SEA DRAGON FOOD LTD v. TUNG CHUNG WAH AND OTHERS

HCA 564 / 2019

[2025] HKCFI 4187

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NO. 564 OF 2019

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D E C I S I O N

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Index

	Sections		Para
A.	Introduction		1
B.	Factual background		16
	B1	Undisputed / indisputable factual background	16
	B2	24 July 2018	24
	B3	25 July 2018	25
	B4	26 July 2018	27
	B5	After the issue of the 26 July Notice, a subsequent oral agreement to resume the business of P	31
	B6	Further disputes between the parties thereafter	35
	B7	Commencement of this Action	38
	B8	Synopsis of Ds’ defences	40
C.	Witnesses and principles on resolving factual disputes		44
D.	Relevance of the Oral Agreement and the Subsequent Oral Agreement		47
E.	P’s pleaded case against D1		53
	E1	Applicable principles on pleadings	53
	E2	P’s pleaded case on the duties owed by D1 to P	57
	E3	Breach of duties relied upon by P that are not pleaded in the SOC	61
	E4	The running of competing business through D3	65
	E5	Other breaches not pleaded or not developed in submissions	69
	E6	A duty not to use any trade secrets / confidential information of P	72
F.	P’s pleaded case against D2		73
	F1	Fiduciary duties owed by D2 to P?	74
	F2	Other claims that are not pleaded in the SOC	86
	F3	An implied duty not to use any trade secrets	94
G.	The establishment of D3 to run business in competition with P		95
	G1	Applicable principles	96
	G2	The evidence that P relies upon against D1	97
	G3	Analysis on P’s evidence against D1	103
	G4	P’s pleaded case against D2	111
H.	Whether D1/D2 made use of any Confidential Information of P		116
	H1	P’s case	116
	H2	Ds’ Defences	118
	H3	The applicable law	119
	H4	Discussion	124
I.	The alleged solicitation of the 4 Employees		135
	I1	P’s case against D2	135
	I2	P’s case against D1	142
J.	The alleged wrongful solicitation of customers of P		148
K.	The alleged passing-off		160
	K1	P’s case against Ds	160
	K2	Applicable principles	161
	K3	The evidence and discussion	162
L.	The Oral Agreement and the Subsequent Oral Agreement		170
M.	Conclusion		176

A.  Introduction

1.  This is the trial of a statutory derivative action brought by the Plaintiff (“P”) against the Defendants (“Ds”) pursuant to the leave granted to Mr. Yuen Tak Sung (“Yuen”) by Deputy High Court Judge Bernard Man SC in HCMP 1721/2018.

2.  P, a company incorporated in Hong Kong, was at all material times and is still running a business of production of secondary food products such as fish balls, siumai and other dim sum, for sale to local restaurants and food stalls.

3.  At the material times, the only shareholders and directors of P were Yuen and Tung Chung Wah, the 1^st Defendant herein (“D1”), each holding 50% of the issued share capital of P. It is P’s case that D1 was at all material times also an employee of P (although P has not pleaded the date of such agreement, or how such agreement was made between the parties, let alone any of its express terms).

4.  Tung Ka Yuen, the 2^nd Defendant herein (“D2”), is the son of D1. It is common ground that D2 was employed as a manager of P from September 2015 to 27 July 2018 pursuant to an oral employment contract. By a written notice dated 27 July 2018, D2 tendered resignation and his employment was terminated on the same day.

5.  The 3^rd Defendant (“D3”), a company in Hong Kong incorporated on 2 May 2018, ran a business of production of secondary food products to local food stores and restaurants. It is not in dispute that D2 was at all material times the only director and shareholder of D3; and that the business of D3 was in competition with that of P.

6.  In this trial, P was represented by Ms. Alison Choy; and the Ds were represented by Mr. Adrian Leung and Mr. Samkei Chan.

7.  As pleaded in the Statement of Claim (the “SOC”), P claims against D1 and D2 for breaches of fiduciary duties (and in the case of D1, also breach of director’s duties) they respectively owed to P and also breaches of implied terms of the employment contracts, in respect of the following:-

(1)  the setting up and the running of a competing business through D3 (which according to P has been operated as a competitor of P) during the period from May to September 2018;

(2)  the misappropriation and misuse of P’s confidential information (“Confidential Information”);

(3)  the wrongful solicitation of 4 employees (the “4 Employees”) of P to terminate their employment with P and to work for D3; and

(4)  the wrongful solicitation of customers of P.

8.  P seeks various reliefs against D1 and D2, including but without limitation to damages and account of profits. In the SOC, P also claims for an injunction to restrain Ds from soliciting P’s customers for a period of 2 years from termination of their employment with P. Yet it is not clear in the SOC as to when D1’s employment with P was terminated. Nonetheless, in P’s written opening submissions, Ms. Choy confirms that P no longer pursues for such injunction.

9.  P also claims against all 3 defendants for damages for passing off. It is P’s case that Ds passed off the products of D3 as those of P, thereby damaging P’s goodwill and business.

10.  I would come back to the SOC in Sections E and F below in more detail, for Ms. Choy in her closing submissions advanced several other claims against D1, including:-

(1)  breach of the fiduciary duties on the part of D1 in failing to inform P of activities that would damage P’s interests;

(2)  breach of the director’s duty to act in good faith in the best interest of the company on the part of D1, when D1 failed to disclose to P his own misconduct;

(3)  breach of the duty of good faith and fidelity owed by D1 qua employee of P, when D1 solicited P’s employees to act for D3 in competition with P.

11.  The position is similar in respect of P’s claims against D2.

12.  In the SOC, it is pleaded against D2 that, as an employee and agent for P, D2 owes to P fiduciary duties, namely:-

(1)  the duty not to take personal benefit out of P’s assets without P’s consent, or to make use of, misapply or misappropriate the same for his own profit;

(2)  the duty not to use or disclose any trade secrets or confidential information of P, whether or not such use or disclosure is for the purposes of making a profit for himself; and

(3)  the duty to return to P any property belonging to P forthwith upon the termination of the agency and/or employment.

13.  Further or in the alternative, P asserts that the aforesaid duties are implied terms of the employment agreement between P and D2.

14.  Whilst the duties pleaded against D2 are within a relatively narrow remit, in the closing submissions, Ms. Choy advanced for P against D2 claims for some other breaches, namely:-

(1)  that D2 was in breach of a fiduciary duty to inform P of his own wrongdoing;

(2)  that D2 was in breach of a duty of good faith and fidelity owed to P, when D2 wrongfully solicited P’s employees to work for D3; and

(3)  that D2 was in breach of the duty of good faith and fidelity owed to P, when D2 set up D3 in competition with D1.

15.  I would address these matters in more detail in Section F below.

B.  Factual background

B1.  Undisputed / indisputable factual background

16.  The following facts are not disputed or indisputable.

17.  Since about 1993, Yuen, D1 and two other business partners had been carrying on the business of manufacturing and selling food products to food stalls and restaurants in Hong Kong under the business name of “Sea Dragon Food Limited” (海龍食品公司).

18.  Later in about 2006, they acquired P for the purpose of operating the business, with all four of them acting as directors and shareholders of P in equal shares.

19.  At all material times, P operated a food processing factory in the Western District, with the cockloft (“Cockloft”) being used as its office.

20.  Later the two other business partners left respectively in 2012 and 2014. Since about 2015, Yuen and D1 have been the only directors and shareholders of P, each holding 50% of its issued share capital.

21.  In about September 2015, D2 was employed by P as a manager pursuant to an oral employment agreement. D2 was in the employment of P from September 2015 to 27 July 2018. By a written notice dated 27 July 2018, D2 resigned and his employment was terminated on the same day.

22.  D3 was at all material times and is a company incorporated in Hong Kong. It was incorporated on 2 May 2018, with D2 being its sole shareholder and director. D3 at all material times carried on a business of manufacturing, selling and supplying similar food products to local food stalls and restaurants and thus a competitor of P.

23.  The disputes between the parties arose in about July 2018. The key events may be summarized as follows.

B2.  24 July 2018

24.  It is P’s case that, on 24 July 2018, when Yuen was not in the office, D2 asked staff members to meet him individually in the office at the Cockloft, asking if each of them was willing to follow him and to work at the new factory on Kowloon side. As a result, 4 Employees left P’s employment; and this seriously disrupted the production of P and its business operation.

B3.  25 July 2018

25.  It is P’s case that, on 25 July 2018, D1 attempted to issue to the customers of P a written notice (the “24 July Notice”) to the effect that P would cease its operation and that D3 would take over the business of P. The 24 July Notice reads this:-

“通告

本公司僅定於2018年7月24日正式停止運作。源海(香港)食品有限公司即時承接，繼續生產供貨。源海(香港)食品有限公司之食品質素及服務宗旨，將與海龍食品有限公司無異。懇請 貴 寶號繼續大力支持為盼！

有關海龍食品有限公司之付款將由源海(香港)食品有限公司代收！

特此通告

海龍食品有限公司

2018年7月24日”

26.  A meeting was held on 25 July 2018 at P’s office. Yuen, his wife Ms. Chan Pui Chu (“Mrs. Yuen”) and D1 attended the Office for the purpose of working out the total assets of P. Yuen also demanded D1 not to issue the 24 July Notice. It is common ground that this 24 July Notice was not issued or circulated.

B4.  26 July 2018

27.  It is also common ground that another meeting was held on 26 July 2018. Those who were present at this meeting were Yuen, Mrs. Yuen, D1 and his daughter, Tung Chau.

28.  It is P’s case that, an oral agreement was reached between Yuen and D1 (“Oral Agreement”) on 26 July 2018. According to the Oral Agreement, it was agreed between Yuen and D1 that the business of P would only cease on 2 conditions (the “2 Conditions”)[1], namely:-

(1)  After the intended cessation of P’s business, Yuen could take away 50% of P’s assets (including but not limited to the cash held in the Nanyang account and Chong Hing Account and cash receivables;

(2)  It is agreed that D1 and Yuen will each receive 50% of all the cash in both Nanyang Account and Chong Hing Account, but since the amount of 50% cash in both Nanyang Account and Chong Hing Account does not amount to 50% of the Company’s total assets which Yuen is entitled to, D1 would pay Yuen the remainder out of his own pocket. D1 would be reimbursed accordingly after P had received the outstanding cash receivables from its customers.

