removed, concealed or destroyed by a defendant within the meaning of section 21M of the HCO. Its fundamental nature will not be altered when it is to be used to assist foreign proceedings even if a similar order can be made under a specific statutory provision.

43.  Moreover, I am unable to accept that section 75 of the EO can perform the functions of an Anton Piller order at all. It is true that a plaintiff can cause a foreign court or tribunal to issue a letter of request to make an application under section 75 of the EO and if the Hong Kong court agrees to obtain evidence in Hong Kong for its use, the Hong Kong court may direct a defendant or any third party to attend and give evidence before an examiner and further make provision for the inspection, photographing, preservation, custody or detention of any property: Camaro Trading Company Limited v Nissei Sangyo America Ltd [1994] 3 HKC 94.

44.  An Anton Piller order, however, serves to preserve evidence where there is a real and imminent risk that it will be removed, concealed or destroyed. Such an application under section 75 of the EO can hardly take care of the urgency and secrecy of an Anton Piller order.

45.  I cannot accept Mr Sussex’s submission that the well-established implied undertaking that documents which were compulsorily disclosed on discovery should be used only for the purpose of the action they were disclosed points to the conclusion that an Anton Piller is not an interim relief within the meaning of section 21M of the HCO.

46.  In my view, the implied undertaking can still be maintained if this court allows an Anton Piller order to obtain evidence for use in foreign proceedings. GPIC is still bound by the same implied undertaking in that any information in whatever form or documents obtained as a result of the APO can be used for the purpose of these proceedings, which were clearly commenced to assist its foreign proceedings. It is absurd to suggest that such information or documents obtained cannot be used in such foreign proceedings. To hold otherwise would defect the fundamental purpose of the present proceedings.

47.  In any event, this argument seeks to impugn the APO only and does not concern the interim injunction order and hence the DDD Obligations thereunder. It should not assist Mr Da Silva’s application for stay of the DDD Obligations.

48.  I now turn to the lack of locus standi argument. It should be noted that I did not reject it altogether on 19 February 2016. I merely said that I had a dim view of this argument. Mr Sussex does not press hard on this and submits that I should not brush it aside before the Discharge Application is determined. I did not and I agree that I should not. It does not strike me as a valid killer point either.

49.  I should first point out that GPIC already made it clear in the supporting affirmation that Mr Da Silva was a former employee of GPIC SAS[1]. Moreover, GPIC’s intended proceedings in France are not just about the breach of employment contract containing some confidentiality clauses. GPIC also relies on breach of confidence[2]. Even if as a matter of French law, GPIC SAS and not GPIC was the legal employer of Mr Da Silva, coupled with the fact that the French Order was obtained by GPIC SAS and not GPIC, it does not necessarily mean that GPIC has no cause of action whatsoever against Mr Da Silva’s misuse of the confidential information and trade secrets he obtained in the course of his employment with GPIC SAS. Suffice it to say, I am satisfied that GPIC passes the first part of the two-stage test.

50.  Thus, I am not impressed with the lack of locus standi argument too.

51.  On the other hand, I was and still am convinced that GPIC requires the inspection of the Hard Drive and Mr Da Silva’s compliance with the DDD Obligations without further delay.

52.  It is remarkable that in granting the APO, this court was convinced the urgency and the secrecy of the matter. By the APO, GPIC is entitled to an immediate inspection of all the relevant documents in both their hard and soft copies upon entry of the premises of Mr Da Silva. There is no reason why GPIC has to wait any longer. It is not an answer that the evidence in the Hard Drive is being well preserved and GPIC can wait until the determination of the Discharge Application. GPIC should be allowed to see the content of the Hard Drive immediately to assist its intended French proceedings having persuaded this court the urgency of this matter at the ex-parte stage. I still stand by my view that GPIC should have access to such evidence so as to find out the full extent of the breach of Mr Da Silva, avoid his further misuse of confidential information and stop the abuse immediately. Mr Sussex does not suggest how this view is in any way mistaken.

53.  Further, in making the directions for filing evidence for the purpose of the inter-partes hearing on 4 May 2016, I expected the inspection should take place before GPIC filed its evidence. Whilst I accept that the validity of the Ex-Parte Orders does not depend on the contents of the Hard Drive, its contents must be relevant to the issues to be canvassed in the Continuation Summons.

54.  I also note that Mr Da Silva has in support the Discharge Application filed his affidavit to deny the allegations of Mr Wong about his possession of a USB containing the confidential information of GPIC. The Hard Drive can shed light on the conflicting evidence of Mr Da Silva and Mr Wong. There is no reason why inspection should be withheld pending the determination of both the Discharge Application and the Continuation Summons.

55.  I accept that inspection of the Hard Drive is potentially an intrusion to the privacy of Mr Da Silva. However, I am convinced that sufficient safeguards are in place to keep such an intrusion to a minimum. In the first place, the persons who carry out the inspection under the APO are confined to the legal advisors and computer experts of GPIC (and their counterpart of Mr Da Silva) only. There is also an express prohibition in the APO that the information obtained shall not be used or made available for the commercial gain or advantage of any person whether or not he is a party to these proceedings.

56.  As far as the DDD Obligations are concerned, I fail to see how Mr Da Silva can complain about any prejudice that he would suffer if he is to comply with it before the determination of the Discharge Application. He is merely required to disclose, deliver up and destroy all the properties belonging to GPIC (and not his personal properties) under the interim injunction order. 

57.  It has taken more than enough time for the parties to agree on the terms of inspection of the Hard Drive. There can be no further delay. I hereby further extend the time for such terms to be agreed on or before 30 March 2016 and inspection must take place on or before 8 April 2016. The parties must understand that this court should not be asked to make any contribution to the agreement of such terms of inspection. I do expect the parties’ legal advisors will approach this matter bearing in mind the underlying objectives of the CJR. The terms of the APO are clear enough.

58.  I also direct the solicitors of GPIC to file a report on the contents of the Hard Drive including soft copies of the information of GPIC, if any, by way of an affidavit/affirmation on or before 18 April 2016. GPIC should also make sure that the English translations of all the documents printed in the French language should be either agreed or certified and made available for use in the Discharge Application. 

59.  Lastly, Mr Sussex urges me to consider granting an extension of time under Order 1B r.1(2)(a) so that both inspection of the Hard Drive and the DDD Obligations should be completed only after the determination of the Discharge Application as a matter of case management. I cannot accede to this request. Any such extension would defeat the whole purpose of the Ex-Parte Orders granted on an urgent basis.  

Conclusion and Order

60.  In reaching my conclusion against the grant of a stay, I was and still am not convinced that Mr Da Silva clearly has case of discharge and I sufficiently considered the issue of minimum injustice. I am not persuaded by Mr Sussex that I misdirected myself in law and/or my discretion was exercised in a plainly wrong manner or aberrantly. Nor can I accept that there is an arguable case that I have mistaken the law.

61.  I hence conclude that the intended appeal does not have a reasonable prospect of success and Mr Da Silva fails to meet the threshold in section 14AA(4)(a) of the HCO. There is no other reason in the interests of justice why the appeal should be heard. Accordingly, I dismiss his application.

62.  Costs should follow the event. I make an order nisi that Mr Da Silva should pay costs of this application to GPIC forthwith, to be taxed if not agreed.

63.  It remains for me to thank counsel on both sides for their helpful assistance in this matter.