ADVANCED MP TECHNOLOGY HK LTD v. SU YAN WEN LISA

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HCA 1288/2007

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NO. 1288 OF 2007

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J U D G M E N T

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1. The defendants in these 2 actions are the employees of the plaintiff.  The allegations against both defendants were similar in nature and were related to events happening at the same time when both defendants were in the employment of the plaintiff.

2. In gist the plaintiff was complaining against the 2 defendants for breaches of confidence, use of trade secrets and/or confidential information and breaches of employment agreement.  For the similarity in the allegations in the two cases, both cases were heard together in the present hearing.

3. The plaintiff is a distributor of electronic components.  Rand Technology, the new employer of the 2 defendants, was a competitor of the plaintiff in the same industry.

4. Lisa Su (defendant in HCA 1252/2007 and hereinafter called “Su” for short) started her employment with the plaintiff as an account executive in June 2000.  According to the plaintiff, Su was alleviated to the post of country manager in March 2004.

5. Ma Tsz Lung (defendant in HCA 1288/2007 and hereinafter called “Ma” for short) started his employment with the plaintiff as a procurement officer in September 2000.  According to the plaintiff, Ma was promoted to the post of assistant purchasing manager in October 2004.

6. Both defendants left the plaintiff’s employment on 26 February 2007 and joined their new employer Rand Technology on 21 March 2007.

7. On 12 June 2007 the plaintiff took out the present proceedings to sue Ma and Su on the following causes of action: -

(i)  The defendants, on dates unknown to the plaintiff, divulged to Rand Technology confidential information and/or trade secrets of the plaintiff.

(ii)    The defendants, in breach of their respective employment agreements or implied terms or equitable obligations, acted in breach of or in competition with the plaintiff approached or solicited the suppliers of the plaintiff to do business with Rand Technology.

(iii)  Since March 2007 both defendants, directly or indirectly, in breach of their respective terms of employment agreement engaged in or assisted in the business of Rand Technology.

8. Breaches of the defendants were particularized as follows: -

(i)  Since March 2007 Su solicited Flextronics Technology (Shanghai) Co Ltd and Flextronics (Nanjing) Technology Co. Ltd to transfer businesses from the plaintiff to Rand Technology.

(ii)    Since March 2007 Ma approached and solicited a number of the suppliers of the plaintiff, namely Systematic Semiconductor Limited, Carton Electronics Limited, JS Microelectronics Limited, Nextron Components Limited, Aulong Electronic Limited, Tech Systems Limited, Dong Woon International Co. and Polar Star International Co. Ltd, to transfer businesses from the plaintiff to Rand Technology.

9. The plaintiff is seeking the following reliefs from both defendants: -

(i)  injunctions to restrain the defendants from divulging, using or exploiting the confidential information and/or trade secret of the plaintiff;

(ii)    injunctions to restrain the defendants from breaching the terms of the employment agreement;

(iii)  damages for breach of employment agreements and/or breach of confidence;

(iv) an account for profits made by the defendants from the breach of their employment agreements and/or breach of confidence and payment of the sum found due from such accounts rendered; and

(v)   interest.

10. The defence of both defendants is the same, namely that: -

(i)  “the confidential and non-solicitation agreements” signed by the defendants did not form part of their employment contracts and the said terms were unenforceable for lack of consideration;

(ii)    the defendants denied allegation of use of confidential information;

(iii)  further and in the alternative the restrictions within the “confidential and non-solicitation agreement” were void and unenforceable for being unreasonable restraint of trade.

11. On 29 January 2008 the two defendants took out the present interlocutory applications to seek to strike out the plaintiff’s claims under Order 18 rule 19 on the ground that the plaintiff’s claims: -

(i)  disclose no reasonable cause of action; and/or

(ii)    are matters within the exclusive jurisdiction of the Labour Tribunal, whereby the initiation of the present proceedings in the High Court is scandalous, frivolous, vexatious and an abuse of the court process.

