CENTALINE PROPERTY AGENCY LTD v. HONG KONG PROPERTY SERVICES (IC&I) LTD AND OTHERS

DCCJ  4937 of 2005

IN THE DISTRICT COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

CIVIL ACTION NO. 4937 OF 2005

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REASONS FOR DECISION

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1. There are two applications before me:

i) the Plaintiff summons dated 5^th October 2005 for various injunctions, including injunction restraining each of the Defendants from making use of materials in the Plaintiff’s retail property listings computer database. This summons was issued pursuant to an order granted ex parte by H.H. Judge Lok on 5^th October 2005 (the “Anton Pillar Order”) ordering, inter alia, search of the 1^st Defendant’s premises for materials in connection with the Plaintiff’s database; delivery up of such materials; disclosure of information and interim injunctions restraining use of such materials; and

ii) the 1^st Defendant summons dated 10^th October 2005 for an order, inter alia, to discharge the Anton Pillar Order as varied by H.H. Judge Chow on 6^th October 2005 and for an inquiry as to damages sustained by the 1^st Defendant by reason of the Anton Pillar Order.

2. In the morning of 6^th October 2005, the Plaintiff proceeded to execute the Anton Pillar Order. After seeking legal advice, the 1^st Defendant decided not to allow the search and indicated an application would be made to discharge the order.

3. At around 11:30 pm the same day, an urgent application by the 1^st Defendant on notice to the Plaintiff was made to H.H. Judge Chow. Upon certain undertakings by the 1^st Defendant, the Anton Pillar Order was varied. The effect of H.H. Judge Chow’s order is to stay the execution of paragraph 1 (the enter and search part) of the Anton Pillar Order and to preserve the status quo of the evidence in the 1^st Defendant’s premises as at 8:30 pm of 6^th October 2005 until the return date i.e. 12^th October 2005. The undertakings include sealing up the premises in question until the return date; cutting off of electricity supply to all computers therein and taking of forensic images of the hard disks of all computers in the premises which were to be kept by the supervising solicitor.

4. Both the Plaintiff and the 1^st Defendant are represented by leading counsel on the return date before me. The 2^nd to 5^th Defendants chose to make no submission and relied on that made by the 1^st Defendant. Since the Anton Pillar Order has effectively not been executed and the 1^st Defendant’s office has been sealed up pending disposal of the matter, both leading counsel urged the Court to hear immediately the 1^st Defendant’s discharging summons and adjourn for argument the Plaintiff’s summons for injunctions. I agreed. The hearing lasted for seven days. On 24^th October 2005 I dismissed the 1^st Defendant’s summons and indicated written reasons would be handed down later. My reasons appear below.

Background

5. The Plaintiff and the Midland Group, of which the 1^st Defendant is a subsidiary, are two of the leading property agencies in Hong Kong. They are business rivals. The 2^nd to 5^th Defendants were ex-employees of the Plaintiff formerly working in the same sales team of the Plaintiff’s Retail (Shops) Department specializing in sales and leasing of retail shops. There was an exodus of members of the Plaintiff working in the said department in July this year to join the 1^st Defendant. Almost all of them were from Team D. These ex-employees include one Poon Wing Tak, Ben (“Ben Poon”), Calvin Lam (“Calvin”), Kim Ngan (“Kim Ngan”), Eunice Kwong (“Eunice”), Sindy Yu (“Sindy”), Ida Cheng (“Ida), and the 2^nd to 5^th Defendants. The Plaintiff claims that the 2^nd to 5^th Defendants have taken away a substantial amount of confidential information from its computer database relating to property listings while they were still under the Plaintiff’s employ. The confidential information is being used by the 1^st Defendant in its business. It is the Plaintiff’s case that the 2^nd to 5^th Defendant are in breach of express and implied terms of contract and breach of confidence or fidelity and the 1^st Defendant in breach of confidence and/or procuring breaches by the 2^nd to 4^th defendants of their duties of fidelity and/or confidence. It is against this background that the Plaintiff institutes this action and applies for the ex parte order.

Grounds for Discharge

6. The essential pre-conditions for the making of an Anton Pillar order are not in dispute. They are basically the same as what have been specified in Anton Pillar KG v Manufacturing Processes Ltd [1976] Ch. 55 at 62, and are stated as follows:

i) there must be an extremely strong prima facie case;

ii) the damage must be very serious for the applicant;

iii) that the defendants have in their possession incriminating documents or things (which was the subject matter sought to be preserved) and that there is a real possibility that the defendants may destroy such material before any application inter parte can be made.

7. Although Mr. Yan S.C. used “very strong prima facie case” whereas Mr. Whitehead S.C. adopted “extremely strong prima facie case”, I understand that they take no issues on the discrepancy of the two labels. I take it that they consider the 2 phrases referring basically to the same threshold.

8. The 1^st Defendant’s grounds for discharge can be summarized as follows:

i) serious and deliberate non-disclosure of material matters;

ii) failure on the part of the Plaintiff to show an “extremely strong prima facie case”;

iii) no cogent evidence that the 1^st Defendant will destroy incriminating evidence; and

iv) no proportionality between the perceived threat to the Plaintiff and the remedy granted.

I will deal with each of these in turn.

Material Non-disclosure

9. The 1^st Defendant accused the Plaintiff of non-disclosure of a judgment by Reyes J. in Centaline Property Agency v Wong Chong Wai, unreported, HCA770/2004 A April 2004 (“the said High Court Case”). It is Mr. Whitehead’s submission that once it is established that there is material non-disclosure and that it is deliberate, the Anton Pillar Order should be discharged without investigating its merits.

10. It is contended on behalf of the 1^st Defendant that the case of the Plaintiff against the 1^st Defendant is based on 2 premises:

i) that the said terms of employment contracts are enforceable against the 2^nd to 5^th Defendant in that they are no wider than is necessary to protect the commercial interests of the Plaintiff; and

ii) that the property lists, property proposals and lists of owners’ contact details allegedly to have been used by the 1^st Defendant amount to confidential information or trade secrets of the Plaintiff.

If either of the above two premises is false or at least doubtful, no court would have granted the Anton Pillar order because to do so it had to be satisfied that there was “an extremely strong prima facie case”.

11. Mr. Whitehead S.C. submitted that on 3^rd March 2004, the Plaintiff commenced the said High Court Case against one Mr. Wong Chong Wai, an ex-employee of the Plaintiff who left in February 2004 and joined its rival, the Midland Realty (Strategic) Ltd, which is part of the Midland Group. According to a copy writ exhibited to the affirmation of Tse Ka Oi filed by the 1^st Defendant, the Plaintiff in that action sought, inter alia, an injunction restraining Wong from using or disclosing to any person any confidential information of the Plaintiff obtained by him in the course of his employment with the Plaintiff, information relating to identities and contact details of the Plaintiff’s customers, customer’s specific instructions and intentions, pricing and up-to-date information on the sale and purchaser and/or leasing of properties through the Plaintiff.

12. According to the writ in the said High Court Case, the Plaintiff relied on clause 15 of the contact of employment, which comprises basically restrictive covenants prohibiting Wong from being employed by any person as estate agent in a particular locality, from dealing as estate agent with properties which were listed on the control lists and data files of the Plaintiff supplied by the Plaintiff and from being employed by someone to deal with former customers of the Plaintiff within a period of 6 months after termination. Mr. Whitehead S.C. also said that the Plaintiff also relied on paragraph 17 of the employment contract of Wong which stipulated:

“All information, clients’ addresses, telephone numbers, lists of properties, mailing lists, clients records belonging to the Company or the clients of the Company and other trade secret acquired by the Employee in the course of his working for the Company shall be treated as confidential and should not be disclosed by the Employee to any other person, firm or company without written approval from the Company. On the termination of the Employee’s employment with the Employer, the Employee shall immediately return all documents, clients’ record books, lists, contracts, etc. that belong to the Employer.”

This clause is exactly the same as that contained in the employment contract of the 5^th Defendant.

13. The Plaintiff applied for an interlocutory injunction against Wong in the said High Court Action. The application was heard and dismissed by Reyes J. on 2^nd April 2004. For the purpose of this decision the entire judgment is repeated below:

“1. The application has now been reduced to the injunction sought by paragraph 1(a) of the summons. However, I do not think that the injunction sought thereby pursuant to a corresponding term of the restrictive covenant is couched in terms that are no wider than is necessary to protect the commercial interests of the Plaintiff, Centaline Property Agency Limited. My preliminary view is that the injunction sought under Summons paragraph 1(a) is too wide. Nor am I satisfied on the affidavit evidence before me that there is a clear case (apart from a tenuously circumstantial and inferential one) that the Defendant has breached the restrictive covenant or threatens to do so. As far I can see from the evidence, for example, the Defendant has neither solicited nor touted for customers of the Plaintiff. Further, I have doubts whether the restrictive covenant protects any trade secrets or confidential information not already in the public domain that might be regarded as trade secrets belonging to the Plaintiff. The evidence on this issue strikes me as scant. 2. For these reasons, I dismiss the Summons.” (Emphasis of Mr. Whitehead S.C.).