29.  It is also common ground that, during this meeting, with the assistance D1’s daughter, Tung Chau, another notice dated 26 July 2018 (the “26 July Notice”) was issued in the following terms:-

“通知

本公司廿多年來蒙各寶號大力支持，經營至今，現謹定於2018 年7 月26 號光榮結業。

2018 年7 月27 號為最後一次送貨，不便之處，深感抱歉，望各寶號多多見諒。 本公司並沒有委託及轉讓同業承接任何業務，其他業務與本公司一概無關。

至於本公司供應各寶號的貨數將個別通知收取，客戶仍可使用現有賬號入數。

祝

身體健康 ， 生意興隆 !

本通知經股東袁德崇，董仲華一致協商同意。

袁德崇  董仲華

[簽署]

海龍食品有限公司啟

2018 年7月26 日”

30.  Whilst it is common ground that the 26 July Notice was issued to the customers of P, D1’s case is that the Oral Agreement was not conditional upon the 2 Conditions.

B5.  After the issue of the 26 July Notice, a subsequent oral agreement to resume the business of P

31.  According to P, D1 had failed to perform the 2 Conditions in accordance with the Oral Agreement. Thus, it is P’s case that there was no agreement for the termination of P’s business.

32.  Further, it is P’s case that, even if, which is denied, there were a valid Oral Agreement between Yuen and D1 for the termination of P’s business, the said Oral Agreement was later replaced by a subsequent oral agreement reached between Yuen and D1 on 28 July 2018 that P would continue its business until further notice (“Subsequent Oral Agreement”). P’s case is that, after the issue of the 26 July Notice, some of P’s customers expressed concerns to Yuen and D1 that they would have difficulties in seeking alternative supplies of food products from other sources if P’s production was to cease at such short notice. Yuen and D1 considered that the customers’ concerns were valid; and that P might have difficulties in recovering from them their outstanding contract sums owed to P should P fail to address such concerns.

33.  It is P’s case that, as a result, Yuen and D1 agreed that the business of P be resumed under the Subsequent Oral Agreement. As such, Yuen issued for and on behalf of P another notice (the “28 July Notice”) to its customers, which reads this:-

“通告

致各位尊貴客戶

本公司近日因內部高級員工作出嚴重損害公司利益的不法行為，故將經營25載本公司（海龍食品有限公司）混淆為新公司（源海(香港)食品有限公司），導致本公司客戶流失，故近日發出結束營業通知。

特此再次鄭重聲明，本公司前經理董家源已於2018年7月27日自動離職，今後此君在外之一切華洋轇轕，一概與本公司無關。海龍食品有限公司與源海(香港)食品有限公司並無任何業務聯繫。

現承蒙各位尊貴客戶大力支持並希望本公司繼續提供貨源，本公司決定繼續生產以盡量滿足客戶需求。以上事件對各位構成混亂及困擾，本公司深感抱歉，懇請各位尊貴客戶多多包涵，並繼續大力支持！多謝！

海龍食品有限公司

2018年7月28日”

34.  Whilst it is not disputed that this 28 July Notice was circulated to P’s customers, D1’s case is that he never made the Subsequent Oral Agreement with Yuen; as he did not agree to the resumption of the business of P. It is D1’s case that he did not consent to the issue of the 28 July Notice.

B6.  Further disputes between the parties

35.  There were further disputes between the parties.

36.  It is P’s case that, in about July / August 2018, Ds misappropriated and made use of P’s Confidential Information to approach P’s customers and falsely stated that P would move its factory to Kowloon; when in fact it was the factory of D3. It is also P’s case that, Ds made use of the Confidential Information to contact the suppliers of P and falsely stated to them that P had already ceased its operation. This is denied by Ds.

37.  It is also P’s case that, on 9 and 16 August 2018, D1 caused the doors of the factory of P to be locked. Later, D1 attended P’s factory and damaged the equipment and machinery on 16 and 17 August 2018.

B7.  Commencement of this Action

38.  It was against such context that Yuen applied for and obtained leave to bring this statutory derivative actions against Ds. In this Action, P sues Ds for breaches of their respective duties owed to P in respect of the following:

(1)  D1 and D2 engaged in the business of D3 to compete with P;

(2)  Ds misappropriated and made use of the Confidential Information / trade secrets of P, which consisted of, inter alia, customers list; suppliers list; financial and marketing data and other information such as dates of invoices; unit prices; etc.

(3)  wrongfully solicited the 4 Employees to leave P to join D3; and

(4)  wrongfully solicited the customers of P to place orders with D3.

39.  P also sues Ds for passing off.

B8.  Synopsis of Ds’ defences

40.  In summary, Ds’ case may be summarized as follows.

41.  First, on the Oral Agreement allegedly reached on 26 July 2018, Ds accept that a meeting took place at P’s office. Apart from Yuen and D1, Mrs. Yuen and Tung Chau (D1’s daughter) were also present at the meeting. In the said meeting, whilst D1 accepted that Yuen and D1 agreed to cease P’s business with effect from 27 July 2018; D1 maintained that none of the Conditions were mentioned. It is D1’s case that the Oral Agreement and the 26 July Notice was never made subject to the 2 Conditions as P alleges.

42.  Second, D1 denies that he reached with Yuen the Subsequent Oral Agreement for the continuation of P’s business.

43.  Specifically, on the various duties and breaches of duties alleged, Ds’ case may be summarized as follows.

(1)  First, on the duties allegedly owed to P, D1 put P to strict proof of those various duties owed by D1 as director of P. D2 denies that he owed to P any fiduciary duties.

(2)  Second, on the claim for misappropriation and misuse of Confidential Information, Ds’ case is that the Confidential Information is not confidential in nature and does not amount to P’s trade secrets. They also deny any misappropriation or misuse of any Confidential Information / trade secrets of P. It is also Ds’ case that the contact details of P’s customers and suppliers cannot be trade secrets of P, when such information is readily available in the public domain. Ds also maintain that they did not make any false statement in telling P’s suppliers that P had ceased operation.

(3)  Third, on the business of D3, it is Ds’ case that D1 was not involved in the business of D3, for it was at all material times a company owned by D2 (being its sole director and shareholder). D3 only commenced business in early August 2018.

(4)  Fourth, on the solicitation of the 4 Employees, Ds’ case is that they did not cause any of the 4 Employees to resign and work with D3. For D2, he only informed the employees on 24 July 2018 that he would resign; and he never asked them to work for D3.

(5)  Fifth, Ds deny that they had caused any customers of P to purchase similar products from D3.

(6)  Ds also maintain that P is not entitled to any claims, as any loss or damage allegedly suffered was not caused by Ds.

(7)  Finally, on the claim for passing off, Ds deny that they had passed off P’s goods and services as alleged. Specifically, D1 and D2 deny that they had made any misrepresentations.

C.  Witnesses and principles on resolving factual disputes

44.  In this action, P called the following witnesses, namely, Yuen; Mrs. Yuen; Ng Chor Lun (“Ng”), Lo Kai Wah (“Lo”) and Lam Chor Yin (“Lam”). Ng was at all material times a driver / delivery worker in the employ of益豐海產貿易公司(Yik Fung Marine Products Co.) (“Yik Fung”). Lo was and still is the proprietor of a Chinese restaurant known as 滿華堂茶餐廳小廚 (“滿華堂”). Lam was at the material times and is still the manager of one restaurant named 永記潮州粉麵 owned by his mother.

45.  For Ds, both D1 and D2 gave evidence. They also called Tung Chau; Tang Kai Hung and Chow Mei Yum (the latter being two of the 4 Employees) as their witnesses.

46.  There are many factual disputes between the parties. Those principles for resolving factual disputes and witnesses’ credibility are well settled. They were helpfully summarized by Deputy High Court Judge Eugene Fung SC in Hui Cheung Fai v. Daiwa Development Ltd (HCA 1734/2009, 8 April 2014), at §§77-80:-

(1)  In assessing credibility, the court takes into account, amongst other things, the inherent probabilities or improbabilities of a witnesses’ testimony; the contemporaneous documents or evidence which is undisputed or indisputable, tending to support or contradict one account or the other and the overall impression of the characters and motivations of the witnesses. Where there exists a wealth of contemporaneous documents, credibility is to be tested by reference most particularly to them.

(2)  Generally speaking, contemporaneous documents and documents that came into existence before the problems in question emerged are of the greatest importance in assessing credibility.

(3)  Importance is attached to the consistency of witnesses’ evidence with undisputed or indisputable evidence, and the internal consistency of witnesses’ evidence (tested by comparison between the oral testimony and his/her witness statement).

(4)  The court should also caution itself against the dangers of too readily drawing conclusions about truthfulness and reliability solely or mainly from the appearance of witnesses or from the assessment of the witnesses’ character.

D.  The relevance of the Oral Agreement

47.  The parties had spent substantial time on arguing whether the Oral Agreement was subject to the 2 Conditions as alleged by P and Yuen; or whether the Oral Agreement was not subject to any conditions (as contended by D1). They also spent substantial time on the Subsequent Oral Agreement.

48.  In the course of the opening submissions, I raised queries with Ms. Choy as to the relevance and significance of the Oral Agreement and the Subsequent Oral Agreement, when this is a statutory derivative action; and P brings its claims for its own loss and damage. Yuen himself is not a party to this Action. There is no personal claim by Yuen for any damage and loss that he personally suffered.[2] There is no claim for any damages for any breach of the Oral Agreement.

49.  In the closing submissions, Ms. Choy clarified the relevance and significance of the Oral Agreement and the Subsequent Oral Agreement. First, she contended that, if P established the breaches of various duties on the part of D1 and/or D2, the existence of the Oral Agreement would affect the question of quantum of damages. I agree. However, for the reasons set out below, in my judgment, P fails to plead, let alone establish, the relevant duties or breach of duties on the part of D1 or D2. As such, the question of quantum of damages does not arise at all.

