SHENZHEN FUTAIHONG PRECISION INDUSTRY CO., LTD AND OTHERS v. BYD CO LTD AND OTHERS

HCA 2114/2007

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NO 2114 OF 2007

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J U D G M E N T

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Introduction

1. By paragraph 1 of their summons dated 30 September 2015, the Plaintiffs (by original action) (“Foxconn Parties”) seek leave to amend their Re–amended Statement of Claim (“RASoC”) in violet (“proposed amendments”).

2. The application is opposed by the Defendants (by original action) (“BYD Parties”).

Foxconn Parties’ present case and proposed amendments

3. In a nutshell, Foxconn Parties’ case is that BYD Parties have wrongfully received and used their confidential information which they had developed for the effective operation of the group’s business.  The confidential information, constituting Foxconn Parties’ “trade secrets”, included inter alia operation manuals and records of suppliers and customers.

4. As far as wrongful receipt is concerned, it is pleaded that, in or around 2005 and 2006, BYD Parties received the confidential information through 9 of Foxconn Parties’ employees.  The 9 employees wrongfully disclosed the confidential information to BYD Parties in breach of their duties, having been induced and procured by BYD Parties to do so.  In relation to each of the 9 employees, their breaches of duties and disclosure of confidential information have been specifically pleaded in paragraphs 20 to 26C of RASoC while the confidential information in question which they had wrongly disclosed is specifically pleaded in Schedules 1–13.  It is further pleaded that BYD Parties knew the information was trade secrets and the employees had breached their duties.

5. As far as wrongful use is concerned, it is pleaded that by about August 2006, BYD Parties had set up a production line highly similar to Foxconn Parties’ production system.  It is also pleaded that BYD Parties have made use of the confidential information and modified it for their own use (RASoC paras 27–32). In this regard, Foxconn Parties set out

(1)   in Schedule 14 various operational and business documents of both parties which are said to bear “striking similarity” (para 27(a)(2) RASoC); and

(2)   in Schedule 15 the confidential information said to have been modified by BYD Parties for their own use (para 29(1) RASoC).

6. On the basis of the aforesaid, Foxconn Parties claim against BYD Parties for:

(1)   breach of their duty of confidence towards Foxconn Parties (“breach of confidence”) (RASoC paras 20–38);

(2)   inducing breach of contractual and fiduciary duties (“inducing breach of duties”) (RASoC paras 39–40);

(3)   conspiracy (RASoC paras 41–43); and

(4)   dishonestly assisting the 9 employees in their breaches of fiduciary duties (“dishonest assistance”) (RASoC paras 44‑47).

7. According to Mr Wong SC, the proposed amendments are intended to plead facts revealed from the discovery given by BYD Parties (“BYD Discovery”) in July 2014[1] and to provide further and better particulars of the existing causes of action already pleaded in the RASoC.  Mr Wong SC told this court the BYD Discovery showed a fuller extent of the wrongful use of Foxconn Parties’ confidential information by BYD Parties, as well as the involvement of some other former employees of his clients in BYD’s wrongful acts.  The BYD Discovery also revealed additional documentsprepared by BYD Parties by reference to comparable operation documents of his clients.  This triggered further investigation resulting in the proposed amendments to Schedules 14 and 15 of RASoC.

8. According to Mr Joffe, most of the proposed amendments are objectionable as they involve various new allegations (“new allegations”):

(1)   The involvement of 3 additional employees of Foxconn Parties viz Dong Gening (“Dong”), Chen Quan (“Chen”) and Akin Wang (“Wang”), and the duties which they each owed to Foxconn Parties: paragraph 16 (opening paragraph and sub–paragraphs 10 – 12) of proposed amendments.

(2)   The wrongful acts and breaches of duties committed by the 3 additional employees which Foxconn Parties likewise allege had been procured and induced by BYD Parties: paragraphs 26D – 26F and Schedules 13A–13C of proposed amendments.

(3)   The additional confidential information which these 3 employees had wrongfully disclosed to BYD Parties between 2003 and 2005 and which BYD Parties obtained for their own use: Schedules 13A–13C of proposed amendments.

9. Mr Joffe complains that the new allegations are relied upon by Foxconn Parties as additional basis in support of their claims for breach of confidence, inducing breach of duties, conspiracy and dishonest assistance.

10. For completeness, this court should mention that, in addition to the specific paragraphs and Schedules identified above, Mr Joffe also objects to various bits and pieces of the proposed amendments eg paragraph 11 last sentence, paragraph 27 opening, paragraph 27(b)(2), paragraphs 41–2; paragraphs 44–5 etc which essentially are amendments consequent upon or arising from the new allegations. As this court sees it, these amendments stand or fall with the proposed amendments concerning the new allegations and shall be so treated.

11. At paragraph 3 of his skeleton submissions, Mr Joffe has helpfully summarized his three grounds of objection as follows.

12. First, the proposed amendments have the effect of introducing new causes of action, which are time barred under the Limitation Ordinance, Cap 347 (“LO”).

13. Second, Foxconn Parties have not shown the new causes of action arose out of the same or substantially the same facts as the causes of action already pleaded in the RASoC so as to come within RHC O 20 r 5(5) and sections 35(5) and (6)(a) LO.

14. Third, even if the proposed amendments satisfy the requirements of RHC O 20 r 5(5), the court should not exercise its discretion to allow the amendments as it would not be just to do so, by reason of 

(a)  the extreme delay of Foxconn Parties in introducing the proposed amendments; and

(b)   the serious prejudice to BYD Parties if the amendments are allowed.

Legal Principles – amendments in general

15. The following principles concerning amendments, summarised in Hsu Ming Chi v Lam Shu Chit, unrep, HCCL8 of 2013, 22 October 2014 at [13]–[18] and adopted in Re Hin Pro International Logistics Ltd [2016] 1 HKLRD 1367 at [8], are well–established:

“13. It is a guiding principle of cardinal importance on the question of amendment that generally speaking, all such amendments ought to be made ‘for the purpose of determining the real question in controversy between the parties to any proceedings or of correcting any defect or error in any proceedings’: Re Playmates Investments Ltd [1996] 4 HKC 577 at 582E–H (per Le Pichon J as she then was); Natamon Protpakorn v Citibank NA [2009] 1 HKLRD 455 at para 25 (per Cheung JA); Hong Kong Civil Procedure 2014 Vol 1 para 20/8/6.

14. Leave is readily granted to amend before trial unless it can be shown that the new claim based on the proposed amendment is bound to fail. While the court is entitled to have regard to the merits of the case, it should only do so when the merits are readily apparent, and are so apparent as not to require prolonged investigation: Natamon Protpakorn v Citibank NA supra at para 25 (per Cheung JA).

15. If the proposed amendments are bound to fail, no leave to amend should be granted. In this regard, the court will take the applicant’s proposed pleaded case to the highest: Bank of China v Leigh Hardwick unrep., HCA 1110 of 2006, 28 August 2013, per Anthony Chan J at para 2.

16. Absent any real prejudice, an application for amendment, albeit late, must be decided upon the general principle that a court of law seeks to adjudicate on the real issues and disputes between the parties and, if possible, technical and procedural rules should not stand in the way of allowing the parties to raise their real claims or defences before the court for adjudication: VSC Building Products Co Ltd v Kono Insurance Ltd, unrep,HCA 947/2005, 9 September 2009, per A Cheung J (as he then was) at [22].

17. Where prejudice is claimed, the burden is on the party opposing the amendment to show prejudice. There is no injustice to the opposing party if he can be compensated by appropriate orders as to costs: Re Playmates Investments Ltd supra at 582H, 584C (Le Pichon J as she then was).

18.  Lastly, in giving effect to the underlying objectives of the Rules of the High Court, the court shall always recognize 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’: RHC O 1A r 2(2).”

Legal Principles – amendments which raise a limitation issue

16. Where a party raises a limitation objection to proposed amendments to pleadings, it is useful to adopt the “three–stage test” set out in Ballinger v Mercer Ltd [2014] 1 WLR 3597 at [15], as further explained in Michael Agapios Diamandis v Sir David Seton Wills [2015] EWHC 312 (Ch) at [46]:

(1)   Stage 1:   Is it reasonably arguable that the opposed amendments are outside the applicable limitation period? If not, then the amendments fall to be considered in accordance with the general principles governing amendment applications.

(2)   Stage 2:   If the answer to (1) is yes, do the proposed amendments seek to add or substitute a “new cause of action”? If not, then again the amendments fall to be considered in accordance with general principles.

(3)   Stage 3:   If the answer to (2) is yes, does the new cause of action arise out of the same or substantially the same facts as are already in issue in the existing claim? If not, the amendments cannot be allowed.  If yes, then the court retains a discretion to allow or refuse the amendments in accordance with general principles.

Deliberation

Stage 1

17. Owing to the doctrine of “relation back” under section 35(1) of LO, as long as there is a prima facie defence of limitation, the burden is on the plaintiff to show the limitation defence is not reasonably arguable: Global Bridge Assets Ltd v Sin Hung Kai Financial Ltd [2012] 4 HKLRD 474 at [20] – [22]; Ballinger v Mercer supra [25] – [29].

18. The question to ask at this stage is: do BYD Parties have a reasonably arguable limitation defence to the new allegations in so far as they are relied upon to support the claims for breach of confidence, inducing breach of duties, conspiracy and dishonest assistance?

19. As expected, Mr Joffe submits the answer must be yes.  This is because the limitation periods in respect of the claims for breach of confidence, inducing breach of duties and conspiracy are those applicable to claims in tort ie 6 years pursuant to section 4(1)(a) LO. The same 6‑year limitation period also applies to the claim based on dishonest assistance:  Timmerton Company Inc v Equity Trustee Ltd & Anor [2015] 1 HKLRD 247 at [ 9 ] - [10] and [21].  If so, the limitation period in respect of all 4 causes of action against BYD Parties expired 6 years after the material events relied upon, which took place between 2003 and 2005 ie sometime between 2009 and 2011.

20. Mr Wong SC, on the other hand, submits that no limitation period applies to the claim for breach of confidence, which is his clients’ principal claim – the other three claims are merely “peripheral” and “supplementary”.  The reason is that breach of confidence is not a tort and the 6–year limitation period under section 4(1)(a) LO is not applicable.  In support of his submissions, Mr Wong SC relies on Dutton v Spink [1977] 1 All ER 287 at 293 e–f, Kitechnology BV v Unicor GmbH Plastmaschinen [1995] FSR 765 at 777–8 and Burrows, The Law of Restitution 3^rd Ed p 705.

21. In reply, Mr Joffe submits that none of the authorities cited by Mr Wong SC are directly relevant since they are not concerned with whether or not any statutory limitation period applies to a claim for breach of confidence.  In so far some of the statements in them appear to support the proposition that breach of confidence is not a tort, they are either obiter dictum or not supported by any detailed analysis.  Mr Joffe further submits that whether breach of confidence is or is not a tort is an unsettled issue.  He refers this court to Clerk and Lindsell on Torts 21^st Ed para 27–04 which suggests a long–standing uncertainty as to how this cause of action should be categorized.  Several possibilities have been mentioned by the learned editors: equitable principle of good faith, tort, sui generis, and a restitutionary claim for unjust enrichment, all with varying degree of judicial support. 

22. This court agrees with Mr Joffe.

23. It is true that, historically, breach of confidence was developed by the Court of Chancery on the equitable principle of good faith.  However, this court is not convinced that, more than a hundred years after the fusion of law and equity, legal history still dictates the juridical nature of a cause of action.  As far as its classification as a tort is concerned, the learned editors have cited Seager v Copydex (No 2) [1969] 1 WLR 809, 813 and Douglas v Hello ! Ltd [2001] QB 967, 998 & 1000 in support.  Indeed, in Clerk and Lindsell on Torts at para 1–06 fn 28, the learned editors have also cited Campbell v MGN Ltd [2004] UKHL 22 at [14] (per Lord Nicholls) and McKennitt v Ash [2006] EWCA Civ 1714 at [8] (per Buxton LJ) as supporting the proposition that breach of confidence can be regarded as a specie of tort. 

24. For the present purpose, it is unnecessary for this court to finally determine the juridical nature of the claim for breach of confidence.  As far as Stage 1 is concerned, the burden is on Foxconn Parties to persuade the court that there is no reasonably arguable limitation defence to the claim for breach of confidence. As long as it is reasonably arguable that breach of confidence can be classified as a tort, the 6–year limitation period in section 4(1)(a) LO will arguably apply.  While the authorities cited in support of the proposition that breach of confidence is a specie of tort, like the authorities against it, also lack detailed analysis as to the juridical nature of the cause of action (since that was not the direct concern of the Courts in question), they cannot be completely ignored.  Rather, they tend to support Mr Joffe’s point that the issue is far from settled.  If section 4(1)(a) LO can arguably be applicable, the new allegations, in so far as they are relied upon to support the claim of breach of confidence, would have been time–barred years ago, as submitted by Mr Joffe. 

25. In any event, the new allegations are also used to support the other three causes of action ie inducing breach of duty, conspiracy and dishonest assistance.  Whether or not they are “peripheral” or “supplementary” is debatable – what cannot be disputed is that Foxconn Parties have chosen to plead and rely on them in the RASoC. There is no suggestion that the 6–year limitation period does not apply to them.  If so, it is reasonably arguable that a limitation defence would be available to BYD Parties.

26. In view of the above, it is not necessary for Mr Joffe to rely on his fallback argument based on section 4(7) LO.

27. Lastly, this court will briefly deal with the point made[2], albeit not pressed, by Mr Wong SC ie the limitation period does not start to run until after the BYD Discovery in 2014 by reason of BYD Parties’ deliberate concealment of the facts involved in their breach of duty: section 26 LO. 

28. First, as a matter of law, in order to rely on section 26 LO, it is not enough for a plaintiff to establish (i) deliberate concealment of the relevant fact(s) by a defendant and (ii) the time it actually discovered those facts. If a plaintiff could have discovered those facts earlier by the exercise of reasonable diligence, limitation period starts to run from that point of time. This is the only reasonable construction of section 26 which provides that “the period of limitation shall not begin to run until the plaintiff has discovered the … concealment … or could with reasonable diligence have discovered it.” If the plaintiff’s case is that he could not, even with reasonable diligence, have discovered the facts concealed earlier, he has to establish his case, by reference to primary facts or inference from primary facts. A bare assertion does not suffice.

29. Second, Foxconn Parties’ evidence in support of the proposition that they could not have discovered the facts concealed earlier is quite thin. It is akin to saying because the breach of duty by BYD Parties was deliberate and was not done openly, Foxconn Parties could not have discovered the concealment earlier than they actually did ie in or about July 2014.  While this court accepts Foxconn Parties were unlikely to have discovered BYD Parties’ breach of duty at the time it was committed (since it was not done openly), that in itself does not mean the facts involved in that breach could not have been discovered earlier than July 2014.  If Foxconn Parties did find out about the secret “wrongdoings” of the 9 original employees and BYD Parties as early as 2007 when they issued the Writ of Summons in this action, what was their explanation for not having also found out about the 3 additional employees then? There might be a perfectly legitimate explanation but it is not in the evidence before this court.

30. However, it is not necessary for this court to make a definite ruling on the applicability of section 26 LO at this stage. As observed by Lewison J in Fattal v Walbrook Trustees (Jersey) Ltd [2012] Bus LR D7 at [45] (quoted with approval by Kwan JA in Global Bridge Assets Limited v Sun Hung Kai Financial Limited [2012] 4 HKLRD 474 at [25]):

“…The principle is that permission to amend should not be granted where the defendant has a reasonably arguable limitation defence. In a case in which it is obvious that section 32[3] will apply so as to postpone the running of time, then I accept that the court must have regard to that. But in a case in which the application of section 32 is itself disputed, in my judgment the right course is to refuse to allow the amendment…”

31. Given the application of section 26 LO is disputed by Mr  Joffe, and given this court is not satisfied on the evidence that section 26 LO will obviously apply so as to postpone the running of time, this court is of the view BYD Parties do have a reasonably arguable limitation defence.

Stage 2

32. On the law, both parties accept the well–established definition of “cause of action” in Letang v Cooper [1965] 1 QB 232, 242–243 as “simply a factual situation the existence of which entitles one party to obtain from the court a remedy against another person”.  This definition is substantially the same as that adopted decades ago by Lord Esher MR in Coburn v Colledge[4] [1897] 1 QB 702, 706, who defined a cause of action as “every fact which it would be necessary for the plaintiff to prove, if traversed, in order to support his right to the judgment of the court”.  At 707, Lord Esher MR went on to explain what he meant:

“…the plaintiff in order to make out a cause of action must assert certain facts which, if traversed, he would be put to prove… In former times, if he failed to assert any of those facts, his declaration was demurrable as shewing no cause of action.”

33. In Paragon Finance v DB Thakerer & Co [1999] 1 All ER 400, 405 f–g, Millett LJ (as he then was) emphasized that only those facts which are material to be proved, are to be taken into account.  The “addition of further instances or better particulars” do not amount to a distinct cause of action.  Further, the selection of the material facts to define the cause of action must be made at the highest level of abstraction.

34. The question to ask at this stage is: whether the proposed amendments have the effect of introducing new “causes of action”?

35. Mr Joffe submits the answer must be yes.  He emphasizes that Foxconn Parties are seeking to introduce new sets of facts, not pleaded before, pertaining to each of the 3 additional employees.  In particular, Foxconn Parties have sought to plead

(1)   new contractual/fiduciary duties allegedly owed by the 3 additional employees arising from their individual employment relationship with Foxconn Parties pursuant to their specific contracts of employment;

(2)   new alleged breaches of duties by each of the 3 additional employees; and 

(3)   additional confidential information belonging to Foxconn Parties said to have been communicated to BYD Parties by the 3 additional employees.

36. Mr Joffe further submits these new sets of facts relating to the 3 additional employees cannot be regarded as further and better particulars of, or as simply “supplementing”, the facts pleaded in the RASoC since they relate to 3 different individuals from the original 9 mentioned in the RASoC.  Nor can the newly pleaded facts be regarded as merely elaboration on the original causes of action.

37. With respect, this court cannot agree.

38. To begin with, neither the causes of action relied upon nor the relief sought have been revised or expanded upon in the proposed amendments.  Foxconn Parties are seeking the same relief based on the same 4 causes of action as before ie breach of confidence, inducing breach of duties, conspiracy and dishonest assistance.

39. Of course, the fact that a plaintiff is relying on the same cause of action as before per se may not be a complete answer at this stage. 

40. For instance, in Arta Properties Ltd v Li & Ors unrep, HCA2741 of 1998, 5 January 2007, Recorder Shieh SC held it was not good enough for the plaintiff to argue that both the amended Statement of Claim and the proposed re–amended Statement of Claim asserted claims “in contract”.  But the reason why it was not good enough in that case was because the plaintiff was asserting a new contract in the proposed re–amendments.  As explained in paragraph 24 of the judgment:

“24.     In this case, it is not enough to say that both the amended Statement of Claim and proposed re–amended Statement of Claim asserted claims ‘in contract’.  That would be to view the matter at too high a level of generality.  The cause of action pleaded in the amended Statement of Claim is a cause of action in contract, based upon “the 2^nd agreement” which involved events in 1993.  The causes of action pleaded in the re–amended Statement of Claim are (i) a cause of action in contract, based upon ‘the Collateral Agreement’ which involved events in 1996 and (ii) a cause of action based on the inherent right of a property owner (as a result of the assignment of Lot 539 RP to the Plaintiff in 1993).  New material facts (such as the date and place of the agreement and the terms of the agreement) are pleaded and the claim is made on the basis of a new (and different) contract…” (emphasis added)

41. What Recorder Shieh SC was saying amounts to this: if one makes a claim for breach of contract A in the original statement of claim, and by amendment seeks to make a claim for breach of contract B, then the amendment has the effect of introducing a new cause of action since the material facts required to support the two claims, albeit both in contract, are different. 

42. By the same logic and for the same reason, an amendment which makes a new allegation of intentional wrongdoing (where previously no intentional wrongdoing has been alleged) constitutes the introduction of a “new cause of action” since intentional wrongdoing and unintentional wrongdoing give rise to distinct causes of action –the material facts required to support a claim for unintentional wrongdoing are different from those required to support a claim for intentional wrongdoing: Paragon Finance v DB Thakerer & Co supra.

43. The present case is different.  Foxconn Parties’ pleaded case is that BYD Parties were under a duty of confidence towards Foxconn Parties in respect of the latter’s confidential information.  BYD Parties have breached that duty of confidence by unlawfully obtaining it from Foxconn Parties’ employees and exploiting it for their own use.  The other three causes of action are legal variants of the same factual case.  By the proposed amendments, the same factual case remains, with additional facts pleaded.  Importantly, the material facts presently pleaded in the RASoC are already sufficient to support all 4 causes of action relied upon – there is no suggestion by Mr Joffe to the contrary.  Rephrasing what Lord Esher MR said in Coburn v Colledge supra and quoted above, Foxconn Parties have sufficiently pleaded in the RASoC all the material facts which, if not traversed alternatively if proved, are sufficient to support their right to the judgment of the court and their claims are not demurrable. 

44. In the view of this court, by the proposed amendments, Foxconn Parties are not introducing any additional material facts which are necessary to support 4 causes of action – sufficient material facts are already in the RASoC.  It is true that the allegations introduced by the proposed amendments are new – but not all new allegations are legally objectionable.  Further instances of wrongdoing or further and better particulars of material facts are also new, but they are not objectionable: Paragon Finance v DB Thakerer & