WILLWIN DEVELOPMENT (ASIA) CO LTD v. WEI XING AND OTHERS

HCA 797/2012

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NO 797 OF 2012

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D E C I S I O N

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Background

1.  This is the plaintiff’s application for an order that the interrogatories served by the 2^nd and 3^rd defendants on 30 September 2013 be withdrawn.

2.  The principles governing applications for interrogatories are clear, and are set out in Lee Nui Foon v Ocean Park Corporation (No 2) [1995] 2 HKC 395 and Kao Lee & Yip v Donald Koo Hoi Yan HCA 8847/1993, unreported 23 April 2002.  Interrogatories are for the discovery of facts.  They are admissible where they go to support the applicant’s case or destroy the opponent’s, but the court will in the exercise of its discretion only order interrogatories where they are necessary either for disposing fairly of the cause or matter, or for saving costs (O 26 r 1(1) Hong Kong Civil Procedure).  Particularly in the aftermath of the Civil Justice Reform, the question of necessity should be the prime consideration for the court when it decides whether interrogatories should be ordered, or permitted to stand.  If interrogatories are not necessary for disposing fairly of the cause or matter, or will only increase and not save costs, there is no justification why they should be allowed even if they can be said to be relevant to the facts in issue, and not otherwise impermissible.

3.  In this case, pleadings have been filed.  Particulars of pleadings have been requested and served.  Discovery was made and is apparently ongoing, and witness statements have been exchanged.  The trial is set down for 10 days, commencing on 3 November 2014.

4.  The plaintiff claims against the defendants for breach of fiduciary and equitable duties on the part of the 1^st and 3^rd defendants as directors and paid employees of the plaintiff, for breach of confidence, and in respect of their alleged diversion of the plaintiff’s business, their misappropriation of the plaintiff’s funds, and their passing off of the plaintiff’s business.

5.  By way of defence, the defendants deny that the plaintiff had owned any business as it alleges, and claim that the business alleged to have been carried on by the plaintiff in fact belonged to Shenzhen Willwin Technology Company Limited (“SWT”).  They claim that the plaintiff’s clients are the clients of SWT, and that any confidential information or reputation asserted by the plaintiff belong to SWT, and not to the plaintiff.  They deny the plaintiff had any confidential information, and also deny any use of the plaintiff’s alleged confidential information.  The defendants further deny that there was any misappropriation of the plaintiff’s funds.

6.  It is against this background that the defendants’ interrogatories will be considered.

Item 1 (1) of the disputed interrogatories

7.  The defendants seek interrogatories of “when the plaintiff ceased to pay the 3^rd defendant’s remuneration”.

8.  I do not allow this interrogatory to stand.

9.  On the face of the pleadings and the statements, it is claimed by the plaintiff and not disputed by the defendants that the 3^rd defendant was a director of the plaintiff, was paid by the plaintiff, and that she ceased to be a director of the plaintiff when Wei Wen of the plaintiff (“WW”) terminated the 3^rd defendant’s employment in June 2011 (paragraph 8 of WW’s statement, and paragraph 4 of the 3^rd defendant’s supplemental statement). 

10.  On the plaintiff’s case, the 3^rd defendant was also employed by SWT as a manager, and she ceased to be under SWT’s employment since 1 December 2011. 

11.  The 3^rd defendant admits that she was paid monthly remuneration of $6000 by the plaintiff, which formed part of her remuneration by SWT. 

12.  The plaintiff claims that the 3^rd defendant was a paid director under the plaintiff’s employment (paragraph 5 (b) of the Statement of Claim), and that as a paid employee of the plaintiff, the 3^rd defendant owed a fiduciary and contractual duty (paragraph 18 of the Statement of Claim) to the plaintiff.  The plaintiff claims that although the 3^rd defendant ceased to be a director of the plaintiff by the end of 2011, she continued to owe a duty not to divert business from the plaintiff (paragraph 19 of the Statement of Claim).  The plaintiff’s case is that the 3^rd defendant’s duties continued after she ceased to be a director, so whether the 3^rd defendant was paid, and when she ceased to be paid, are not relevant (on the plaintiff’s case).  In any event, WW already stated in paragraph 24 of his witness statement that the 3^rd defendant received monthly remuneration of $9,500 until 8 August 2011.

13.  As counsel for the plaintiff pointed out, the defendants have not either in their pleadings or in their witness statements raised any issue or case as to when the plaintiff had ceased to pay the 3^rd defendant’s remuneration, and how it would affect the plaintiff’s case against her.  I fail to see why this interrogatory is necessary in view of the matters already contained in WW’s statement.  If there are any inconsistencies in his statement, then they can be dealt with in cross-examination.