50.  Second, Ms. Choy contended that the Oral Agreement and the Subsequent Oral Agreement would have some impact on P’s claim for passing off. I agree, for this may have some impact on the question of the existence of goodwill of P. However, for the reasons I set out in Section L, the claim for passing off has no merits and should be dismissed.

51.  Third, Ms. Choy submitted that, if there was never any valid agreement to cease business under the Oral Agreement; or that there was a valid agreement to resume business under the Subsequent Oral Agreement, P’s operation after 27 July 2018 was lawful. With respect, I do not see why this is relevant to any issues in this Action, for there is no suggestion that P’s operation after 27 July 2018 was unlawful. There is no counterclaim from D1 against Yuen for any unlawful operation of P after 27 July 2018 or breach of duties on the part of Yuen.

52.  In the circumstances, given the limited significance of the Oral Agreement and the Subsequent Oral Agreement, I would deal with them only briefly after addressing the various heads of breaches of duties made by P against Ds.

E.  P’s pleaded case against D1

E1.  Applicable principles on pleadings

53.  At the outset, given the various claims mounted against Ds only in the closing submissions, it is necessary to refer to those well-established principles on pleadings.

54.  In Kwok Chin Wing v. 21 Holdings Ltd (2013) 16 HKCFAR 663 at §21, Ma CJ held that the basic objective of the pleadings is to fairly and precisely inform the other party or parties of the stance of the pleading party, so that proper preparation can be made; and to ensure that time and effort are not expended unnecessarily on other issues. It is the pleadings that will define the issues in a trial and dictate the course of proceedings both before and at trial. Where witnesses are involved, it will be the pleaded issues that define the scope of the evidence, and not the other way round. In other words, it will not be acceptable for unpleaded issues to be raised out of the evidence which is to be or has been adduced.

55.  In Sinoearn International Ltd v Hyundai-CCECC Joint Venture (2013) 16 HKCFAR 632 at §30, Ribeiro PJ held that a party must raise all the issues he wishes to raise to be dealt with at the trial; and parties are not entitled to have issues recently thought up dealt with separately and piecemeal. Pleadings are not mere formalities; and they impose a necessary discipline and are fundamental to enabling every procedural facet of the adversarial system to operate fairly: §34.

56.  However, many of the claims that P seeks to advance against Ds are not pleaded.

E2.  P’s pleaded case on the duties owed by D1 to P

57.  On the duties owed by D1 to P, P’s case is pleaded in §§4 and 5 of the SOC, which read as follows:-

“4. By reason of the 1^st Defendant’s position as a director and an agent of the Plaintiff, the following fiduciary duties and/or director’s duties were and are still (sic) to the Plaintiff by the 1^st Defendant:-

(1) To act bona fide in the best interests of the Plaintiff;

(2) To act for proper purposes;

(3) Not to place himself in a position where there might be a conflict of interests between himself and the Plaintiff;

(4) To make full and frank disclosure of any such conflict of interests or potential conflict of interests;

(5) To act within his scope of duties;

(6) To preserve and apply the Plaintiff’s assets solely for its benefit;

(7) Not to take personal benefit out of the Plaintiff’s assets without the informed consent of the Plaintiff or to make use of, misapply or misappropriate the same for his own benefit;

(8) To give regular account of the Plaintiff’s assets and to disclose all relevant information in relation to its assets; and

(9) Not to use, disclose or attempt to use or disclose to any person any secrets or confidential information of the Plaintiff, whether or not such use or disclosure is for the purposes of making a profit for himself.

5. Further or alternatively, §4(1) to (9) were implied terms of the employment agreement between the Plaintiff and the 1^st Defendant, whereby the Plaintiff agreed to hire the 1^st Defendant as, and the 1^st Defendant agreed to work as, a director of the Plaintiff. The said implied terms were implied from the nature of the said employment agreement, and/or by business efficacy, and/or as a matter of law.”

58.  D1 was at the material times a director of P. As such, D1 qua director clearly owed to P director’s duties. However, the position is very different in respect of any duties that D1 may owe to P as employee.

(1)  Whilst it is pleaded in §5 of the SOC there was an employment agreement between P and D1, the SOC is silent as to when it was concluded and whether it was made orally or in writing.

(2)  There is no plea of any express terms of the said employment agreement. Whilst there is a plea that those terms set out in §§4(1) to (9) are implied terms of the employment contract, it is significant to note that there is no plea of any implied duties of good faith and fidelity owed by D1 to P.

(3)  Ms. Choy did not advance any arguments as to explain why those duties pleaded in §§4(1) to 4(9) of the SOC were implied terms of the employment agreement. In her written closing submissions, Ms. Choy even submitted that “P does not seriously need to rely on the fact that D1 was an employee to drive the case home”.

59.  I now come to D1’s breaches of duties as pleaded in the SOC. They are set out as follows:-

(1)  SOC §§18 and 21(2)-21(6): D1 and D2 made use of the Confidential Information (as defined in the SOC) and caused some of P’s customers to stop purchasing products from P; and to purchase similar / identical products from D3 instead. In this connection, the Confidential Information was defined in §8 of the SOC to cover the following:-

“… the following secrets and confidential information regarding the Plaintiff, its customers and its suppliers, either in electronic form or in hard copy:-

(1) Customer lists, personal data and contact information of the customers;

(2) Suppler lists, personal data and contact information of the suppliers;

(3) Financial and marketing data; and

(4) Information concerning the products purchased by each customer of the Plaintiff, including, inter alia, dates, invoice numbers, types of products and unit process.

(Collectively, “Confidential Information”)”

(2) SOC §§19 and 21(7): that D1 and D2 caused the 4 Employees of P to resign and work with D3 instead.

(3) SOC §§20, 21(9)-21(10): that in August 2018, D1 and/or D2 locked the doors of the factory of P and broke some of P’s equipment and machinery.

(4) SOC §21: As such, D1 and D2 had breached their fiduciary duties, director’s duties (insofar as D1 is concerned) and duties under the employment agreement with P.

60.  At this juncture, it is significant to note that, in SOC §§17 and 21(1), it is P’s case that it was D2 who set up D3 in about May 2018. There is no plea against D1 that he was involved in the establishment of D3 or its business. I would address this further below.

E3.  Breach of duties of D1 relied upon by P that are not pleaded in the SOC

61.  Nonetheless, in her closing submissions, Ms. Choy sought to advance against D1 various breaches of duties on his part.

62.  First, in the closing submissions, Ms. Choy argued for the first time that D1 owes to P a fiduciary duty to inform P of activities that would damage P’s interests; and that D1 was in breach of such duty.[3] In my judgment, such claim is not open to P, when it is never pleaded in the SOC that D1 owed to P such duties, let alone that D1 had breached such duties.

(1)  It is not sufficient for P to plead simply that D1 owed to P a duty to promote the best interests of the company. Should P intend to rely upon such breach, it is incumbent upon P to plead specifically that D1 owed to P a duty to disclose any actual or threatened activity of the others to set up a competing business; such that the opponent would know the case that he has to meet.

(2)  More importantly, such claim is not open to P, when no breach of such duty was ever pleaded in the SOC. Cf. SOC §§17-21 summarized above.

(3)  In the premises, I do not see why it is open to P to advance such claim against D1.

63.  Second, Ms. Choy argued that, under a director’s duty to act in good faith in the best interest of the company, D1 owed a sub-duty to disclose to P his own misconduct.[4] She argued that D1 was in breach of such duty, when he failed to disclose to P his own misconduct in setting up D3. Again, irrespective of whether D1 was involved in the setting up of D3 (and whether P could advance such argument in the state of the pleadings), this claim of failure to disclose any of his own misconduct is not open to P, when P has never pleaded in the SOC such duty to disclose or any breach of such duty (Cf. §§19-22 of the SOC).

64.  Third, Ms. Choy argued that D1 acted in breach of his duty of good faith and fidelity qua employee of P, when he solicited other employees to act in competition with the employer.[5] However, as stated above, it is never P’s pleaded case that D1 owed to P any implied duty of good faith and fidelity. Nonetheless, I am prepared to consider this head, given P also relies upon breach of fiduciary duties / director’s duties against D1.

E4.  The running of competing business through D3

65.  Fourth, P argues that D1 was in breach of the fiduciary duty he owed to P when he was involved in the setting up of D3 and its business.

66.  But as stated above, as pleaded in §§17 and 21(1) of the SOC, P only pleaded that it was D2 who was involved in the setting up of D3. There is no plea in the SOC that D1 was involved in the establishment of D3. It is only in the Amended Reply that D1 was said to have been involved in D3’s business (see §7 of the Amended Reply).

67.  Nevertheless, it is not open to P to plead his case against D1 only in the Amended Reply, for it is well established that facts pertinent to the cause of action should be pleaded in the statement of claim, rather than in the reply: see for instance First Laser Ltd v. Fujian Enterprises (Holdings) Ltd (unrep.) CACV 126/2008, 8 July 2010, at §§8.1-8.2, per Yuen JA. Such requirement cannot be said to be merely technical objection. In Magic Score Ltd v. The Hong Kong and Shanghai Banking Corporation Ltd (unrep) HCA 11077/1994, 23 June 2006, Lam J (as Lam PJ then was) said this at §§19-21:-

“19. The answer to the first question lies with the rules relating to pleadings. Order 6 rule 2 requires a writ be endorsed either with a statement of claim or a concise statement of the nature of the claim made or the relief or remedy required. Order 18 rule 15 requires a statement of claim to state specifically the relief or remedy which the plaintiff claims. Further it cannot raise a cause of action not mentioned in the writ nor arises from facts giving rise to the cause of action so mentioned.

20. Thus, it is not appropriate to raise in the reply a new cause of action (see Hong Kong Civil Procedure 2006 paragraph 18/3/2). A plaintiff who wishes to pursue an additional or alternative cause of action should do so by amending the statement of claim.

