TSUI PO HING AND ANOTHER v. SK KAKEN CO LTD AND ANOTHER

HCA9602/1998

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NO.9602 OF 1998

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D E C I S I O N

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Introduction

1. By an inter partes summons dated 20 December 2003 (as amended on 24 December 2003 pursuant to the order of A. Cheung J), the plaintiffs seek an injunction restraining the defendants and their solicitors, Messrs T.C. Lau & Co. ("TCL") from :

(1) interfering or threatening Mr Toru Eguchi whether in Hong Kong or Japan in writing or orally or in any other way in respect of his going to be a witness for the plaintiffs in these proceedings and on the basis of his witness statements filed with the court; and

(2) causing or procuring Mr Kuroda to interfere or threaten whether in Hong Kong or Japan in writing or orally or in any other way to interfere Mr Eguchi with a view to persuading or pressurising him into withdrawing his witness statements in this action.

2. The relevant background to the application could be shortly stated. The plaintiffs claim against the defendants alleging that in 1992 the defendants orally and by conduct agreed to grant to the plaintiffs a 50 years sole agency for the production and sale of the 1st defendant's paint products on the Mainland. It is said that pursuant to such an agreement the plaintiffs expended substantial investment to set up a factory in joint venture with a PRC entity, and purchased machineries from the 1st defendant which were specificially made and only suitable for the production of the 1st defendant's paints.

3. However, the written agency agreement eventually produced in May 1994 only provided for an agency period of three years. The plaintiffs claim that despite the written agency agreement, there was a clear agreement created both orally and by conduct that the agency was for 50 years. Moreover, it is the plaintiffs' case that when they saw the terms of the draft agency agreement, the 1st plaintiff went to Japan to meet with Mr Fujii, the Chairman of the 1st defendant, to clarify the matter and was assured by Mr Fujii that the defendants intended to do business with the plaintiffs for "as long as [the 1st plaintiff] was alive".

4. The relationship between the parties turned sour even before the expiration of the three years. The plaintiffs advanced a number of claims including breach of contract and fraudulent misrepresentation.

5. In relation to the plaintiffs' case that the agreement for the sole agency of 50 years was reached between the parties orally and by conduct, the plaintiffs rely on (inter alia) a meeting with Mr Fujii and other representatives of the defendants held over a dinner in Hong Kong in mid November 1992 and the meeting with Mr Fujii in Japan referred to above. Mr Eguchi attended both meetings. He was at the relevant time an employee of the 1st defendant and was the General Manager of the 2nd defendant which was a subsidiary of the 1st defendant in Hong Kong. The plaintiffs say Mr Eguchi was the liaison person between the plaintiffs and the 1st defendant.

6. Mr Eguchi had left the defendants' employment and is now working for another company in Japan. He has filed three witness statements on behalf of the plaintiffs referring to his involvement in the negotiation of the agency agreement between the two sides, including what had happened at the two fateful meetings relied on by the plaintiffs and what he had been told by his superiors at the time as to the true intention of the defendants. There is no dispute that Mr Eguchi's evidence is likely to be of material importance at the trial.

The alleged interference with Mr Eguchi

7. In support of this application, the plaintiffs filed evidence from the 1st plaintiff (based on what he was allegedly told by Mr Eguchi) and from Mr Eguchi himself asserting that after the filing of Mr Eguchi's witness statements on 30 October 2003, the following events occurred :

(1) The 1st defendant through its Japanese lawyers sent a letter ("the 1st Letter") to Mr Eguchi which was received by him on 20 November 2003, in which the 1st defendant allegedly asserted that Mr Eguchi had disclosed confidential information of the 1st defendant in his witness statements filed with this court, and had exposed the 1st defendant to the risk of potential defamation action from one of the 1st defendant's customers. The plaintiffs further alleged that the 1st defendant asserted in this letter that Mr Eguchi had mis-used confidential information of the 1st defendant in his current employment. It is accepted that such a letter was sent by the 1st defendant's Japanese lawyers to Mr Eguchi upon the instructions of the 1st defendant.

(2) The 1st defendant's Japanese lawyers sent a letter ("the 2nd Letter"), apparently pursuant to procedures in Japan, to Mr Eguchi's current employer seeking information about his employment. In this letter the "Reason of inquiry" was stated to be :

"The Client [ie the 1st defendant] is going to claim for restitution regarding breach of confidential contract which agreed between client and defendant [ie Mr Eguchi] when defendant left client's company."

A copy of this letter was produced by the defendants together with Mr Eguchi's employer's reply.

(3) During December 2003, a Mr Kuroda, who was Mr Eguchi's boss but based in Hong Kong, allegedly on three or four occasions telephoned Mr Eguchi from Hong Kong concerning Mr Eguchi's witness statements.

