DCCJ 586/2006
IN THE DISTRICT COURT OF THE
HONG KONG SPECIAL ADMINISTRATIVE REGION
CIVIL ACTION NO. 586 OF 2006
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BETWEEN
CSAV GROUP (HONG KONG)
LIMITED (formerly NORASIA
SERVICES (HKG) LTD.)
1st Plaintiff
NORASIA CONTAINER LINES LIMITED
2nd Plaintiff
and
JAMSHED SAFDAR
Defendant
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Coram : H.H. Judge Chow in Chambers
Hearing date : 27th February, and 9th March, 2006
Date of handing down Decision : 22nd March, 2006
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Decision
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1. This is an inter-parte application by the Plaintiff for the following orders:-
“1. Paragraph 4 of the order made by Her Honour Judge Chua dated 7th February 2006 (“Order”) be continued until trial or further order.
2. The Defendant do forthwith deliver up to the Plaintiffs’ solicitors all copies of the Plaintiffs’ Property (as defined in paragraph 4 of the Order, and whether in printed form or stored on portable electronic media including but not limited to USB drives, CD-ROM, DVD-ROM and floppy discs) in the possession of the Defendant.
2A. The Defendant do within 14 days file and serve an affidavit giving a full and complete list of all the Plaintiffs’ property taken or otherwise received, directly or indirectly, by the Defendant in the past 6 months, from whom such property has been received and what has happened to the same.
3. The forensic images made pursuant to paragraphs 2 and 6 of the Order (“Images”) be dealt with in the following manner:
(1) There be a joint inspection of the Images by the respective professional representatives of the Plaintiffs and the Defendant (“Representatives”).
(2) Where the Representatives agree that certain files, documents or other data on the Images are the Plaintiffs' Property and/or are otherwise relevant to this Action, such files, documents or other data shall be printed out and/or copied onto portable electronic media and a copy given to the Plaintiffs' solicitors.
(3) Where the Representatives are unable to agree whether certain files, documents or other data on the Images are the Plaintiffs' Property and/or are otherwise relevant to this Action, such files, documents or other data shall be printed and/or copied onto portable electronic media and sealed in a carton pending further order of the Court.
(4) The Plaintiffs' representatives do give an undertaking that, save for the items in sub-paragraph (2) above, no disclosure would be made to the Plaintiffs of any of the files, documents or other data on the Images without the leave of the Court.
4. Further or other relief.
5. Liberty to apply.”
2. Pursuant to an ex parte application (with notice) by the Plaintiff on 7th February 2006, Her Honour Judge Chua made, inter alia, the following orders:-
“4. Until trial or further Order, the Defendant, whether by himself, his servants, agents or any of them or otherwise howsoever be restrained from using or disclosing in any way whatsoever any information, property, files, documents or other material belonging to the Plaintiffs (“Plaintiffs’ Property”) (paragraph 4 of the Order).
5. The Defendant do serve upon the Plaintiffs’ solicitors an Affirmation or Affidavit (as the case may be) within 7 days specifying whether any of the Plaintiffs’ Property has been given, forwarded, transferred to, or otherwise possessed by third parties other than the 1st and 2nd Plaintiffs, and if so:
(1) The identities of the third parties and/or entities;
(2) A description of the Plaintiffs’ Property so given, forwarded or transferred;
(3) Particulars of the Defendant’s business or personal relationship with the third parties and/or entities.
6. The Defendant do allow forthwith, under the joint supervision of the solicitors of the Plaintiffs and the solicitors of the Defendant, a forensic computer expert to inspect the email accounts jamshedsafdar@hotmail.com and jamshed@netvigator.com and to make copies and/or forensic image(s) of the same.
7. The said forensic images and/or copies be sealed and placed in the safe custody of the said expert and not to be released to any parties pending further Order of the Court.”