21. This is not simply a technical rule. A defendant to an action is entitled to know from the writ and statement of claim what are the precise limits of claims he is faced with. He should focus on the same and then put forward his case in his defence and prepare for the evidence accordingly. He should be able to conduct the litigation and arrange his affairs on the basis that all the relief and remedies claimed against him have been set out in the statement of claim, subject to any amendments that might be made to that document. He could, for example, consider whether to make any payment into court or any offer for settlement based on this. He could also decide what is the proportionate time and costs that he should spend on the litigation by reference to those claims. A reply (or any subsequent pleadings) is not the right place for new claims to be put forward as it does not contain any prayers and a defendant does not have any automatic right to file any pleadings subsequent to reply (see Order 18 rule 4). It would also be confusing for new claims to be buried amongst other positive allegations made in genuine reply to a defence.”

68.  During the closing submissions, I raised with Ms. Choy as to why P could advance the various claims when they are not pleaded. However, Ms. Choy could not provide this court with any answer, let alone a satisfactory one. P has never sought leave to amend the SOC to add any facts pleaded in the Reply. In my judgment, these claims against D1 are not open to P. In any event, even if one were to consider the facts and evidence before this Court in respect of D1’s role in D3, I would still have concluded that P has failed to discharge its burden of proof to show that D1 was involved in the business of D3 and was thus in breach of the no-conflict duty. This will be discussed further below (see §95 below).

E5.  Other breaches not pleaded or not developed in submissions

69.  In the closing submissions, Ms. Choy mentioned other breaches on the part of D1, including the following:-

(1)  The attempt to fire Mrs. Yuen to affect the normal operation of P;

(2)  The refusal to co-sign cheques so as to settle the outstanding sums owed to P’s suppliers;

(3)  The refusal to co-sign bank mandates and accounting papers with Mr. Yuen for the financial year ended on 31 March 2019; and

70.  Counsel for P has not developed any submissions on such breaches. It is not even clear to this Court as to what loss and damage was suffered by P as a result of these alleged breaches.

71.  There is also evidence adduced for P that D1 had caused damage to the production utensils and also disrupted the business operation of P. However, no claim for any special damages was pleaded. There is no evidence on the quantum of any damages for such loss and Counsel for P has not developed any submissions in this connection.

E6.  A duty not to use any trade secrets / confidential information of P

72.  Nonetheless, I am prepared to hold that D1 as a director owed to P a fiduciary duty not to use any trade secret or confidential information of P which he learned during his directorship for any improper purposes. As D1 has no serious disputes about the fact that he had an employment agreement with P and that it was not terminated, I am also prepared to proceed on the basis that D1 also owed a similar duty of confidence to P under an implied term of the contract of employment. This is open to P under §§4(9) and 5 of the SOC.

F.  P’s pleaded case against D2

73.  P’s pleaded case against D2 is, with respect, even more problematic.

F1.  Fiduciary duties owed by D2 to P?

74.  First, Ms. Choy contends that D2 as an employee owed to P fiduciary duties. During her oral opening submissions, I expressed that I have difficulties with this argument.

75.  It is necessary to examine P’s case against D2, which is pleaded in §§2, 6 and 7 of the SOC. They read as follows:-

“2. The 2^nd Defendant is the son of the 1^st Defendant and was, from about September 2015 to 27 July 2018, employed by the Plaintiff as a manager pursuant to an employment agreement entered into orally between the Plaintiff and the 2^nd Defendant. By a written notice dated 27 July 2018, the 2^nd Defendant resigned from the Plaintiff on the same day. As such, the 2^nd Defendant’s employment with the Plaintiff was terminated on 27 July 2018.

6. By reason of the 2^nd Defendant’s position as an agent and an employee of the Plaintiff, the following fiduciary duties were and are still (sic) to the Plaintiff by the 2^nd Defendant:-

(1) Not to take benefit out of the Plaintiff’s assets without the informed consent of the Plaintiff or to make use of, misapply or misappropriate the same for his own benefit;

(2) Not to use, disclose or attempt to use or disclose to any person any secrets or confidential information of the Plaintiff, whether or not such use or disclosure is for the purposes of making a profit for himself; and

(3) To return to the Plaintiff any property belonging to the Plaintiff forthwith upon the termination of the agency and/or the employment.

7. Further or alternatively, §6(1) to (3) were implied terms of the employment agreement between the Plaintiff and the 2^nd Defendant. The said implied terms were implied from the nature of the said employment agreement, and/or by business efficacy, and/or as a matter of law.” [Emphasis added]

76.  §§6 and 7 of the SOC set out the entirety of the P’s case on the duties allegedly owed by D2 to P. In light of the SOC, I am unable to see how P could mount a claim that D2 owed to it fiduciary duties.

77.  First, it is well established that an employment contract per se does not give rise to a fiduciary duty owed by an employee to the employer. This was accepted by Ms. Choy in her written closing submissions. The legal position was explained in the leading case of Nottingham University v Fishel [2000] ICR 1462, where Elias J said this at 1491-1493:-

“The employment relationship is obviously not a fiduciary relationship in the classic sense. It is to be contrasted with a number of other relationships which can readily and universally be recognized as “fiduciary relationships” because the very essence of the relationship is that one party must exercise his powers for the benefit of another. Trustees, company director and liquidators classically fall into this category which Dr PD Finn, in his seminal work on fiduciaries Fiduciary Obligations (1977) has termed “fiduciary offices”. As he has pointed out, typically there are two characteristics of these relationships, apart from duty on the office holder to act in the interests of another. The first is that the powers are conferred by someone other than the beneficiaries in whose interests the fiduciary must act, and the second is that these fiduciaries have considerable autonomy over decision making and are not subject to the control of those beneficiaries.

By contrast, the essence of the employment relationship is not typically fiduciary at all. Its purpose is not to place the employee in a position where he is obliged to pursue his employer’s interests at the expense of his own. The relationship is a contractual one and the powers imposed on the employee are conferred by the employer himself. The employee’s freedom of action is regulated by the contract, the scope of his powers is determined by the terms (express or implied) of the contract, and as a consequence the employer can exercise (or at least he can place himself in a position where he has the opportunity to exercise) considerable control over the employee’s decision making powers. This is not to say that fiduciary duties cannot arise out of the employment relationship itself. But they arise not as a result of the mere fact that there is an employment relationship. Rather they result from the fact that within a particular contractual relationship there are specific contractual obligations which the employee has undertaken which have placed him in a situation where equity imposes these rigorous duties in addition to the contractual obligations. Where this occurs, the scope of the fiduciary obligations both arises out of, and is circumscribed by, the contractual terms; it is circumscribed because equity cannot alter the terms of the contract validly undertaken. The position was succinctly expressed by Mason J in the High Court of Australia in Hospital Products Ltd v. United States Surgical Corporation (1884) 156 CLR 41, 97 as follows …

“that contractual and fiduciary relationships may co-exist between the same parties has never been doubted. Indeed, the existence of a basic contractual relationship has in many situations proved a foundation for the erection of a fiduciary relationship. In these situations, it is the contractual foundation which is all important because it is the contract that regulates the basic rights and liabilities of the parties. The fiduciary relationship, if it is to exist at all, must accommodate itself to the terms of the contract so that it is consistent with, and conforms to, them. The fiduciary relationship cannot be superimposed upon the contract in such a way as to alter the operation which the contract was intended to have according to its true construction.”

The problem of identifying the scope of any fiduciary duties arising out of the relationship is particularly acute in the case of employees …

Accordingly, in analysing the employment cases in this field, care must be taken not automatically to equate the duties of good faith and loyalty, or trust and confidence, with fiduciary obligations. …

Accordingly, in determining whether a fiduciary relationship arises in the context of an employment relationship, it is necessary to identify with care the particular duties undertaken by the employee, and to ask whether in all the circumstances he has placed himself in a position where he must act solely in the interests of his employer. It is only once those duties have been identified that it is possible to determine whether the fiduciary duty has been breached.” [Emphasis added]

78.  Those principles were re-affirmed by the English Court of Appeal in Ranson v Customer Systems plc [2012] EWCA Civ 841, at §§22; 24-35; 41-43. In particular, Lewison LJ emphasized the following:-

(1)  The starting point for determining whether an employee owed fiduciary duties to the employer; and if so, what duties, is the contract of employment: §25.

(2)  An analysis of an employee’s contractual obligations (including his job description) is an essential foundation for determining the scope of the obligation of fidelity: §34.

(3)  There is difference between the contractual duty of fidelity and duties of a fiduciary. The hallmark of a fiduciary is a single-minded duty of loyalty. The duty of loyalty in that context has a precise meaning, namely the duty to act in the interests of another. But this is not a feature of an employment relationship. In the employment context, the duty of loyalty, whilst given the same label, is one where each party must have regard to the interests of the other, but not that either must subjugate his interests to those of the other. The distinguishing mark of the obligation of a fiduciary, in the context of employment, is not merely that the employee owes a duty of loyalty but of single-minded or exclusive loyalty: §§41-42, citing Helmet Integrated Systems Ltd v Tunnard [2007] FSR 16 at §36, per Mose LJ.

79.  Similarly, during closing submissions, Ms. Choy also cited to me Otkritie International Investment Management Ltd v. Urumov [2014] EWHC 191 (Comm), where Elder J said this at §72:-

“72. The touchstone is that a fiduciary is someone “who has undertaken to act for or on behalf of another in a particular matter in circumstances which give rise to a relationship of trust and confidence”: Bristol & West Building Society v Mothew [1998] Ch 1, 18 per Millett LJ. In the employment context, the courts typically look to the employee’s contractual obligations and the circumstances of his employment, for example seniority, managerial responsibility, decision-making autonomy, independence and the vulnerability of the employer, which may justify holding the employee bound by a duty of loyalty to the employer: Helmet Integrated Systems Ltd v. Tunnard [2006] EWCA Civ 1735; Foster Bryant Surveying Ltd v Bryant [2007] IRLR 425; Crowson Fabrics Ltd v Rider [2008] IRLR 288.”

80.  In Hong Kong, the position is the same that an employment relationship per se does not attach fiduciary duties: Leader Screws Manufacturing Co Ltd v. Huang Shunkui [2021] HKCFI 141 at §46, per Au-Yeung J.

81.  In light of the authorities set out above, I accept that it is perfectly possible for fiduciary duties to arise in the context of an employment contract. However, should P wish to assert that D2 as an employee owed to it fiduciary duties, it is incumbent upon P to plead and identify all the relevant material facts, such as the material terms of the employment contract; the particular duties undertaken by the employee; his seniority, managerial responsibility, decision-making autonomy and independence; etc. It is only after pleading those material facts that the Court can then consider if D2 as an employee has placed himself in a position where he must act solely in the interests of his employer P.

