HOPU (HONG KONG) INVESTMENT CONSULTANCY COMPANY LTD v. HUI LI

HCA 1692/2023

[2023] HKCFI 3158

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NO 1692 OF 2023

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REASONS FOR DECISION

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1.  At the end of the hearing, I allowed the 1^st defendant (“D1”)’s application by his summons dated 24 November 2023 (“D1’s Summons”) for relief from sanction and granted leave to D1 to file and serve evidence in opposition to the plaintiff (“P”)’s application (“the Injunction Application”) for an order to continue an ex parte injunction (“the Injunction”) granted by Lisa Wong J on 20 October 2023. These are my reasons.

The Facts

2.  On 20 October 2023, P obtained the Injunction.  The Injunction requires, inter alia, that each of the defendants shall, within 48 hours of being given notice of the Injunction by email, provide to P’s solicitors a full account of the Confidential Information as defined in the Injunction, which shall be verified by each of the defendants personally by affirmation (“the verification affirmation”) filed and served on P’s solicitors within 7 days of the notice of the Injunction given to him or her by email pursuant to the Injunction (“the Disclosure Order”).  Leave was also granted to P to serve the writ of summons out of the jurisdiction on D1 in Beijing through the judicial authorities of Mainland China.

3.  Notice of the Injunction was given on D1 by email on 24 October 2023.  On 26 October 2023, D1 sent an email (“the Email”) to P’s solicitors for the purpose of complying with the Disclosure Order in the Injunction.  In the Email, D1 has set out the Confidential Information in his possession, custody or power.

4.  On 2 November 2023, Nixon Peabody CWL (“NPCWL”) filed a notice to act for D1 in these proceedings.

5.  On 3 November 2023, the return date hearing was before

(1)  D1’s case is that on 3 November 2023, before the hearing, there was some discussion between counsel (“Discussion between Counsel”).  In the Discussion between Counsel, there was an agreement between counsel that the verification affirmation could be an unnotarized affirmation signed by D1, produced by an affirmation made by a solicitor in NPCWL (“a cover affirmation”).  Alternatively, D1’s counsel was given an understanding that the aforesaid arrangement would not be objected by P.  It was on that basis, D1’s counsel did not raise any objection to P’s proposal that the time extension granted to D1 for filing and serving the verification affirmation was granted on unless basis.

(2)  P’s case is that the Discussion between Counsel before the hearing on 3 November 2023 is without prejudice communication, and D1 is not entitled to rely upon the contents of the discussion.  Further, there was no agreement between the parties before the hearing on that day, as evidenced by the fact that in the hearing, there was an argument as to whether D1 should be given 7 days or 14 days to file and serve the verification affirmation.  D1 asked for 14 days, and P argued that D1 should only be given 7 days.   At the end of the hearing, Au-Yeung J accepted the time proposed by P.

(3)  P’s application for an order to continue the Injunction until the final determination of the issues in these proceedings or a further order of the court is opposed by D1.

(4)  At the end of the hearing on 3 November 2023, Au-Yeung J ordered, inter alia, that unless D1 do file and serve the verification affirmation in full compliance with the disclosure order contained in the Injunction by 4 pm on 10 November 2023, D1 be debarred from opposing the Injunction Application (“the Unless Order”).  The learned judge also granted leave to all the defendants to file and serve affirmations in opposition to the Injunction Application within 21 days, and leave to P to file and serve an affirmation in reply within 14 days thereafter. 

6.  On 10 November 2023, at around 2:50 pm, D1’s solicitors served the Affirmation of Wong Sze Long Charlotte (“WSLC”) on P’s solicitors.  WSLC is a solicitor and an associate in NPCWL.  In that confirmation, WSLC produced an unnotarized affirmation signed by D1 (“the Signed Affirmation”) as an exhibit. WSLC said that the Signed Affirmation was prepared under D1’s instructions and approved by D1.  D1 has confirmed the contents thereof by signing that affirmation.  WSLC’s Affirmation was filed at around 3:15 pm on 10 November 2023. 

7.  In the Signed Affirmation, D1 has confirmed the contents of the Email. D1 has also said that after sending out the Email, he tried to locate all the Confidential Information in his possession, custody and control.  He prepared a list (“the Disclosure List”) to show his findings, and the said Disclosure List was produced in the Signed Affirmation.

8.  On 13 November 2023, P’s solicitors wrote to D1’s solicitors and said that the Signed Affirmation “is not in compliance with [the Disclosure Order] and therefore, [D1] is debarred from opposing [the Injunction Application]”.

9.  On 16 November 2023, a notarized affirmation of D1 (“the Notarized Affirmation”) was filed and served.  The contents of the Notarized Affirmation and the contents of the Signed Affirmation are the same.

10.  The objection raised by P’s solicitors in their letter dated 13 November 2023 cannot be resolved through discussion in the correspondence passing between P’s solicitors and D1’s solicitors.  On 24 November 2023, D1’s solicitors took out D1’s Summons.

11.  D1’s Summons was the subject matter before me in the hearing on 5 December 2023.  The summons was supported by WSLC’s 2^nd Affirmation, in which a signed 2^nd Affirmation of D1 (“the 2^nd Signed Affirmation”) was produced as an exhibit.  D1’s application was vigorously opposed by P.

12.  The substantive hearing of the Injunction Application will take place on 30 January 2024.

Discussion

13.  In considering D1’s Summons, I have taken into account all the circumstances, including the matters specified in Order 2 rule 5.  I have also borne in mind the underlying objectives of the Rules of the High Court as spelt out in Order 1A rule 1.  One must remember that the primary aim in exercising the powers of the court is to secure the just resolution of disputes in accordance with the substantive rights of the parties.  See Order 1A rule 2(2).

14.  Since the Disclosure Order requires that the verification affirmation be made by D1 personally, strictly speaking, filing and serving the Signed Affirmation before 4 pm on 10 November 2023 is not full compliance with the Disclosure Order.  Unless relief from sanction is granted to D1, by the operation of the Unless Order, D1 would be debarred from opposing the Injunction Application.

15.  Ms Tara Liao for P submits that relief from sanction should be refused. She argues that: 

(1)  It is P’s case that prior to the termination of his employment with P, D1 had obtained the Confidential Information from P and disseminated and/or threatened to disseminate the same.  D1 covered his tracks by deleting records of his emails.  When the termination of his employment was imminent, D1 has expressly indicated to P that he would expose the Confidential Information if he was not given a generous severance package.  D1 has also made a threat to P via a middle man subsequent to the notification of the Injunction to him.  Anonymous emails containing the Confidential Information continued to be disseminated subsequent to the notification of the Injunction to D1.

(2)  The Disclosure Order is vital for P to take steps to protect its interest.

(3)  D1’s breach is deliberate and contumelious.  On D1’s own admission, the information in the Email sent out by him on 26 October 2023 is far from complete.  D1 again failed to comply with the Unless Order.  He did not even approach a notary until 13 November 2023.  There has not been any credible explanation from D1 as to the delay.

(4)  The sanction imposed is proportionate.  D1 has not shown what prejudice he will suffer as a result of the sanction.

16.  With respect, I am unable to accept these submissions.

(1)  As to the underlying dispute between P and D1 in this case, this has to be resolved in the trial.  As to whether there is a serious issue to be tried, the matter will be investigated in the substantive hearing of the Injunction Application.  As to whether D1 has breached the Injunction, the matter should be resolved in committal proceedings begun by P, if P intends to start those proceedings and is able to obtain leave to commence the proceedings.  In my view, all these matters are not relevant for the present purpose.

(2)  While P is saying that the Disclosure Order is vital for the purpose of protecting P’s interest, there is no satisfactory explanation as to why P obtained the Injunction on 20 October 2023, but notice of the Injunction was only given to D1 by email on 24 October 2023.  I am aware that 21 October 2023 and 22 October 2023 are Saturday and Sunday, and 23 October 2023 is a public holiday.  However, P would have no difficulty in giving notice of the Injunction to D1 by email during weekend or on a public holiday.  The 4-day delay in giving notice of the Injunction to D1 would need to be borne in mind in assessing the whole picture.  Further, I am of the view that the non-compliance with the Unless Order is a mere technical breach with no prejudice to P:

(a)  There is no allegation that there is any deficiency in the contents of the Signed Affirmation.

(b)  By putting his signature on the Signed Affirmation, D1 has acknowledged that he is bound by everything said by him in the Signed Affirmation.  If P intends to take action against D1 by reason of anything said by D1 in the Signed Affirmation, P would be at liberty to do so.

(c)  The contents of the Signed Affirmation and the contents of the Notarized Affirmation are the same.  The Notarized Affirmation was filed and served on 16 November 2023, just a few days after the filing and service of WSLC’s Affirmation.  

(3)  I do not agree that D1’s breach is deliberate and contumelious.

(a)  After being notified the Injunction by email on 24 October 2023, D1 did within 48 hours send the Email to P’s solicitors to comply with the Disclosure Order.  In the Signed Affirmation, D1 said that after sending out the Email, “to ensure that I have complied with the Injunction Order, I have made my best effort to locate all Confidential Information in my possession, custody and control”. D1 then complied the Disclosure List.  The fact that D1 has spent time and has made an effort to prepare the Disclosure List cannot be said as contumelious breach of the Disclosure Order.