Background
3. The Defendant was the Plaintiffs’ former Vice-President of Marketing. He resigned on 3rd January 2006 and he remained an employee until 2nd February 2006. His last day in office was 13th January 2006. In examining the Plaintiffs’ computer used by the Defendant during his course of employment, the Plaintiffs discovered that during his employment the Defendant had been involved in setting up a competing business of the Plaintiffs. A few days prior to his last day, the Defendant emailed to his personal email address a number of documents belonging to the Plaintiffs. When confronted on 2nd February 2006 about this matter, he denied wrongdoing, and agreed to permit the Plaintiffs to inspect the personal computer in his home.
4. On 3.2.2006, the Defendant’s solicitors, Clyde & Co. wrote to the Plaintiffs, stating that:-
(1) the emails had been forwarded from the office to his personal account so that he could access the information whilst he was away from office and working from home;
(2) he is not in possession of any confidential information of the Plaintiffs in his home computer ;
(3) he had withdrawn his consent to allow the Plaintiffs to inspect his home computer.
5. Pursuant to paragraph 5 of the court order made on 7th February 2006, the Defendant made, on 14th February 2006, an affirmation in which he said:-
(1) a copy of emails containing articles published by PR News for which the 1st Plaintiff had subscribed and which the Defendant received whilst being an employee of the 1st Plaintiff was forwarded to a Mr. Vikas Khan. He does not regard the PR News as the Plaintiffs’ property or as containing confidential information
(2) a copy of a document entitled “Freight Rate Report – 3Q05” had also been given to Mr. Vikas Khan. However this document had been retrieved and is in the possession of the Defendant’s solicitors.
6. Regarding the PR News, Mr. Guillermo Ginesta, the Chief Executive Officer of the 2nd Plaintiff and a Director of the 1st Plaintiff states in his affirmation dated 22nd February 2006:-
“5. PR Newswire is a business media service, which provides news and information concerning various business sectors. Its services include maritime news, which includes information concerning commercial developments in the shipping industry.
6. The Plaintiffs have a subscription with PR Newswire, for which the companies pay an annual subscription fee of $500 (approximately HK$6,750). As such, the news reports received form PR Newswire are the Plaintiffs’ property for which it has paid the service provider and should not be disclosed to third parties……..
7. PR Newswire sends emails to the Plaintiffs on a regular basis, providing updates concerning shipping industry news. The service would assist a shipping company, or any new proposed shipping company, in keeping track of trends in the shipping market. In particular, it allows subscribes to keep track of developments concerning competitors' shipping operations.
8. I am aware that Mr. Safdar sent more than 20 PR Newswire articles from the Plaintiffs’ computer to his personal email account between July 2005 and 13 January 2006………..
9. ……………………
10. In paragraph 6 of his affirmation, Mr. Safdar describes Vikas Khan as a friend who used to be the Chief Executive Officer of the 1st Plaintiff. Mr. Khan is the person to whom the Defendant forwarded the PR Newswire articles ……. and the document entitled “Freight Rate Report – 3Q05…………”
No doubt, the PR News is the 1st Plaintiff’s property, because, as admitted by the Defendant, the 1st Plaintiff had made subscriptions for it.
7. In his Affirmation, the Defendant has failed to mention that Mr. Khan is reported to be currently establishing his own shipping line in competition with the Plaintiffs. The Defendant forwarded a PR Newswire article from the Plaintiffs’ computer to his personal email account on 9th January and 12th January 2006, headed “PR News Service – Copy 4165 – Exclusive – Ex-Norasia Chief Executive to set up owner shipping line”. In this article, its is reported:-
“Vikas Khan, the ex-chief executive of Norasia Container Line, who left his post in Hong Kong last year, is understood to be in the process of establishing his own container shipping line, most likely headquartered in Hong Kong.
A number of other ex-management from Norasia in Hong Kong are also expected to be joining Mr. Khan and will be involved in his new venture.”