14. There is no dispute that the said High Court Case and the present case were handled by the same solicitor, Mr. Choy Man. It was submitted by Mr. Whitehead S.C. that Reyes J. had dealt with:

i) the same plaintiff and a defendant leaving the Plaintiff to join the Midland Group;

ii) The same problem i.e. An employee leaving the Plaintiff to join the Midland Group;

iii) The same contractual provisions now relied on to show an “extremely strong prima case”;

iv) The same question as to whether the type of information now said by the Plaintiff to be confidential was protected, or was in the public domain, or was capable of being trade secrets. 

The disclosure of the judgment of Reyes J. is therefore, as argued by Mr. Whitehead S.C., fundamental to the Court’s assessment of the strength of the ex parte application, particularly when a High Court Judge has raised doubts on whether the restrictive covenant protects any trade secrets or confidential information not already in the public domain that might be regarded as trade secrets belonging to the Plaintiff.  The placing of this judgment before the ex parte judge will certainly lead to a chain of enquiry by him. Mr. Whitehead S.C. also said in the supporting affirmation placed before Reyes J. (TKO-3 of the 2^nd Affirmation of Tse Ka Oi for the 1^st Defendant), the defendant also had access to the Plaintiff’s computer database of properties listings and customers identities and relied on this as a ground for the injunction. The Judgment of Reyes J. must therefore be relevant to whether the information sought to protect this time is in fact protectable confidential information.

15. Mr. Whitehead S.C. also said the non-disclosure is deliberate as the 2 cases were handed by the same solicitor of the same firm acting for the same client and that there was evidence of forum shopping. According to the daily cause list exhibited by the 1^st Defendant, Reyes J. was the Duty Judge assigned to hear urgent ex parte applications during the period from 3rd to 8^th October 2005 when the Plaintiff saw fit to apply for the Anton Pillar Order. The move to District Court is with a view to avoid Reyes J. who has once dismissed application based on similar contractual provisions.

16. Mr. Yan S.C. submitted that the case before Reyes J. was simply different from the present case.  In the said High Court Case before Reyes J., the Plaintiff was seeking to enforce the restrictive covenants (clause 15) in the employment contract, whereas in the present application the Plaintiff was dealing with copying and taking away of lists of information from employer’s database which concerned a breach of the confidentiality clause (clause 17) and breach of duty of fidelity and confidence to employer which are implied terms of employment.

17. The solicitor for the Plaintiff Mr. Choy Man filed his 3rd Affirmation exhibiting the summons for injunction before Reyes J. and a number of copy writs issued in this Court by the Plaintiff against ex-employees and another property agency. A number of copy writs by the Midland Group issued in this Court were also exhibited. In rebuttal of the serious allegation by 1^st Defendant’s counsel, Choy said that in one of the cases instituted in the District Court, the Plaintiff has also sought an Anton Pillar order against the defendants. Choy said in paragraph 5 of his 3^rd affirmation:

“ … As the Plaintiff ‘s application in HCA 770/2004 sought relief only in relation to breach of restrictive covenants … and had nothing to do with the sort of situation in the present case… it never even crossed my mind that the judgment of Honourable Mr. Justice Reyes was even remotely relevant or relevant to the present case. It is in fact not relevant or material.” 

18. It is useful to set out paragraph 1(a) of the Plaintiff’ summons before Reyes J. in the said High Court Case:

“1(a). The Defendant be restrained until 28^th July 2004, judgment in this action or further order (which is the earlier): - from being employed (whether on a part-time, full-time or ad-hoc basis) by any person (including a limited company) for the purpose of negotiating or otherwise acting as an estate agent in any business transactions in respect of the sale and purchase or leasing of properties within the areas or residential developments in Tai Po as set out in the Schedule hereto (“the Zone”).

19. After going through the detailed evidence of the Plaintiff as set out in paragraphs 42 to 85 below, I do not consider the non-disclosure of the judgment of Reyes J. material because the nature of the two applications is in fact quite different. It is obvious that the application before Reyes J. in the said High Court Case was concerned only with the restraint of trade clause (clause 15 of the contract, see the affirmation of Cheung Cheuk Yin filed in HCA 770/2004 in TKO-3) and not breach of express confidentiality clause (clause 17 of the contract, TKO-3) or duty of fidelity and confidence.  Before Reyes J. there is no allegation that a collocation of confidential information having been taken away as in the present case. So the application before Reyes J. was not a case dealing with the same question as the present one. Restraint of trade clauses are prima facie unenforceable unless there is a legitimate interest on the part of the Plaintiff to be protected e.g. confidential information in the nature of trade secret. In my view, Reyes J. was not expressing any view on whether the property lists, property proposals and lists of owners’ contact details were protectable, were in the public domain or such information amounted to trade secret.  I agree with Mr. Yan’s submission that in so far as Reyes J. mentioned trade secrets and confidential information in his judgment, he was only expressing his view whether the restraint of trade clause relied on by the Plaintiff and sought to be enforced was too wide. On the evidence before him, which he said being scant, he doubted whether there is any trade secret or confidential information to be protected. He did not say that any collocation of information, as in the present, is protectable.

20. The classic case of Robb v Green [1895] 2 Q.B. 1 concerns with a defendant being accused of secretly copied his master’s order-book a list of names and addresses of customers with the intention of using it for the purpose of soliciting orders from them after he had left the plaintiff’s service. He was held in breach of implied term of fidelity and for damages for any loss to his employer. Hawkins J stated at pages18 to 19:

“There is one other contention of the defendant’s counsel I must refer to. He contends that the order-book of the plaintiff contained no more information than might be acquired by reference to the directories and such-like publications; and, moreover, he says that the defendant’s master, in seeking to advance his own business, before the defendant made the copy of the order-book, had published circulars or pamphlets containing the names of many of the customers who had sent him favourable testimonials; so that the defendant had when he made the list complained of materials at his command without making use of his master’s book. This to a considerable extent may be true, but it is not so altogether. The order-book contains collected together the names and addresses of purchasers of pheasants’ eggs spread over the length and breadth of England, Wales, and Scotland. No directory would give information in this collocation; and though, of course, the testimonials would give similar information as to many of the names in the order-book, there are many names in the order-book which do not appear among the testimonials. The names of all the customers are collected together in the order-book in a manner not to be found in any other book or paper to which the defendant had access. To him, therefore, the possession of a copy of the order-book would be peculiarly valuable. He would be saved the expense and delay of searches, such as would be necessary to enable him to compile such a list for himself. Practically, to bring all those names together, even though singly each may appear in some directory or other, would be almost impossible; and it would obviously be much more difficult to ascertain whether they would be likely customers for pheasants’ eggs. By making a copy of the order-book defendant was able to canvass at once each of his master’s customers without trouble or expense…”

21. The decision of Hawkins J was upheld on appeal.

22. In Hong Kong, the principle of Robb v Green was also confirmed: Gilman Engineering Ltd v Ho Shek On Simon [1986] HKC 523. Liu J. (as he then was) stated at page 531I:

“A list of customers has always been jealously guarded by the courts. Any surreptitious copying, physically or even by making a conscious mental note, for unauthorized personal use has invariably been disapproved by the courts. That is because a list of customers is often, and can readily be shown to have, compiled with much effort in the strictest confidence, see Robb v Green…”

23. So the above authorities clearly show that even though the component parts of which information is composed of is not confidential, a collocation of such component parts already in the public domain are still confidential and is protectable as a matter of law. It is because whoever obtains the same can be saved of the laborious effort in compiling the collocation and can immediately make use of it. So the said judgment of Reyes J. cannot really assist the 1^st Defendant.

24. No doubt, the lists of active customers compiled by the 2^nd Defendant (see paragraphs 56 and 61 below) from the Plaintiff’s database, which is a collocation of information is obviously protectable confidential information by the authority of Robb v Green, (supra). In the present case, the Plaintiff’s case is even stronger. The Plaintiff’s evidence is that apart from information already in the public domain, other information, such as the updated preference of the owners in respect of price or the type of tenants, the contact numbers, photographs taken by the Plaintiff has been taken away. This information can hardly said to be in the public domain. The database is obviously confidential information and should be protected.

25. In Fortune Reality Company Ltd v Chan Hiu Yeung Dick, unreported, HCA 1582/2001, 24 May 2001, Chu J., the plaintiff, who was doing estates agency business as the Plaintiff in the present case, sought an interlocutory injunction to enforce a restraint of trade clause in the employment contract against the defendant. The Honourable Madam Justice Chu granted the injunction sought and said in paragraph 13:

“Information relating to identities of customers, properties available for sale and letting and the asking prices of such properties are vital assets of any real estate agency.”