12. The defendants cited the Court of Appeal decision of Citipost CACV 111/2004 in support of their arguments that: -

(i) No further action has been taken by the plaintiff against both defendants since the issuing of the writs on 16 June 2007, the injunctive reliefs were a matter of history as the contractual restraint period has now passed since the alleged acts of breaches.

(ii)   The allegations of breaches were vague and non-specific. The nature of the confidential information was not particularized. The lack of particularity was a blatant breach of O.18 r.12.

(iii) The reliefs sought were window-dressing rather than true claims for breaches of contract or breaches of fiduciary duties.

(iv) The Labour Tribunal ought to have exclusive jurisdiction over employment disputes.

13. Directions have been given by Court at the call over hearing of these summonses for the parties to file their affidavits in opposition and then in reply.  The plaintiff filed no affidavit in opposition to the defendants’ application despite the Court’s directions.

14. The plaintiff evaded its obligation to file its affidavit evidence in opposition to the striking out application by providing voluntary particulars of the factual occurrence of the events at this hearing.  The facts averred to in these voluntary particulars made reference to incidents happening between January 2007 and February 2007 involving Su and Ma.  The particulars stated contain clear allegations of tortious acts including copying as well as deletion of computer data from the plaintiff’s computer records.  These voluntary particulars did not form part of the pleadings of the plaintiff nor were they deposed to on oath or by way of affirmation.  The practice of providing voluntary particulars in lieu of affidavits should be discouraged as this deprived the defendants a proper chance to respond to the contentions contained therein.

15. On the other hand, it is also true to say the defendants have breached the paragraph 5 of PD 19.1 in failing to inform the plaintiff within time of the broad grounds upon which the defendants relied upon to seek to strike out the plaintiff’s pleadings for disclosing no reasonable cause of action.

16. The focal points of concern are: (i) whether the pleadings disclosed a reasonable cause of action; (ii) whether there were sufficient particulars to justify a reasonable cause of action as opposed to presenting sheer window dressing causes and reliefs within High Court jurisdiction; and (iii) whether these 2 claims are within the exclusive jurisdiction of the Labour Tribunal.

17. As the pleadings now stand one cannot dispute the fact that the allegations of breaches contained therein were vague and non-specific.  The confidential nature of the information has not been disclosed.  Information contained in the voluntary particulars bridged part of the gap in providing details of tortious acts of data copying and data deletion, which is beyond what has been pleaded in the original pleadings.

18. Should the plaintiff include in its pleadings the factual contentions stated in its voluntary particulars, providing details about the confidential nature of the information, one cannot say the causes of action and reliefs sought are window dressing exercises.

19. The lack of particulars does not provide an outright basis for striking out if the deficiency can be remedied by way of amendments or the supply of particulars pursuant to requests.  Though it cannot be disputed that the primary duty to particularize details within its pleadings to meet the requirements under O.18 r.12 rests with the plaintiff.

20. On the consideration of exclusive jurisdiction of the Labour Tribunal there have been significant judicial debates in the past 20 years.

21. Sir Denys in National Ebauch [1981] HKLR 114 (decision of 19 January 1981), after analysing the legislative bill, came to a pragmatic determination and ruled the words “a sum of money” within the Labour Tribunal meant “an ascertained sum”.

22. Hunter, J in the subsequent decision of Panalpina [1983] HKLR 275 (decision of 16 June 1983), after lamenting about the inflexibility of the exclusive jurisdiction clause in the Labour Tribunal Ordinance and the suitability of having the determination of an action in accounts in the High Court, came to a legalistic construction and found the words “a sum of money” referred to “quantified claims” though the claim could be for unliquidated damages.

23. Chung, J in Cabaya HCLA 93/2003 (decision of 28 April 2004) gone through a detailed legislative interpretation of the phrase “a sum of money” and preferred the determination of Hunter, J.

24. The matter eventually reached the Court of Appeal for determination in Citipost CACV 111/2004 (decision of 8 February 2005) in which Rogers V-P adopted the approach of Hunter, J and accepted the phrase “a sum of money” within the Labour Tribunal Ordinance meant the claim must be quantified but not necessarily liquidated.