82.  However, none of these material facts are pleaded in the SOC.

(1)  The only plea in §2 of the SOC that D2 was the manager of P is plainly not sufficient. P relies upon Tesco Stores Ltd v. Pook [2004] IRLR 618 at §66 to contend that a senior management employee just below board level was in a fiduciary position. Nonetheless, the employee’s title alone is not adequate for the Court to find that D2 owed to P any fiduciary duties. It is trite that the court is concerned with substance rather than form (let alone the title of the employee alone).

(2)  In §6 of the SOC, the only matters pleaded in support of the claim of fiduciary duties on the part of D2 is the fact that D2 was “an agent and an employee of the Plaintiff”. This is clearly inadequate for the purpose of showing that D2 owed to P fiduciary duties.

(3)  §7 of the SOC adds nothing. It merely repeats the three duties pleaded in §6 and alleges that they were also implied into the employment contract.

83.  In those circumstances, the SOC is clearly inadequate to support P’s case that D2 owed to P fiduciary duties.

84.  Belatedly in the closing submissions, Ms. Choy relied upon other factual matters to argue that D2 owed to P fiduciary duties, namely, that (1) D2 was one of the persons being authorized to operate P’s bank accounts; (2) D2 was entitled to receive director’s emoluments / bonus; (3) the salary of D2 was significantly higher than the other workers; (4) D2 had access to P’s computer system which was password-protected; and (5) D2 was involved in major matters of P.

85.  Yet the fact remains that none of these material facts were ever pleaded in the SOC. In my judgment, it is not open to P to advance any breach of fiduciary duties against D2.

F2.  Other claims that are not pleaded in the SOC

86.  The SOC is defective in two other aspects.

87.  First, whilst only fiduciary duties were pleaded in §6 of the SOC, there is no plea in the SOC of any implied duties of good faith and fidelity owed by D2 as an employee to P.

88.  Second, it is also significant to note that the only duties that are said to be owed by D2 to P are those 3 duties set out in §§6(1) to (3) of the SOC.

89.  Nonetheless, in the closing submissions, Ms. Choy submitted that D2 committed breaches of various duties:-

(1)  First, D2 was in breach of a fiduciary duty owed to P, when he failed to inform P of the setting up of D3.

(2)  Second, D2 was in breach of the duty of good faith and fidelity, when D2 wrongfully poached the 4 Employees to work for D3 in competition with P.

(3)  Third, in breach of the fiduciary duty owed by D2 to P, there was wrongful solicitation of P’s customers by D2.

90.  In my judgment, the first head of complaint (i.e. failure to inform P of the setting up of D3) is not open to P, when (1) no material facts in support of fiduciary duties were pleaded in the SOC; (2) no duty of good faith and fidelity was pleaded; and (3) worse still, the only duties pleaded in §§6(1) to 6(3) of the SOC do not include any duty not to establish any business in competition with that of the employer. The incorporation of D3 did not amount to any breach of any those duties pleaded in §§6(1) to 6(3) of the SOC.

91.  The second head of complaint against D2 (i.e. the breach of duty in wrongful solicitation of the 4 Workers) is not open to P either, when it is not pleaded in the SOC any duty of good faith and fidelity against D2. Further, the only three duties pleaded against D2 in §6 of the SOC do not cover any duty not to solicit the employees of P.

92.  Likewise, the third head of complaint (i.e. wrongful solicitation of P’s customers by D2) is not open to P, when P fails to plead that D2 owed to P any such duty or the implied duty of good faith and fidelity. In any event, the duties pleaded in §§6 and 7 of the SOC are inadequate and do not cover any duty on the part of D2 not to solicit customers of P.

93.  During the closing submissions, I raised with Ms. Choy as to why P could advance a case that is not pleaded; and yet she could not provide any or any satisfactory answer. In my judgment, in the absence of a plea of those duties (let alone a properly formulated one), it is not open to P to complain that D2 was in breach of such duties of good faith and fidelity. It is not open to P to advance such claims against D2.

F3.  An implied duty not to use any trade secrets

94.  Many of the duties or breaches now relied upon by P in the closing submissions are not pleaded. Nonetheless, on the basis of §6(2) of the SOC, I am prepared to hold that it is an implied term of the employment contract that D2 qua employee will not use any trade secret or confidential information of P which he learned by reason of his employment: see for instance Chitty on Contracts, Vol. 2 (34^th ed) §42-068.

G.  The establishment of D3 to run a business in competition with P

95.  On the setting up of D3, as stated in §§65-67 and §90 above, in light of the defective SOC, it is not open to P to advance any claims against D1 or D2 for any wrongful establishment of D3. But solely for the sake of completeness, I also set out my findings and rulings on the evidence and submissions.

G1.  Applicable principles

96.  P relies upon Kao Lee & Yip v. Donald Koo Hoi Yan & Ors [2003] 3 HKLRD 296 at §50, per Ma J (as he then was), to contend that D1 as a director / fiduciary owes the no-conflict duty. It was submitted for P that the Court applies an objective test, namely, whether a reasonable man looking at the relevant facts would think that there to be real sensible possibility of conflict.

G2.  The evidence that P relies upon against D1

97.  P relies upon the following evidence against D1 to show that D1 was involved in the business of D3.

98.  First, P relies upon the evidence of Ng Chor Lun (吳楚倫) of Yick Fung. According to Ng Chor Lun:-

(1)  On around 23 July 2018, Ng went to deliver some fish to D3’s shop in Tai Kok Tsui. He was greeted by D1, who collected the fish from him. D1 then showed him around the shop and told Ng that he had helped with applying for the gas licence.

(2)  Ng further recalled that, on one occasion back in about 2016, D1 asked Ng if there were any shop premises available for rent in Yau Tsim Mong District.

99.  Second, P relies upon a transcript of telephone conversation between Yuen and one Mr. Wong (“Wong”), the owner of the owner of 藝新工程公司 (Ngai Sun Engineering Co) (“Ngai Sun”). According to Yuen, in around January 2019, he was told by Mr. Wong that D1 had ordered some machine parts from Ngai Sun and asked Ngai Sun to deliver those parts to Tai Kwok Tsui. Although Mr. Wong did not give any viva voce evidence, P relies upon the telephone conversation as recorded and the transcripts produced.

100.  Third, Ms. Choy also sought to rely upon Yuen’s evidence. According to Yuen, on 10 September 2018, Yuen called one Ms. Hui of 高妹小食; and he was informed by Ms. Hui that, D1 told her to place orders with D3 when D1 collected money from Ms. Hui.

101.  Fourth, P asked the court to draw the inference that D1 must have been participated in the establishment of D3, or its business. Ms. Choy argued that D2 himself has no relevant experience, as he studied business in university and that the only job before joining P was a liberal studies tutor at the university. It is P’s submission that D2 must have consulted D1 on the setting up of D3; and that D1 must have provided some help.

102.  On the basis of such evidence, it is submitted for P that, a reasonable man looking at the relevant facts would think that there to be a real sensible possibility of conflict, and thus D1 was in breach of the no-conflict duty.

G3.  Analysis on P’s evidence against D1

103.  I would address the evidence first.

104.  On the transcript of the telephone conversation between Yuen and Mr. Wong of Ngai Sun and also the conversation between Yuen and Ms. Hui, Mr. Leung asked me to draw adverse inference against P for failing to call Mr. Wong or Ms. Hui. He relied upon various authorities, such as Li Sau Keung v Maxcredit Engineering Ltd [2004] 1 HKC 434, 443E-444C, per Le Pichon JA. It was later applied by Deputy High Court Judge Lisa Wong SC (as Lisa Wong J then was) in South China Securities Ltd v. Lam Kwen Yuen [2012] 5 HKLRD 524, where the learned judge said this:-

“7. … I take note, of the principle that where a person without explanation fails to call as a witness a person who he might reasonably be expected to call, it is open to the Court to infer that that person’s evidence would not have helped that party’s case. See, e.g. Li Sau Keung v. Maxcredit Engineering Ltd [2004] 1 HKC 434, 443E-444C, per Le Pichon JA, citing O’Donnell v Reichard [1975] VR 916 at 929, per Newton and Norris JJ. The same principle would apply to a failure without proper explanation to produce a document or other real evidence that a party might reasonably be expected to disclose.”

105.  Mr. Leung also relied upon Hoie Sook Fong v. Ismail Halima & Anr (unrep), HCA 1974/2006, 24 December 2008, where Sakhrani J said this at §53:-

“53. I would also observe that the 2^nd defendant has failed to provide a satisfactory explanation for not calling Wong as a witness. He is still employed by the 2^nd defendant and he has been mentioned as the person to whom the 1^st defendant spoke both before and after the auction. In my view an adverse inference can and should be drawn against the 2^nd defendant …”

106.  I am not persuaded by Mr. Leung’s arguments. The present case is different from those cases cited by Mr. Leung. As Mr. Wong and Ms. Hui were never P’s employees and were only P’s equipment supplier or customer, there is no basis for Mr. Leung to suggest that P is reasonably be expected to call and yet had failed to call Mr. Wong / Ms. Hui.

107.  Nonetheless, I would not attach any weight to the transcripts of the telephone conversation between Yuen and Mr. Wong and also Yuen and Ms. Hui, when what was said by Mr. Wong and Ms. Hui during the telephone conversations was nothing but hearsay. There is no chance for Ds to cross-examine Wong / Hui. Insofar as Mr. Wong is concerned, it is not even clear as to when the said telephone conversation took place. In the Amended Reply, it is pleaded that the said telephone conversation took place in about January 2018. But in Yuen’s evidence, he maintained that the telephone conversation took place in January 2019. There is no application for amendment to correct such error / discrepancies.

108.  In any event, the aforesaid evidence relied upon by P cannot be evidence that D1 had any personal interest in the business of D3, such that his personal interest conflicts with that of P.