Item 1 (2)

14.  The defendants require the plaintiff to “explain how the plaintiff’s business was in decline prior to June 2011”.  This was in the context of paragraph 8 of WW’s witness statement, in which he states: “Based on my recollection, I had in or about June 2011 and by way of an email relieved the 3^rd defendant from her position as a director of the plaintiff and the plaintiff had thereafter ceased paying her monthly remuneration.  At that time, I had come to that decision because of a decline in the plaintiff’s business - it was solely a business decision made in the interests of the plaintiff.”

15.  This interrogatory cannot be allowed, as I fail to see how it can be said to be necessary for disposing fairly of the cause or matter or for saving costs.  In my view, the interrogatory is totally imprecise and prolix in character as an interrogatory.  The defendants seek an “explanation” as to how the plaintiff’s business “was in decline prior to June 2011”.  They seek to justify the interrogatory on the basis that the plaintiff seeks damages from the defendants in respect of their alleged breach of fiduciary and confidentiality duties, and that the decline of the plaintiff’s business is relevant to the quantum of damages recoverable by the plaintiff. 

16.  As Kay LJ pointed out in Oppenheim & Co v Sheffield [1893] 1 QB 5 at 15-16, if on a general view, the court considers that the length and character of the form of interrogatories are prolix or unnecessary, it is no answer to say that there are some aspects or features of the whole set of interrogatories which might be admissible if they stood alone.  In my view, it is for the defendants to frame the interrogatories in a precise and clear manner, limited to precise points on which information or admission is sought. The objective of interrogatories is to obtain information as to material facts which the applicant needs to prove in support of his case, or to reveal weaknesses in the other party’s case (Discovery, Matthews and Malek, paragraph 13.01) It would not be necessary for the trial judge to have a lengthy explanation from the plaintiff as to how the plaintiff’s business declined before June 2011, for the purpose either of deciding the facts in dispute in this case, or determining the quantum of damages claimed by the plaintiff.  To allow the interrogatory is in my view a waste of unnecessary costs, and totally disproportionate to any benefit that may be gained by the defendants.

Item 4

17.  This seeks information as to WW’s reference in his witness statement as to the 3^rd defendant’s “resignation in 2011”, and it requires the plaintiff to state “how and when the 3^rd defendant resigned from the plaintiff”.

18.  The plaintiff claims in paragraph 19 of the Statement of Claim that the 3^rd defendant ceased to act as the plaintiff’s director “by the end of 2011”.  WW claims in paragraph 8 of his statement that he relieved the 3^rd defendant from her position as director of the plaintiff in June 2011.  The 3^rd defendant herself states in her witness statement that the plaintiff terminated her directorship “in around June 2011”.

19.  Whilst the parties have not raised any issue as to the distinction between the 3^rd defendant’s resignation, and her removal as a director of the plaintiff, and how any such distinction will affect the plaintiff’s claim, or the defence, there is a dispute as to when the 3^rd defendant ceased to be a director of the plaintiff: in June 2011, or by the end of 2011. I will allow the interrogatory as to “how and when the 3^rd defendant resigned from the plaintiff”. 

Item 5

20.  This seeks “full particulars of each and every contract made between the Plaintiff’s Clients and the plaintiff”, including the terms, the date and time when the contract was made, the place where the contract was made, and the identities of the persons by whom the contracts were made.

21.  The plaintiff has set out in Annexure A to the Statement of Claim the identities of its clients (“Plaintiff’s Clients”), and claims that they directly contracted with the plaintiff for products and services to be rendered by the plaintiff.

22.  The purpose of interrogatories is to give to the applicant party information as to the facts of which the opponent party proposes to give evidence at trial.  Interrogatories are not to enable a litigant to ask what his opponent’s evidence is going to be and how his opponent is going to prove his case (Knapp v Harvey [1911] 2 KB 725).  I agree with counsel for the plaintiff that the disputed interrogatory seeks evidence of the facts relied upon by the plaintiff.  The facts asserted and pleaded by the plaintiff and which the plaintiff has to establish at trial are that the entities listed in Annexure A are its clients, and that the plaintiff had directly contracted with these clients for products and services.  The plaintiff has already given adequate particulars of the identities of these clients.  To seek further particulars of the making of each and every contract, and the terms of each and every contract made, is simply to extract evidence of the facts relied upon and to be proved by the plaintiff. 

23.  I also consider that the interrogatory is oppressive, requiring the plaintiff to embark on a prolonged examination of its records to obtain details of each and every of its agreements with its clients, the expenditure of time and trouble for which is disproportionate to any benefit to be gained by the defendants, and unnecessary for the issues for determination at trial.