Mr. Vikas Khan was appointed a director of Emirates Shipping (Hong Kong) Limited, a Hong Kong - registered company, on 16th December 2005. He was appointed a director Emirates Shipping Agencies (Hong Kong) Limited, a Hong Kong - registered company, on 16th December 2005. He was appointed a director of Emirates Shipping Agencies (China) Limited, a Hong Kong - registered company, on 19th December 2005. He resigned from this position on 6th January 2006. Therefore, when the Defendant forwarded the PR Newswire articles Freight Rate Report to Mr. Vikas Khan, he was giving the Plaintiffs’ property to a potential competitor of the Plaintiffs in the shipping industry.
8. In respect of the Freight Rate Report, the Report was headed “FOR NORASIA INTERNAL USE ONLY”. The Defendant forwarded the Report to his personal email account, and he admitted he then forwarded it to Mr. Vikas Khan. According to Mr. Ginesta, the information contained in the Report is confidential, because:-
'(1) The evolution or trend of the Plaintiffs' freight rate is highly confidential, providing evidence of the Plaintiffs' position in the shipping marketplace. In essence, it is a summary of the Plaintiffs’ prices for its customer services, when compared with its competitors. Further, if the information is widely released, it may affect the pricing structure that the Plaintiffs have established with different customers.
(2) Given that the freight rates are essentially the Plaintiffs' price list for major international shipping operations, if this information is disclosed, it may affect the commercial standing of the Plaintiffs. The Plaintiffs' freight rates are a relevant issue for the profitability of the companies.
(3) The Freight Rate Report includes information relating to the shipping conferences to which the Plaintiffs are parties. The conference members enter into conference agreements which define the contractual terms on which the conference will operate. The Plaintiffs have entered into conference agreements which include confidentiality provisions, requiring information concerning the conference members to be kept confidential.
(4) Mr. Safdar's statement that “the information contained in the report does not include any freight rates” is misleading. The report identifies average freight rates per TEU (that is, a custom – sized shipping container) for the Plaintiffs, as compared with other conference members and/or the market generally. Further, the report includes projections for freight rate development into 2006, which would be of key interest to the Plaintiffs' competitors in planning their operations this year.
(5) The Confidentiality Declaration executed by Mr. Safar dated 7th August 2002, ………….. defines 'Confidential Information' as follows:
“For the purposes of this Declaration “Confidential Information” is any matter known internally within CSAV or any affiliated company, except those facts and circumstances which are public knowledge. Any information about clients, market research, cost studies or any other material not for public knowledge is understood to be particularly confidential.”
Therefore, in the Confidentiality Declaration, the Defendant has knowledged that market research and cost studies (which include the Freight Rate Report) are particularly confidential. As an employee of the Plaintiffs, the Defendant was not entitled to make his own assessment regarding whether such documents are confidential. He breached the Confidentiality Declaration by forwarding the Freight Rate Report to Mr. Khan.”
The inter-partes summons
9. Now I turn to consider the application under the inter-parte summons. At the hearing on 9th March 2006, the Plaintiff produced a schedule attached to its letter dated 8th March 2006 addressed to Clycle & Co. The schedule is headed “Plaintiffs Documents”. It comprises 11 paragraphs and a “definition” of “documents”. Save and except paragraph 11 of the schedule, the Defendant raises no objection that the things covered by paragraphs 1 to 10 are the Plaintiffs’ documents. Subject to an acceptable definition as to the meaning of the Plaintiffs’ documents, the Defendant agreed to paragraph 4 of the Order of Judge Chua dated 7th February 2006 to be continued until trial or further order, and the deliver up of all copies of the Plaintiffs’ documents which may have been in the Defendant’s possession. Paragraph 11 reads:
“Any budgets, reports, briefings, market analyses or marketing documents produced by the Defendant during the period of his employment with the Plaintiffs, including any documents prepared for third parties.”