(1)  First, there is no allegation, let alone evidence, that D1 benefited from the business of D3. In §98(3) of P’s written closing submissions, relying upon such evidence, Ms. Choy contends that D1 participated in the setting up of D3, thereby placing himself in a position “where his son’s interests would or possibly may conflict with those of P” (emphasis added).

(2)  Second, P has not identified any personal interest of D1 which may be said to have conflicted with those of P. The undisputed facts are that D2 was at all material times the sole shareholder and director of D3. P has never pleaded, or adduced any credible evidence to show that, D1 was a shareholder or director of D3, or that D1 had any stakes in the business of D3. Counsel for P has never attempted to identify any interests that D1 has derived from D3, which are said to have conflicted with D1’s duties owed to P.

109.  On Ng’s evidence, even if I were to accept Ng’s evidence that D1 was present at the shop to collect the fish, this is not adequate to show that D1 had any interest or stake in the business of D3. The fact is that D2 was at all material times the only shareholder and director of D3; and that there is no allegation, let alone evidence from P that D2 was acting as a nominee of D1.

110.  Finally, contrary to Ms. Choy’s submissions, I am not prepared to draw the inference that D1 must have been participated in the establishment of D3 when D2 has no such experience.

(1)  During cross-examination, D2 was challenged for his lack of relevant experience in the setting up of a food production factory, when his previous working experience was a liberal studies tutor at the university; and P submitted that D1 must have been involved in the setting up of D3.

(2)  In the cross-examination, D2’s explanation is that he had retained some third-party contractors to assist with the setting up of D3. Ms. Choy criticized D2’s evidence as recent fabrication when there was no previous discovery of relevant documents relating to the hiring of third parties.

(3)  I find such criticism made by Ms. Choy against D2 unfair. In the SOC, it is never averred that D1 was involved in the setting up of D3. P has not even pleaded in the SOC that D1 assisted D2 in the establishment of D3. Even in the Amended Reply filed, there is no plea that D1 had assisted D2 in the establishment of D3. P has never administered interrogatories or sought any discovery against Ds in this connection. In those circumstances, it is unfair to blame D2 for not disclosing those documents relating to the hiring of third-party contractors for the setting up of D3.

G4.  P’s pleaded case against D2

111.  I have already held that, on the basis of the pleadings, it is not open to P to advance claims against D2 about the setting up of D3, for the simple reason that (1) no material facts were pleaded to establish that D2 owed to P fiduciary duties; (2) there is no plea of any duty of good faith and fidelity owed by D2 to P; and (3) there is no plea of any duties owed by D2 to P not to establish any competing business (as pleaded in §§6 and 7 of the SOC).

112.  Even if I were to allow P to advance such unpleaded case against D2, the evidence did not show that D2 had crossed the line.

113.  The legal position is that set out in Helmet Integrated Systems Ltd v. Tunnard [2007] FSR 16, where Moses LJ said this at §§26-27:-

“26. … But whilst he must not compete with his employer during the course of his employment, the duty of fidelity imposes no inhibition on his competing against his former employer once he has left. He is entitled to take the skill he has acquired and developed during the course of his employment and apply it for his own benefit once he has left, even if that involves competing against his former employer. He may also take with him and use knowledge and information which he has acquired, provided he does not use or disclose information properly described as a trade secret (see e.g. Faccenda Chicken Ltd v Fowler [1986] 1 Ch 117 at 136).

27. This freedom to compete, once an employee has left, unrestrained by any enforceable covenant, carries with it a freedom to prepare for future activities, which the employee plans to undertake, once he has left. In Robb v Green (above), Hawkins J concluded that a manager who had copied a list of customers was liable in damages for breach of an implied term not to use such information to the detriment of his employer. But he observed, in words echoed frequently thereafter, that each case would depend upon its own circumstances and there will be cases where an employee may legitimately canvass, issue circulars, have a place of business ready and hire employees. The Court of Appeal made no observation suggesting disagreement when it affirmed Hawkins J’s conclusion.”

114.  Applying the aforesaid principles:-

(1)  Insofar as D2’s conduct is concerned, any conduct after 27 July 2018 is not relevant for present purposes, given it is common ground that D2’s employment contract was terminated with effect from 27 July 2018.

(2)  For D2’s conduct before 27 July 2018, whilst in the course of his employment with P, it was open to D2 to undertake preparatory steps for the purpose of setting up D3.

(3)  D2’s evidence is that the planning and arrangement for the setting up of D3 took place during D2’s spare time. P has not been able to adduce any evidence to challenge the same.

(4)  P has not been able to adduce any evidence to show that D2 took such steps during employment with P. P has not been able to show any actual competitive activities on the part of D2 prior to his resignation on 27 July 2018. Merely taking preliminary steps does not give rise to any such duties, as long as there is no actual competitive activity such as competitive tendering or actual trading: Kao Lee & Yip (above) §76, per Ma J (as he then was), citing Balston Ltd v. Headline Filters Ltd (No. 2) [1990] FSR 385 at 412, per Falconer J.

115.  In conclusion, P has failed to plead, let alone establish, breach of duties on the part of D1 and D2 in respect of the setting up of D3. Further and in any event, in light of the evidence before this Court, even if I were to allow P to advance such claims, I would still have held that P failed to establish any breach of duties on the part of D1/D2 in respect of engaging in the business of D3.

H.  Whether D1 / D2 made use of any Confidential Information of P

H1.  P’s case

116.  According to §8 of the SOC, the Confidential Information is pleaded to cover the following: (1) customer lists, personal data and contact information of the customers; (2) supplier lists, personal data and contact information of the suppliers; (3) financial and market data; and (4) information concerning the products purchased by each the customer of P, such as dates, invoices numbers, types of products and unit prices.

117.  To substantiate the claim under this head, P relies upon the evidence of Yuen. Yuen’s evidence is that the Confidential Information constitutes trade secrets of P. It is also the evidence of Yuen that, in about July and August 2018, D1 went back to the office of P and took some pictures of certain documents of P. D1 also made some photocopies of the documents and also copied certain files in a USB. According to Yuen, he believed that D1 had passed the Confidential Information to D2.

H2.  Ds’ defences

118.  In defence, Ds contend that the Confidential Information is not trade secret of P, and the information such as clients’ contact or suppliers’ contact is available in the public domain. Further, D1 also denied that there was any wrongful misappropriation of any confidential information of P. Ds also deny any wrongful use of any trade secrets of P.

H3.  The applicable law

119.  Both parties referred me to several decisions in Hong Kong.

120.  First, they both rely on The University of Hong Kong v Hong Kong Commercial Broadcasting Co Ltd [2016] 1 HKLRD 536 at §38, and contends that P would need to prove the 3 elements identified by G Lam J, namely:-

(1)  the information itself has the necessary quality of evidence about it;

(2)  that information has been imparted in circumstances importing an obligation of confidence;

(3)  unless restrained there is likely to be an unauthorized use of that information to be detriment of the plaintiff.

121.  The parties also referred me to AXA China Region Insurance Co Ltd v Pacific Century Insurance Co Ltd [2003] 3 HKC 1. After referring to the various leading cases in this area,[6] Deputy High Court Judge To (as he then was) summarized the legal principles at §38:-

“38. The principle to be distilled from all these well considered authorities is that a trade secret or its equivalent must be information:-

(1) Used in a trade or business (Lansing Linde and Faccenda Chicken;

(2) Is confidential, i.e. not already in the public domain (Thomas Marshall v Guinle and Faccenda Chicken);

(3) Can be easily isolated from other information which the employee is free to use so that any man of average intelligence and honesty would think it is improper to use the information at the disposal of his new employer (Faccenda Chicken 5(d) and Printers & Finishers)

(4) Which, if disclosed to a competitor, would be liable to cause real or significant harm to the owner, (Lansing Linde and Thomas Marshall v Guinle); and

(5) Which the owner of the information must limit its dissemination or at least not encourage or permit its widespread publication or otherwise impress upon the employee the confidentiality of the information (Lansing Linde and Faccenda Chicken 5(c)).

(6) The test to be applied for items (2) and (4) is that of the owner’s subjective belief in the light of the usage and practices of the trade and industry. All circumstances must be taken into account, including the nature of the employment, for example whether the employment is in a capacity where confidential material is habitually handled by the employee or agent (Faccenda Chicken 5(a) and Printers & Finishers).”

122.  In the closing submissions, Ms. Choy also sought to rely upon the well-known case of Robb v Green [1895] 2 QB 1 at 18-19. In that case, the defendant was employed as manager by the plaintiff of his business; and secretly copied from his master’s order-book a list of the names and addresses of the customers. At 18-19, Hawkins LJ held that, the collection of the names and addresses in the order book was the property of the plaintiff; and that the compilation made the book and the list so valuable to the defendant; and facilitated his endeavours to entice his master’s customers to the detriment of the latter. It was held that by making a copy of the master’s book it was a gross breach of the manager’s duty owed to the master.

123.  In the closing submissions, Ms. Choy also relied upon the decision in Crowson Fabrics Ltd v. Rider [2008] FSR 17 at §44 cited by Ds. In that case, the claimant was engaged in the design and production of fabrics for home furnishing. The defendant was entrusted with the task of setting up a “Supplier Bible”, which formed one of the confidential information in question. It was a document which the defendant was asked to work on, containing the suppliers’ name, address, full contain details, etc. In that case, the plaintiff’s evidence was that the Supplier Bible was the combination of years of work and that the value of the information to a competitor was literally priceless.

H4.  Discussion

124.  I have difficulties in accepting P’s case – in light of the various problems in terms of P’s pleadings and its evidence.

125.  First, it is pertinent to note §8 of the SOC, the “Confidential Information” was pleaded to include “customer lists” and “supplier lists”.

126.  However, when I made enquiries with Counsel for P as to where the customers lists and the supplier lists could be found in the hearing bundles, I was informed by Counsel that no such lists could be found in the hearing bundles. In such circumstances, P is not able to rely upon the dicta in §44 of Crowson Fabrics Ltd v Rider (above) or Robb v. Green (above). In the present case, there is no evidence of any customer lists or supplier lists. There is also no evidence from P as to how such lists were created or the efforts involved in compiling such lists. When P fails to adduce such evidence, such failure makes the present case very different from the “Supplier Bible” discussed in Crowson Fabrics (above) or the order-book in Robb v Green (above). Without even seeing such lists, it is simply impossible for this Court to consider if they could be regarded as trade secrets / confidential information that requires the court’s protection.