Item 8

24.  The plaintiff claims in WW’s witness statement that the 1^st defendant had told a representative of a client of the plaintiff, Doone, that the plaintiff had changed its name to that of the 2^nd defendant.  The interrogatory seeks the identity of the representative of Doone who had given such information to the plaintiff, and how and when such information was communicated to the plaintiff.  The defendants highlight that no witness statement from Doone has been filed so they will not be able to cross-examine Doone on this matter.

25.  In resisting the interrogatory, the plaintiff claims that it has already disclosed emails exchanged between the plaintiff’s representative, one Betty, and one HJ Kim of Doone, and further claims that the information sought by the defendants is already apparent from these emails.

26.  I agree with the plaintiff that this interrogatory raises questions which go only to the evidence the plaintiff intends to adduce of the facts in dispute, which form no part of the facts themselves.  As such, the interrogatory is not permissible (paragraph 26/4/13 Hong Kong Civil Procedure, Mariott v Chamberlain (1886) 17 QBD 154, Knapp v Harvey [1911] 2 KB 725, Lee Nui  Foon v Ocean Park Corp (No 2)[1995] 2 HKC 395).  Even without the answer to the interrogatory sought, in view of the discovery already made and the witness statements exchanged, the defendants would not be surprised at the trial.

Item 9

27.  The same objection applies to the interrogatory which seeks the identity of the person who forwarded an email from Apple Inc to WW of the plaintiff, and when such email was forwarded.

Item 12

28.  The interrogatory relates to WW’s witness statement, and his claim that by January 2012, the 2^nd defendant was already in the process of manufacturing, testing and delivering products to a client, as evidenced by an email dated 10 January 2012.  The interrogatory seeks information on how and from where the email was obtained, who had provided the email to WW, and when it was provided.

29.  The interrogatory goes to the evidence which the plaintiff intends to adduce of the facts in dispute, and is not allowed.

Item 13

30.  The interrogatory refers to WW’s witness statement, and his claim that the 1^st defendant had, since December 2011, played an active role in the setting up and the initial staff recruitment exercise for the 2^nd defendant. WW refers to a series of emails and attachments to support his said claim, and the defendants’ interrogatory seeks information as to how and where the emails were obtained, who had provided the emails, and when the emails were provided to the plaintiff.

31.  Again, the interrogatory goes to the evidence, and not to the facts in dispute.  They should be dealt with in cross-examination, and submissions on credibility and the probative value of the emails can be dealt with at trial.  I am not satisfied that the interrogatories are necessary for disposing fairly of the cause or matter, or for saving costs.

Items 15 and 25

32.  The plaintiff pleads (paragraph 51, Statement of Claim) that despite its repeated requests, the 1^st and 3^rd defendants have not accounted for or explained the purpose of their withdrawals of funds from the plaintiff’s bank accounts.  WW says in his witness statement that “since about early 2011”, he had repeatedly called upon the 1^st and 3^rd defendants to give him a full or proper account of the monies they had withdrawn from the plaintiff “as well as the books of account that they should have prepared and kept for the plaintiff and SWT”. 

33.  The defendants seek information as to how and when the 3^rd defendant was called upon to give the full or proper account of the monies withdrawn.  I will allow the interrogatories which relate to the fact of the plaintiff’s alleged repeated requests for the 3^rd defendant’s account for the withdrawals, in terms of item 15 (1) which should be adequate.

34.  As for the interrogatory that the plaintiff is to “state what is being alleged that the 3^rd defendant needs to prepare and keep for the plaintiff and SWT”, I consider that the facts and matters stated in paragraph 121 of WW’s witness statement are clear, and that the interrogatory is not necessary.

Item 16

35.  The plaintiff pleads in paragraph 9 of the Statement of Claim that “in the course of undertaking and carrying out each order, project or testing procedures for the Plaintiff’s Clients, the plaintiff often has to be furnished with market sensitive, highly confidential and non-public information by the relevant client which includes but are not limited to product plans … (collectively referred to as ‘Clients’ Confidential Information’)”.

36.  By interrogatories, the defendants seek “full particulars” of the Clients’ Confidential Information furnished by each and every one of the Plaintiff’s Clients, whether such information is contained in a written or printable document, and full particulars of the “undertaking” given to each and every one of the Plaintiff’s Clients.

37.  First, I agree that the reference in paragraph 9 of the Statement of Claim to “undertaking” is not to an undertaking in the sense of a promise or guarantee, but is used as a verb.  Item 16 (3) of the interrogatories, which seeks particulars of each and every “undertaking” given, is misconceived and should be withdrawn.

38.  I also agree that paragraphs 9 and 11 of the Statement of Claim set out adequate detailed particulars of the confidential and non-public information referred to by the plaintiff, which particulars have been categorized under the labels of “List of Clients”, “List of Suppliers”, and “Technical Confidential Information”, the last of which refers to the plaintiff’s own technical operations and test procedures.  The defendants should have no difficulty in preparing their defence as to whether such information has the quality of confidence as claimed, whether any such information is in the public domain, and whether the defendants have misused the plaintiff’s confidential information.  The further information sought by interrogatories is unnecessary.