26. It is noted that the same authority has been applied in Midland Realty (Strategic) Limited v Ma Yin Kwan, unreported, DCCJ1175/2005, 18^th May 2005, Deputy DJ Tracy Chan. Midland, of which the 1^st Defendant is a member, in fact relied on the authority of Fortune Reality in applying for an interlocutory injunction to enforce a restraint of trade clause against its ex-employee and was successful.

27. As pointed out by Mr. Yan S.C., the 1^st Defendant does not deny the information now being sought to be protected by the Plaintiff is confidential. In the Affirmation of Fung Ho Shing filed on behalf of the 1^st Defendant on 10^th October 2005, he deposed in paragraph 7 that:

“ Like the Plaintiff, the 1^st Defendant also maintains a large, comprehensive and up-to-date database of property listings which is confidential.”

28. As such, I do not think the contention of Mr. Whitehead S.C. that the property lists, property proposals and lists of owners’ contact details allegedly to have been used by the 1^st Defendant not amounting to confidential information or trade secrets of the Plaintiff or being doubtful is with any merit. Even the 1^st Defendant also admits that similar information in its own database is confidential.

29. Counsel for the 1^st Defendant also levied an attack on forum shopping and said the copy writs exhibited by Choy Man could not help as all of them were issued after the judgment of Reyes J.

30. Mr. Yan S.C. relied on, inter alia, Flowerdale Ltd v Hale Electricity Co, Ltd. (1949) 66 RPC 333, per Jenkins L.J. at 337:

“ That passage sets out what I understand to be a well settled rule of general application, not merely in trade mark cases, but in all cases where alternative remedies are available to the plaintiff; and that rule is that prima facie the plaintiff can choose his tribunal and the defendant is not entitled to divert him by saying: I would prefer that, of the alternative tribunals possible, some other tribunal should be resorted to”

31. I think the accusation goes to whether there is a deliberate attempt to avoid Reyes J. As I have accepted that the two applications are different, I have no problem to accept Choy Man’s explanation that since they are different, the judgment of Reyes J. did not crop up in his mind. Since both the Plaintiff and the Midland group of companies have instituted many actions in the District Court, they naturally know that the District Court is also a proper forum. I do not think that there is sufficient evidence to substantiate the accusation of the 1^st Defendant regarding forum shopping.

Any Discretion

32. Even if it should be considered there was a breach in failing to disclose the judgment of Reyes J., the Court still retains a discretion to determine whether the ex parte order should be discharged. Initially Mr. Whitehead S.C. relied on the Hong Kong authority of Overhalt v Overhalt [1999] HKLRD 445 in support of his proposition that the court has no discretion. He later agreed that the Court does retain a discretion as to whether to discharge the ex parte order taking into all the circumstances of the case.

33. In the case of Brink’s Mat Ltd v Elcombe [1988] 3 All ER 188, at 193, Ralph Gibson LJ has helpfully set out the relevant principles relating to the matter of discretion in non-disclosure case as follows:

“(vi) Whether the fact not disclosed is of sufficient materiality to justify or require immediate discharge of the order without examination of the merits depends on the importance of the fact to the issues which were to be decided by the judge on the application.  The answer to the question whether the non-disclosure was innocent, in the sense that the fact was not known to the applicant or that its relevance was not perceived, is an important consideration but not decisive by reason of the duty on the applicant to make all proper inquiries and to give careful consideration to the case being presented.  (vii) Finally ‘it is not for every omission that the injunction will be automatically discharged.  A locus poenitentiae may sometimes be afforded’: see Bank Mellat v Nikpour [1985] FSR 87 at 90 per Lord Denning MR. The court has a discretion, notwithstanding proof of material non-disclosure which justifies or requires the immediate discharge of the ex parte order, nevertheless to continue the order, or to make a new order on terms…”

34. The learned author Steven Geein the 5^th edition of his Commercial Injunctions has this to say at page 718:

“The application to discharge the injunction takes the form of a complete rehearing of the matter, with each party at liberty to put in evidence. Thus, e.g. the defendant may seek to persuade the court that on all the evidence there is insufficient risk of a judgment being unsatisfied to justify the granting of Mareva relief. The court decides the application on all the evidence before the court. This include evidence of matters which have occurred since the without notice application, so for example it would include evidence resulting from execution of a search order or how he acted in relation to an order for disclosure of information obtained”

35. The learned author cited several authorities in the footnotes in support, including Bradford & Bingley plc v Dean Edward Holden [2002] EWHC 2445 and English Court of Appeal case Societe Libanaise pour L”Industrie du bois “Libanbois” Sal v Fama Shipping Ltd.

36. Similar approach has been adopted in the case of Sportless Plastic Proprietary Limited & Anor v Keen Resource Industrial limited & Ors Unreported, Cheung J. (as he then was), 10 November 1998. In Sportless, an application to discharge an Anton Pillar order was made on grounds including, inter alia, material non-disclosure. Cheung J (as he then was) said (at page 11) that he was entitled to look at the documents seized as part of all the circumstances that he should consider in deciding whether the order should be discharge because of non-disclosure.

37. I consider the said passage in Commercial Injunctions a correct statement of the proper approach that this Court should adopt in the present case. Non-disclosure in the present case, if any, is not of a fact which is material or is only marginal in the sense that a “possible” arguable defence in law, namely, Reyes J. has doubted that the information sought be protected is confidential, has not been disclosed at the ex parte stage. I accept Mr. Choy Man’s explanation and consider that the Judgment of Reyes J. was not perceived by him to be material and the non-disclosure, if any, is not deliberate.

38. In Brink’s Mat Ltd v Elcombe, (supra) at p193-4, Balcombe LJ stated:

“The rule that an ex parte injunction will be discharged if it was obtained without full disclosure has a twofold purpose. It will deprive the wrongdoer of an advantage improperly obtain: see R v Kensington Income Tax Comr, ex p Princess Edmond de Polignac [1917] I KB 486 at 509. But it also serves as a deterrent to ensure that the persons who make ex parte applications realize that they have this duty of disclosure and of the consequences (which may include a liability in costs) if they fail in that duty. Nevertheless, this judge-made rule cannot be allowed itself to become an instrument of injustice. It is for this reason that there must be discretion in the court to continue the injunction, or to grant a fresh injunction in its place, notwithstanding that there may have been non-disclosure when the original ex parte injunction was obtained: see general Bank Mellat v Nipour … and Lloyds Bowmaker Ltd vBritannia Arrow Holding plc (Lavens, third party)…) (my emphasis).

39. Taking into account of all the circumstances, including the additional evidence from the Plaintiff after the service of the ex parte order, I consider that an extremely strong prima facie has been established and there is a real risk of destruction of evidence, and in fact the 1^st Defendant may have already destroyed some of them. To discharge the Anton Pillar Order will do injustice to the Plaintiff. In the event I were wrong in holding there being no material non-disclosure, I would have certainly exercised my discretion in favour of the Plaintiff in continuing the Anton Pillar Order.

Whether an extremely strong Prima Facie Case

40. Mr. Whitehead S.C. also argued that the Plaintiff has failed to establish an extremely strong prima facie case. Even if, he contended, the Plaintiff may be able to establish a strong case against the 2^nd to 5^th Defendants, its case against the 1^st Defendant is weak.

41. Since all the affirmation evidence needs be evaluated in order to assess whether a strong prima facie case has been established. It is therefore necessary to go into the evidence in some details. The evidence filed in this case is very extensive and substantial. Up to the conclusion of the hearing, it is contained in 15 box files.

Affirmation evidence of the Plaintiff

42. In the ex parte application the Plaintiff relied on 3 affirmations: affirmation of Poon Chi Ming who is the General Manager of the Retail (shop) Department of the Plaintiff (“Poon’s affirmation”), Affirmation of Ho Yam Fai who is a private investigator engaged by the Plaintiff (“investigator’s affirmation”) and Affirmation of Ho King Fai who is a colleague of the 2^nd to 5^th Defendants working in the same sales team (“Ho’s affirmation”).

43. Poon deposed to the fact the Plaintiff was founded in 1978 and now has a market share of about 30% in property agency business in Hong Kong. In or about 2002 to 2003 the Plaintiff branched out into providing estate agency services relating to retail shops. Some 350 employees are now being engaged in this branch of business.

44. The 1^st Defendant belongs to the Hong Kong Property group of companies (“HKP”) which are in turn owned by the Midland Group, comprising the only listed company doing real estate agency business in Hong Kong. HKP was taken over by the Midland Group in the year 2000. It ceased to carry on property agency services in relation to commercial, industrial and retail properties after the take-over but revived its business in this area through the 1^st Defendant in July 2005.

