CHINA LIGHT & POWER CO LTD AND ANOTHER v. MICHAEL EDWARD ASHTON FORD

IN THE COURT OF APPEAL

1995, No. 108
(Civil)

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J U D G M E N T

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Godfrey, J.A.:

Introduction

1. This is an appeal from an order of Sears, J. made on 8 February 1995. By his order the judge awarded the appellants damages in the sum of $321,270.13. The appellants appeal, because the judge refused to award them also exemplary damages, as they had asked him to do; and they now ask this court to award them such damages on top of the $321,270.13 they were awarded by the judge. The appeal came before this court (differently constituted) on 19 September 1995; the respondent did not appear, and was not represented, but the court indicated that, before it embarked on the hearing of the appeal itself, it would require to be satisfied that, having regard to the nature of the case (the alleged misuse by the respondent of confidential information) the remedy of damages was available at all. The appellants asked for and were granted an adjournment, to a date to be fixed, to enable them to prepare themselves to meet the concern of the court on this point. The hearing of the appeal was subsequently fixed for 30 January 1996, when this court received the appellants' argument both on this fundamental point, and on the exemplary damages point. Again, the respondent did not appear and was not represented. The respondent had transmitted a voluminous amount of paper to this court, intended to be used both in opposition to the appellants' appeal and in support of a notice of cross-appeal, dated 11 September 1995, of his own. But, since it is not possible in this court for parties to advance their cases otherwise than by oral argument, and since the respondent had not appeared before us, in person or by counsel, for the purpose, we were of the opinion that we ought not to consider the papers he had transmitted to this court; and, since he did not appear either in person or by counsel to support it, we dismissed his cross-appeal. We then proceeded to hear the argument in support of the appeal, presented to us by Mr. John Griffiths, Q.C. At the conclusion of the argument, we indicated that we would take time to consider our judgments.

The facts

2. The facts found by the judge at the trial of the action (at which, again, the respondent did not appear and was not represented), so far as material for present purposes, may be summarised as follows.

3. The respondent was a barrister. He was instructed by solicitors, on behalf of the appellants, to represent the appellants at an inquest, due to be opened on 19 April 1993, into the deaths of two employees of the appellants in an explosion at the Castle Peak B power station. During the course of the inquest, the appellants' solicitors withdrew the respondent's instructions, as their clients had asked them to do, and asked him for the return of the papers which they had supplied to him. The respondent instructed solicitors in New York, U.S.A., to institute proceedings against the Exxon Corporation (which held a stake in the appellants) for compensation for the damage to his practice, and to his professional reputation, which (he alleged) had been caused by the appellants' actions in connection with the withdrawal of his instructions. The respondent failed to return to the appellants' solicitors all the papers which he had been asked to return, and indeed made use of them, or some of them, in commencing the threatened U.S.A. proceedings, which in fact he instituted, initially, in Texas on 19 July 1995 (claiming, as is the American practice, absurdly large damages), despite an injunction granted by the judge here on 16 July 1995 framed so as to prevent him from making use of such documents. The respondent justified, or attempted to justify, his conduct on the ground that the appellants had sought to destroy him professionally, by accusing him of professional misconduct, and that in those circumstances he was entitled to make use of the papers in question in order to rebut that charge and protect his professional reputation.

The trial

4. The trial was held on 7, 8 and 9 March 1994. At the conclusion of the trial, the judge, rejecting the respondent's attempted justification, in absentia, of his conduct, held that conduct to have been "disgraceful". He found that the respondent had "quite deliberately utilised information entrusted to him in confidence for his own advantage, and to his clients' detriment". He held that the respondent had misused the appellants' confidential information. He gave judgment for the appellants for damages to be assessed. (He also, in my view wrongly, ordered an account of profits to be taken as well; the remedies of damages, and an account of profits, are alternative remedies, and a plaintiff has to elect at the trial the remedy he chooses to take. But for present purposes we should, I think, treat the appellants as having elected for the remedy of damages.)

The assessment of damages

5. The judge heard further argument from the appellants (once again, the respondent did not appear and was not represented) on 8 February 1995. At the conclusion of the hearing, the judge assessed the appellants' damages in the sum of HK$321,270.13. This was the sum for which the appellants had asked, apparently in respect of money they had spent on a public relations exercise designed to limit the damage which, they said, the respondent's actions had caused them. As to the appellants' additional request for an award of exemplary damages, the judge held that although in principle he was satisfied that the case was a proper one for an award of exemplary damages, the financial position of the respondent (which was parlous) was a matter which he was entitled to take into account in deciding whether or not to make such an award. Taking that matter into account accordingly, he decided that it would be "inappropriate" for him to make such an award. He therefore declined to do so.

The right to damages for misuse of confidential information

6. As a matter of history, the common law provided no protection against the misuse of confidential information. No action for damages (the only remedy available for any wrongful act at common law) would lie. Eventually, equity, true to form, stepped in to supplement this deficiency of the common law; it made available the equitable remedy of an injunction to restrain such misuse. Now, however, under the Chancery Amendment Act 1858 (Lord Cairns' Act), damages may be granted in certain cases in lieu of an injunction, and this has caused some confusion.

7. In Seager v. Copydex Ltd. [1967] 1 WLR 923, the defendant company had made use of information which had been received in confidence; but the remedy ultimately granted by the Court of Appeal was not an injunction, nor an account of profits, but damages to be assessed. In English v. Dedham Vale Properties Ltd. [1978] 1 WLR 93, Slade, J. treated the case last cited as being an application of Lord Cairns' Act, with the court granting damages in lieu of an injunction. He added:

"I am not convinced that it illustrates or establishes any general principle that the court has power to grant damages in lieu of an account of profits; and no other case has been cited to me which suggests that the court has any such jurisdiction."

(see at p.111 H). Yet there seems to be no good reason in principle why equity should not allow a remedy, the award of compensation in money for the infringement of an equitable right, without reference to Lord Cairns' Act.

8. In Attorney-General v. Guardian Newspapers (No. 2) [1990] 1 AC 109, Lord Goff of Chievely, referring to the remedy of an account of profits in relation to claims for restitution in breach of confidence cases, stated as follows:

"This remedy of account is alternative to the remedy of damages, which in cases of breach of confidence is now available, despite the equitable nature of the wrong, through a beneficent interpretation of the Chancery Amendment Act ..... (emphasis added)."

9. It does fly in the face of the equitable origin of the remedies for breach of confidence, and it does require a "beneficent" interpretation of Lord Cairns' Act, to hold that the remedy of damages (if by that is meant common law damages) is "now available" in breach of confidence cases. And it causes all sorts of difficulties. By what principles are these damages to be assessed? It will be appreciated that the rules differ in contract and in tort. Which, if either, is to be preferred? There are dangers in muddying the pure waters of equity with alien elements imported from the law of tort : as the Privy Council reminded this court in China & South Sea Bank v. Tan [1990] 1 AC 536, the law of tort "does not supplant the principles of equity" (see per Lord Templeman, at p.543 H).

10. Nevertheless, Mr. John Griffiths Q.C. was able conclusively to demonstrate that, whatever historical, legal or conceptual difficulties may be involved in the view that the (common law) remedy of damages is "now available" in cases of breach of confidence, that view is supported, not only by the statement of Lord Goff of Chievely in Attorney-General v. Guardian Newspapers Ltd (No. 2) (above) but by a number of New Zealand authorities to the same effect. He referred us, in particular, to Coleman v. Myers [1977] 2 NZLR 225; AB Consolidated Ltd. v. Europe Strength Food Co. Pty. Ltd. [1978] 2 NZLR 515; Vancamp Chocolates Ltd. v. Aulsebrooks Ltd. [1984] 1 NZLR 354 (in which, without giving any reasons for doing so, the court dismissed an argument by counsel challenging on historical grounds the jurisdiction to give damages for past breaches of confidence); Day v. Mead [1987] 2 NZLR 443; and Aquaculture Corporation v. New Zealand Green Mussel Company Ltd. [1990] 3 NZLR 299.

11. I have to say, with King David (see Samuel 3, 39) "..... these men the sons of Zeruiah be too hard for me." Despite the misgivings expressed in this court when this appeal was originally called on for hearing, I am satisfied that we should accept, for Hong Kong, that the remedy of damages for breach of confidence is indeed "now available" (and do our best sensibly to work out the consequences). To do so is consistent with elementary notions of justice, if with nothing else. Why should a wrongdoer who, by his misuse of the confidential information of another, has caused the latter damage, not be liable to compensate him for that damage? The question does not admit of any acceptable answer.

The judge's award of damages

12. The judge, on the basis of the money spent by the appellants on their public relations exercise mentioned above, awarded the appellants $321,270.13 damages. This award appears to be in the nature of an award of special damages, the expenses incurred in repairing the injury done by the respondent to the reputation of the appellants, akin to the expenses incurred in repairing the injury to the body in an action for damages for personal injuries. An award of this nature in an action for damages for breach of confidence is novel (so far as I am aware) and I would reserve for consideration on a further occasion whether an award of special damages, rather than an award of general damages such as would be made in an action for damage to reputation in a defamation action, is appropriate in a case like this. We have not had the benefit of adversary argument on the point. Nor did the judge. And, for the reasons I have already given, the respondent's cross-appeal (in which the point might have been raised) has been dismissed. In these circumstances, despite my doubts as to its propriety, I do not consider we should interfere with the judge's award of damages in the sum of $321,270.13. I might have thought it necessary to do so if I considered that the award operated to inflict a substantial injustice; but, on the facts found by the judge, the award cannot in my view be said to have done any such thing.

The judge's approach in principle to an award of exemplary damages

13. In the Aquaculture case, cited above, the court said that it saw no reason in principle why exemplary damages should not be awarded in an action for breach of confidence in a case where a compensatory award would not adequately reflect the gravity of the wrongdoer's conduct. Once it is accepted that damages is an available remedy in an action based on breach of confidence, it seems to me to follow, from the nature of the subject matter, that exemplary, as distinct from merely compensatory, damages should, in a proper case, be available as well (although such damages are punitive in nature and alien to equitable principles : as Somers J. pointed out, at p.302, "equity and penalty are strangers"). I would therefore agree with the judge, who held that he could properly make an award of exemplary damages if he thought it right to do so.

The judge's refusal to award exemplary damages

14. However, he declined to do so. He expressed himself satisfied that this was one of those cases where the respondent's conduct (in bringing his US proceedings) was calculated to make a profit for himself which might exceed the compensation payable to the appellants. In doing so, the judge did not misdirect himself in law; that is indeed one type of case in which exemplary damages may properly be awarded. And, so far as the facts are concerned, I am of the opinion that we ought not to disturb his findings, in the absence of any properly supported cross-appeal, unless his conclusions are so plainly at variance with the primary facts that we must step in to prevent a substantial injustice being done to the respondent. I would for myself have had some difficulty in coming to the same conclusion as the judge, that on the facts the respondent's conduct was calculated to make a profit for himself which might exceed the compensation payable to the appellants. But I do not think that is sufficient to justify us in rejecting the judge's conclusion, and this court should, I think, proceed on the footing that it was correct. Why, then, did the judge decline to make an award of exemplary damages against the respondent?

The judge's reason for his decision

15. The judge's reason, that it would be "inappropriate" to award exemplary damages because of the current financial position of the respondent, seems to me, with respect, to be no reason at all. The appellants' whole point was that an award of damages in favour of the respondent in his US proceedings, an award which he could not have obtained without misusing the appellants' confidential information, would be a profit (potentially, a huge profit) made by the respondent from that misuse. That point would have been the same, whether the respondent, before the award was made, was as poor as a churchmouse or as rich as Croesus. I would, therefore, put on one side the judge's reason for refusing to award exemplary damages, and hold that we should consider the matter afresh.

Conclusion

16. It seems to me, considering the matter afresh, but in the light of the judge's finding (subject to no legitimate challenge in this court) that the respondent's conduct was calculated by him to make a profit for himself which might well exceed the compensation payable to the appellants, that the appellants are indeed entitled to exemplary damages. I would so hold. But how, and when, are these to be assessed? The profit which it is said the respondent may make is hypothetical, future and uncertain. For this court to award these damages now, as the appellants asked us to do, in the (unascertained) sum which (perhaps) the respondent might recover in his US proceedings would indeed, as it seems to me, be "inappropriate" (to use the judge's word). I consider the right course for us to take is to adjudge that the appellants are entitled to exemplary damages against the respondent, the amount of such damages to be assessed on a date to be fixed, being a date not before the conclusion of the respondent's US proceedings.

17. If, on the assessment, the appellants are able to show that the respondent has in fact made a profit, perhaps a huge profit, from misusing the appellants' confidential information, they will recover substantial exemplary damages. If, on the assessment, it appears (as is, I think, probable) that the respondent has profited not at all from his US proceedings, the rationale for an award of exemplary damages will have disappeared altogether. Certainly, no question can arise of our making any assessment of such exemplary damages at this stage of these proceedings. On the other hand, there seems no good reason why the appellants should not recover, now (in so far as they are able to do so) the $321,270.13, in the nature, as we think, of special damages, already awarded to them by the judge. This should be treated as an interim award, enforceable now, and unaffected by this judgment.

18. So I would allow the appeal to the extent that I would adjudge the appellants entitled to exemplary damages to be assessed on a date to be fixed, being a date not before the conclusion of the respondent's US proceedings. But since Bokhary and Liu, JJ.A. are in favour of dismissing the appeal, it will be dismissed, with the consequences to be indicated by Bokhary, J.A. in his judgment.

Liu, J.A.:

19. The defendant was at one time a barrister retained by the plaintiffs. He was dismissed. He kept original and copy documents of the plaintiffs after his dismissal. The defendant has instituted proceedings against Exxon Corporation in America for "damage done to him and his legal practice by Exxon and its affiliates". He also claimed that his reputation had been tarnished. The defendant alleged that his claims were supported by the "voluminous documentary evidence ........ in the files of (Exxon's) Hong Kong Lawyers".

20. Sears, J was satisfied that the American proceedings "were commenced utilising either original or copy documents obtained from the plaintiffs (by the defendant)". Copies of these documents have even been disseminated to the Hong Kong press. The defendant further explained that criminal investigation implicating him might be initiated and that if he "then parted with the papers, (he) would no longer have the very proof (he) required to establish (his) own innocence. (He) had no other means to do so".

21. Sears, J concluded that the defendant had used "these documents for really what (had) been described as greed, but at any rate self interest, because what he (had) done (was) to launch proceedings claiming the staggering sum of US$125 million". The judge described some of the fears of the defendant as paranoia and his actions as "shameful" or "more appropriately disgraceful". The judge gave judgment to the plaintiffs for "substantial detriment". An account was ordered to be rendered with payment to the plaintiffs of the sums found due in the following terms:

"The defendant do give an account of all profits and monies presently, or potentially to be, made or received by him arising directly or indirectly from the use of the material ordered to be returned and/or the information contained therein and that there be an order for payment of all sums found to be due to the plaintiff in connection therewith."

Damages were thereupon ordered to be assessed, and the judge assigned assessment to himself.

22. In the proceedings for assessing damages, the judge observed:

"As I have said, it is difficult, as he never turned up in court, to know really what his true motive was".

The judge held:

"I am satisfied that it is one of the cases where exemplary damages can be awarded where the defendant's conduct has been calculated to make a profit for himself which may exceed the compensation payable to the plaintiff. I have no doubt that these actions of Mr Ford were calculated, for some unknown reason, to make a profit for himself. As a matter of principle therefore, in my judgment, the plaintiffs would be entitled to exemplary damages." (Emphasis supplied).

The judge was however of the view that the defendant had sufficiently punished himself by his own deeds. The judge refused to order exemplary damages and his deliberation was focused on the means of the defendant who was a bankrupt. From such a refusal, the plaintiffs appeal.

23. The judge failed to appreciate the nature of "the exemplary damages award sought by the plaintiffs, (namely, an indemnity against any award made to the defendant in the defendant's United States of America proceedings)". Clearly, the financial standing of the defendant would not be adversely affected by the plaintiffs' prayer. If this court has jurisdiction to entertain an application for exemplary damages and if that jurisdiction can be invoked in this case, for this reason the judge's exercise of his discretion in not awarding exemplary damages could be impugned and consequently discretion would have to be exercised afresh by this court.

24. Some basic principles need to be addressed. First, a plaintiff cannot be awarded both an accounting of profits and damages against a confidant for breach of his duty of confidence. These remedies are hardly reconcilable. Counsel should have been put on election. See The Law of Restitution by Lord Goff and Gareth Jones 4th edn. at p. 686; Neilson v. Betts (1870) L.R.5 H.L. 1 at p. 22 per Lord Westbury; Peter Pan Manufacturing Corporation v. Corsets Silhouette Ltd. [1963] R.P.C. 45 at p. 58 per Pennycuick J.See also Tang Man Sit (deceased) (personal representative) v. Capacious Investment Ltd, [1996] 1 AER 193. The selection is not final until judgment: United Australia Ltd. v. Barclays Bank Ltd. [1941] AC 1. In a proper case, a successful plaintiff may be permitted to make an informed decision on election within a reasonable time after judgment. See Island Records Ltd. v. Tsing International plc & Another, [1995] 3 AER 444; Tang Man Sit (deceased) (personal representative) v. Capacious Investment Ltd. supra. p. 198C.

25. Secondly, the known remedies in an action founded on breach of confidence are: an account of profits, a quantum merit in the sense of a sum which represents the reasonable value of the information, damages for loss, a lien, a declaration of the confidant as the constructive trustee of identifiable assets and exemplary damages. See Law of Restitution, supra p. 686 et seq. Exemplary damages have been awarded in cases of misuse of economic information by the confidant, newspapers libels, high-handed eviction of tenants, deceit and nuisance. See McGregor on Damages 15th edn. pp. 418 - 423. This list is not closed, but a prayer for exemplary damages in the circumstances of this case is unusual and unprecedented.

26. Thirdly, as Professor Finn of Australian National University reminds us that "English law (on exemplary damages) is governed by Lord Devlin's famous restatement in Rookes v. Barnard [1964] AC 1129, according to which exemplary damages are only recoverable in three cases". Essays on Damages, Professor P.D. Finn. The plaintiffs rely on the second category of cases as formulated by Lord Devlin in the following terms:

"Cases in the second category are those in which the defendant's conduct has been calculated by him to make a profit for himself which may well exceed the compensation payable to the plaintiff. I have quoted the dictum of Erle CJ in Bell v. Midland Railway Co. Maule, J. in Williams v. Currie suggests the same thing; and so does Martin B. in an orbiter dictum in Crouch v. Great Northern Railway Co. It is a factor also that is taken into account in damages for libel; one man should not be allowed to sell another man's reputation for profit. Where a defendant with a cynical disregard for a plaintiff's right has calculated that the money to be made out of his wrongdoing will probably exceed the damages at risk, it is necessary for the law to show that it cannot be broken with impunity. This category is not confined to moneymaking in the strict sense. It extends to cases in which the defendant is seeking to gain at the expense of the plaintiff some object - perhaps some property which he covets - which either he could not obtain at all or not obtain except at a price greater than he wants to put down. Exemplary damages can properly be awarded whenever it is necessary to teach a wrongdoer that tort does not pay." Rookes v. Barnard & Others, supra pp. 1226-7.

27. In Cassell & Co. v. Broome & Another [1972] AC 1027 at p. 1078 H, Lord Hailsham regarded Lord Devlin's second categorisation as being "not intended to be exhaustive but illustrative". At p. 1088 D/E, Lord Reid was critical of Lord Devlin's formulation of his Lordship's second category, but he accepted that "the meaning (was) clear enough". At p. 1088 E/F, Lord Reid was prepared to exclude a malicious tortfeasor from its operation for admittedly no logical reason other than the fact that the second category had been "firmly established" by authorities which "did not require us to go farther". It would seem that the narrow ambit of Lord Devlin's second category is tolerably well-defined and that no extension of the category should be encouraged.

28. I turn then to the issues before us: Does this court have jurisdiction to order exemplary damages? If so, may that jurisdiction be invoked against the defendant? If not, is this court bound by what would appear to be a holding of Sears, J on whether the court can make an award against the defendant? If so, how is its discretion to be exercised?

29. It is clear that our courts have jurisdiction to award damages including exemplary damages in equity. After all, we have fusion of common law and equity in Hong Kong. Suffice it to refer to AG v. Guardian Newspapers (No. 2) [1990] 1 AC 109, where at p. 286 D/E Lord Goff gave us a positive reassurance: "The remedy of an account is alternative to the remedy of damages, which in cases of breach of confidence is now available." (Emphasis mine).

30. What has the defendant done? He is suing Exxon for damage done to him, his reputation and his law practice. It is not suggested that the defendant must necessarily fail in his claims without the documentary evidence. That the defendant may conceivably prove his case by viva voce evidence was not examined, though it was alleged that the original and copy confidential documents would "support his claim". It is conceded that no damages had been sustained by the plaintiffs to found any claim. The order for account should have been refused or abandoned. These original and copy documents have in themselves no economic value. All the defendant claims against Exxon is for damages caused by the alleged wrongs done to him. In the defendant's American proceedings, there will be no profit made in breach of confidence, nor benefit acquired or advantage obtained by the use of confidential information. The damages claimed allegedly arose from his dismissal and the following measures taken, which were said to have been improperly motivated. The breach of confidence or the unauthorised use of confidential material will not bring the defendant any profit, benefit or advantage. And supporting a cause of action by documentary evidence cannot be said to have given rise to any advantage in the true sense of that word. The defendant's gain, if any, derives from alleged loss brought about by his dismissal and the follow-up actions, improper motivation and/or unfounded implication in a criminal conspiracy. The original and copy documents in the possession of the defendant merely serve to support his claims founded on assertions which arose independently of these papers. None of the damages sought in the American action is a benefit or advantage attributable to misuse of the confidential information. Profit is clearly out of the question. The original and copy documents in question are not of a profit-earning nature. No pecuniary value can be placed on them. It would be inapt to speak of a calculated value of these original and copy documents. No reasonable sum can be assigned to the unauthorised use of these documents and copies. The motive of the defendant in pursuing his America litigation is, so the judge said, obscure.

31. How is it then possible to say that the defendant's activities in America are caught or clearly caught by the second category of Lord Devlin in Rookes v. Barnard, supra. It is true that Lord Devlin did not confine the second category to "moneymaking in the strict sense". He extended it to cases in which a defendant was seeking "a gain at the expense of the plaintiff" in respect to some object or property. In Broome v. Cassell, supra at p. 1088 D/E, similarly Lord Reid spoke in terms of "an advantage which would outweigh any compensatory damages likely to be obtained by his victim". However, in Drane v. Evangelou [1978] 1 WLR 455 at 462B (C.A.), Goff, LJ, as he then was, was of the view that "calculation by the defendant of actual money which he hoped to make out of the conduct was not necessary". Further, in Archer v. Brown [1985] QB401 at p. 423F, Peter Pain, J was even prepared to make an award of exemplary damages in an action for deceit, where the defendant had not made any profit at all, but no award was ordered in that case because the defendant had been duly prosecuted for fraud, convicted and imprisoned and thus actively punished. But a confidant's deeds must be judged in the context of a gain such as profit, benefit or advantage within the contemplation of Lord Devlin in his second category. That is not the nature of the defendant's claimed damages in his American suit. The plaintiffs have themselves sustained no loss. Try as I may, I find it quite impossible to put the defendant's American proceedings neatly into Lord Devlin's second category.

32. An application of this kind is not known to have been previously attempted. It cannot be said that the defendants' conduct "has been calculated by him to make a profit for himself which may well exceed the compensation payable to the plaintiffs" (Rookes v. Barnard, supra p. 1226) or that the defendant "faces up to the possibility of having to pay damages for doing something which may be held to have been wrong but where nevertheless he deliberately carries out his plan because he thinks that it will work out satisfactorily for him" (Broome v. Cassell supra p. 1094 C/D - D, per Lord Morris). In Broome v. Cassell supra at p. 1131 A/B, Lord Diplock assigned "the express purpose" of Lord Devlin's second category in Rookes v. Barnard to restricting, not expanding, "the anomaly of exemplary damages". In my view, it has not been demonstrated that the jurisdiction of this court to grant exemplary damages may be invoked against the defendant in this unusual case. At least, it must be very doubtful whether the defendant's conduct satisfies the requirements of Lord Devlin's second category.

33. That this court may or may not invoke its jurisdiction to order exemplary damages against the defendant is a question of law or mixed law and fact, in which this court cannot be fettered by the decision of Sears, J. Even if this court were deemed, by issue estoppel between the parties to this appeal or otherwise, capable of granting exemplary damages against this defendant and even if exemplary damages could be awarded in conjunction with an order for accounting profits without an election, discretion would have to be re-exercised. Matters would then have to be examined realistically to see if it would be unjust, in the exercise of our equitable jurisdiction, to order exemplary damages when in truth the defendant's case does not fall squarely within Lord Devlin's second category despite what Sears, J held or seemed to have held. The granting of damages in equity is always discretionary. See Day v. Mead (1987) 2 NSLR 443 at p. 451, line 25 per Cooke, P. I refer to the observation of Cook, P merely for convenience. The New Zealand and Australian decisions which extend the restitutional principle are not binding authorities for Hong Kong. New Zealand, Australia and Canada share a history of restitutional remedy. See p. 104 Essays on Damages, Professor P.D. Finn. Indeed, on the grounds of indigenous exemplary principle and separate judicial policy, their Lordships in the Judicial Committee upheld a decision given in Australia, where the Australian High Court refused to adopt the English approach. See Australian Consolidate Press v. Uren [1969]1 AC 590 (P.C). For exemplary damages, we should regard ourselves better guided by Lord Devlin's second category inRookes v. Barnard, supra.

34. Turning to discretion, "the legitimate interests of the plaintiffs in seeking to keep the confidential information suppressed and the legitimate interests of the defendant in seeking to make use of" it in the peculiar circumstances of this case would have to be finely balanced. "There is never any question of an absolute right to have confidential information protected." Webster v. James Chapman & Co (a firm) and others [1989] 3 AER 939 at p. 945a, per Scott, J. In the spycatcher case, Lord Goff took into consideration "all the circumstances" for deciding if "it would be just ...... that (a defendant) should be precluded from disclosing the informations to others". See AG v. Guardian Newspapers Ltd. (No. 2) supra. p. 281B. As to the circumstances in which the information obtaining came into the hands of the defendant, the issues were joined in the action against the defendant and in the American action, the defendant sought to rely on the relevance of the documents and disclosure of these documents was needed, the American proceedings aside, little could be said for the defendant. But the exemplary damages sought in the manner and to the extent as prayed for in this case are novel. There is no known case for exemplary damages akin to the claim against the defendant here. In Broome v. Cassell supra at p. 1088 F Lord Reid refused "to extend the right to inflict exemplary damages to any class of case which (was) not already clearly covered by authority". (Emphasis added). Lord Devlin's second category was designed to restrict the anomaly of exemplary damages. See Cassell v. Broome supra. P. 1076 B/C, per Lord Diplock. "The firmly established authority (binds us) to accept this category however little we might like it, but (would) not require us to go farther". P. 1088 E/F, per Lord Reid. Further, the defendant is not making any profit, acquiring any benefit or obtaining any advantage out of the use of the documents in question. In real terms, damages award in the American action is not attributable to the unauthorised use of these documents and copies. These documents and copies may or tend to support the defendant's claims founded on independent causes of action. In conclusion, I cannot find any justification for extending the application of Lord Devlin's second category to the case of the defendant.

35. Whether exemplary damages sought against the defendant may be ordered is, at least, unclear. No satisfactory explanation is given as to why the plaintiffs should not be left to intervene in the American proceedings. After all, the plaintiffs have obtained injunctions restraining the defendant from using or disseminating these papers. The plaintiffs have not elected to relinquish the order for accounting, and with no loss to themselves from the unauthorised use of confidential information they have throughout been well placed to make an election. Compensation or damages in equity has traditionally been said to aim at restoration or restitution. Insofar as Lord Devlin's second category may be said to be based on a waiver of tort for suing in restitution, namely, to recover the benefit which the tortfeasor has derived from the commission of his tort, the English Court of Appeal refused to apply "restitution" where the gain to the defendant was not matched by an equivalent loss to the plaintiff. See Phillips v. Homfray, (1883) 24 Ch. D. 439 (C.A.). The plaintiffs have admittedly sustained no loss by the unauthorised use of the said original and copy documents. Moreover, the second category revolves significantly about the motive or intention behind the defendant's conduct (McGregor on Damages 15th edn. para. 419 at pp. 262-3), and the motive of the defendant is obscure. It has also been said that malice by itself should not be visited by exemplary damages. See Broome v. Cassell supra p. 1088 E, per Lord Reid. Indeed, we must not loose sight of observation of Lord Reid: "Objections to allowing juries to go beyond compensatory damages are overwhelming. To allow pure punishment in this way contravenes almost every principle which has been evolved for the protection of offenders". p. 1087 C. His Lordship went as far as describing the second category as providing "a form of palm tree justice". p. 1087 F/G. The anomalous and draconian nature of the remedy calls for greater caution. In all the circumstances, judicial discretion, if it need be considered, should not be exercised in favour of granting exemplary damages.

36. In Mcgregor on Damages 15th Edn. para. 422 at pp. 266 and 267, it is suggested that full recognition should be accorded to the real purpose behind the second category of Lord Devlin, which is not for "the punishment of the defendant but the prevention of his unjust enrichment". In the Law of Restitution by Lord Goff and Gareth Jones, 4th edn. reference is made at p. 690 to the observation of Slade, J in My Kinda Town Ltd. v. Soll [1982] FSR 147 at p. 156: "the purpose of ordering an account ... is to prevent an unjust enrichment". It is quite unnecessary for me to dwell on the conceptual basis for the second category of Lord Devlin. During the hearing, I bravely resisted the temptation of seeking aid from counsel as amicus curiae. But for the firm views I have expressed, further submissions would be justified. For all these reasons, I would not order exemplary damages and would dismiss the appeal.

Bokhary, J.A.:

37. I have no doubt that damages are recoverable for misuse of confidential information. And I take the view that such damages can in an appropriate case include exemplary damages. But is the present case such a case?

38. What the appellants seek is a Hong Kong award of exemplary damages which, in the event of the respondent obtaining damages in the proceedings which he has commenced in the United States, would equal such United States award.

39. So the appellants do not seek an award defined by a figure. Rather, they seek an award governed by an elastic formula into which is built a contingency. I am not persuaded that such an award is ever legitimate.

40. That difficulty apart, there is also this difficulty. The appellants seek such a Hong Kong award on the assumption that any award which the respondent may obtain in the United States proceedings would necessarily be the result of misuse by him of their confidential information.

41. I do not see how we can proceed on that assumption. The appellants deny the "cover-up" alleged by the respondent. That being so, it can hardly be their case that any confidential information of theirs points to the existence of a cover-up. Accordingly, how any use or misuse of their confidential information could help the respondent to establish a cover-up is by no means apparent.

42. On any view, there can be no basis for an award of exemplary damages against the respondent unless and until he recovers damages and does so by misusing the appellants' confidential information.

43. There is such a thing as a quia timet injunction; but there is no such thing as a quia timet award of unquantified and unaccrued damages. The present case is wholly different from, for example, the case of someone who misused confidential information to write a "tell all" book. There an award of exemplary damages could be made in a specific sum based on a reasonable estimate of the royalties which the book is likely to earn for the author.

44. I too would dismiss the appeal.

45. There is one thing which I would add. If the respondent were to recover damages one day and if there then appeared to be a viable basis for saying that he had succeeded in doing so by misusing the appellants' confidential information, it may well be that they could then bring a fresh action seeking exemplary damages (doing so on the basis that until then they had no cause of action to pursue or to lose). I would leave that open.

46. The result is as follows. By a majority, the appeal is dismissed. As to costs, we are unanimously of the view that there should be no order as to costs since the respondent is not represented and has not appeared. There will be an order nisi as to costs to that effect.