Item 17

39.  This seeks particulars of the confidential agreements entered into between the plaintiff and its clients, whereby confidential information of the clients is prevented from being communicated to the public and competing companies, and from misuse.

40.  It is unnecessary for the preparation of the defence to seek the details of each and every one of the confidentiality agreements made between the plaintiff and its clients.  When and where the agreements were made are irrelevant to the plaintiff’s claims against the defendants.  The defendants have not put forward any case as to how the identities of the plaintiff’s representative who made the agreements would have impact on either the plaintiff’s case against the defendants, or the defence.  In view of the particulars already provided of the effect of the confidentiality agreements, I am not satisfied that the further information sought, including the precise terms of the agreements, are necessary for the fair disposal of the cause or the defendants’ preparation for trial, or for saving costs.  Even if any of the details sought are relevant, the interrogatories are oppressive and disproportionate to any benefit that may be obtained.

Item 18

41.  The interrogatory seeks full particulars of the plaintiff’s Technical Confidential Information, and the means of the keeping and maintenance of such information.

42.  I consider that adequate particulars of the Technical Confidential Information have been supplied in paragraph 11 (c) of the Statement of Claim.  The remarks made under paragraph 38 above are equally applicable to the interrogatory made under item 18.  The interrogatories as to the plaintiff’s means of the keeping and maintenance of the Technical Confidential Information go to the evidence to be adduced by the plaintiff, as opposed to the facts as pleaded.  I am not satisfied that they are necessary.

Item 21

43.  The interrogatory relates to paragraph 31 (i) of the Statement of Claim, in which the plaintiff pleads that its Clients’ Confidential Information is only provided by its clients upon the plaintiff going through “a lengthy credit check and vetting process” which takes up to 1 to 2 years.  The defendants seek full particulars of each and every one of the credit check and vetting process that the plaintiff went through.

44.  The defendants have denied that the plaintiff had undergone any credit check or vetting process.

45.  Even if the particulars required by the defendants are relevant to any fact directly or indirectly in issue, I agree that the interrogatory is oppressive, disproportionate to the benefit to be obtained, and unnecessary for disposing fairly of the cause or matter or for saving costs.

Item 22

46.  In paragraph 31 (j) of the Statement of Claim, the plaintiff claims that since its inception, it “has invented, developed and /or modified its internal plant, equipment and technology to specifically cater to each of the Plaintiff’s Clients’ needs and requirements”.  The defendants seek full particulars of the inventions created by the plaintiff since its inception, the alleged internal plant owned by the plaintiff since its inception, the equipment and technology developed or modified by the plaintiff since its inception, and the location where they are stored and maintained.

47.  Read in its context, the reference to the plaintiff’s “internal plant” may mean its machinery and equipment used in its industrial or manufacturing process.  However, in the light of the pleadings and the issues for trial, I consider that it is oppressive and unnecessary to require the plaintiff to give particulars of each and every invention created by it since its inception, without regard to the ambit of the claims made by the plaintiff against the defendants.  It is for the defendants to phrase their interrogatory in a precise manner to justify their necessity for saving costs or for the fair disposal of the course or matter.  I am not satisfied that it is necessary to have the facts of all the plaintiff’s inventions made, all the plants it owned, all the equipment and technology it developed or modified, and the location where all these are stored and maintained, from the date of the plaintiff’s inception.

Item 23

48.  The facts sought by the interrogatory are already self-contained in paragraph 31 (k) of the Statement of Claim, and the interrogatory is not necessary.  Further facts or clarification can be elicited by cross-examination at trial.

Item 24

49.  The interrogatory which seeks full particulars of each and every one of the credit check, background checks and vetting processes undertaken by the Plaintiff’s Clients referred to in paragraph 41 of the Statement of Claim relates to evidence of the facts asserted by the plaintiff, and should not be allowed.  It is also oppressive, disproportionate to any benefit to be obtained, and unnecessary for saving costs.

Conclusion

50.  Of all the interrogatories served by the 2^nd and 3^rd defendants on the plaintiff, I have only allowed item 4, and item 15 (1), which covers item 25.  I order that all the other interrogatories are to be withdrawn, and make orders in terms of paragraphs 2 and 3 of the Summons issued on 28 October 2013.  Since the plaintiff has succeeded in substance on its application, I will make an order nisi that the plaintiff’s costs are to be paid by the 2^nd and 3^rd defendants forthwith, with certificate for counsel, on an indemnity basis since I consider that nearly all of the disputed interrogatories are totally unnecessary, and were unreasonably served.