DEXTRA CHINA LTD AND ANOTHER v. LAM WING KIT

HCA 38/2010

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NO. 38 OF 2010

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J U D G M E N T

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Introduction

1. In HCA 38/2010 – commenced by writ dated 11 January 2010 – the plaintiffs are Dextra China Limited (“Dextra”) and Dextra Building Products (Guangdong) Limited (“DBPG”) and the defendant is Lam Wing Kit, who uses the English name Albert (“Lam”), whereas in HCA 967/2010 (transferred from LBTC 1828/2010) – commenced on 18 May 2010 – Lam is the plaintiff and Dextra the defendant.

2. These two actions have been ordered to be heard together, because they each raise the same questions surrounding the circumstances by which Lam came to be dismissed as an employee by Dextra on 19 October 2009, and the consequences that flow from that.  The trial was in effect conducted as though of just one action, and all evidence in each action has stood as evidence in both.

3. The essence of the primary factual dispute between the parties is as to whether or not Lam had set up and operated and/or otherwise participated in the setting up or operation of a rival business in breach of the various duties he owed to Dextra by virtue of his employment, and/or used confidential information obtained from Dextra/DBPG.

4. The allegation that Dextra/DBPG makes is essentially that from April to October 2009, Lam masterminded the setting up and operation of a rival business to Dextra, assisted by various co-conspirators being other employees of Dextra/DBPG or its sales agents.  The name of the rival business was at one point, “萬事達” (Putonghua transliteration “wan-shi-da”), later changed to the name of “Agility” or “科普斯” (Putonghua transliteration “ke‑pu‑si”). Dextra says that Lam has been caught red-handed, despite his considerable efforts to cover up his wrongdoing.

5. Lam denies any such wrongdoing and says he has been wrongfully dismissed.

6. At the trial, Lam was represented by Mr Hylas Chung and Andrew CHY Leung of Counsel, and Dextra and DBPG by Mr Christopher Chain of Counsel.

Some Background

7. Dextra is the holding entity of a group of companies engaged in the business of manufacturing and sale of construction products.  The managing director of Dextra is Arnaud de Surville (“de Surville”).

8. DBPG is the particular subsidiary of Dextra responsible for manufacturing and trading of Dextra’s sonic tubes and couplers in the PRC market under the brand name “Sonitec”.

9. A sonic tube is essentially a length of steel pipe used for sonic testing of concrete piles.  Because concrete is poured underground, it is impossible to evaluate quality and consistency of the concrete pour visually. Sonic testing provides a detailed view of the pile, which allows trained technicians to spot areas where air pockets may have formed or where soil may have contaminated the concrete.

10. Dextra’s Sonitec brand utilised a push-fit assembly system which, according to Dextra, at the material times had not been successfully duplicated by competitors.  Those competitors would tend to use standard water pipes assembled together by means of a threaded coupler, which on-site operations would generate inconvenience and risk, and would require skilled and qualified workers.  The push-fit assembly system, using a proprietary bell mouth and gasket design, was simpler, removed the need for skilled labour, and permitted the use of lighter and cheaper pipes.

11. Lam was an employee of Dextra or its affiliates from about 1992.  Since 2000, Lam was employed by Dextra in the position of general manager, responsible for overseeing its PRC business.  He was also a director of DBPG from 6 September 2006.

12. The latest employment agreement entered into between Lam and Dextra was signed on 8 May 2008, together with a revised appendix signed on 28 October 2008, and related to employment as general manager with effect from 1 January 2008 continuing (after the first year) until terminated by either party giving three months’ notice in writing or payment in lieu of notice. 

13. The employment agreement expressly states that it is to be governed by and construed in accordance with the laws of Hong Kong, and provides amongst other things for the following:

a.  Extent of services (clause 1.4): Subject to normal and reasonable absences for reasons of illness, accident and/or other incapacity, the Employee shall devote all of his/her attention and energies to the business of the Company and shall not, during the term of this Agreement, be engaged in any other business activity, whether or not such business activity is pursued for gain, profit or other pecuniary advantage that will significantly interfere with his/her duties.

b.  Restrictive Covenants (clause 5.1): The Employee acknowledges that certain of the Company’s products and services are proprietary in nature and shall have produced and marketed through the use of customer lists, supplier lists, trade secrets, methods of operation and other confidential information possessed by the Company and disclosed in confidence to the Employee (hereinafter “Trade Secrets”) which may not be easily accessible to the other persons in the trade.  The Employee also acknowledges that he/she will have substantial and ongoing contact with the Company’s customers and suppliers, and will thereby gain knowledge of customer needs and preferences, sources of supply and other valuable information necessary for the success of the Company’s business.  The Employee therefore, covenants and agrees (all of which covenants and agreements shall survive termination of this Agreement, regardless of the reason, therefore) as follows:

   i.  (clause 5.1.2): The Employee shall at no time during the term of this Agreement or any time subsequent to its termination, regardless of the reason therefor, disclose to any person or entity, or use for personal gain any of the Trade Secrets or any other confidential information of or pertaining to the Company or its products and services, disclosed to or obtained by the Employee during the term hereof.

   ii.  (clause 5.1.5): If at any time, the Employee wilfully disobeys a lawful and reasonable order or direction, or misconducts himself/herself, or is guilty of fraud or dishonesty, or is habitually negligent in his/her duties, or is infringing Hong Kong laws and regulations he/she shall be dismissed by the Company summarily without notice or salary in lieu.

14. The revised appendix to the employment agreement specifically appointed Lam as general manager of two groups of Dextra operations in China, one being the specific China business of DBPG and a related company CB (HK) Limited, the other in relation to an “Asian JV”.  The revised appendix also set out updated remuneration terms, including as to an incentive scheme, and provided for the location and office hours at work.

15. Dextra had a Personnel Policy which went through various iterations but which amongst other things consistently made plain that any employee who removed company records or released confidential information would be instantly dismissed.  Though Lam denies that such a policy was in force, I think it was, but in any event the case does not turn on that.

16. Indeed, it has not been the subject of serious dispute that Lam owed Dextra and DBPG fiduciary duties, duties of good faith and fidelity, and duties of confidence as a result of his employment and the directorship he held.

17. Those working under Lam included Luo Guan Jun, sometimes seen referred to in the documents by his initials LGJ (“Luo”), purchasing manager of DBPG until he resigned on 31 August 2009 and Richard Liang, sales manager of DBPG until he resigned on 19 October 2009.  Amber Lu was Lam’s secretary.

18. One of the regular suppliers of raw steel pipes to Dextra and DBPG at the material times was a business known as Li Lian Da (“LLD”) sometimes known as Luiwang, which was owned and operated by a Liu Yin Quan.

19. Lam was summarily dismissed on 16 October 2009 by a letter sent from solicitors acting for Dextra.

20. The letter is long and detailed and identifies that the termination is a direct result of multiple breaches of the employment agreement and of acts by Lam of misconduct, fraud, dishonesty, corruption, “amongst others”.  The letter states that the management of Dextra has learned from a variety of sources that Lam had been conspiring with others to establish an independent enterprise intended to compete directly with Dextra.

21. In the letter, Dextra stated that investigations up to that point indicated that the misconduct included, but was not limited to: establishment of or efforts to establish a PRC enterprise called “Agility” designed to compete directly with Dextra; conspiring with current and former employees to poach employees to staff Agility and to sow distrust and animosity amongst employees, so as to increase the likelihood that they would join Agility; undertaking work for the establishment and development of Agility while working on Dextra time and using Dextra’s resources; theft and misuse of Dextra’s intellectual property and confidential information; diversion of sales and potential sales.

22. Upon the dismissal, Lam was provided with two statements of items of pay which were to be provided to him, comprising basic salary, certain allowances, annual leave pay less small deductions including for MPF contribution.  The statements invited him to sign that he agreed to accept the sums in full and final settlement of those payment items and to release and discharge Dextra from any claims which he had or may have under the Employment Ordinance and employment contract.  Lam, perhaps not surprisingly, refused to sign that document, and confirmed receipt of the payments without prejudice to his rights.

23. There followed the cross-claims in the two actions.

Claim in HCA 38/2010

24. The writ was issued on 11 January 2010 and amended on 9 March 2011 (the amendment being made, including for the purposes of adding DBPG as a plaintiff).

25. The claim broadly follows the complaints identified in the dismissal letter.  After the identification of the parties and the material terms of Lam’s employment and directorship, and the duties that are said to have arisen in consequence, the Amended Statement of Claim pleads how Dextra/DBPG says those duties were breached.

26. It is alleged that beginning in April 2009, while still employed by Dextra, Lam conceived a scheme to establish an independent entity in the PRC to be named Agility Building Products Company Limited, intended to compete directly with Dextra’s sonic tube business, by exploiting his awareness of the business, his access to confidential information and resources, and to Dextra’s relationships with its customers and suppliers.

27. As at the date of the pleading, Dextra was unable to say whether Agility was actually established or whether Lam carried out his scheme through others acting on his behalf.

28. Nevertheless, it was asserted that Lam conspired with others, including LLD and Dextra’s then Kunming sales agent and then current but now former employees, to establish and invest in Agility. Reference is made to a business plan and minutes of meetings for setting up Agility, prepared by Lam, which describe how his scheme was planned to be carried out.  The pleading sets out those matters by reference to the months of May, June, July, August and September 2009.

29. The pleading also asserts numerous business trips made between June and September 2009 by Lam, for which he claimed expenses from Dextra, with various Dextra’s sales agents in PRC, but which trips were really for the purpose of generating and diverting sales or potential sales to Agility (or others acting on Lam’s behalf).  Some particulars of diverted business are provided.

30. It is further alleged that Lam induced and arranged for the resignation and/or dismissal of Dextra’s employees, so that they might staff Agility and 15 staff members are named, some of whom were long-term Dextra employees and all of whom left Dextra employment in the period July to October 2009.  The last 6 departing employees, including Richard Liang, left on 19 October 2009 (very shortly after Lam’s dismissal on 16 October 2009).

31. It is alleged that the business plan prepared by Lam for Agility identified that various staff members would resign, as in fact they subsequently did, and that the names of some staff appear in work logs and sales reports (prepared by Lam) showing the hours worked and sales made by Agility’s staff.

32. Allegations are made of Lam having made false and discrediting statements about Dextra to third parties to induce them to transfer their business to Agility, and other actions intended to induce Dextra’s sales team to generate sales for Agility whilst still employed by Dextra.

33. There are also allegations of theft and misuse of Dextra’s confidential information, and information of a commercially sensitive nature which would not have been available to anyone outside Dextra’s organisation without Dextra’s consent.  Amongst the documents and information said to have been taken and used by Lam were matters covering virtually all aspects necessary to establish and operate a competing business.  There is also a list of physical property, which is alleged to have been stolen.

34. The claim alleges that documents obtained by Dextra show that by July or August 2009, Agility (or others acting on Lam’s behalf) had already commenced operations and was producing, marketing and selling sonic tubes to the market.  On 14 October 2009, Dextra personnel visited LLD’s premises and discovered a secret production line for sonic tubes, albeit that substantial effort had been taken to conceal the existence of that production line area.  Also discovered was a stockpile of sonic tubes with Dextra’s distinctive corrugated bell mouth system, and packaging identical to that used by Dextra.  It is alleged that these sonic tubes could only have been produced through use of Dextra’s confidential information.

35. It is then pleaded that prior to April 2009, Dextra’s sales of sonic tubes and couplers in the PRC market had been healthy and work trending upwards, whereas during the period in which Lam planned and carried out his scheme, Dextra experienced a significant drop in those sales.

36. As a result, Dextra claims delivery up of its property; delivery up of its products; injunctions to restrain Lam or others acting for him acting in breach of the restrictive covenants or making use of any confidential information; damages; equitable damages; alternatively, an enquiry as to damages and an order for payment of sums found due; interest; and costs.

37. In his Amended Defence, Lam pleaded that from 2007 to October 2009 he had frequent disagreements with de Surville about the direction and strategy of Dextra and DBPG, as result of which their relationship became acrimonious. Consequently, Dextra took measures gradually to decrease Lam’s duties and responsibilities in relation to its operations in the PRC, and at the same time inserted senior personnel from France to take up part of his managerial and executive functions.

38. It is pleaded that from 2000 to 2008, when Lam was the general manager, Dextra’s business and operation expanded rapidly, and sales turnover and staff numbers both increased.  But in May 2009 Dextra started to have cash-flow problems, so de Surville asked Lam to increase business trips for promotion and for collecting debts due.  As far as the decline in sales is concerned, Lam pleads that the reason could be because of the decisions by Dextra to terminate its agent in Kunming, to stop delivery of products to customers where there was overdue payment of more than 90 days, and to stop delivery of products to customer where the product margin was less than 25%.

39. Though the employment relationship is admitted, Lam pleads that the restrictive covenants amount to an unnecessary restraint of trade.  In any event, he pleads that it was well-known to Dextra that he had interests in other businesses, including a company to trade textiles, garments and fabrics as well as other investments.

40. It is pleaded that Lam did receive a proposal for a new business venture from an acquaintance, and it is also accepted that, at the invitation from an acquaintance, Lam did have a discussion about a proposal to set up a new business venture.  But the allegations made by Dextra are denied.  It is specifically denied that he has ever consulted Hong Kong lawyers for establishing Agility, and asserts that reliance will be placed at trial on the true meaning and interpretation of the alleged business plan as pleaded by Dextra.

41. Specifically, it is pleaded that as far as Lam is able to ascertain, Agility does not exist.  He denies he was ever a shareholder of Agility.

42. It is denied that Lam has any property belonging to Dextra, or that he has used any confidential information.  The fact that various staff left Dextra is attributed to their being sacked or resigning as a result of restructuring between October 2008 and October 2009.

43. There is no counterclaim in this action, as Lam made his claim in Labour Tribunal proceedings which were transferred to and became HCA 967/2010.

Claim in HCA 967/2010

44. Lam’s claim is upon an allegation of wrongful termination of employment, by reason of which he has been deprived of the salary and allowances he would otherwise have earned during the continuance of the employment agreement.

45. The claim is for damages for wrongful dismissal; a salary and allowances in lieu of notice in the sum of $222,876; outstanding payment in view of annual leave in the sum of $134,857; severance pay, or alternatively, long service payment in the sum of $133,548; interest; and costs.

46. Further and Better Particulars were provided of the computation of the various sums claimed.

47. In the Amended Defence to this claim, Dextra essentially re‑pleaded the matters set out in its claim in the other action as the basis for its entitlement validly to have terminated Lam’s employment without notice or payment in lieu of notice.

48. There is also some responsive pleading to the matters of calculation of the sums claimed by Lam under the different case of remuneration.

Factual Witnesses at Trial

49. Standard directions were given for the filing and exchange of statements of witnesses as to fact.  By a procedural order, it was left to me as the trial judge to decide whether or not such statements should stand as evidence in chief at trial, and I so ordered.

50. On behalf of Dextra/DBPG, evidence at trial was called from the following witnesses: de Surville; Deren Oh Hock Huat (a member of the production and technical staff for DBPG) (“Oh”); Frankie Zhang Jian Xin (also a production and technical manager for DBPG) (“Zhang”); and Peng Weiyi (a project engineer at DBPG) (“Peng”).

51. Lam was the only witness of fact to give evidence on his own behalf.

52. Insofar as it is necessary, I can deal with certain detail of the various witnesses’ evidence below, and in the context of a review of the other evidence. 

53. Broadly, Oh gave evidence about the Sonitec system, the use of Dextra technical drawings and the purchase of equipment apparently used to set up a manufacturing line, the inspection of a factory which it is alleged was the competitor’s production centre, and the inspection at a building site in Guangzhou where copy Sonitec tubes were discovered. Zhang gave evidence about what technical drawings and other requests were made of him by Lam.  Peng gave evidence about rumours he heard that Lam had set up a competing business.

54. As regards Oh and Zhang, both sides sought to draw support for their own position from their evidence, and neither was seriously challenged as to overall credibility, though specific matters were put in cross-examination.  The contest was as to what is to be inferred from what they said.  As regards Peng, the evidence of rumour given by him was hearsay and perhaps unlikely to provide much weight to the other evidence.  It might provide some context, but I do not place any great weight upon it at all.

55. But, of course, the main factual protagonists were de Surville and Lam.

56. It is clear that they had formerly enjoyed a close working relationship that developed into a relatively close personal friendship.  de Surville expressly accepted in his oral evidence that he trusted Lam up to mid-2009 because the latter was a good general manager, who was honest, good at his job and produced performance and results.  Although perhaps to an earlier date than mid-2009, Lam gave similar evidence from the other side of that relationship.

57. Shining through their evidence was the strong sense that each clearly feels betrayed by the other.  de Surville feels that Lam has betrayed his personal and professional trust in secretly engineering to set up a competing business.  Lam feels that de Surville has betrayed his personal and professional trust in first side-lining him from the Dextra business, then accusing him of such wrongdoing as is said to justify summary dismissal.

58. In part, my task in resolving the issues between the parties might involve some consideration as to whether the breakdown in this formerly close relationship is the result of the events from early 2009 to October 2009, or is the context and perhaps catalyst for those events.

59. In this context, and in my assessment of the evidence, I specifically take into account that the Dextra business in the PRC undoubtedly developed extremely well over the decade or so before October 2009, significantly as a result of the activities of Lam as its general manager.  It was telling that in his evidence, Lam clearly felt strongly that he had significantly helped to build the business over the years, so much so that he even described it by saying “Dextra is my son”.

60. Therefore, whatever the rights and wrongs of what happened, I think it natural that Lam displayed some moments of agitation when giving his evidence.  Whilst Mr Chain has invited me to consider that Lam was a dishonest, incredible and unreliable witness, in part because of his demeanour – which Mr Chain described as overly defensive, agitated and aggressive – I think it more fruitful to consider the content of the oral evidence (rather than unduly to focus on the manner in which it was given) and to compare that content with the other evidence, in particular the contemporaneous documentary material.

61. For his part, Mr Chung urged me to be cautious about de Surville’s evidence, which he described as dishonest, contradictory and opinionated, being essentially based on a collection of de Surville’s own imagination.  Mr Chung is obviously correct in identifying that de Surville has formed strong opinions on the materials which he has seen, but whether his conclusions are properly to be described as a collection from his own imagination or not seems to require my own assessment of those materials so as to reach a conclusion as to what those materials (in the context of all the other evidence) identify as having actually occurred.

62. Indeed, it seems to me that the core of this case turns on the proper view to be taken of the documents generated, predominantly in the period April to October 2009, and which are said by Dextra to evidence the unlawful activities of Lam, but which are given an entirely different complexion by him.

63. In reaching my concluded view, I shall specifically take into account (as was urged upon me by Mr Chung) that the allegations made against Lam are very serious in nature, perhaps equivalent to criminal activity in some respects and certainly serious breaches of trust and duties owed. 

64. I recognise that when assessing probabilities I should have in mind as a factor, to whatever extent is appropriate in this particular case, that the more serious the allegation, the less likely it is that the event occurred, and hence the stronger should be the evidence before I could conclude that the allegation is established on the balance of probabilities (which nevertheless remains the applicable standard of proof).

65. I also accept that I should not make findings or draw inferences of serious misconduct by conjecture, but should draw any inference only from properly grounded primary facts as I find them.  Any inference should be logically and reasonably justified from the primary evidence from which it is drawn.

66. I think it is also fair and appropriate to follow the submission of Mr Chung to approach the evidence from the starting presumption that Lam is innocent of the serious charges ranged against him by Dextra.  Indeed, it seems to me to follow from the trust and confidence and respect which Lam engendered over the decade or so prior to 2009 that I would need cogent and compelling evidence to find or infer a fundamental change in Lam’s approach to his employment and his employer.

67. Of course, many of the primary facts will be evident from the contemporaneous documentation.  Many of the core contemporaneous documents were discovered on certain electronic devices, which were (1) a Seagate external hard disk drive (“the Seagate Device”); (2) a Hewlett-Packard Pavilion Dv2 (“the HP Device”); and (3) a Fujitsu 2.5 inch hard disk drive (“the Fujitsu Device”).  This gave rise to the need for appropriate expert opinion evidence.

Expert Evidence

68. Against the strong suspicions formed by de Surville that Lam had set up and/or was running a competitor company, in the early hours of 23 September 2009 de Surville made an inspection of Lam’s office, as he put it, “looking for clues”.  In the drawer of a desk, he found the Seagate Device, which he took to his own office and copied the Personal Doc folder on that device to his own external hard drive.  Having done so, he returned the Seagate Device to Lam’s drawer.

69. At the time of (or shortly after) Dextra’s dismissal of Lam, Dextra staff took possession of the Seagate Device, and also the HP Device and the Fujitsu Device.  The HP Device was taken from Lam, and the Fujitsu Device was the hard disk removed from a computer returned to Dextra by Richard Liang when he left Dextra employment on 19 October 2009.

70. The Seagate Device is a removable hard disk drive that provides a way for a computer user to store a large amount of data files in an easily portable form that can straightforwardly be connected to and used on any standard PC or Macintosh computer.

71. The HP Device is a laptop computer that provides a standard operating environment, applications (eg a word processor), networking tools (eg a web browser) and storage for user data files in a lightweight and portable casing.

72. The Fujitsu Device is a hard disk drive that was fitted inside a laptop computer, but had been removed from the laptop computer prior to analysis of its content.  (It was apparently removed by Dextra’s IT manager from the computer and kept by Dextra until passed to its solicitors in early December 2009.)

73. Dextra asked Richard Stagg, a computer forensics investigator, to provide an expert report, essentially to address the following issues: (1) what were the files/data contained in each of the devices which appear to be relevant to the subject matter of the actions, and how were such files/data collected, retrieved or recovered from each of the devices?; (2) are there any indications or evidence in the devices identified or assisting in the identification of the user(s) of each of them, and if so, who was/were the user(s)?; (3) are there any indications or evidence in the devices showing or suggesting that there was sharing or dissemination of files/data between the users (in so far as they can be identified), and if so, how was that done?; (4) are there any indications or evidence in the Seagate Device showing that an attempt was made on or around 20 to 23 September 2009 to delete the “Personal Doc” folder from the Seagate Device, and if so, how and when was such attempt made?

74. In his report dated 13 April 2011, Mr Stagg reviewed those questions and gave his expert opinion answer to them.  Having explained his method of extracting the data from the devices, Mr Stagg identified what files/documents he extracted. 

75. As regards the Seagate Device, the majority of the hits on his search related to documents, images and files within a folder called “Personal Doc”, which was itself located in the hard disk’s “Recycle Bin”. Since the files were marked for deletion, but not actually deleted, no special forensics techniques were needed to make the files readable.  He provided a figure/chart to show the structure of the recycle bin at the time of his forensic examination.

76. Whilst Mr Stagg did not consider it his task to point out those files/data which are in fact relevant to the subject matter of the action – leaving that properly to the Court – he did express the opinion that the entire contents of the “Personal Doc” folder would at least appear to be relevant to the subject matter of the action.  He also pointed out that the contents of that folder (except for six discrete files) are all contained in a sub-folder titled “科普斯” which is understood by him to be the alleged Chinese name of the alleged competing entity Agility.

77. Mr Stagg’s forensic examination showed that on 23 September 2009 at 08.45 HKT, someone had attempted to delete the “Personal Doc” folder, albeit that the attempt was not successful in that although the folder was deleted to the recycle bin, the user had omitted to empty the recycle bin.  That is why the file/documents contained in that folder were still accessible.  Mr Stagg was also of the opinion that there was some evidence that Lam was using his laptop at the same time as the deletion attempt (suggesting the Seagate Device was attached to it at that time).

78. The contents of the Seagate Device provide a number of indicators that Lam was the user of it.  Whilst the Seagate Device is only a hard disk drive, and as such has no user accounts of its own, the information in the “last saved by” entries on it indicate the user “alam” has opened, amended and saved the files.  There is no indication that anyone other than Lam is responsible for the files stored on the Seagate Device, and all content (that has not been deleted) is stored in a folder called Albert, where no equivalent folder exists for any other user.

79. As for the HP Device, there was no conventional “My Documents” folder on the system, and the “alam” user profile did not contain such a folder.  Mr Stagg therefore considered that D:\Albert was the main location for documents on the device.  He found that the structure of the files on the Seagate Device matched those of the D:\Albert folder on the HP Device, perhaps suggesting that the former was used as a destination for the backups initiated by the backup script on the latter.

80. Whilst no folder named “Personal Doc” was located on the HP Device, amongst the “lost files” recovered by the forensic tool was a folder called “科普斯”, which contained a small number of files with the same file names as those observed in the “Personal Doc” folder on the Seagate Device.  From Mr Stagg’s investigation, it seemed probable that these files were deleted on 24 September 2009 at 01.28 and 01.46 (notably close to the date on which the folder on the Seagate Device was deleted).

81. From other evidence relating to the “Recent” folder inside the “alam” user profile, and certain LNK files, making reference to a “Personal Doc” folder located on the D:\ drive in D:\Albert\MyDocuments\PersonalDoc, Mr Stagg identified that the “Personal Doc” folder, containing at least some of the files that can be found on the Seagate Device, was present on the laptop in the past, but had been deleted.

82. The search for the word “Agility” found occurrences in the Internet Explorer cache in the “alam” user profile.  These turned out to be embedded in a Hotmail message, in the account “albertlamhk@hotmail.com“, and the messages were from “alexho@ecyberwork.com”. The messages concerned e‑mail accounts for the domain “agilitychina.com”, which domain name is also seen in PowerPoint presentations found on the Seagate Device.  The messages stated that certain e-mail accounts had been created, including “richard@agilitychina.com”, “ivan@agilitychina.com”, “lgj@agilitychina.com”, “amber@agilitychina.com”, and “albert@agilitychina.com”.  The dates suggest that the albert@ address was created a few days before the others.

83. It was subsequently discovered that, by the date of Mr Stagg’s report, the domain “agilitychina.com” was no longer in use.

84. In the Internet Explorer cache, Mr Stagg also found the text of a Hotmail message, which when decoded was from “13650982@qq.com” to “albertlamhk@hotmail.com”, which together with some Chinese text had an embedded table originating from an Excel spreadsheet.  That table contains salary data for Agility staff, named as: Lam, Richard Liang, Luo Guang Jun, Ivan Wang, Amber Lv (sic), Xiong, Qiu and Morris Fan.

85. Mr Stagg considers that Lam was the user of the HP Device, and that there is no indication that anyone other than him has been a user of that device.

86. As regards the Fujitsu Device, Mr Stagg identified certain link files pointing to documents with filenames matching those seen in the “Personal Doc” folder on the Seagate Device.

87. Including from a user profile name “rliang” on the Fujitsu Device, a number of indicators on the drive suggest that Richard Liang was the user of it.

88. Mr Stagg also identified that 20 removable storage devices (including the Seagate Device) had been used at one time or another, on the HP Device.  Having performed analysis across the three devices, Mr Stagg identified that viewing on the Fujitsu Device of files also on the HP Device took place in two batches on 30 July and 18 August 2009.  It was Mr Stagg’s opinion that there was a sharing of files and data between the user of the HP Device (ie Lam) and the user of the Fujitsu Device (ie Richard Liang).  He provided a list of the files and data shared or disseminated.

89. Lam asked Dr Fung Wai Wa, another computer science expert, to give an expert opinion on the matters raised in Mr Stagg’s report.

90. By reference to the description of the handling of the devices, Dr Fung could not verify the integrity of the data evidence remaining intact during the digital imaging process described in Mr Stagg’s report.  Dr Fung also pointed out that there was no mention in Mr Stagg’s report on reliability of the date/time as given in the three devices, and as computer time can be changed easily, any deviation in time between computer date/time and actual Hong Kong standard time should be counted in before drawing inferences based on computer time.

91. Dr Fung also identified how it would be possible to create a Word document named “costing” with creation date, modification, data and access date set to year 2009 with Microsoft Word author name “Lam”, presumably, thereby intending to cast some doubt as to the truth of the document descriptions as elicited by Mr Stagg in his forensics analysis.

92. Dr Fung stated that unless Dextra had arranged strict physical security protection on Lam’s Seagate and HP devices, he could not rule out the possibility that other people could read or write to those devices and insert portable devices to the HP Device, whilst Lam was away from those devices.  Nor could he rule out the possibilities of log-in activities of other persons on the user accounts.

93. In short, Dr Fung expressed a number of reservations about the forensic examination and inferences drawn by Mr Stagg. But I am afraid I do not think any of those expressed reservations were sufficient to detract from the apparent integrity of the investigations performed by Mr Stagg, and the results of those investigations as he described them.  Mr Stagg also comprehensively answered the reservations in a supplemental report provided by him, dated 29 June 2011.  In essence, whilst Mr Stagg agrees with the theory of the technical points made by Dr Fung, there is no evidence or reason to consider that time stamps had been changed accidentally or had been deliberately modified through tampering.

94. The two experts also provided a joint experts’ report.

95. Albeit that the experts agree that as a result of the imperfect chain of custody information with respect to the devices from when they were seized, until they were provided to Mr Stagg, they could not determine that the images taken by Mr Stagg were exact copies of the devices at the time that were seized from their respective users, I am perfectly satisfied that there was no tampering with the devices prior to their forensic examination.

96. The experts agree that the entire contents of the “Personal Doc” folder on the Seagate device would appear to be relevant to the subject matter of this action and that the Seagate Device was used (perhaps not exclusively) as the destination of the backups initiated by the backup script on the HP Device. As the experts agree about the various references to “Agility” as described by Mr Stagg, they agree as to which files/data found on the HP Device appear relevant to the subject matter of these actions.

97. The experts agree that the contents of the HP Device provide a number of indicators as to who were the active users and who was its primary user.  Whilst both experts acknowledge the theoretical possibility that the “alam” account was not always or exclusively used by Lam, I am satisfied that Lam was the primary user of the Seagate Device and the only user of the HP Device.

98. I am also satisfied that the primary user of the Fujitsu Device was Richard Liang.

99. The experts also agree that there is evidence showing that there was sharing or dissemination of files/data between the user of the HP Device and the user of the Fujitsu Device.  Whilst that finding was based on file names only, both experts agree that the user of the Fujitsu Device obtained media containing files whose names indicated they concern the business known as “Agility”.

100. The experts also agree that examination of the Seagate Device identifies that someone attempted to delete the “Personal Doc” folder from it (though only doing so by moving it to the recycle bin, without completely erasing it), and that the HP Device was in use at the same time, shortly after someone had logged into the device using the “alam” user account.

101. It is the logical conclusion, and I find as a fact, that it was Lam who sought to delete the folder, and thereby to destroy or conceal the contents of it.  That he failed to do so is what permitted Dextra to be able to produce in evidence the vast amount of documents, which Dextra says cumulatively paints a cogent and compelling picture of Lam’s conduct in setting up and operating a competing business.

The Documents

102. Mr Chain submitted that the recovered documents, together with other contemporaneous evidence, can be categorised into separate groups for examination.  His categorisation, which I think appropriate and useful to adopt, was into the following groups: planning and timetable documents; draft investment agreements; tenancy agreement for factory premises; spreadsheets and tables; administrative and logistical documents for operation of rival business; e-mails; and potential dissemination of confidential information.

103. I have already stated my finding that the documents recovered from the devices had not been tampered with or modified by anyone on behalf of Dextra.  Indeed, although Lam in his witness statement (adopted as part of his evidence) suggested tampering with the devices, again based on the theoretical possibilities, I note that when taken by Mr Chain to the various documents during his oral evidence no allegation was made by Lam that any particular document had been in any way tampered with or modified.

104. The documents can therefore be taken to mean, and were intended to mean, what they actually state.

105. The planning and timetable documents include various versions of the agenda and minutes of the meeting held on 19 May 2009, rough notes, timetables and Lam’s diary.

106. The meeting on 19 May 2009 was obviously of some importance, and the minutes went through several iterations, all of which were found in Lam’s personal document folder on the Seagate Device.  The various drafts are either headed “cooperation proposal discussion – first meeting” or “first preparation meeting”, and it is to be noted that the company about which the meeting is taking place is identified in different drafts as “萬事達” and “科普斯”, or “Agility”.

107. More or less consistent across all the drafts is that there should be a company structure involving probably one Hong Kong company, one Sino foreign joint-venture and one PRC joint-venture, and that among the shareholders (as the largest shareholder) is Lam, with other shareholders to include Liuwang (or its owner Liu Yin Quan), Richard Liang and Luo.  Their roles are respectively described as general manager, supplier of pipes, sales manager, and purchase and office manager.  On some versions an additional shareholder, being the agent in the Yunnan area, is also described.

108. Though the specific business of the new company structure is not clearly described in the meeting minutes, the product is plainly identified as being sold by the meter, which is at least consistent with sonic tubes.  As stated, Liuwang is also described as the supplier of steel pipes, and it was of course also the supplier of the steel pipes used for Dextra’s Sonitec brand of sonic tubes.

109. One version of the minutes sets out a clear timetable for establishing the new business over the months May to September 2009.  In each month there is specified to be a meeting. 

110. The month of May timetables the consultation of Hong Kong lawyers and the Foreign Economic Commission, and for the decision on cooperation framework and relevant details. 

111. For June, there are timetabled events relating to a decision on relevant details and the name of the company, a decision on timing of capital injection and preparation of incorporation documents, the signing of cooperation agreement and rental agreement, arranging for the resignation of relevant production personnel (note, not the hiring of them), and application for product patent.

112. For July, there are timetabled events for the first injection of capital, for Lam to resign (with three months’ notice), for the purchase of machinery and production preparation, and for contact with customers and agents.  There are also remarks relating to renovation of workshop and office, feng shui assessment and plan.

113. For August, there are timetabled events for the second injection of capital, the resignation of sales personnel (note, not the hiring of them), product catalogues and business cards, develop website, install machinery and production test run, purchase raw materials and accessories, set up account department and warehouse, complete renovation and commence production.  The remarks column includes the suggestion that there should be preparation for transfer of orders (which I read as the transfer from one company to another).

114. For September, the timetabled event is to commence sales deliveries.  The remarks include grand opening of company and report on developments, and to commence operations.

115. As can be seen from a number of the other documents, many of these events in fact took place, and more or less in accordance with this suggested timetable.  For example, Lam did contact Dextra’s lawyers; a rental agreement was signed; some office premises were inspected by a feng shui master who sent e-mails to Lam on 8 July 2009 and 17 September 2009 with his recommendations as to how to arrange the office, by narrative description, together with drawing and writing on a plan of the relevant office premises; staff did resign; production equipment was purchased; and deliveries were apparently made.

116. Indeed, the document is consistent with another timetable where all manufacturing preparations were supposed to be completed in August 2009.

117. Nevertheless, I note in passing that Lam did not in fact resign in August 2009, nor had he resigned at any point before he was summarily dismissed in October 2009.

118. In some rough notes titled “Considerations for new business April 09”, which Lam acknowledged during his oral evidence that he personally typed, some thoughts as regards the new business are set out under the headings of cooperation, concerns, fund flows and other issues.

119. The cooperation is “with LLD”, as suppliers, as shareholders and as to how much credit and capital.  There is reference to other agents in Kunming and Nanjing.  There is reference to a joint-venture agreement and some of its content.  Concerns include who would be willing to join, and how much risk could be undertaken, family and financial issues.  Fund flows relate to matters including target selling price, costing and margin, possible sales volume, payment of dividends and working capital required.  The other issues include “just copy from DX” (which must be a reference to Dextra) and “how to differentiate with DX”, as well as possible legal risk.  This all points to setting up a business, and one in competition with Dextra.

120. Another set of untitled rough notes states that sales documents such as the catalogue, sales contracts, test reports and certificates are stored on Lam’s computer.  As revealed from the forensic investigation, that is correct.

121. Lam’s diary also contains entries which are consistent with the setting up and operating of a new business, but are incongruent or inconsistent with his duties as general manager for Dextra.  For example, there are references on 21 and 22 June 2009 to “RL10,000/LGJ3,000” and “AL50,000”, which match another document containing an updated capital injection and expenditure table, which identifies RL (ie Richard Liang) and LGJ (ie Luo) and AL (ie Lam) as being required to inject those amounts (in RMB) during June.

122. There is also reference to “FengShui” on 27 June 2009; to “Clean + pack documents”, “letter head” and “telephone & fax” on 10 August 2009; to “57 thread + office layout”, and “draft turnover” on 11 August 2009; to “set up accounting & control system” and “website/email” on 21 August 2009; to “Amber handover” (Amber being Lam’s secretary), “Design for new factory”, “Incentive + Com” and “R&D Cost + splite” (sic) on 26 August 2009; to “Furniture & Equipment” on 28 August 2009; to “resign” (in Chinese) on 2 September 2009; to “Bank account & BR” on 7 September 2009; to “50k Xiao-RL” on 9 September 2009 (where the role of a Xiao in the context of capital injection is apparent from an investment agency agreement as referred to below); to “4000 Leo” on 12 September 2009 (where Leo is also mentioned on the updated capital injection table referred to in the last paragraph); to “start work” on 21 September 2009; and to “Capital Injection” on 12 October 2009.

123. Again, in passing, I note that Lam of course did not in fact resign on 2 September 2009, and had not done so prior to his summary dismissal.

124. Incidentally, the reference to Leo on the capital injection table is to a Leo Chan, together with a reference to a May (who is May Lam, Lam’s sister as explained by Lam in evidence), and those references are consistent with the draft investment agency agreement found elsewhere on Lam’s computer.

125. That agreement needs to be seen in the context of the draft investment agreements relating to the new business, of which there are nine revisions with dates between 29 May and 30 June 2009.  Most of those drafts were found in the personal document folder on the Seagate Device under the “Agility\setting up” subfolder.

126. Whilst the revisions vary one to another, the preamble in all drafts identifies that the first draft investment agreement followed the 19 May 2009 meeting.  The first six drafts provide that Lam is to form a business together with Li Yin Quan (of LLD), Li Ren Bin (Dextra’s Kunming sales agent), Richard Liang and Luo, with Lam as the largest shareholder at 35%. 

127. In the drafts dated 15 and 22 June 2009, the business is named “Agility”, but Lam’s name has disappeared as a shareholder, and instead is named Xu Xiao Hong, with a shareholding of 50%.  This is where the draft investment agency agreement comes into play, for it is dated 17 June 2009 and provides that Lam beneficially investing 35% of Agility’s shares, together with Chen Jing Pei (Leo Chan) at 5% and Lin Cui Xia (May Lam) at 15%, together totalling 50%, which shareholding would be held for their benefit by Xu Xiao Hong. The draft investment agency agreement also expressly identifies its relevance to Lam’s own private business, which is clearly Agility as named.  In fact, the document shows the original company name as “萬事達”, but that was deleted by tracked change and replaced with “科普斯”.

128. One of the drafts of the minutes of the 19 May 2009 meeting also identifies Xu Xiao Hong, with an identity card number given, as one of the shareholders of Agility.

129. I accept Mr Chain’s submission that all these documents, all found on Lam’s computer, contradict the offered explanation (see below) that he attended only a single meeting in relation to a business proposed by Richard Liang and Luo in May 2009, but thereafter decided not to be involved in any new business.  Further, Lam’s denial that he knew Xu Xiao Hong is also contradicted by these documents and the diary entry for 9 September 2009 (and in any event was somewhat departed from in oral evidence when Lam said Hu Xiao Hong was Luo’s wife).

130. The name of Xu Xiao Hong is also to be found on a tenancy agreement for factory premises, whereby “Agility” would rent factory premises from a landlord surnamed “Zhong”.  Two versions of that agreement were found in the personal documents folder of Lam’s computer.  The agreement gives the name of Xu Xiao Hong as the legal representative of Agility, the term of the tenancy as three years from 1 August 2009 (with the first month rent‑free), and the relevant premises are stated to be within LLD’s factory premises.

131. As it happens, that would be entirely consistent with what Dextra says it discovered on a visit to those factory premises on 14 October 2009.  Oh gave evidence about that visit, at which he and a colleague found what they believed to be a hidden production line for sonic tubes, with apparent copies of Dextra product and packaging.

132. That something was being produced for “Agility” is also certainly consistent with the group of documents comprising spreadsheets and tables.  As Mr Chain described it, the spreadsheets appeared to track what he called the performance metrics and logistics of a business selling sonic tubes in August 2009, but which business was not that of Dextra/DBPG.  All the documents were found within the “Agility\production” subfolder in the personal documents folder on the Seagate Device.

133. The spreadsheets deal with disparate subjects, including daily stocks of sonic tubes for August 2009, inventory control of sonic tubes for the same month, new plant employee working hours for the same month, manufacturing and investment and expenditure at the end of that month, and the manufacturing capacity analysis for 2009. 

134. Some of the documents identify sales data listing named projects, and identified sales staff apparently headed by Richard Liang, all of whom were still employed by Dextra as at that date.  The record of outgoing sonic tubes for August 2009 also lists delivery notes by date and by number, clearly suggesting that actual sales have led to actual deliveries starting from delivery note number 00001 dated 3 August 2009.

135. The documents relating to the breakdown of new plant employees work hours for August 2009 identify for example, amongst other employees, a crane operator who was actually employed by Dextra until 30 September 2009.

136. The daily stocktake reports for sonic tubes include references to tubes with a thickness which Dextra does not use.  I also note that two documents headed ‘Details of machineries and building materials for new factory for July 09’ and for ‘Aug 09’ respectively, appear to identify the various materials for use at the new factory, notwithstanding that the first such document bears the Dextra logo (which has been removed from the second document).

137. There are also tables and spreadsheets containing confidential pricing information originating from Dextra (sometimes even adopting the product code from Dextra), but modified for the purposes of a new or different business, found on the Seagate Device in “Personal Doc\科普斯\Costing”, for example “Personal Doc\科普斯\Costing\New business01.09.09”.  Some of the documents identify the relevant intended margin by reference to a comparison with the margin for Dextra, such as “same as DX” or “half of DX”.

138. Another margin comparison in relation to the steel delivery costs is “no need”.  This seems to me to be consistent with the difference between the Dextra business, where the steel pipes would have to be delivered from LLD, and the apparent new business conducted from within the factory premises of LLD, where there would obviously be no such delivery charge. 

139. These documents bear various dates, apparently indicating some ongoing updating on Lam’s computer.  That is not consistent with inactivity by reference to documents merely shown to him.  The sales margins are then carried forward into a cash flow table, ultimately identifying the forecast first year dividend by reference to the capital and loan amounts injected. 

140. Another cash flow table identifies amount of credit from LLD, together with expected payments by cash on delivery, as opposed to 90 days terms, so as to be able to calculate an apparent maximum capacity of metres of tube, which could be delivered in terms financed.

141. This series of documentation is also consistent with the commencement of new business in July or August 2009, and forecast to be ongoing for the next year or so.  The references to accounts receivable, starting in September 2009, with no account receivable for the previous month August 2009, is also consistent with the commencement of a new business in August 2009 (and inconsistent with the continuation of a previously existing business).

142. One document found on the Seagate Device appears to identify a kind of “shopping list”, as might be required for the setting up of a new business.  There are matters relating to QC standards, procedures, and forms; production product and parts drawings, reports and control form; sales catalogue softcopy, sales contract, agent contract, other product catalogue and usual information, monthly report agent, billing instruction and submission file; purchase list of suppliers with pricing terms; a copy of a patent; finance and administration documents, including standard employment contract, leave application form; and other product information.  All of these items are listed on the left-hand side of the paper, which contains on the right the notation “√ AL Computer”.

143. The document appears consistent with the fact that a number of administrative and logistical documents for the operation of the business are also to be found on the Seagate Device.  For example, there are numerous extracts from Dextra’s sonic tube catalogue, sometimes where the name and logo of “Agility” has been used to replace the Dextra name and logo. Sometimes, the address is given at Foshan Nanhai Guanyao Li-gang Industrial Zone, with a phone number, and a website address of “www.agilitychina.com”. The website is, of course, consistent with the e-mail accounts, apparently set up for Lam, Richard Liang, Luo, Amber Lu and Ivan Wang.

144. There are also lists of equipment purchased, which I accept was suitable and/or necessary for producing sonic tubes with the characteristsics of those with the Sonitec brand.

145. There are also various forms of delivery note, factory certificates, quality-control charts, and other documents where the Dextra name and logo has been replaced with that of “Agility”.

146. There was an interesting, perhaps unwittingly candid, comment in cross-examination, when Lam accepted that he used Dextra data in certain documents so as not to have to start from scratch.  That would only have been appropriate in the context of a sonic tube business.

147. There are also various versions of the “Agility” logo, and drafts of letterhead for that company or business.

148. I have already mentioned that Mr Stagg found the text of a Hotmail message, which when decoded was from “13650982@qq.com” to “albertlamhk@hotmail.com”, with some Chinese text and an embedded table containing salary data for Agility staff, named as: Lam, Richard Liang, Luo , Ivan Wang, Amber Lv, Xiong, Qiu and Morris Fan.

149. In fact, that email was part of a chain of e-mails dated across 11 and 12 October 2009 (notable late in the material chronology).  The chain starts with an email from Ivan Wang (who is using the “13650982@qq.com” address) to Lam headed “Relatively urgent matters requiring your confirmation”.  Ivan Wang had left Dextra employment in June 2009.  He apologises for disturbing Lam at night, but says that there are a number of urgent matters needing his confirmation before everybody’s work can proceed in a better manner.

150. In his responsive e-mail, Lam answers the individual queries paragraph by paragraph, with notations at the end of each of them.  I note that Lam apparently copied Amber Lu (at a Hotmail address and another private email address) into his response.  Though formerly his secretary, she had left Dextra in early September 2009, so he is clearly including her for a non-Dextra purpose.  The tone of Lam’s response is as one who is indeed making decisions and providing the confirmations.  He appears also to make reference to an account receivable, indicative of a business that has actually commenced.

151. It is the further reply to that response which contains the table showing various remuneration, around which the text suggests that individuals like Lam and RL (Richard Liang) will be paid in accordance with the actual time they come and report to work.  This indicates that they will be paid for the work performed for the new business, even whilst still employed by Dextra.

152. I accept Mr Chain’s submission that this e-mail chain particularly demonstrates Lam’s close involvement in the control, setting up and operation of “Agility”.  It does not appear to me to be consistent with his explanation in his evidence, namely that it dealt with a concrete additive and grouting tube business of Luo, which he was merely agreeing to help for free, but in which he was not otherwise involved. 

153. Lam is asked to make decisions, and he does make decisions.  None of the explanations proffered by Lam in his evidence seeking to explain away this document is at all convincing.  In any event, it is clear that none of Richard Liang or the others had experience in running a business, so that it was natural for Lam to be the one doing that (not just as an unpaid assistant to others).

154. I would also mention that Lam’s explanation is difficult to reconcile with his own position as the general manager of Dextra. Even if he had no real involvement in the alternative new business, it is difficult to understand why he would not have made complaints and taken action when he was asked to review documentation which clearly showed Dextra staff (current as well as former) engaged in that new business.  Where the alternative business was also not clearly one which was not in competition with Dextra, that ought to have heightened any concern.  That no concern was ever expressed by Lam is consistent with his full knowledge of and participation in it.

155. Lam’s case was set out in his witness statements, as was adopted by him, and to an extent expanded by him, in his oral evidence.

156. In his first witness statement, Lam denies having set up a competing business.  He accepts that in or about May 2009, he received a proposal for a new business venture from an acquaintance, and had a discussion about the proposal at the invitation of that acquaintance.  He says he contacted Dextra’s lawyer in relation to an investment agreement.  Indeed, he claims it was well-known to Dextra that he had interests in other businesses. He explains the downturn in the sales figures for Dextra was caused by poor management decisions by de Surville and others.

157. This explanation is expanded upon in his supplemental witness statement.  He stresses that to the best of his knowledge, no business plan in relation to Agility was ever drawn up, established or executed; nor was any competing entity set up by him.

158. Instead, Lam says he was approached at the end of April 2009 by Richard Liang and Luo, who approached him at the same time as they approached Li Ren Bin and Liu Yin Quan.  As Lam was unhappy with Dextra’s business decisions (which he has explained elsewhere in the witness statement), and because he was in fear that his employment would be terminated, like several other employees, Lam was interested in the proposal.

159. Therefore, he drafted a ‘Business Proposal’ for future meetings, with different topics to be discussed in May, June, July and September 2009.  But, after the first meeting in May 2009, Lam formed the view that the other parties were not in agreement with his own proposals, including his salary and concept of running the business, so he did not attend any more meetings.

160. He says there was no discussion or agreement as to the name of the proposed business, or any agreement as to the type of business of the proposed.  He even says he reminded the others that he had a restrictive covenant in his own employment contract, which would prohibit him from conducting sonic tube and coupler business within one and half years after leaving Dextra’s employment.

161. Subsequently, he says, when Luo and a Deng Zhen Xiong had their employment with Dextra terminated at de Surville’s instigation, they approached Lam for his advice in setting up their own business.  They approached him to invite him to join them as an investor in a potential concrete additive, scaffolding and grouting tube business, but Lam says he declined to invest.  Part of the reason was that he was not familiar with those lines of business.

162. Nevertheless, he assisted them in preparing certain documents on the administration and commercial side, including an investment agreement in which the company name was Agility.  He says he also assisted them to register the domain name and e-mail accounts in relation to that new company.

163. Later, he says, Luo e-mailed him various documents, he believes because Luo and the others were hopeful that they might persuade him to invest in the business at some point in the future.  Lam says that as the documents received were largely unorganised, he reorganised them and stored them in his personal documents folder on his computer, sometimes without even looking to see what kind of documents they were.

164. Lam denies having disseminated any confidential information, and asserts that it would in any event have been possible for LLD to have produced its own sonic tubes without reference to any Dextra information.  After Lam’s employment was terminated, he said he came to know from Luo that LLD had started producing its own sonic tubes in 2008.  I note at this point that Oh accepted in cross-examination that if LLD intended to set up shop cloning Dextra sonic tubes it could have done so easily, and that he himself had difficulty in differentiating Dextra product from others.

165. But I am afraid I do not think any of this explanation is convincing, even adopting a starting position that Lam was unlikely against his own history with Dextra to have been so involved.  Rather, the documents consistently show the full involvement of Lam in the setting up (and later operation) of a rival business of sonic tubes.  That someone might have started the business without Lam does not mean that he did not himself join in.  The documents show he did.

166. There can be no convincing explanation brought forward for the “Agility” brochures, which superimposed its name and details in place of Dextra on Dextra materials (deleting references to Dextra in most circumstances).  I do not accept the suggestions by Lam that there was a fake tender process by Dextra for certain projects in China, expressly consented to by de Surville.  Instead, I accept de Surville’s evidence that he did not condone any such process.  In any event the fake tender suggestion is inconsistent with Lam’s own story that the “Agility” documents related to a business set up by and belonging to Luo and others.

167. In this context, there is an interesting comment made by Lam in his witness statement material, when he explains why he attempted to delete the Personal Document folder from his computers.  He says that he did so because by the end of September 2009, after DBPG had secured a particular contract on a new project, he made up his mind and told Luo that he was not going to go into business with them.

168. Even leaving aside that the documents show Lam’s continued involvement well into October 2009, this comment seems to me to be revelatory of, or at least consistent with, two things.  First, it suggests that Lam had not made up his mind and had not notified the others that he would not go into business with them until sometime towards the end of September (at the earliest).  On that basis, he would have continued to be interested in at least the possibility of the alternative business project until that time, and that is what the documents indeed show.

169. Secondly, it emphasises that Lam was looking at an alternative business because of his concern about, and dissatisfaction with, the state of affairs in Dextra/DBPG. 

170. As I have already indicated, there was certainly a change in the formerly excellent relationship between Lam and de Surville in around April 2009.  No doubt, at that time, Lam felt and expressed some dissatisfaction with some management decisions being taken. 

171. Indeed, though Mr Chung was broadly critical of de Surville’s evidence, he suggested there were parts of it that were supportive of Lam’s case.  For example, (though Mr Chain did not necessarily accept this was a fair summary of the evidence) Mr Chung pointed out de Surville had forbidden the issuance of post-dated cheques to LLD from April 2009, had partitioned management between local and export sales, had progressively added more foreign employees, had instructed Lam to stop delivery to customers that were overdue for payment for more than 90 days, had instructed reduction of business to customers where a 25% margin was not being made, and had pushed the introduction of an ERP system which caused chaos and resulted in complaints from customers. 

172. I was also invited to take account of similar comments from the evidence of Oh, who said for example that maybe 50% of orders could not be satisfied because of pipe supply problems (although de Surville insisted that production capacity was never an issue).

173. But it seems to me that this evidence is rather double-edged.  Whilst it may help to explain some part of the downturn in Dextra’s business in 2009, it might also identify precisely the circumstances where Lam might be driven to consider an alternative business venture.  In essence, Lam accepts that much; nevertheless, he says he never went through it. Unfortunately for him, the very documentation which he kept (and much of which he authored and/or typed and/or directed), and which he tried but failed to delete, tells a different story.

174. I am prepared to accept that there may have been some element of internal conflict in Lam’s thinking.  After all, as he put it, he would not allow anyone – even de Surville – to harm Dextra; Dextra was “his son” (by which I take it he meant the China business, primarily for sonic tubes).  On the one hand, Lam probably would not have wanted to act contrary to the interests of his child, but on the other hand if he perceived his child being harmed by others, he may have preferred to save or maintain the actual business, albeit within another entity.  He may even have felt that the business had grown so much under his helm, so that he regarded it almost as his own.

175. I also am prepared to accept that there may have been the demonstration of “cold feet” from time to time.  It is not unlikely, though it does not seem to me to matter much to the analysis, that Lam’s enthusiasm for setting up a competing business might have waxed and waned over the months, if that in fact is what he was doing.  I find that is what he was in fact doing.

176. As regards the dissemination of confidential information, Dextra’s case is not simply based on the fact that around 10 unknown devices (not registered as Dextra’s devices) had shared files with Lam’s hardware. Importantly, as I have pointed out, the experts were in agreement that there had been sharing or dissemination of files and data concerning “Agility” between the user of the HP Device (ie Lam) and user of the Fujitsu Device (ie Richard Liang).

177. Further, Zhang gave evidence that Lam had asked him to send him certain technical drawings for the bell mouth and rubber gasket, and a part called the finger, of various of the sonic tubes.  Lam had not told Zhang why he wanted the drawings at the time, and Zhang sent him soft copies.  Zhang was also asked to prepare budgets (though Zhang never in fact got around to doing that), and an analysis of electricity consumption required for a factory to support two lines of sonic tube production lines.

178. Not only do those requests from Lam only likely support the contention that he was engaged in gathering materials for a competing business, Lam clearly transmitted at least some of the documents to others. 

179. There is an email from Lam to a Hong Shi Qing on 12 October 2009 (again notably late in the chronology, indeed after the attempted deletion of material from the Seagate Device); though Hong was a sales engineer for DBPG at the time, the email was sent by Lam to Hong at a private email address.  Those drawings would have permitted the replication of the Sonitec sonic tube products and accessories.

180. Oh gave evidence to this effect, in the context of differentiating the characteristics of Dextra’s sonic tubes from those of competitors.  I accept the evidence of Zhang and Oh in this regard. 

181. That the materials were sent to a private email address by Lam is inconsistent with his explanation that Hong might legitimately have used the materials received.  Of course, it is to be remembered that Hong also resigned from Dextra employment shortly after Lam was terminated on 16 October 2009 (a Friday).  Indeed, it seems to me that all those who resigned on the following Monday 19 October 2009 (by letters sent in similar terms) were jumping ship from Dextra openly to join Lam on his new commercial voyage.

182. Also, contrary to Mr Chung’s submission, it does not seem to me to matter that the technical information sought by Lam from Zhang might also have been obtained from a different source, and that Lam had previously requested drawings from Zhang on a number of occasions over the 10 years or so before 2009.  Nor does it seem to me to matter that LLD might, from its previous experience of dealings with Dextra, have been able to copy Dextra sonic tubes from its own knowledge.  It did not, as it was given Dextra knowledge.

183. It might also be thought that Mr Chung’s submission that Oh had accepted in cross-examination that because Dextra had not paid LLD, LLD stopped delivering steel tubes to Dextra, causing it to be unable to supply up to 50% of their orders on time for a few months in 2009, is also double-edged.  On the face of the various documents relating to the alternate business, in which LLD or its owner was an active participant, LLD at least had more than one motive for disrupting (or allowing the disruption of) the delivery of steel tubes to Dextra, and perhaps for joining a competing venture.

184. By the end of the trial there was not much between the parties as to the principles as to what amounts to confidential information; though it was argued that some materials were available from other sources, the real contest was on what was or was not done by Lam.  In any event, the quality of the information is less important if and when there has been a deliberate collation by copying, and dissemination, of information which would not otherwise simply have been part of the employee’s memory, or acquired skill or knowledge.  This is what I find happened.

185. These acts of dissemination of confidential information are also indicative of the extent of the dealings Lam had with still current and then former employees of Dextra/DBPG.  Whether he positively encouraged staff to leave to set up in, or join, a competing business, or whether he merely allowed them to leave to do so does not seem to me to matter much.  But, I accept on the evidence overall that it is more likely than not that Lam actively joined those employees in the new business and would likely have encouraged them to join it and him in it.  His own diary, which provides a timetable for the resignation of both production and sales staff, reveals that as part of the plan.

186. If it is correct, as was part of Lam’s own case, that de Surville and others were taking management decisions which were harming the business of Dextra/DBPG, about which Lam felt strongly he had been instrumental in building, then it is not unlikely that Lam would hope to save or continue that business by transferring it to a new entity, including with as many appropriate staff as he could muster.

187. For the avoidance of doubt, I would mention that I have taken into account that DBPG was involved in litigation in the PRC courts, when sued by Richard Liang for outstanding sums due under his employment.  It is correct that DBPG’s defence to Richard Liang’s claim was very similar to the case, which it has run in these proceedings against Lam. But the fact that that case failed in the PRC litigation does not seem to me to tie my hands at all in dealing with the evidence placed before me in this case.

188. What is more important, and is a point strongly in favour of Lam, is that he appears to have acted entirely correctly when subjected to surveillance in October 2009. Acting under a pretext, a private investigator or enquiry agent invited Lam to a meeting to discuss obtaining sonic tube products. It is noteworthy that throughout the meeting, Lam acted solely as the representative of Dextra and offered only Dextra’s products.  During the meeting, Lam was asked about LLD and he stated that LLD was Dextra’s supplier and was not able to manufacture the final product for the sonic tubes. Indeed, Lam advised the enquiry agent not to deal with small Chinese companies, as they could not ensure the quality and no claims can be made on a long-term project.

189. Of course, from the attempted deletion of the personal documents folder, it seems likely that Lam was alerted to the suspicion under which he had fallen by the date of that meeting.  Nevertheless, Mr Chung was correct to lay great emphasis on the behaviour of Lam when approached by the enquiry agent, as that behaviour was the apparent antithesis of any wrongdoing.

190. I also take into account that Dextra has not been able to find an actual business operating under the “Agility” name.  This is obviously a flaw in the evidence in the context of Dextra’s position.  As was emphasized for Lam, it seems unlikely that if a competing entity called “Agility” in fact existed that it would be impossible not to discover any information regarding its sales activities, even with the assistance of the replacement sales team which Dextra built up from November 2009 (to replace the sales team which left in the middle months of that year, apparently to join “Agility”).

191. Nevertheless, and giving them all due weight as seems to me to be appropriate, I do not think that those pieces of evidence are capable of changing the overall picture painted by the totality of the evidence. 

192. For Lam to have been in breach, he need not have been in breach by all his actions if he was in breach by some.  As already mentioned, there is also evidence of the resignation of many Dextra staff immediately after Lam’s termination on 16 October 2009, which strongly suggests they all had somewhere to go.  Further, there is some evidence of a drop in Dextra business in August 2009, at exactly the time when it says a competing entity had commenced business (as the documents on Lam’s computer identify was intended – including by a transfer of orders), and there was some evidence of sonic tubes resembling Dextra’s product having been produced at the LLD premises, and later having found on construction sites in Guangzhou.

Conclusion on liability

193. Overall, it seems to me to be plain that Lam was instrumental in the setting up of the new and alternate business from May 2009.  The totality of the documentation is broadly consistent, and there is so much of it that it is difficult to explain away.  Indeed, the consistency is as regards the total categories of documentation that one would ordinarily expect an experienced manager like Lam to put together for the purposes of setting up and operating a business.  It is also produced and updated over an extended period of months.

194. Not only is there the ‘shopping list’, most of the items on the list have been obtained and grouped together within the “Agility” sub-folder in Lam’s personal documents file.  None of the documents appear to refer expressly to a business involving concrete additive, or scaffolding, or grouting tubes.  Rather, they are either all expressly dealing with or are at least consistent with a business producing and selling sonic tubes, and tubes which resemble or are a copy of the Sonitec tubes produced by Dextra.

195. It is to be noted that it was Lam who liaised with the lawyer, and who drafted the first agenda and minutes of the meeting in May 2009.  Those documents consistently identify Lam as the largest shareholder of the alternative business.  That later versions of documents obscured Lam as a shareholder is consistent with his carrying out a new business clandestinely, including taking deliberate steps so as not to be discovered.  The proffered explanation that the investment agency agreement related to an intended fruit business could not stand when the document itself refers to “Agility”.

196. It was Lam who had the relevant management experience, performed the various calculations, and was also responsible for setting up the domain name for “Agility” and related e-mail accounts.  Most of the steps identified in Lam’s diary, and the timetabling document, appear to have taken place broadly in the chronological order identified.  I have in mind, for example, the capital injections, the feng shui inspection, and the resignation of Dextra staff (albeit not Lam himself).

197. The raft of costing and pricing tables, based upon but different from the Dextra model, is also consistent with the intention to set up a new and competing business.  These documents go together with the capital injection tables and the various documents pointing to an intended dividend payment at the end of the first year of operation.  The catalogue information, which effectively merely superimposed the “Agility” name and logo and contact details onto the Dextra document, is instructive.  None of this is consistent with Lam’s attempted exculpatory explanation that he was engaged in a fake tender process for the benefit of Dextra.

198. Factory premises had been rented.  Those premises were within the existing factory premises of LLD, which was part of the venture, and which explains why no delivery costs were required for the raw material pipes on the costing analysis.  There are documents identifying that necessary manufacturing equipment had been purchased.  The spreadsheets tracking performance metrics identify that the business had actually commenced, that deliveries were made (starting with delivery note number one), and that this occurred broadly in accordance with the intended timetable revealed by the documents.

199. None of this is consistent with Lam’s explanation of some of the Dextra salesmen acting ‘rogue’; rather, it is consistent only with an organised commencement and operation of a competing business.

200. Indeed, that there is so much documentation identifying involvement in the new business by Dextra personnel, not just ex-personnel but also those still employed, makes it extremely difficult to accept any innocent explanation for the presence of these documents in Lam’s personal documents folder on his computer devices.  I am persuaded that Lam was indeed instrumental in encouraging staff to leave Dextra/DBPG to work for a competing business, even if he was not the only one and, for example, Richard Liang was also involved.

201. I also take into account the fact that there was a deliberate, albeit inadvertently unsuccessful, attempt to delete the incriminating materials from Lam’s computer devices.  That seems to me to be also consistent with his guilt, and his recognition that he was rightly under serious suspicion.  I do not accept the offered explanation that the deletion was because there was no longer any need to keep documents pertaining to Luo’s business; it was not Luo’s business. 

202. That Lam went so far as to suggest tampering with the computer evidence, when he subsequently made no positive allegation of that in his oral evidence, but rather accepted authorship and/or possession of almost all of the key documents, is another feature of the case which can be taken against Lam.  There is an obvious inconsistency in Lam’s case where he seeks to offer a positive explanation for the documents which in broad terms he accepts were found on his computer, were kept by him, had been organized by him, and sometimes had been authored by him, with the suggestion that the documents were somehow tampered with (based only upon the theoretical possibility of that having occurred).

203. Dextra’s case is that Lam was the “mastermind” of the setting up and operation of rival business.  Whether or not that is a fair description, there can be no real doubt that Lam was significantly involved in a very senior role with the new business.  Lam was to be a substantial owner of that business and his management experience was vital to it.  It seems to me that the documents identify that he was so involved over a number of months, and on an ongoing basis, and whilst he was nevertheless an employee of Dextra/DBPG.

204. That he might at the same time have been doing some genuine work for Dextra/DBPG does not change the fact that he was acting contrary to the duties he owed.  I have taken into account the conflict in evidence as to Lam’s travel over the period, where Dextra suggests he was travelling to divert business as the drop in turnover reveals, but Lam says he was essentially chasing payment from customers as instructed.  I think Lam was probably doing both, and could have been using the chasing for payment and tightening of credit terms by Dextra as a means of encouraging customers to transfer loyalty to the new venture (or perhaps to maintain loyalty to Lam, in his new venture).

205. There was also the sharing of confidential information between Lam and others, at least Hong and Richard Liang (though it is simply unrealistic to think materials stopped with him)

206. In conclusion, even bearing in mind the seriousness of the allegations and the history before 2009, I am wholly satisfied that Lam acted in breach of the various duties owed under his employment.  Those breaches include the dissemination of confidential information.

207. Dextra/DBPG was perfectly entitled to terminate Lam’s employment summarily.  As a result, Lam’s own claim must fail. 

208. Lam is liable for any loss or damage flowing from those breaches.

Damages

209. The principles applicable to the calculation of a loss of profit claim were not seriously disputed, though different emphasis was placed by the parties on parts of the governing authorities.

210. My attention was drawn by Mr Chain to the decision of Deputy Master Rimsky Yuen (as he then was) in ICI Swire Paints Ltd v. Techni Motor & Engineering & Trading Co (unreported, HCA 7251/1995, 29 January 2003), in which the relevant principles were extensively reviewed. The starting point is obviously that where a party sustains a loss by reason of a breach of contract, he is, so far as money can do it, to be placed in the same situation, with respect to damages, as if the contract had been performed.

211. The Deputy Master then identified that a party claiming damages has to prove, on the balance of probabilities, both the fact of damage and the amount. If the fact of damage is shown, but no evidence is given as to its amount so that it is virtually impossible to assess damages, this will generally permit only an award of nominal damages. On the other hand, where it is clear that some substantial loss has been incurred, the fact that an assessment is difficult is no reason for awarding no damages and merely nominal damages.

212. In essence, even if there is a difficulty in assessing damages, where precise evidence is not available to the court, it must do the best it can.  Where appropriate, the court can adopt a broad brush approach when assessing damages; the court is not dealing with an exact science.

213. I have also taken account of the points made by Mr Chung by reference to the case of Davies v. Taylor [1974] AC 207, namely that when the question is whether a certain thing is or is not true, or whether a certain event did or did not happen, then the court must decide one way or the other. There is no question of chance or probability.  Either it did or did not happen. 

214. Though in part deployed to deal with the question of whether or not a competing business can be said truly to have been set up when no such extant business can be positively identified (where I think the dictum might be apposite), Mr Chung also relied on the dictum in the context of whether Dextra could prove on the balance of probabilities that it would have been able to achieve the budgeted 2009 sales.  In this context, I do not think the dictum is so apt, as it is not a question of whether the budgeted sales did or did not happen, but whether absent the breaches by Lam those sales would or would not have happened.

215. As it was put elsewhere in the Davies case, one can prove that a past event happened, but one cannot prove that a future event will happen; the law is not so foolish as to suppose that one can do.  All one can do is to evaluate the chance.  In this particular claim to loss, that simply takes one back to the need for Dextra to have proved, on the balance of probabilities, both the fact of and amount of damage.  I am satisfied as to the fact of damage and must see what amount is proved.

216. Dextra suggests that there are three variables to the calculation of its loss of profit claim, being the period of lost sales to take into account, the projected sales that the Dextra parties would have achieved but for Lam’s misconduct and breach of duty, and the gross margin.

217. As to the period of lost sales, de Surville gave evidence that Dextra projects tended to have an average duration of 6 to 8 months, and that evidence was not significantly challenged.  Hence, it is argued for Dextra that the relevant period should be one of 13 months, commencing in May 2009 (when Lam began his plan for the rival business) and including a period of 7 months after Lam’s termination in October 2009.

218. Dextra argued that though on the evidence it could not pinpoint with absolute certainty precisely when the rival business commenced operations and trading, Lam was involved and expending effort in setting up the rival business from May 2009, rather than maintaining or obtaining new sales for Dextra.  That is said to justify the commencement of the period of loss claimed.

219. However, it seems to me to be tolerably clear on the evidence that the rival business actually commenced operations only in August 2009 (a date forecast in the planning of that new business).  Even on the assumption that some of Lam’s time was being directed to the new business, in conflict with time, which ought to have been directed to Dextra business, I am not persuaded that the period of loss should commence as early as May 2009. I would also think that the lead time for business and average project duration also point against the period of loss starting as early as May 2009.

220. I also accept to some extent Lam’s argument (though, for reasons which I have given or as will appear from below, certainly not to the extent argued) that part of the drop in Dextra turnover from April 2009 might be the reflection that a sizeable project had come to an end around that time, and that de Surville had put in place certain steps which caused a hiccough or lull in turnover, or receipts.  But I am also wholly satisfied on the materials that the competing business had commenced and had taken business from Dextra, either by diversion of sales or by an unfair start on competition, and probably both.

221. On that basis, it seems to me that a fair start date for any period of loss would be 1 July 2009.  That takes account of a temporary but relatively short term change in conditions (including any teething problems with the new Dextra administrative processes), but also that Lam must have been starting to divert or encourage business to come to the new venture rather than Dextra (as at least one entry in his own diary referring to transfer of sales appears to indicate).  I note the actual sales achieved by Dextra significantly dropped in July 2009 from a figure for June which was already considerably lower than for the previous few months, and almost halved again in August 2009.

222. As to the end of the period, I would accept a date roughly 6 months after the termination of Lam’s employment, namely 31 March 2010.  I bear in mind that a replacement for Lam was hired in November 2009, along with much of a new sales team.

223. That gives a material loss of profit period of nine months (though it is relevant to later discussion that those months include the winter months when the sales would be expected to be lower).

224. Much of the discussion as to projected sales turned on a document which was a handwritten budget, or a note of budget discussions between de Surville and Lam, dated 10 October 2008 and headed “Budget 09”. 

225. Dextra argued as its primary position that projected sales should be on the basis of RMB4.5 million per month, with a 25% discount over the winter months of November to February inclusive, which would amount to annual sales of RMB49.52 million, which Dextra identified as consistent with the potential sales estimate of RMB50 million given by Lam in the 2009 budget document.

226. But that is neither fair nor apt on my reading of that document, as also dealt with in the evidence.  I think the ‘potential’ figure was really a top end description of what might be achieved in the best of all possible markets and conditions (and the figure appears to exceed the capacity figure in any event).  Further the projected sales figure given by Lam was RMB35.1 million, already a significant jump from the budgeted figure for 2008 (also shown) of RMB16.5 million.  Yet further, de Surville did not really regard even that figure as realistic and his own budget figure used in the discussions with Lam was RMB23.5 million (although it is fair to note Lam thought that was conservative).

227. I accept that the figures discussed between de Surville and Lam were serious figures (and were not part of just a non-serious, casual discussion as suggested by Lam in his evidence).  But where de Surville considered Lam to have been over-optimistic, and where the Lam figure was not ultimately adopted for budget purposes, I do not think taking the very much higher ‘potential’ figure can be correct.

228. I accept that Lam made his own budget projections when he enjoyed a high degree of autonomy, so could be expected to have a grip on the figures, including the threat from known competition.  But the discussions in October 2008 were before the problems arose with the implementation of the ERP system (though Oh said they could be worked around to ensure delivery more or less on time), and before the new policies implemented at de Surville’s instruction. 

229. I also have in mind the issues which are dealt with in an email memo of 27 April 2009, following meetings on 20-22 April 2009 and recapping the important points then discussed, including those new policies. Incidentally, that memo refers to the need to pursue efforts to reach the second revision of a target for 2009 at “29mRMB @ 25% GM” (only emphasising the unrealistic aspiration for anything like sales of RMB50 million).

230. I have not forgotten that Lam appears to have projected best sales for the new business at around RMB44 million (being the top of a range starting from RMB33 million), and that de Surville gave unchallenged evidence that there was a boom in highway, railway and infrastructure construction projects which are the basis for sonic tube sales. I also accept de Surville’s evidence that Dextra would have put in the capital required to maintain the sales which it was able to achieve.

231. But, overall, I think an appropriate annual figure for sales would be around RMB32 million, which reduced to a nine month period including the four winter months would give a figure of RMB23,272,727 million.

232. Against that, actual sales of RMB4,474,685 were achieved in that period, giving a variance or shortfall of RMB18,798,042.

233. As to the margin, I am not persuaded that damages should be calculated by reference to an assumed margin of 24-25%, as was argued by Dextra on the basis that it achieved a 22% gross margin in 2009, notwithstanding the diversion of sales.  I do not think diversion of sales is necessarily so relevant to the margin, and I note that the gross margin in the 2009 budget document was at 20%, though that was raised on revision to 25 %, and that the 27 April 2009 memo noted that gross margin had not reached 25%, though steps were identified to try to reach that.  Overall, I think 22% represents a fair figure for gross margin.

234. Applying that to the lost sales figure of RMB18,798,042 gives a loss of RMB4,135,569.

235. I do not allow the claim to the recruitment fees incurred for a replacement for Lam, as I do not see why the urgency necessitated those fees.  As Lam could have left at his own will on 3 months’ notice, or been dismissed on the same basis absent misconduct, a fee for recruiting a replacement was always likely to be incurred.

Other relief

236. I am prepared to award interest on that sum for the pre-judgment period at the judgment rate of 8%, as Dextra seeks on the basis of a breach of fiduciary duties amongst others (see Hong Kong Civil Procedure 2014 Note 6/L/14).  Nevertheless, I would in the exercise of my discretion award interest only from 28 days after the end of the loss period assumed, ie from 28 April 2010 (even though the date of the writ was 10 January 2010).  I calculate that interest sum as RMB1,323,382.

237. Post-judgment interest will, of course, accrue by operation of the material statutory provisions at the judgment rate until payment is made.

238. As to the remedies for misuse of confidential information, I have found that Lam made use of and disseminated such information in the setting up of the rival business, so that Lam misused this material contrary to the terms of his employment and directorship and duties owed under them.  I therefore accept that Dextra/DBPG is entitled to the usual remedies of delivery up of the materials, as set out in Schedule 3 to Dextra/DBPG’s claim, and an injunction to prevent any further use of them.

239. As to costs, I see no reason why costs should not follow the event.  I therefore order that the Dextra’s costs of both actions and DBPG’s costs of the HCA 38/2010 action shall be paid by Lam.  But I shall make the order for costs on a nisi basis in the first instance, which will become absolute should neither side apply to vary within 14 days.  I will deal with any variation application on paper.

240. Pending satisfaction of the judgment, I extend the Mareva injunction previously obtained by Dextra/DBPG.  I will also grant liberty to apply as to the formulation of the order.

241. Finally, I would like to extend my gratitude to Counsel for their assistance with this case, including through their helpful written materials.