(4) It is alleged by the plaintiffs that on the first occasion of Mr Kuroda's phone call to Mr Eguchi in early December 2003, he said to Mr Eguchi that he had learnt of the lawyers' letter to the current employer (ie the 2nd Letter), and advised Mr Eguchi "not to fight against [the 1st defendant]".

(5) It is then alleged by Mr Eguchi that on the subsequent occasions, Mr Kuroda had said to Mr Eguchi that he (Mr Kuroda) had been approached by a staff of the 2nd defendant in Hong Kong who had told him that Mr Eguchi's witness statements had not been filed with this court but only shown to the court staff, they were not important and that Mr Eguchi should withdraw them. It was allegedly said by Mr Kuroda that if Mr Eguchi insisted, the statements could be withdrawn. Further, Mr Eguchi deposed that Mr Kuroda had told him that the aforesaid information came from the 2nd defendant's staff, who was in turn informed by TCL.

(6) Further, according to Mr Eguchi, after the present application had been made in late December 2003, Mr Kuroda called him at home on 1 January 2004 asking why his (Mr Kuroda's) name had been mentioned in the affirmations filed on behalf of the plaintiffs since all that he had said was his private suggestion to Mr Eguchi. Mr Kuroda also denied having asked Mr Eguchi to withdraw his statements.

(7) There is finally evidence from the plaintiffs' solicitors to the effect that when Mr Kuroda was asked to respond to these events in March this year, he (who was at the airport at the time ready to leave Hong Kong because he had been transferred back to Japan) over the telephone said to the plaintiffs' solicitors that he was not in a position to answer those queries.

8. The plaintiffs concede that the 1st and 2nd Letters would not separately or together constitute any contempt of court for interfering with or threatening or pressurising a witness. Mr Eguchi said in his affirmation that he was not worried about being sued by the 1st defendant : see paragraph 16 of his affirmation.

9. However, Mr Eguchi claims, when asked by the 1st plaintiff whether he would get into trouble with his current employer if he did not do what Mr Kuroda allegedly told him to do and if his employer forbade him to testify at the trial, that he was "very frustrated", since on the one hand he thought that it was right for him to stand up and tell the truth, but on the other hand he knew that he would not have peace in his current employment and even if he was not fired he would have to "work like a dog" : see paragraph 21 of his affirmation.

10. The plaintiffs contend that the Letters and the conduct of Mr Kuroda aforesaid taken together would amount to contempt.

The issues

11. The arguments of the parties are focused on the following issues :

(1) what is the standard of proof required of the plaintiffs in this application;

(2) whether the evidence adduced is sufficient (on whatever standard of proof) to establish that there has been attempt by the defendants and TCL to interfere with or threaten or pressurise Mr Eguchi; and

(3) whether the grant of an injunction is appropriate in all the circumstances.

The standard of proof

12. There is no dispute that the conduct complained of, if proved, and if instigated by the defendants or TCL would amount to a contempt of court and/or an attempt to pervert the course of justice : see for example R. v. Kellett [1976] 1 QB 372. Nor is there dispute that the burden of proof must be on the plaintiffs. The issue is the standard of proof that the plaintiffs must meet.

13. Mr Arthur Yip, who appears on behalf of the plaintiffs, contends that since this is an application for an interlocutory injunction, the familiar American Cyanamid test is applicable. He submits that the evidence clearly establishes a serious question to be tried, and I need only be satisfied that some acts of interference with the witness might have happened. He submits that since there is a serious question to be tried, the only question with which I should be concerned is the balance of convenience.

14. Mr Kenneth C.L. Chan, appearing with Mr Raymond Tsui for the defendants and TCL, takes a diametrically opposed approach. He complains that since the alleged conduct would amount to the offence of perverting the course of justice or at least a criminal contempt of court, the plaintiffs should have made a complaint to the Secretary for Justice for her to consider instituting criminal proceedings which the plaintiffs never did. Alternatively, the plaintiffs should have proceeded by way of contempt proceedings. As I understand his submissions, Mr Chan contends that had the defendants and TCL been charged with such criminal conduct, hearsay evidence would not be admissible in the criminal trial. Moreover, the defendants and TCL would have the opportunity of defending themselves publicly (which he says is particularly important for TCL) and to cross-examine the plaintiffs' deponents. It is submitted by Mr Chan that the plaintiffs should not be allowed to adopt the current procedure to bypass the safeguards the defendants would otherwise enjoy in criminal proceedings, including a higher standard of proof.

15. Mr Chan further submits that even if the plaintiffs are to proceed by way of contempt proceedings under Order 52 RHC (which are civil proceedings hence hearsay evidence is admissible), the defendants and TCL would at least have an open court hearing and the benefit of cross-examination. The court would have applied the higher standard of beyond reasonable doubt and Mr Chan submits that I should approach the matter and look at the evidence critically in the same way.