127.  Second, on the contact information of the customers and suppliers (as pleaded in §8(1)-(2) of the SOC), Mr. Leung relied upon Crowson Fabrics Ltd v Rider (above) §§98-99 and argued that such information is available in the public domain and therefore does not constitute the trade secret of P. As Mr. Leung rightly submitted, such information about the contact information of the suppliers / customers of P could be located on internet or various online food and restaurant guides. Further, many of the information such as the name or telephone numbers of the restaurants / food stalls could be obtained when one just goes into the relevant shops or food stalls. As such, I do not accept that such contact information as the trade secrets of P.

128.  Further, insofar as the suppliers list is concerned, whilst it is the pleaded case of P that the contact details of the suppliers constitute trade secrets of P; and that D1 and D2 made use of P’s suppliers list to contact its suppliers, there is no such evidence from P to this effect. There is no submission either to explain why the contact details of the suppliers would constitute trade secrets of P.

129.  Third, it is well established that any confidential information should be pleaded and defined with utmost clarity. However, it is not clear what is meant by “financial and marketing data” as pleaded in §8(3) of the SOC. Ms. Choy made no submission to elaborate on what constituted such “financial and marketing data”; or how they could be said to be trade secrets that require protection for P. Without any evidence or submissions, this Court is not able to tell if such financial and marketing data would constitute trade secrets of P. For the sake of completeness, if and insofar as information relating to the market is concerned (described in §12 of Yuen’s witness statement as 市場資訊), it is difficult, if not impossible, to see how such information could be regarded as P’s trade secrets.

130.  Fourth, on the “information concerning the products purchased by each customer of P, including the dates, invoice numbers, types of products and unit prices” pleaded in §8(4) of the SOC, it is difficult to see how the dates or invoice numbers can be said to be trade secrets of P, for it is impossible to see how the disclosure of such information would cause any harm to P. Ms. Choy has not put forward any submissions to that effect either.

131.  Finally, on “the types of products and unit prices”, on the basis of the evidence and the legal arguments before me, I also have difficulties to see how they could be regarded as trade secrets of P. The evidence of D2, which is not disputed by Yuen, is that information such as the types of products ordered and the unit prices of the goods supplied could be readily obtained from the relevant supplier of P, or the customers of P. Further, information such as the quantity of goods and the name of the customer is also marked on the delivery bags when the goods were delivered to the respective customers. On such basis, relying on Crowson Fabrics v. Rider [2008] FSR 17, §102, Ds argue, that such information cannot be traded as trade secrets. In that case, Peter Smith J held that, on the facts in that case, matters such as sales figures and profit margins on the facts of that case were not trade secrets, as such information would be readily obtained from the suppliers in the course of negotiation.

132.  Whilst it is also P’s case that D1 had misappropriated the Confidential Information of P, P also fails to discharge its burden of proof when P could not even establish what trade secrets that D1 or D2 took away.

133.  In any event, on the evidence of the misappropriation, P relies upon the evidence of Yuen. However, in my judgment, it is unsafe to rely upon Yuen’s evidence. According to Yuen’s own evidence, his eyesight was not good, as he had previously suffered from cataracts and retinal detachment. Further, he accepted that he could not tell what those documents or information were taken by D1 when there was quite some distance of about 3 to 5 feet between him and D1 (whilst D1 was using the USB memory stick). No discovery / interrogatories or other investigation was ever made before the trial. As a result, it is impossible for this Court to tell what the documents allegedly taken away by D1 consisted of; and whether those documents contained or were said to constitute the trade secrets of P. Yuen also frankly admitted during cross-examination that he never personally witnessed that D1 passed any such information to D2.

134.  In conclusion, P fails to establish any breach of confidence or misuse of trade secrets against Ds.

I.  The alleged solicitation of the 4 Employees

I1.  P’s case against D2

135.  In light of the defective SOC, it is my ruling that such head of claim is not open to P against D2, when (1) no facts were pleaded in the SOC to show that D2 owed to P a fiduciary duty; (2) no duty of good faith and fidelity was ever pleaded by P, let alone its breach; and (3) no duty not to solicit any employees was ever pleaded in the SOC (Cf. SOC §§6-7).

136.  In any event, even if I were to consider the evidence of P against D2 under this head, I do not see how P could establish its case against D2. P’s case in this respect is based solely upon the evidence of Yuen. According to Yuen, he was told by Lai Kam Shing (黎金勝) (“Lai”), that, on 24 July 2018, D2 called upon each of the employees and spoke to them individually and asked if they would join him to work at the Kowloon address. Lai was at the material times another employee of P. Lai continued to work for P even after the split between Yuen and D1. Lai was still an employee of P at the time of this trial.

137.  Yuen’s evidence is nothing but hearsay, for Yuen admitted that he himself has no personal knowledge of the matter, as he was not present at the office at the material time on 24 July 2018.

138.  I am not prepared to rely upon the hearsay evidence adduced by Yuen. There is no reason why P chose not to call Lai, especially when he remained as an employee of P. Even when I refuse to accept Mr. Leung’s submissions to draw adverse inference against P, the fact remains that P has not been able to establish its case by calling Lai. I agree with Ds’ submission that no weight can be attached to such hearsay evidence.

139.  On the other hand, Ds called Chow. It is not disputed that Chow was in the employment of P from 2003 to 31 July 2018. She was responsible for the production of fish dumplings (魚皮餃). Her evidence is that:-

(1)  In the morning on 24 July 2018, in the absence of Yuen, D2 informed the staff of P that he would resign. According to Chow, D2 did not say anything about his next job or career plan; and D2 did not mention anything about D3.

(2)  Later, on about 27 July 2018, Yuen and D1 had a meeting with all the staff of P; and announced that P would cease its business on 27 July 2018 after the completion of the last delivery on that day; and that it would terminate the employment contracts of all the staff on 31 July 2018. She was surprised and worried about the fact that she would become unemployed.

(3)  After the aforesaid meeting, she learned that D2 would start a new business under the name of D3. She later agreed with D3 that she would start to work for D3 with effect from 1 August 2018.

140.  Tang’s evidence is similar to that of Chow. He denies that D2 had ever solicited him to work for D3. His evidence is that, after learning the termination of the business of P on 27 July 2018, he started to look for a new job. About two to three days thereafter, he knew that D2 has started D3. He thus decided to join D3 and continued to work for D3.

141.  Chow and Tang remained unshaken during cross-examination. Their evidence is consistent with the undisputed background facts, in particular the announcement made by Yuen and D1 for the cessation of the business of P on 27 July 2018. I see no reason to disbelieve their evidence.

I2.  Against D1

142.  It is P’s pleaded case that, in around July to August 2018, D1 caused the 4 Employees of P to resign and work with D3 instead.

143.  It was also argued for Ds that the SOC contains no particulars about D1’s involvement. Likewise, Yuen’s witness statement is again silent on this. It was only in Yuen’s supplemental witness statement filed in October 2021 that Yuen suggested for the first time that, on 31 July 2018, he persuaded the 4 Employees to stay by promising them increase in the annual bonus; and that if they chose to leave, P would not pay them any severance payment or damages in lieu of notice. It is Yuen’s evidence that D1 immediately suggested to the 4 Employees that, should they leave P to join D3, D1 would pay them cash that equals to the several payment and the damages in lieu of notice. It is Yuen’s evidence that such conduct constituted serious breach of duties on the part of D1.

144.  Even after the filing of Yuen’s supplemental statement, such averment was never pleaded back to the SOC by way of amendment.

145.  D1, Chow and Tang disagree with Yuen’s evidence.

146.  I am not prepared to accept the evidence of Yuen. Given the seriousness of the matter, had there been such serious breaches of duties on the part of D1, one would expect that such allegations would have already been covered in the SOC and in Yuen’s first statement. There is no credible explanation as to why they were not canvassed in the SOC or in his first statement.

147.  In conclusion, I find that P fails to plead any duty of good faith and fidelity against D2; and also fails to establish any breach of fiduciary duties against D1.

J.  The alleged wrongful solicitation of customers of P

148.  In the closing submissions, Ms. Choy focused her submissions against D2, arguing that D2 was liable to P for the wrongful solicitation of customers of P.

149.  But as stated above, this argument is not open to P because (1) no fiduciary duty was pleaded against D2; (2) no implied duty of fidelity and loyalty was pleaded against D2; and (3) none of the duties pleaded against D2 covered a duty not to solicit P’s customers.

150.  But even if I were to allow P to advance its case against D2, I would still have found that P had failed to discharge its burden of proof against Ds.

151.  First, P also relies upon the hearsay evidence of one of the bosses of 同榮泰. According to Yuen, 同榮泰was at the material times a customer of P and had been placing orders with P. One of the bosses of 同榮泰 informed Yuen that D1 had told him that P had moved to the factory premises in Tai Kwok Tsui; and invited them to place orders with that factory in Tai Kwok Tsui.

152.  Mr. Leung invited the Court to draw adverse inference against P for failing to call the said boss of 同榮泰 as a witness. For reasons set out above, I see no basis to draw such adverse inference against P.

153.  However, on the other hand, I am not prepared to place any weight on Yuen’s evidence for it is essentially hearsay evidence. Yuen could not even identify the name of the said bosses of 同榮泰. There is no explanation from P as to why that boss could not be identified. Ds also have no chance to cross-examine him. In the premises, I refuse to attach any weight to such hearsay.

154.  Second, P relies upon the evidence of Lo, the proprietor of 滿華堂, alleging that D2 wrongfully solicited the customers of P. However, I accept Mr. Leung’s submissions that there are inconsistencies between the evidence of Yuen and Lo.

(1)  Lo’s evidence is that it was D2 who approached him and told him that P would no longer deliver the goods.

(2)  This is contradicted by Yuen’s own evidence. According to Yuen, Lo told him that D1 had approached him and asked him to place orders with D3: Yuen 1^st statement §58(2). This is not corrected in Yuen’s evidence in chief.