45. The Plaintiff said it has maintained a large database of property listings. Its employees can make use of such database in serving their clients. Staff members of different seniority are allowed different extent of access. This database of property listings contains information such as address of the property, names of property owner, identity and contact telephone numbers of the actual person who should be contacted for the purposes of enquiries about dealings with a particular property, identity of tenant, the current rental, expiry date of tenancy, width of frontage of property and whether the property is currently being offered for sale or for leasing, the price so sought by the owners, etc. While some of them may be gleaned from public record, many of the information are obtained through the personal efforts of the plaintiff’s staff by either making visits or phone calls. The database also contains pictures for some of the properties which are taken by employees of the Plaintiff.  Poon said the database is built up through the laborious effort and expenses of the Plaintiff.

46. The 2^nd to 5^th Defendants joined the Plaintiff at different time and at different ranks. So their respective contracts of employment with the Plaintiff are not the same but contain similar confidentiality terms as follows:

i) Clause 9 of the 2^nd Defendant’s employment contract provides:

“Any information especially addresses, telephone numbers, lists of properties, mailing lists belonging to the Company or the clients of the Company acquired by you in the course of your working for the Company shall be treated as confidential and should not be disclosed by you to any other person, firm or company without written approval from the Company.”

ii) The respective employment contracts of the 3^rd and the 4^th Defendants contain the following term in clause 18:

“All information includes but not limit to clients’ addresses, telephone numbers, list of properties, mailing lists, clients records belonging to the Company or the clients of the Company and other trade secrets acquired by the Employee in the course of his working for the company shall be treated as confidential and should not be disclosed by the Employee to any other person, firm or company without written approval from the Company. On the termination of the Employee’s employment with the Employer, the Employee shall immediately return all the original and copy of documents, data, information, search record, etc. that belong to the Employer or in relation to the affairs of the Company or of its subsidiaries or associated companies (if any). No copy of any information, data, document, listing or records shall be kept by the Employee without the written approval of the Company.”

iii) Clause 17 of the 5^th Defendant’s contract, which is similar to clause 18 of that of the 3^rd and the 4^th Defendants, is the same as that of the Wong’s contract.

47. In paragraph 25 of his affirmation, Poon deposed to:

“… I verily believe that most established property agencies in Hong Kong, including the 1^st Defendant, would have similar terms in their contract of employment which they enter into with their employees. I therefore believe that the 1^st Defendant would and should have known that the contracts of employment between the Plaintiff and those employee of the Plaintiff who had left the Plaintiff to join the 1^st defendant would have contained such terms”.

48. The exodus of staff joining the HKP occurred in July this year. At the same time, irregularities in the use of the Plaintiff’s database were discovered. Poon said in his affirmation that he verily believed that the ex-employees of the Plaintiff formerly in Team D of the Plaintiff’s New Territories Branch of the Retail (Shop) Department who joined HKP have:

“surreptitiously and systematically, but wrongfully, filched large quantities of very valuable and confidential information from the Plaintiff’s property listings database”.

49. Ho said in his affirmation that Kim Ngan, the supervisor of Team D left the Plaintiff to join one of the companies in HKP on 18^th July 2005. In the name card of Kim Ngan exhibited in Ho’s Affirmation, Kim Ngan was the Assistant Sales Director of a HKP company situated at G/F 3C Waterloo Road (“Waterloo Road office”) with a fax no of 2388 6303 (“Waterloo Road fax number”). The 4^th and 5^th Defendant, together with Eunice, Sindy resigned on 19^th July 2005. The 3^rd Defendant was asked to leave because he was caught red-handed copying owners’ details onto an unusually large amount of print-outs of property proposals generated from the Plaintiff’s database. All of them left and worked at the Waterloo Road office.

50. Surveillance reports from the Plaintiff’s computer were generated to find out whether the 3^rd to 5^th Defendants had engaged in suspicious activities amounting to “filching” of the Plaintiff’s confidential information. Such reports revealed that as from 23^rd November 2004 onward, the use of the Plaintiff’s database by them was unusual.

About the the 3^rd Defendant

51. Between 23^rd November 2004 and 20^th July 2005, the 3^rd Defendant had searched for and generated thousands of property listings. Further, it was found that unusual parameters, such as telephone numbers were used for the searches. According to Ho’s affirmation, it is noted that at least 286 unusual searches were conducted of which over 250 were searches using telephone numbers. The other parameters used include names of contact person or [area>10,000 ft]. Ho said that the use of such parameters was highly unusual. It was because a client would normally look for property in a particular location and/or of a certain value. A client was unlikely to look for properties owned by a particular owner or properties with common contact telephone number. Ho’s conclusion was that the 3^rd Defendant was trying to build up his collection of database of property listings from the Plaintiff’s confidential database for his own benefit after leaving employment.        

About the 4^th Defendant

52. Regarding the 4^th Defendant, Ho’s affirmation evidence was that she started to conduct searches using parameters such as value of properties or names or contact numbers several weeks before she resigned. Ho reached the same conclusion for the 4^th Defendant as in the case of the 3rd Defendant.

About the 2^nd and 5^th Defendants

53. According to paragraph 47 of Ho’s affirmation, he said he was “extremely surprised” to note that while there was not much activity by the computer login ID “Temp 1” and “Temp 2” in July 2005, some 9,200 and 3,380 property listings had been generated by using respectively “Temp 1” on 2^nd August and “Temp 2” on 3^rd August, 2005. These two special login IDs “Temp 1” and “Temp 2” were not assigned to any specific employees. They were used for the purpose of conducting demonstrations, say, to new employees and for presentation. Sometimes they were for use of summer interns. From a study of the log in and out time of “Temp 1”, “Temp 2” and the 2^nd Defendant’s ID, the Plaintiff concluded that it was the 2^nd Defendant who accessed the Plaintiff’s database using Temp 1 and 2.

54. On 8^th August 2005, Ho found out that “Temp 1” was used to generate a property proposal relating to a department store in Kwong Fuk Road in Tai Po. This property proposal was fax out from his computer to the Waterloo Road fax number. The faxed out copies comprised floor plans, location plan and photographs.

55. The 2^nd Defendant was then working with Ho in the same team and sharing the same login ID for the Plaintiff’s computer fax. The printing time of the proposal using Temp 1 was at 11:01am while the actual faxing out time was 11:21am. Ho therefore concluded that it was the 2^nd Defendant who used the login ID of Temp 1 to generate the proposal and then had it faxed out immediately. The time lag was the queuing time as all staff in their New Territories used the same computer software to send a fax.

56. The computer hard disk of the 2^nd Defendant had been duplicated and studied without alerting the 2^nd Defendant. The hard disk was read using the same Window login ID and password which Ho and the 2^nd Defendant shared. A summary of the folders and files found in the said hard disk is as follows:

i) NT10000: comprised two lists and all were relating to properties in the New Territories with a size of 10,000 square-feet or more;

ii) JD: in two files, one relating to retail properties in the Jordan area with street numbers being odd number and the other file being even number. The odd number file and even number file were made up of respectively 202 and 186 pages.

iii) MK: again there were two files, one for retail properties in the Mongkok area with street numbers being odd and the other even. The odd file was consisting of 713 pages and the even file 876 pages;

iv) TST: there were three files: one for retail properties in the Tsim Sha Tsui area with street numbers which were odd numbers; a second one for street numbers being an even number. The third file was a file in EXCEL format containing contact details of owners of some owners of properties in the Tsim Sha Tsui areas along the Granville Road, Cameron Road, Humphrey Avenue and Hau Fook Street (“Granville Road EXCEL file”). These were “active owners” in the sense they were actively looking for buyers and/or tenants. The odd file comprised 442 pages while the even one comprised 543. There were over 60 owners contact numbers in the Granville Road EXCEL file.

v) YMT: again it comprised two files: one for retail properties in the Yaumati area with street numbers being odd and the other being even. The odd file was consisting of 143 pages and the even file 123 pages.

vi) Book1.xls: a list in EXCEL format listing active owners of properties with size of 10,000 square feet or above in the New Territories areas (“Book1.xls”).

57. Having found the above, the Plaintiff planted a special surveillance software (“scouting software’) to monitor the use of computer by the 2^nd Defendant. Further internal review of computer records was also carried out.

58. Ho found out 6 faxes (including the one described above) were sent to the Waterloo Road fax number between 21^st July and 8^th August 2005 by employees of the Plaintiff including the 2^nd Defendant. 5 out of the 6 records have been deleted. However, Ho was able to find out that apart from the Kwong Fuk Road fax, one of these fax related to floor plans and a location map of shops in a property development in Junk Bay from the Plaintiff database.

59. On 10^th and 11^th August, 3 further faxes were found sent by the 2^nd Defendant to the Waterloo Road fax number.  Two of these faxes were sales proposals, floor plans and location plans relating to sales of several shops in Granville Road in Tsim Sha Tsui.  The other one was a single property proposal relating to a Shatin property, together with floor plan and location map.

60. The scouting software can capture exactly the screenshots that appeared in the computer screen of the user and all the keystrokes input by him.  The said software revealed that while the 2^nd Defendant was logging onto the Plaintiff’s database viewing particulars of owner of a property, he also opened up his Book1.xls spread sheet at the same time copying contact details of the owners to the spread sheet. It is because the owner contact details are not shown on the property lists generated by the Plaintiff’s computer.

61. Apart from the above, Ho also managed to access to the 2 personal email accounts maintained by the 2^nd Defendant with Yahoo. Ho found out in the inbox of the two accounts the following:

i) the Book1.xls file;

ii) the Book1.xls file with further updates headed “荀盤” meaning “good property listings”;

iii) a file containing property listings from the Plaintiff’s database appearing to correspond to owners under the “good property listings” in the Book1.xls;

62. In the outbox of these 2 email accounts, Ho found out that 4 emails were sent out during 7^th to 8^th August to an email address with name “bbqaya” which he believed to belong to the 5^th Defendant. The basis for his belief was that the 5^th Defendant had used BBQ and bbq as her passwords to protect her files when working for the Plaintiff. Ho was able to print out one of them. It was a property proposal relating to a block of commercial building at 83 Austin Road generated from the Plaintiff’s database with pictures and relevant transactions records in the nearby areas.  In order not to alert the 2^nd Defendant, Ho said he did not open the other 3 out-going mails.

63. In the 2^nd Affirmation filed by Ho on 12^th October 2005, Ho said he later accessed the said email accounts again and opened the other out-going mails. He found out that the documents sent include:

i) Granville Road EXCEL file;

ii) Property proposal relating to the entire block of 204-206 Nathan Road;

iii) Property proposal relating to a property at 67 Mody Road generated from the Plaintiff’s database and naming the 5^th Defendant as the contact person;

iv) Property proposal relating to a property at 83 Austin Road which is for sale by tender and naming Eunice as the contact person;

v) Property proposal relating to the entire block of 67,69, 71 Argyle Street;

vi) Research report on a Mou Sing Hotel.

All these information came from the Plaintiff’s computer database and sent out at a time the 5^th Defendant was working for the 1^st Defendant.

64. The 2^nd Defendant gave notice of resignation on 12^th August 2005 but was asked to leave on 17^th August 2005. Ho said that the 2^nd Defendant told him he would be joining Kim Ngan at HKP and worked at the Waterloo Road office. It was also found out that the 2^nd Defendant had deleted all the files he created in the computer before he left.

65. Ho continued to keep in touch with the 2^nd Defendant who appeared not aware of what Ho had done. The 2^nd Defendant told him in or about end of August 2005 that he had started employment with the commercial, industrial and retail section of HKP at the Waterloo Road office and would soon be moving to a new office at 11/F Chow Tai Fook Centre at Nathan Road around beginning of Sepember, 2005.

66. Ho asked the 2^nd Defendant out for lunch on 9^th September. Ho said the 2^nd Defendant told him ex-employees of Team D, Kim Ngan, 3^rd, 4th, 5th Defendant, Eunice, Sindy and Ida were all working for the HKP. He would be signing formal employment contract on 10^th September. Ho also said that the 2^nd Defendant also made certain statements against the 1^st Defendant. Since Mr. Whitehead S.C. takes issues on whether they are really incriminating against the 1^st Defendant, the relevant paragraph 117 of Ho’s Affirmation is reproduced here:

“When I asked the 2^nd Defendant what he was busy with these days, he told me that he and his colleagues had commenced inputting data into the 1^st Defendant’s computer system, that they were in the process of scanning documents into the 1^st Defendant’s computer system and that all of the ex-employees from Team D who joined the 1^st Defendant had taken confidential information from the Plaintiff’s property listings database with them when they left to join the 1^st Defendant’s employment.”

67. It is the Plaintiff’s case that starting from 8^th September, the 1^st Defendant started to place advertisements of properties on newspapers. Almost all properties featured in the advertisement correspond to property listings found in the Plaintiff’s database. Some of them can also be traced back to those property listings printed by the 2^nd and 3^rd Defendants. 

68. Private investigators were engaged by the Plaintiff to collect the garbage in the rubbish bin outside the Waterloo office on 3^rd September 2005. Some torn off documents were re-constructed and are exhibited in the investigator’s affirmation. Staff list with names of the 3^rd to 5^th Defendants, Ida, Sindy and Kim Ngan and also name card of the 3^rd Defendant could be found. A property proposal of the 1^st Defendant relating to a property, which is the subject matter of a fax sent out from the Plaintiff to the 1^st Defendant’s fax on 11^th August was also found (see paragraph 59 above). Among the papers collected, there is one “Stock Update Report”, which was re-constructed from remnants and which Mr. Yan, S.C. for the Plaintiff said, told a horrible story.

69. Ho said this report recorded the selling prices and/or rentals of certain properties before 15^th August 2005. There were 17 entries of properties of which names of 15 tenants could be identified. Ho said that the format of the report was very similar to that used by the Plaintiff. It was a report recording certain particulars of properties having been updated by a staff of the 1^st Defendant. The Plaintiff found out that 13 out of 15 names in this “Stock Updated Report” had a corresponding property listings in the Plaintiff’s own database. It was discovered that the asking prices or rentals of the properties before the updating corresponded exactly to those found in the Plaintiff’s database between the period from April 2005 to 12^th August 2005 and in one case September 2004.

70. Ho highlighted the following unusual features in respect of 3 properties:

i) Property with the name “車厘子女裝” (“Cherry ladies Fashion”)

It was stated in the “Stock Updated Report” that the property was at Ground Floor Unit A. The remark by the updating staff of the 1^st Defendant was “無人听”, meaning calls unanswered. The Plaintiff was able to find from its own database that this fashion shop was situated at Ground floor of 199A of Fa Yuen Street. According to the Plaintiff record, there was one updating remark: “電話留言待覆” meaning “message left in phone, awaiting reply”. There are other remarks in the Plaintiff’s database to the effect that it should be Shop 199 and not Shop 199A which was being offered for letting. Ho said that it was a mistake on the part of the Plaintiff’s staff compiling the database, thinking that it was Shop 199A, but in fact it should be Shop 199, which was offered for letting. Ho said he was driven to believe that the mistake was repeated in the 1^st Defendant’s record because the 1^st Defendant copied that from the Plaintiff. 

ii) Property with tenant “明利雞檔” (“Ming Lee Chicken Stall”)

According to the remark on the memo, the updating staff remarked “電話沒有此單位” meaning no such unit at this phone number. The selling price stated was 4 million and asking rental 20K. In the Plaintiff’s database, the record showed: “A women sd no mr fong & also no shop at canton rd.” on 16^th June and “此電話無方生亦無鋪位”meaning “no Mr. Fong and no such shop unit at this phone number” on 17^th May 2005. Before these remarks were entered, the Plaintiff’s last contact was made on 13^th May 2005. On that occasion the selling price of HK$4.0 M and rental of HK$20,000 were obtained. Ho said that the Plantiff’s record indicated a wrong telephone number has been entered. Ho wondered why the Plaintiff’s mistake was repeated in the database of the 1^st Defendant who only re-launched its business July this year.

iii) Property with tenant “樂苑茶餐廳” (“Lok Yuen café”)

The memo showed that the one updating was told that it had already been sold. The memo also showed an old asking price of HK$7M. However, the Plaintiff said its record showed that the owner had asked for HK$7.0M since 25^th September 2004 but after 4^th March 2005 the property was no longer available on the market for the simple reason that the same had been sold to the Hong Kong Housing Society. The Plaintiff’s view was that for a company which only re-established its business in retail shops in July 2005, how it could have such information in 2004, which was the same as the Plaintiff.

71. Mr. Yan S.C. had also prepared a written summary showing that 8 out of 15 of these properties can also be found from the property listings generated by the 2^nd to the 5^th Defendants. By reasons of the above the Plaintiff said it has demonstrated a strong case against all the Defendants.

72. It will also be appropriate to deal with the evidence filed by the parties after the grant of the Anton Pillar Order.

Plaintiff’s further affirmations

73. According to 1^st and 2^nd Affirmations of Choy Man, the Plaintiff’ solicitor, both filed on 12^th October, the team of Plaintiff’s lawyers attempted to execute the Anton Pillar Order in the morning of 6^th October 2005 at the 1^st Defendant’s office at 11^th Floor of Chow Tai Fook Centre. He found in the office copy of a property proposal relating to 67 Mody Road, which was the subject matter of an email sent by the 2^nd Defendant to the 5^th Defendant’s email account. Paper covers of the Plaintiff’s property proposals with contents removed could also be found. Request by the supervising solicitors to retain the said documents was refused by the 1^st Defendant’s representative.

74. Miss Fanny Chau, an employee of a private investigator company engaged by the Plaintiff, filed an affirmation on 12^th October. She deposed to that fact that after the unsuccessful execution of the Anton Pillar Order in the morning of 6^th October, her company was engaged to monitor the activities of the 1^st Defendant at Chow Tai Fook Centre. In that afternoon, in the staircase outside the said office, she saw some persons handling shredded papers and paper documents. These papers were contained in several cartoon boxes and plastic bags which were later transported away by a jeep driven by Kim Ngan and then re-loaded onto another van. It was Fanny Chau’s evidence that the van drove into the restricted area in Man Kam To near the border. She was unable to follow further as she was then on board a taxi. She also heard somebody in the staircase saying “你地記住有logo果d同埋有fax果d就唔好掉出街” meaning “those with logo and fax should not be disposed of in the street”. Among the persons handling the shredded papers, she alleged she was able to identify Eunice, Sindy, Sunny Yau, Calvin Lam, Kim Ngan.

75. In the affidavit of Lorraine Lee, a trainee solicitor from the Plaintiff’s firm of solicitors filed on the 12^th October, she said that upon instruction of his supervisor, she went back to the staircase of the said Chow Tai Fook Centre. She managed to find 3 shreds of paper in a moon cake tin there bearing respectively “HK Land Registry Page 7/25”, “Date: 2004/10/5” and ‘下午 03:29:15” (meaning PM 03:29:15).

76. Ho of the Plaintiff filed a 3^rd Affirmation on 14^th October to explain his findings concerning the shreds. He said that the shreds resembled the customized header of documents received by the Plaintiff through the fax. He managed to identify the three remnants in fact belonged to one single shred which tallied exactly with the header of the 7^th page of a document comprising 25 pages sent from the Land Registry to Plaintiff at a fax no. 24072362, which was a fax number used by Team D.

Affirmation from the Supervising Solicitor

77. The supervising solicitor Miss Alice Chan field an affirmation on 12^th October exhibiting her report on her effort in effecting service of the Anton Pillar Order. According to her affirmation, the said order was served on 2^nd to 5^th Defendants and the 1^st Defendant through Ben Poon, Senior Sales Director and one Ms. Caroline Fung, Director of the 1^st Defendant. It was reported by Miss Chan in paragraph 24 of her report (CSW-3 of her report):

“At about 12:40 pm, Valerie [a trainee solicitor of the Plaintiff] reported to Alice that she overheard Ben whispered to Felix, the 2^nd Defendant with the words “删哂佢” [meaning “delete them all”] and within then, Valerie saw Felix opened the email in the Outlook and did something. Alice did not witness the process but simply reported what Valerie had reported to her.”

Affirmations from the 1^st Defendant

78. The 1^st Defendant filed several affirmations in support of the discharging summons. A brief summary of the evidence is set out in the following paragraphs.

79. In the Affirmation of Fung Ho Shing who was the Chief Technology Officer of the Midland Holdings Limited dated 10^th October 2005, Fung said in paragraph 16 that the database contained in the 1^st Defendant’s computer was compiled by different employees of the 1^st Defendant. There are about 40,000 listings of properties and numerous information relating to potential purchasers.  He said:

“The information has been obtained and collated by the employees using their own effort.”

80. He also said it was common for owner of a property to enlist the services of different property agents in order to enhance the chance of locating a willing purchaser, and so there is bound to be a substantial overlapping between the two databases of the parties. Many property listings cannot be found in the database of the Plaintiff. To this extent, these property listings are confidential information belonging to the 1^st Defendant.

81. Ben Poon, an ex-employee of the Plaintiff who joined the 1^st Defendant on 5^th July 2005 as a Senior Sales Director overseeing or supervising 3 sales teams of the 1^st Defendant, filed an affirmation on 13^th October. He exhibited 10 written consents from owners of properties featured in the 1^st Defendant’s newspaper advertisements.

82. Ben Poon filed a 2^nd affirmation deposing to his past experience and present duties with the 1^st Defendant. He was in the trade for 18 years. He said he worked for the Midland group from end of 95 until early 2002 and then worked for the Plaintiff from 2002 to 2005 under the supervision of Poon of the Plaintiff before he left. He said during the past 16 years he had accumulated thousands of personal contacts of retail shop properties’ owners. He now had more than 3,000 contacts of retail shop properties owners. Since some owners owned more than one property, he estimated that the total number of properties owned by these contacts would be 20,000. He said when he left Midland to join the Plaintiff in 2002, he had brought along his contacts of Midland to join the Plaintiff and a great deal of them has been input into the Plaintiff’s computer.

83. In paragraph 10 of Ben Poon’s 2^nd affirmation, he said this:

“In July 2005, the 1^st Defendant started to revive its estate agent business in relation to commercial and retail shop properties by use of the information it had collected during the years since 1988.”

He also exhibited a written consent from the owner of the Shatin property confirming appointment of 1^st Defendant as its agent and confirming that the owner has never appointed the Plaintiff.

84. In paragraph 18 of his Affirmation, Ben Poon has this to say:

“On 6 October 2005 the solicitors for the Plaintiff came to our office to execute a search order. Having obtained legal advice, I asked all the employees present at the premises not to tamper with the documents in the office. I was not aware of the matters alleged by Ms. Fanny Chau in her affirmation dated 11 October 2005.”

85. Sindy filed an affirmation confirming that for health reason, she left the 1^st Defendant’s employ on 4^th October 2005 although she only joined on the 1^st August 2005. She denied having taken part in the incident allegedly occurred at the staircase of Chow Tai Fook Centre on 6^th October.

Whether an extremely strong prima facie case

86. The gist of Mr. Whitehead’s contentions can be summarized as follows:

i) not all information covered by the Anton Pillar Order is necessarily confidential because much of it is already in the public domain;

ii) it is incumbent upon the Plaintiff to show that the 1^st Defendant knew what the 2^nd to 5^th Defendants did was in breach of confidence on their part. If this is true, then it must follow that the 1^st Defendant would and should have known that the very clause relied on by the Plaintiff was held by the High Court to be wider than is necessary to protect the commercial interests of the Plaintiff and that a High Court Judge had expressed doubts whether the alleged confidential information might be regarded as trade secrets belonging to the Plaintiff. The strength of the Plaintiff’s case, in the eyes of the ex parte stage, must be weakened;

iii) that the 1^st Defendant is a stranger to the relationship between the Plaintiff and the 2^nd to 5^th Defendants. No authority has been shown that a third party can be restrained from using a collocation of information which can be obtained from publicly available source. In this respect, Mr. Whitehead S.C. advanced his arguments in two respects :

a) if the confidential information is taken by the 2^nd to 5^th Defendants, the 1^st Defendant is liable to be enjoined by injunction if, and only if, it knew or ought to have known the information was confidential when the 1^st Defendant received it;

b) if the information is not confidential but nevertheless has been collated into a list or database, then the 1^st Defendant who received the information is not liable to be restrained nor is liable for damages unless he has induced or procured a breach of contract or of fidelity; and

iv) owners of properties featured in the 1^st Defendant’s have provided written consents to the 1^st Defendant appointing it to be their agent to market their properties.

87. I have already dealt with sub-paragraph (i) above. With the greatest respect to counsel for the 1^st Defendant, I do not think it is a point with merit. I would like to add this.  In Saltman Engineering Co Ltd v Campell Engineering Co (1948) 65 R.P.C. 203, it is stated that what makes certain information confidential is the fact that the maker of the document has used his brain and then produced a result which can only be produced by someone who goes through the same process. So even assuming (which I have already found against this) that all information of the Plaintiff’s database can be found in the public domain, the database is still protectable.

88. On the evidence placed before the Court, apart from that the collocation, i.e. the database itself, which is confidential, some information in the Plaintiff’s database is also confidential.  It is crucial that of the large number of property owners in hand, one have to find out who have the intention to sell or lease out and if so their preference such as the type of tenants and expected rentals and or their bottomline. Any estate agent equipped with this information can immediately go into business by matching the owners’ requirements with potential buyers or tenants. In a volatile property market like Hong Kong where property prices fluctuate drastically within short period of time, it is this updated information which is most valuable to estate agents. Evidence also shows that pictures taken by the Plaintiff’s employees are also contained in this database and have faxed and received by the 1^st Defendant. All this information cannot be said already in the public domain and is obviously confidential protectable information.

89. I also do not think I need to deal with sub-paragraph (ii) as I have considered that the judgment of Reyes J. cannot assist the 1^st Defendant.

90. The contentions of the 1^st Defendant in paragraph 86 (iii)(a) boil down to whether the 1^st Defendant has or ought to have knowledge that the information is confidential when receiving it. Knowledge therefore includes express or “constructive” knowledge. I agree it is the crucial question to ask. In AG v Guardian Newspapers (No.2) [1990] AC 109, an English House of Lords case also known as the Spy Catcher case, Lord Goff has succinctly stated (at page 281B) when the obligation of confidence arises:

“I start with the broad general principle (which I do not intend in any way to be definitive) that a duty of confidence arises when confidential information comes to the knowledge of a person (the confidant) in circumstances where he has notice, or is held to have agreed, that the information is confidential, with the effect that it would be just in all the circumstances that he should be precluded from disclosing the information to others. I have used the word “notice” advisedly, in order to avoid the (here unnecessary) question of the extent to which actual knowledge is necessary; though I of course understand knowledge to include circumstances where the confidant has deliberately closed his eyes to the obvious.”

91. Whether the 1^st Defendant has express notice or constructive notice of the confidential information is a matter of facts to be decided from the available evidence on affirmation.

92. In the course of the argument, Mr. Whitehead S.C. has commented that Mr. Yan S.C. has advanced two different cases against the 1^st Defendant when it was before the ex parte judge and me. He said in the application before H.H. Judge Lok, the case is based on the information contained in the property listings database being confidential. The case now being advanced before me was premised on collocation of information already in the public domain. He said the shift is for avoiding the consequence of deliberate non-disclosure of Reyes J’s decision. Mr. Yan S.C. denied the allegation.

93. No doubt when Mr. Yan S.C. was arguing against material non-disclosure, he has placed emphasis that a collocation of information, even though the component parts have already been in the public domain, is protectable in order to contrast the present case with the case before Reyes J. I understand Mr. Yan’s position is that the present case is one of the more serious cases under the collocation category because the collocation of the Plaintiff’s database comprises confidential information as well. I do not have the slightest impression that Mr. Yan S.C. has conceded or shifted as alleged and I do not think he has advanced two different cases before the Court.

94. It is submitted on behalf of the 1^st Defendant that if the information has already been in the public domain, the court will not grant an injunction restraining disclosure. In support of this proposition, the Spy Catcher case has been cited. In Spy Catcher, the information sought to be protected was initially top secret and there was a breach of confidence by an employee of the British Government. The refusal to grant the injunction against a third party was simply because the secrets had already entered into the public domain and loss the status of confidentiality. In the present case there is neither evidence nor suggestion that the database has entered into the public domain. So I do not think that Spy Catcher is relevant in this respect.

95. Mr. Yan S.C. submitted that in view of the lame response from the 1^st Defendant to the overwhelming evidence of the Plaintiff, the Court is entitled to infer that the 1^st Defendant should or ought to have knowledge about the breach of confidence and it has induced the breach. Mr. Whitehead S.C. asked the Court not to draw the inference as invited. He relied on a number of authorities including Nina Kung v Wang Din Shin, FACV 12 of 2004, in support. He submitted that if it is the one against whom the inference is made has to dispel them, it amounts to a reversal of the burden of proof in civil cases.

96. The authority of Nina Kung v Wang Din Shin is a decision of the Court of Final Appeal. It is no doubt binding on this Court. However, in an interlocutory application like the present one, it will be difficult to have any finding of facts if in dispute because there is no cross-examination of witnesses. However for the purpose of the interlocutory order I consider that the Court can come to a view on whether there is a strong case based on all the primary affidavit evidence filed by the parties. The case of Nina Kung is not saying that adverse inference cannot be drawn. It only states that whenever inference is drawn, it has to be based on primary evidence. In Nina Kung v Wang Din Shin, Mr. Justice Ribeiro, PJ states at paragraph 185 (pages 62,63) the following:

“ …Where, as in the present case, the court is invited to reach a conclusion of forgery as an inference to be drawn on the basis of circumstantial evidence, any such inference must be properly grounded in the primary facts found. The court guards against indulging in conjecture under the guise of drawing an inference where the primary evidence does not logically and reasonably justify particulars inference in question.”(my emphasis)

97. The case of Sportless concerned with the Defendant allegedly having infringed the patent and registered designs of hangers of the Plaintiff. An Anton Pillar order has been issued and executed. Infringing materials were found. The Defendant sought to discharge the Anton Pillar on material non-disclosure ground. The Defendant chose to file affirmations to explain. The Honorable Mr. Justice P. Cheung, (as he then was) stated:

“In view of the serious allegations of infringing activities against the Defendants, one would expect, and I am not confusing the burden of proof in any event, that they should say that they had not infringed the rights of the Plaintiffs at all. This is something glaringly absent from the many affirmations filed by the Defendants in this case.” (pages 13,15) (my emphasis)

“These are hangers subject to the rights of the Plaintiffs. One would expect Mr. Lau to go and state that no infringement was carried out of the Plaintiffs. There is a complete silence on this point.”(page 15)

98. Sportless is not inconsistent with Nina Kung. The learned judge has warned himself with whom the burden of proof should lie. He concluded, on the clear evidence against the defendant before him, the court is entitled to draw inferences from the silence of the defendant.

99. Mr. Yan S.C. submitted that when there is overwhelming evidence from the Plaintiff, it is for the Defendants to adduce positive evidence to answer allegations. He also relied on the authority of Third Chandris Shipping Corporation v Unimarien S.A. [1979] 1 Q.B. 645. In that case, the plaintiff has applied for and obtained a Mareva injunction against the defendants. The defendants applied to have it discharged claiming, inter alia, they were the biggest charterers in the world. The discharge was refused. On appeal, the Mareva injunction was maintained. Lord Denning M.R. stated at page 669-70:

“… Further, when the position was tested on the application to discharge the injunction, it is a remarkable thing that the charterers, whilst asserting their own standing and solidity, never supported it by the evidence of any director or officer of the company, or by any balance sheet or statement of account, or by anything tangible at all. It was on those grounds that Mustill J. refused to discharge the inunctions. I agree with his decision, and would dismiss the appeals.”

100. I agree that for an interlocutory application like the present one, once sufficient evidence has been placed before the court, it is for the defendant to adduce evidence to assert its position and rebut any adverse inference drawn against it.

101. I warn myself that at the interlocutory stage, the Court should not embark on a mini trial on affirmations. However, the Plaintiff’s affirmation evidence establishes the following:

i) all the 2^nd and 5^th Defendants have generated substantially lists of properties which are more than necessary for the discharge of their duties as an estate agents;

ii) lists of telephone numbers of active owners of popular shopping areas such as Jordan, Tsim Sha Tsui, Mongkok and Tsim Sha Tsui have been compiled by the 2^nd Defendant and emailed to the 5^th Defendant at a time when the 2^nd Defendant was still under the Plaintiff’s employ but the 5^th Defendant had joined or would soon join the 1^st Defendant;

iii) almost the entire Team D including the 2^nd to 5^th Defendants left the Plaintiff and re-constituted themselves in the 1^st Defendant under the supervision of their former supervisor Kim Ngan and Ben Poon;

iv) the staff strength of the 1^st Defendant is around 25 (see paragraph 3 of  Ben Poon’s affirmation filed on 13^th October 2005). Eight were ex-employees of the Plaintiff working in Team D. It amounts to one-third of the staff strength of the 1^st Defendant;  

v) several documents were faxed by the 2^nd Defendant to the fax number of the 1^st Defendant while the 2^nd Defendant was still under the employ of the Plaintiff and when at least Kim Ngan was working for the 1^st Defendant or its group using that fax number;

vi) the 2^nd Defendant told Ho of the Plaintiff that all ex-employees have taken away property listings information from the Plaintiff and they were then busily inputting data into the computer;

vii) some mistakes in the database of the Plaintiff were found to have repeated them in the 1^st Defendant’s database;

viii) documents belonging to the Plaintiff were found inside the 1^st Defendant’s premises;

ix) active property listings appeared in the 1^st Defendant’s advertisements;

x) instruction to delete documents was overheard and someone was seen doing something immediately with his computer;

xi) there has been suspicious activities verily believed to be shredding and disposal of documents after attempts to execute the Anton Pillar Order have failed. The documents were taken to the restricted areas near the border. The persons identified to be involved in such activities were several ex-employees of the Plaintiff now working with the 1^st Defendant, including Kim Ngan who is occupying the position of Assistant Sales Director in the HKP group;

xii) the alleged shredding took place after the attempted execution and after the service of the Anton Pillar Order on a Director and a Senior Sales Director of the 1^st Defendant;

xiii) remnants of shreds have been found at the staircase outside the 1^st Defendant’s office where the disposal of documents and shredded papers has taken place. The shreds were identified as part of a document originated from the Plaintiff.

102. Regarding the mistakes revealed in torn piece of paper, the 1^st Defendant explained that the Plaintiff based its argument on the premises that the information in its database is absolutely correct. Furthermore, if the 2^nd to 5^th Defendant left employment in July/August and took away information with them, why in some cases the updated information as at the time of leaving was not stolen.

103. The latter point is an issue that can only be resolved after further discovery or trial. The first argument raised is not entirely understood. Suffice it to say that it is very peculiar for mistakes, which are very often unique to the one who makes them, find their way into the database of another person. For the fashion shop example the Plaintiff said that they thought it is No.119A which was put up for leasing but it was confirmed later to be No. 119. Why the 1^st Defendant also started off with No. 119A and not with No.119?

104. It occurred again to the chicken stall. The telephone number used appears to be wrong for both the Plaintiff and the 1^st Defendant, but other information such as the updated rental appears to be the same for the two databases. Why do both parties use a wrong number at the same time for the same property owner? Is an explanation that it is by chance and not by arrangement sufficient explanation? How a company allegedly using information collected since 1988 (see Poon’s affirmation evidence) but has ceased business in this area since 2000 would contain mistakes made by the Plaintiff in 2005. These are things that are unlikely to occur by chance. The accusation of the Plaintiff is not without ground.

105. The primary evidence of the Plaintiff reveals that there was an organized disposal of documents by the 1^st Defendant by shredding and taking the same to a restricted area near the border, or perhaps out of the jurisdiction. That happened after a director and senior sales director of the 1^st Defendant were duly served with the Anton Pillar Order. The evidence from Ben Poon in relating to this is surprising: he was not aware of the incident described and he has already asked all employees not to tamper with the documents (see paragraph 84 above). There is strong evidence pointing towards destruction of incriminating documents. Given Ben Poon’s position in the company, he should be aware of everything that happened in his office, particularly in that very afternoon when he was made aware of the serious allegations of the Plaintiff. He chose to file an affirmation in response but did not say anything amounting to denial of those serious allegations. He simply said he was not aware of the matter alleged. That is clearly not enough.

106. Mr. Whitehead S.C. submitted that the reliability of the investigator is in doubts as she has mistakenly identified Sindy to have involved in the matter. Furthermore other Defendants were separately represented and it is not up to the 1^st Defendant to request them to file any affidavit evidence. As pointed out by Mr. Yan S.C., which I accept, the affirmation of Sindy does not help much as she only denied having taken part but not the alleged incident. Whether she has taken part is a matter to be resolved at trial. Other staff allegedly to have involved in the matter, e.g. Kim Ngan, Eunice, who are still the 1^st Defendant’s employees and not defendants have not filed any affirmation in response. Given the positive evidence before the Court, the logical and reasonable inference is that such organized activity to destroy documents is with the consent or at least connivance of the 1^st Defendant. It is a logical inference that the 1^st Defendant knows or ought to have known the documents contain confidential information belonging to the Plaintiff and are incriminating materials otherwise no destruction is necessary.

107. Furthermore, one third of the 1^st Defendant staff members were ex-employees of the Plaintiff. Evidence shows that they have taken confidential information from the Plaintiff’s database. The 2^nd Defendant even faxed documents to the 1^st Defendant while still under the employ of the Plaintiff. So while Ho said that the 2^nd Defendant has told him that information has been taken away and all ex-employees were busily inputting data and scanning document into computer (paragraph 117 of Ho’s affirmation), it is not unreasonable to draw an inference that information, including information taken from the Plaintiff is being input into the 1^st Defendant’s computer.

108. It will be hard to believe that the management of the 1^st Defendant is not aware of the data input exercise being carried out in the office when one third of the employees were involved, and if so, not to take heed to enquire what and where they obtain such information. The inference that the 1^st Defendant knew or ought to have known the information they are inputting is protectable confidential information belonging to the Plaintiff is compelling.

109. By reasons of the above, there is strong evidence that the 1^st Defendant has knowledge or ought to have known that it possesses confidential information belonging to the Plaintiff and knowingly uses it its own business. The Plaintiff has sufficiently demonstrated a very strong case against the 1^st Defendant for breach of confidence and procuring breach of confidence by the other Defendants. It is therefore not necessary for me to deal with the question posed in paragraph 86(iii)(b). 

110. The contention in paragraph 86(iv) does not really assist the 1^st Defendant. The question is not whether these property owners consent to instruct the 1^st Defendant to act as their agents because presumably, the 1^st Defendant have to enter into an estate agency agreement with each of their clients anyway according to Estate Agents Ordinance, Cap 511 before it acts for them. If the 1^st Defendant chooses to reply in light of the strong evidence against it, I think it should address the issue of how its clients come to be in contact with them. This is exactly what the Plaintiff is now complaining of: the information in their database has been stolen and being used by the 1^st Defendant in its business. So the written consents are not answers to the issue.

Cogent Evidence to Destroy Incriminating Documents

111. The Court is entitled to take into account of the circumstances after the application of the ex parte order in order to assess whether there is a real possibility of destruction of incriminating evidence. There is evidence of destruction of documents at the 1^st Defendant’s premises: deletion of computer files, shredding of documents and disposal of the same in the restricted areas. All these happened after the service on all the Defendants of the Anton Pillar Order on 6^th October 2005. I consider there is strong evidence that the 1^st Defendant is likely to destroy incriminating documents.

Proportionality

112. It is submitted on behalf of the 1^st Defendant that the orders made against it were made in circumstances where there was serious and deliberate non-disclosure by the Plaintiff who is a major competitor with a history of litigation against the Midland group. Further Mr. Whitehead S.C. also submitted the current and past Non Permanent Judge of the Court of Final Appeal as they then were (Hoffman J in Lock v Beswick [1989] 1 WLR 1268, Scott J. in Columbia Pictures v Robinson [1987] 1 Ch 38 and Nichollas V-C in Universal Thermosensors Ltd v Hibbe & Onrs [1992] 1 WLR) have all spoken in one voice against the readiness of the court in granting Anton Pillar orders in the past. The following passage at page 1281C in Lock v Beswick is cited to me:

“Even in cases in which the plaintiff has strong evidence that an employee has taken what is undoubtedly specific confidential information, such as a list of customers, the court must employ a graduated response. To borrow a useful concept from the jurisprudence of the European Community, there must be proportionality between the perceived threat to the plaintiff’s right and the remedy granted. The fact that there is overwhelming evidence that the defendant has behaved wrongfully in his commercial relationships does not necessarily justify Anton Pillar order. People whose commercial morality allows them to take a list of the customers with whom they were in contact while employed will not necessarily disobey an order of the court requiring them to deliver it up. Not everyone who is misusing confidential information will destroy documents in the face of a court order requiring him to preserve them.

In many cases it will therefore be sufficient to make an order for delivery up of the plaintiff’s documents to his solicitor or, in cases in which the documents belong to the defendant but may provide evidence against him, an order that he preserve the documents pending further order, or allow the plaintiff’s solicitor to make copies. The more intrusive orders allowing searches of premises or vehicles require a careful balancing of, on the one hand, the plaintiff’s right to recover his property or to preserve important evidence against, on the other hand, violation of the privacy of a defendant who has had no opportunity to put his side of the case. The making of an intrusive order ex parte even against a guilty defendant is contrary to normal principle of justice and can only be done when there is a paramount need to prevent a denial of justice to the plaintiff.”

113. Although I consider the above passage in Lock v Beswick sets out the proper approach that the court should adopt in granting an Anton Pillar order, which is a draconian order, I cannot see how it really assists the 1^st Defendant. As correctly pointed out by Mr. Yan S.C., the Anton Pillar Order comprises a delivery up order (paragraph 4) and disclosure order (paragraph 5). However, those orders have not been complied with nor is there any suggestion by any of the Defendants to deliver up.

114. The explanation advanced on behalf of the 1^st Defendant was that since the premises has been sealed up, it will be difficult, if not impossible, to observe the delivery up order. I disagree. I do think proposal along the line of Lock v Beswick can still be made even when the office is sealed up. At least an intention to do so can be expressed. According to the evidence, none has been forthcoming. It is unreasonable to blame the Plaintiff for not taking the initiative to make such proposal. Why the Plaintiff needs to make the proposal when it has already obtained the order.

115. Furthermore, there is clear evidence of destruction of documents after granting of the ex parte order. The destruction took place after the Anton Pillar Order has been duly served on and explained to each of the Defendants and even after, apparently, the 1^st Defendant having obtained legal advice. Given the conduct of the Defendants, obviously a delivery up order will be totally insufficient in the circumstances. There is a paramount need to protect the Plaintiff’s interest by preserving evidence with an enter and search order. Justice requires the balance be tipped in favour of the Plaintiff.

Conclusion

116. By reasons as aforesaid, I dismiss the 1^st Defendant’s discharging summons. I shall hear the parties again on costs on 25^th November 2005.

115. Finally, I would like to express my gratitude to both senior counsel for their able submissions and the assistance that they have rendered to this Court.

Mr. John M.Y. Yan S.C. & Miss Shannon Leung, instructed by M/s Cheung & Choy for the Plaintiff.

Mr. Robert Whitehead S.C. & Mr. Steven Kwan, instructed by M/s Iu, Lai & Li for the 1st Defendant.

Mr. William Hui (Mr. Victor Dawes on 24^th October), instructed by M/s Hui & Lam for the 2nd to 5th Defendants.