25. Sakharni, J was confronted with the same exercise in Gain Hill HCA 1321/2006 (decision of 31 August 2006) in which Sakharni, J found “… I accept that the dispute between the parties arises from the relationship of employer and employee but that does not mean that the causes of action are founded merely in contract.  The claim for damages and injunctive relief for breach of confidence is founded both in contract and in tort.”  The ruling reached was: - “The claim for damages for breach of confidence is founded both in contract and in tort.  It would fall within paragraph 1(a) as being within the jurisdiction of the Labour Tribunal but it would be excluded from the jurisdiction of the Labour Tribunal under paragraph 3 as being a claim for a sum of money in respect of a cause of action ‘founded in tort whether arising from a breach of contract or a breach of duty imposed by a rule of common law…...’.”

26. Factually I do accept in the present case the injunctive reliefs prayed for have not been proceeded with more than a year after the purported breaches.  The urgency to apply for an injunction to prevent future breaches can hardly be pressing and such reliefs are likely academic even if the right exists.

27. Actions involving claims for secret profits, duty to account, breach of confidence and use of trade secrets would likely involve intrigue facts entailing protracted legal arguments for which the assistance of legal representation would have enhanced the presentation of the case.

28. In a contract of employment, terms existed to delineate the duration and the scope of service as well as to reflect the consideration for the service and the benefit to be provided to the employee.  Terms are often written in to govern the standard and quality of the service to be furnished by the employee.  Provisions touching on the employment conditions, dealing with wages, holiday, financial benefits, welfare of an employee and the like should rightly be attended to in the Tribunal, be the claim liquidated or unliquidated.

29. When one is considering whether an employee breaches his duty of confidentiality (contractually written or implied) or has acted in breach of his other duties (common law or statutory) for acts done in the course of his employment (e.g. to steal from one’s own employer as in the case of 4M Goldmec Jewelry DCCJ 5902/2005), one is talking about the incidental acts of the employee whilst at work.  The employee can hardly be said to be carrying out his duties under his employment contract when he performed tortious acts against the interest of his employer.  For example, in outright case of theft from the employer, the Court does not need to look at the employee’s employment contract and construe the terms therein to determine the rights and liabilities of the parties.

30. Even if the tortious scenario is within the contemplation of the parties and had been reduced into writing in employment contract as a prohibitory duty, paragraph 3 of the Schedule of the Labour Tribunal Ordinance comes in aid to clarify the situation and remove such tortious claims from the jurisdiction of the Labour Tribunal.

31. In Gain Hill Sakranki, J pointed out that in Citipost Rogers V-P decided the High Court rightly ordered a stay of the proceeding in pure employment claims when the tortious acts complained of were no more than window dressing to masquerade the genuine nature of the underlying employment dispute.

32. What was supplied in the voluntary particulars by the plaintiff gave rise to a clear plea of tortious liability which brings the claim out of the jurisdiction of the Labour Tribunal.  Without those particulars the claims are vague and non-specific which lacks details to justify the claim to constitute a reasonable cause of action.  I also note the voluntary particulars failed to particularize the confidential nature of the information.  The injunction intended is an academic issue in light of the time lapse.  In any event the right to an injunction hinges upon the subsistence of a reasonable cause of action to begin with.

33. Hence for each of the 2 summonses I do allow “Leave to strike out the plaintiff’s pleadings as disclosing no reasonable cause of action and the action to be dismissed unless the pleadings in the action are amended to disclose a reasonable cause of action within 14 days from the day of this order.”

34. Though the defendants have failed to abide by paragraph 5 of PD 19.1 to provide the plaintiff with their broad grounds of application within time, the primary duty rests with the plaintiff to disclose sufficient particulars to justify a reasonable cause of action to commence a proceeding. I do grant the costs order nisi that costs of the present applications be to the defendants in their respective action, with certificate for counsel.

35. Should the plaintiff fail to make amendments to reflect reasonable cause or causes of action within 14 days from today, the claims in both proceedings stood dismissed with costs to the defendants.