16. Mr Chan also refers to an anomaly in that the alleged perpetrator of the interference, Mr Kuroda, is not before the court and the plaintiffs seek no order against him. I can see nothing in that point since on the evidence Mr Kuroda has already left Hong Kong permanently.

17. In relation to Mr Yip's contention on the applicable test, Mr Chan points out that the American Cyanamid test is not of universal application even for interlocutory injunctions, for example where the grant or refusal of the injunction at the interlocutory stage would in effect dispose of the action: see Hong Kong Civil Procedure 2004, paragraph 29/1/18.

18. In my judgment, the approach contended by Mr Yip must be rejected. While it is correct that the instant application is for an interlocutory injunction, it does not follow that the American Cyanamid test must apply. In the instant case, whether the injunction is granted or not the matter will not be revisited at the trial. There will be no question in relation to the injunction to be tried. In my view, quite clearly the "serious question to be tried" in American Cyanamid refers to the questions in issue at the trial, rather than some incidental questions arising during the interlocutory stage which will no longer be relevant (save perhaps as to questions of costs or consequential matters) once the application is disposed of. In that sense the present case bears some similarity to the case where the interim relief would effectively dispose of the action. I am therefore unable to accept that the American Cyanamid test is the appropriate test.

19. On the other hand, I am not persuaded that I must treat this hearing in the same way as a hearing under Ordinance 52 RHC for committal. In committal proceedings the applicant seeks an order to punish the respondent, and if the alleged contempt is established the respondent is liable to be imprisoned. It is only appropriate, therefore, that a very high standard of proof is required, hence the adoption of the criminal standard. That is, however, not what the plaintiffs seek to do here, for they do not seek any relief in relation to the (alleged) past conduct but only to restrain the defendants and TCL from future interference of the witness.

20. Neither side has been able to place before me any authority in support of their respective contentions although Mr Chan refers me to two relatively old cases in which the court granted injunctions restraining clear acts or threats of contempt.

21. In Kitcat v. Sharp (1882) 52 LJ Ch 134, Fry J on a motion for injunction granted the relief sought to restrain a clear threat by the defendant to publish certain statements relating to the plaintiff's case which was "calculated to interfere with the fair trial of [the] action". Due to the nature of the evidence before the court, there was no discussion as to the standard of proof required.

22. In Lewis v. James (1887) 3 TLR 527, the defendant by motion sought to commit the plaintiffs and one Boyle for contempt, it being alleged that Boyle on behalf of the plaintiffs interfered with a witness for the defendant by attempting to bribe her not to give evidence. The motion for committal against the plaintiffs failed for want of proof that they had participated in Boyle's conduct but Kay J, finding that the contempt by Boyle was established, made an order restraining him from interfering with the witness. Since the matter was decided after a hearing for commital, the case does not provide any guidance on the approach to be adopted by the court in the present circumstances.

23. In my judgment, the High Court clearly must have jurisdiction to issue an injunction to restrain a threatened contempt : see Kitca v. Sharp above and Miller Contempt of Court, (3rdedn, 2000) at paragraph 3.58.

24. However, the appropriate standard of proof required is not clear : see Miller, at paragraph 3.63. It seems to me that as a matter of principle since the applicant is not seeking to commit the respondent for contempt in respect of the alleged past conduct but for the restraint of future interference, the civil standard of proof would be appropriate. Nevertheless, the court must be satisfied that a proper case has been made out that the past conduct complained of had been committed so as to justify the inference that unless restrained, such conduct would be likely to continue or even intensify. In that connection, I shall bear in mind that even under the civil standard, the cogency of the evidence must commensurate with the seriousness of the allegation : see Re H (minors) [1996] AC 563, applied in HKSAR v. Lee Ming Tee & Securities and Futures Commission [2004] 1 HKLRD 513 at 532H-533B. In any event, the applicant must at least satisfy the court that there is a real risk of the respondent committing the threatened act in the future so as to justify the granting of the injunction.

Evidence of interference

25. I have summarised above the effect of the evidence advanced on behalf of the plaintiffs to support the application. The defendants and TCL strenuously deny having anything to do with the alleged conduct of Mr Kuroda. In relation to the 1st Letter, the defendants' evidence is that it was issued to warn Mr Eguchi not to reveal the defendants' trade secrets and information; it was a bona fide demand and should not be regarded as a threat for the purpose alleged by the plaintiffs. The 2nd Letter was issued for the purpose stated in the letter which I have already quoted in paragraph 7.2 above.

26. I have earlier recorded the plaintiffs' case that the 1st and 2nd Letters by themselves would not amount to interference or contempt. Despite that concession, I remain disturbed by the fact that the 1st defendant chose to take such actions shortly after Mr Eguchi's witness statements had been filed and also by the fact that the terms of the 1st Letter (as translated by Mr Eguchi) do not quite support the assertion that it was intended to be a warning to Mr Eguchi. Be that as it may, given the plaintiffs' position, and the absence of evidence to show that the 1st defendant had no genuinely belief that it had a bona fide claim against Mr Eguchi (a matter which presumably would be governed by Japanese law on which I have no evidence), I am not prepared to find that the 1st and 2nd Letters whether separately or together amounted to interference of or attempt to interfere with or threaten Mr Eguchi.

27. Turning to the telephone calls from Mr Kuroda, I am not able to accept Mr Chan's contention that the evidence is insufficient to prove on any standard that the alleged phone calls in fact took place. Despite the forensic points taken by Mr Chan over certain discrepancies in the evidence of the 1st plaintiff and Mr Eguchi as to what exactly was said by Mr Kuroda as to the source(s) of his information, I am not prepared to disregard Mr Eguchi's direct evidence of Mr Kuroda's phone calls.

28. However, in my judgment, the evidence is insufficient to satisfy me that the defendants, let alone TCL, had anything to do with what Mr Kuroda did.

29. I come to this conclusion for the following reasons :

(1) According to Mr Eguchi, Mr Kuroda said at least three times that he had been informed by the 2nd defendant's unidentified staff, who in turn had been informed by TCL, that Mr Eguchi's witness statements had not been filed and could be withdrawn. Mr Eguchi further said that Mr Kuroda even suggested that he (Mr Eguchi) could check with the plaintiffs' solicitors, which Mr Eguchi duly did and was told, of course, that his witness statements had been filed and could not be withdrawn. It seems to me incredible that the defendants or their staff, if they had intended to interfere with or pressurise Mr Eguchi through Mr Kuroda, would have given Mr Kuroda such inaccurate information.

(2) The staff of the 2nd defendant has not been identified and while it may be inferred that Mr Kuroda might have obtained the information concerning these proceedings from someone within or associated with the defendants, there is no evidence before me that such information was imparted by that person to Mr Kuroda with intent to cause him to interfere with or pressurise Mr Eguchi.

(3) Nor am I prepared to draw an inference that Mr Kuroda must have been instigated by someone from the defendants' camp. It is not impossible that Mr Kuroda did not want Mr Eguchi to give evidence in Hong Kong "against" a sizable Japanese corporation. He might have other reasons such as the interests of his own company in mind. The fact that Mr Kuroda refused to answer the plaintiffs' solicitors enquiries could not be taken to be implied admissions of the allegations against him.

(4) There is even less evidence against TCL. Mr Eguchi's evidence, taken at its highest, is that Mr Kuroda had told him that the unidentified staff of the 2nd defendant has told Mr Kuroda that he/she was in turned informed by TCL : see paragraphs 17 and 19 of Mr Eguchi's affirmation. It is multi-hand hearsay and in my judgment fails very far short of proving that TCL did cause or attempt to cause the alleged unidentified staff to procure Mr Kuroda to interfere with or pressurise Mr Eguchi.

(5) I am therefore not satisfied, on the civil standard of balance of probabilities, that the defendants or TCL did or did attempt to interfere with or pressurise or threaten Mr Eguchi into withdrawing his evidence and not to give evidence at the trial.

No ground for injunction

30. It follows from my conclusions on the previous issues that the plaintiffs have failed to persuade me that the alleged interference is likely to continue and that the defendants or TCL should be restrained by an order of the Court.

31. For these reasons, the plaintiffs' application fails and must be dismissed.

Costs

32. I have not heard the parties on costs and I propose to make the following costs orders nisi which the parties are at liberty to apply in writing within seven days to vary.

33. There is no question that the plaintiffs must bear TCL's costs and I so order.

34. The defendants' costs warrant separate consideration. I consider that in the circumstances of this case, the plaintiffs did have some justification in thinking that the defendants were behind Mr Kuroda. As stated above, I am disturbed by the 1st and the 2nd Letters caused to be sent by the 1st defendant to Mr Eguchi. Although in the end I am not satisfied that the plaintiffs have made out their case, I am reluctant to order them to bear the defendants' costs irrespective of the outcome of the action. On the other hand, the defendants have been successful in resisting the application and it would be wrong to deny them any part of their costs at this stage. Taking into account these considerations, I think the fair order to make is defendants' costs in the cause.

35. The defendants applied for certificate for two counsel for the hearing. Despite its obvious importance to the parties, I am not persuaded that this matter is of such complexity that it warrants the services of two counsel and I reject that application.

36. Lastly, I think this judgment may be of general interest and therefore propose to release it for circulation. If the parties have any objection they should lodge such objection in writing for my consideration within seven days.