The documents or matters covered by paragraph 11 were produced by the Defendant during his period of his employment with the Plaintiffs. During that period of employment, the Defendant was the Plaintiffs’ employee. He produced those documents or matters for the Plaintiffs. So those documents or matters must be documents or matters belonging to the Plaintiffs. Hence they are the Plaintiffs' documents.
10. In respect of Paragraph 2A, in light of Mr. Ginesta’s affirmation, to which there is no opposition affirmation made by the Defendant, I cannot see any objection to it.
11. In respect of Paragraph 3, referring to the phrase “the Plaintiffs’ property and/or are otherwise relevant to this Action” the Defendant argues that the terms sought are wide and unacceptable, and are wholly unreasonable. The Defendant says that “This is objectionable on the grounds that it is in effect an application for discovery which is premature (see Hong Kong Civil Procedure 2006, paragraph 29/8/9 and Huddleston and another v. Control Risks Information Services Ltd. th of February, 2006 (paragraphs 1, 2, 3 6 & 7).”
12. Rule 29 r. 2 (1) of the District Rule reads:-
“(1) On the application of any party to a cause or matter the Court may make an order for the detention, custody or preservation of any property which is the subject-matter of the cause or matter, or as to which any question may arise therein ……..”
(Underline provided)
13. The Defendant has forwarded the Plaintiffs’ property to a third party, namely, Mr. Vikas Khan. Such property, no doubt, contains confidential information. An order made under Paragraph 3 would have the effect of preserving their properties which might be in the possession of Mr. Vikas Khan. This is necessary for the Plaintiffs to preserve or protect their properties. It is only fair and just to make this order, in view of the fact that the Defendant has not been full and frank in his affirmation. This is reflected in his failing to mention in his affirmation the business status of Mr. Khan, someone who was about to set up a competing business with the Plaintiffs.
14. The Plaintiffs are concerned that other confidential documents have also been passed on to Mr. Vikas Khan to assist him in setting up a competing business. Such concern is justified. Therefore immediate steps are required to be taken to enable the Plaintiffs to know exactly how many confidential documents the Defendant have passed on to other people, and who were the people to whom such documents had been passed, so that action may be taken up, if necessary, in order to preserve these properties. If other confidential accounts have also been passed on to Mr. Vikas Khan, this may do irreparable damage to the Plaintiffs’ business. This court has the jurisdiction to make an order under paragraph 3 of the inter-partes summons for the preservation of the Plaintiffs’ properties, and in the circumstances of this case, it should make such an order.
15. The Defendant says that the Declaration of Confidentiality is a declaration of another company, namely, Compania Sud Americana de Vapores S.A. Therefore it has nothing to do with the Plaintiffs. But the affidavit of Cristian Ulloa reveals that the Plaintiffs and other associated companies operating in Hong Kong are subsidiaries of Compania Sud Americana de Vapores S.A (“CSAV”), a global carrier company incorporated and headquartered in Chile. This is not contradicted by the Defendant. By signing this declaration, the Defendant admits that it forms part of the essence of the work contract, and he undertook to respect it. Therefore the Declaration is part and parcel of his employment contract. Clearly he committed a breach of this part of his employment contract.
16. The Defendant argues that the application under inter-partes summons is different from the ex-parte summons. There is no rule of law that the two summons must be the same. So long as the inter-partes summons embraces, inter alias, the ex-parte application so as to enable the parties to argue in full the ex parte application, that will be sufficient.
17. All the Defendant’s arguments fail. I therefore make an order in terms of the amended inter-parte summons.
Costs
18. I make an order nisi for costs, to be made absolute in 14 days’ time, that the Defendant is to pay costs of this application to the Plaintiffs, to be taxed, if not agreed, with certificate for Counsel.
The Plaintiff : represented by Mr. Douglas Lam, instructed by Messrs. Holman, Fenwick & Willian, Solicitors.
The Defendant: represented by Mr. Ashley Burns, instructed by Messrs. Clycle & Co., Solicitors.
Ex parte preservation order limited: see CACV133/2006 dated 21 April 2006