(b)  The time provided in the Disclosure Order for filing and serving the verification affirmation is within 7 days of the notice of the Injunction given to D1 by email.  P was given notice of the Injunction by email on 24 October 2023.  In computing the 7-day period provided in the Disclosure Order, in accordance with Order 3 rule 2(5) and (6), 21 and 22 October 2023 (Saturday and Sunday) should be excluded. Accordingly, the 7-day period expired on 2 November 2023.  In the hearing on 3 November 2023, D1 was only out of time for less than 1 day.  In that hearing, there was no disagreement that further time should be given to D1 to file and serve the verification affirmation.

(c)  In the 2^nd Signed Affirmation, D1 said that NPCWL told him that using a cover affirmation to produce the Signed Affirmation was a usual practice, and hence he was under the impression that the verification affirmation could be the Signed Affirmation produced under a cover affirmation.  He was also told by NPCWL that P’s counsel had indicated that P would not take issue if the verification affirmation was produced under a cover affirmation.  I have no reason to doubt these explanations.  I also observe that 11 and 12 November 2023 are Saturday and Sunday.  After filing and serving the Signed Affirmation on 10 November 2023 (a Friday), under the belief as mentioned in the above, it would not be unreasonable for D1 to approach a notary public on the coming Monday, ie 13 November 2023.

(4)  The sanction imposed in the Unless Order is that D be debarred from opposing the Injunction Application.  The Injunction was obtained by P in an ex parte hearing. D1 has not filed evidence in opposition, and D1 has not yet been heard on the merits of the Injunction Application.  Before giving any opportunity to D1 to adduce evidence and to make submissions on the Injunction Application, one cannot say that P would certainly succeed in that application.  To debar D1 from opposing the Injunction Application is draconian measures.  In my view, to debar D1 from opposing the Injunction Application because of the non-compliance with the Unless Order in the circumstances described above is disproportionate.

17.  As submitted by Mr Tommy Cheung for D1, if relief from sanction is granted to D1, there is no prejudice to P.  There would be no need to postpone the substantive hearing on 30 January 2024.  The parties would still have sufficient time to prepare evidence for that hearing.

18.  Bearing in mind that the primary aim in exercising the powers of the court is to secure the just resolution of disputes in accordance with the substantive rights of the parties, in my view, it is plain and obvious that relief from sanction should be granted to D1 in the circumstances of this case.

19.  I also granted leave to D1 to file and serve affirmation(s) in opposition to the Injunction Application on or before 15 December 2023, and leave to P to file and serve affirmation(s) in reply on or before 5 January 2024.

20.  The above would be sufficient for disposing of D1’s Summons.  I am of the view that it would be unnecessary to investigate the details of the Discussion between Counsel for the purpose of D1’s Summons.  Such investigation would be a time consuming and costly exercise.  Bearing proportionality and cost-effective case management in mind, while D1’s application can be resolved in the way as set out in the above, details of the Discussion between Counsel should not be a subject matter in the hearing before me.

21.  Without prejudice to the above, as submitted by Mr Cheung, I observe that when “without prejudice” communications have resulted in a concluded agreement, those communications are admissible.  Even if there is no agreement or compromise, a clear statement which is made by one party to negotiations, and on which the other party is intended to act and does in fact act, may also be admissible.  See Gee on Commercial Injunctions (7^th ed), §10-008.  Thus, if it is necessary to investigate the details of the Discussion between Counsel, the aforesaid principles would need to be borne in mind.  It may also need to have affirmations made by the relevant counsel personally, and the court may need to make some factual findings.  The fact that there were arguments in the hearing before Au-Yeung J on 3 November 2023 is inconclusive and cannot ipso facto disprove D1’s case as set out in [5(1)] above.  If it is necessary to investigate the details of the Discussion between Counsel, the whole exercise would be time consuming and costly.  Unless it is absolutely necessary, the court should not go into that exercise.

22.  As to the costs of D1’s Summons, I am of the following view.  On the one hand, D1 is seeking an indulgence from the court.  On the other hand, P’s objection is unsuccessful.  Having considered the matter in the round, in my view, the fair costs order is that there be no order as to costs as to the hearing before me, and there be no order as to costs as to the affirmations in opposition filed by P.  Save and except these, costs of D1’s summons be paid by D1 to P forthwith.  Those costs have been summarily assessed at HK$14,000.

Conclusion

23.  For these reasons, I made the order set out in the above at the end of the hearing before me.