(3)  As such, even in the evidence adduced by P, there are internal inconsistencies between the evidence of Yuen and that of Lo. There is no explanation for such inconsistencies. Ms. Choy has made no submissions as to why this Court can ignore such inconsistencies in P’s own evidence.

155.  Alternatively, if I were to consider Lo’s evidence alone, that would not help P’s case. Lo’s evidence is that it was D2 who approached him. But I have already ruled that this is not pleaded by P against D2 – there is no plea of any fiduciary duty; no plea of duty of fidelity and good faith; and no plea of any such duty not to solicit P’s customers. In my judgment, I reject P’s claims against Ds under this head.

156.  Third, Lo’s evidence is that D1 visited his shop in around mid-July 2018 and gave him a A5-size notice, stating that P would no longer deliver the goods with effect from late July 2018. Lo no longer kept the A5 notice. But that was quite consistent with the 26 July Notice. Further, there is no suggestion that D1 solicited 滿華堂to place orders with D3 but not with P.

157.  Fourth, it is P’s pleaded case that D2 had also solicited “some other customers” of P. After citing the examples of 同榮泰 and 滿華堂, Ms. Choy asked the Court to draw the inference that D2 had done the same to other customers, when D2 was responsible for collecting monies from customers (whilst working for P) and thus he had ample opportunities to do so. I am not prepared to draw such inference, when (1) P could not even establish the case relating to the said two customers; and (2) there are too many unknowns here, when it is not even identified in the pleadings what D2 had done or said; and to whom such solicitation was made by D2.

158.  Fifth, P also seeks to rely upon the evidence of Lam of 永記潮州粉麵. But Lam’s evidence does not assist P. His evidence is that on 27 July 2018, D2 told him that he had resigned from P. There is nothing wrong about it. Further, Lam’s evidence is that he placed order with D2 on 28 July 2018. But by that time D2’s employment with P had already been terminated on 27 July 2018.

159.  In conclusion, the fact remains that P has failed to plead a proper case against D2 for the breach of the duty not to solicit its customers. In any event, P also failed to discharge its burden of proof for the breach of duties under this head against D1.

K.  The alleged passing-off

K1.  P’s case against Ds

160.  P also sues D1-D3 for passing off. According to the SOC, D1 and D2 passed off D3’s products and services as products of P, damaging P’s goodwill and business.

K2.  Applicable principles

161.  In Re Ping An Securities Limited (2009) 12 HKCFAR 808, Gault NPJ said this at §17 (adopting Reckitt & Colman Products Ltd v Borden Inc [1990] 1 All ER 873 at 880F-J per Lord Oliver):-

“17. The elements of the tort of passing off relevant in this case are not in dispute. The plaintiff must establish a goodwill (in the country or region) in a business in the supply of goods or services distinguished by a name or mark that has been, or likely will be, damaged by conduct of the defendant that is misleading or deceptive to the public. No one is entitled to represent his goods or services as those of, or connected with, another whose goods or services are known in the market. These elements, as formulated by Lord Oliver in the well-known JIF[7] case, have been repeatedly relied upon. Having said that the questions which arise are, in general, questions of fact, he said:-

“The law of passing off can be summarized in one short general proposition, no man may pass off his goods as those of another. More specifically, it may be expressed in terms of the elements which the plaintiff in such an action has to prove in order to succeed. These are three in number.

First, he must establish a goodwill or reputation attached to the goods or services which he supplies in the mind of the purchasing public by association with the identifying ‘get-up’ (whether it consists simply of a brand name or a trade description, or the individual features of labelling or packaging) under which his particular goods or services are offered to the public, such that the get-up is recognized by the public as distinctive specifically of the plaintiff’s goods or services. Second, he must demonstrate a misrepresentation by the defendant to the public (whether or not intentional) leading or likely to lead the public to believe that goods or services offered by him are the goods or services of the plaintiff. Third, he must demonstrate that he suffers or, in a quia timet action, that he is likely to suffer damage by reason of the erroneous belief engendered by the defendant’s misrepresentation that the source of the defendant’s goods or services is the same as the source of those offered by the plaintiff.”

K3.  The evidence and discussion

162.  For the purpose of the claim for passing off, P relies upon the same evidence adduced relating to the solicitation of customers (summarized above, involving those representations made to one of the bosses of 同榮泰 and Lo of 滿華堂).

163.  On goodwill, Ms. Choy argued that P had enjoyed goodwill prior to the relevant events that took place in July 2018. She submitted that the fact that the orders placed by P’s customers prior to the incident are proof that P had goodwill amongst local restaurants and food stalls, earning a revenue of around HK$1,000,000 per month. With respect, such argument is erroneous, when the goodwill in the context of passing off cannot be just some general goodwill or something in abstract. Instead, as explained by Lord Oliver in Reckitt & Colman Products Ltd v Borden Inc (above), the goodwill in question should be “attached to the goods … which he supplies in the mind of the purchasing public by association with the identifying “get-up” (whether it consists simply of a brand name or a trade description, or the individual features of labelling or packaging) under which his particular goods or services are offered to the public”. Nonetheless, I am prepared to assume that there was goodwill attached to the products of P under the trade name of “海龍”.

164.  On the question of misrepresentation, Ms. Choy first submitted that D1 had attempted to issue the 24 July Notice on about 25 July 2018. But this cannot be treated as misrepresentation, when it is Yuen’s own evidence that he had prevented D1 from issuing the same to P’s customers. On Yuen’s own evidence, he cannot even tell if D1 had circulated it to any other customers.

165.  Second, P relies upon the evidence of Yuen and Lo (viz. that was adduced in connection with its claim against Ds for wrongful solicitation of customers of P, as summarized above).

166.  But as stated above, I am not prepared to place any weight on such hearsay evidence, when Yuen could not even identify the name of the said boss of 同榮泰. Yuen has not provided any or any sufficient reason as to why that boss could not be identified.

167.  Similarly, P relies upon the evidence of Lo, the proprietor of 滿華堂. Yet, as discussed earlier, I accept Mr. Leung’s submissions that there are inconsistencies between the evidence of Yuen and Lo. Yuen’s evidence was that it was D1 approached Lo. However, Lo’s evidence is that it was D2 (but not D1) who approached him and made the representation. There is no explanation for such inconsistencies. Ms. Choy has made no submissions as to why this Court can ignore such inconsistencies in P’s own evidence.

168.  Ms. Choy in her closing submissions also rely upon Yuen’s evidence, when he said in his witness statement that D1 and D2 had told P’s customers that P would close down and that D3 would take over P’s business. She argued that such statement implied that “D3 was a continuation of P”. I am unable to accept her submissions. First, Yuen has no personal knowledge and therefore this is again hearsay evidence. Even worse, Yuen has not been able to identify his source of information (from whom he allegedly learned that D1 and D2 made those misrepresentations). P clearly failed to discharge its burden of proof.

169.  In my judgment, P’s claims for passing off have to be dismissed.

L.  The Oral Agreement and the Subsequent Oral Agreement

170.  For the reasons set out in this judgment, P failed to establish or even plead the relevant duties or breach of duties against Ds. In those circumstances, my findings on the Oral Agreement would not improve the case of P. Yet solely for the sake of completeness, I also set out my findings on facts as follows.

171.  On the Oral Agreement, I am not prepared to accept the evidence of Yuen that the Oral Agreement was subject to the 2 Conditions.

(1)  As rightly submitted by Mr. Leung, there are inconsistencies between P’s pleaded case in the SOC and the evidence adduced by P. For instance, in §10(2) of the SOC, there is no plea that D1 would have to pay to Yuen the balance of the sum by any deadline. However, in Yuen’s witness statement, his evidence is that D1 promised him that he would pay Yuen the following day by a personal cheque.

(2)  Second, in Yuen’s witness statement, the 2 Conditions he described contain a lot of details and exact figures. For instance, the total assets of P were of HK$1,460,936.19; and that the total balances in the two bank accounts of P were in the sum of HK$871,162.39. Yet, such figures are not pleaded in the SOC.

(3)  Third, in §10 of the SOC, it is P’s pleaded case that the 2 Conditions were discussed on about 26 July 2018. But this is inconsistent with Yuen’s answers given in cross-examination, when he maintained that the 2 Conditions were discussed on 25 July 2018.

172.  Further, given the parties’ relationship was tense and had already turned sour, one would expect that, had they agreed that the Oral Agreement would be conditional upon the 2 Conditions, one would have expected that the 2 Conditions would be reduced into writing or somehow reflected in some contemporaneous documents. However, the fact that the Oral Agreement was made conditional upon the 2 Conditions was never canvassed in the contemporaneous documents.

173.  Likewise, Mrs. Yuen’s evidence does not state that the Oral Agreement was conditional upon the 2 Conditions.

174.  On the other hand, Ds relied upon the transcripts of the recording of the meeting that took place on 26 July 2018 taken by Tung Chau. The transcripts did not record that the parties had reached the Oral Agreement conditional upon the 2 Conditions.

175.  However, on the Subsequent Oral Agreement, I accept Yuen’s evidence that D1 did not object to the resumption of the business of P, when it is not disputed that some customers of P had expressed concerns about the difficulties they faced in locating alternative suppliers. As such, it is inherently probable for Yuen and D1 to have concerns that, should their supply of goods to their customers be discontinued, those customers might refuse to settle the sums they owed to P for the goods previously delivered. This is consistent with the objective facts that, even after 28 July 2018, D1 still accepted orders on behalf of P. It is not disputed that, D1 accepted the orders placed by 同榮泰 on 3 September 2018.

M.  Conclusion

176.  In conclusion, P’s claims are dismissed.

177.  On question of costs, I direct Ds to take out a summons for costs and any further directions they seek (setting out the costs order they respectively seek) within 14 days from the date of this Order, to have the summons returnable before me (with 30 minutes reserved) for the purpose of hearing any submissions on costs and any other consequential directions (if any).

178.  To allow P sufficient time to consider the matter and to prepare for written submissions, I would direct Ds to file any written submissions 14 days before the hearing (not exceeding 10 pages); and P to file any written submissions in opposition (if any) 7 days before the hearing (not exceeding 10 pages).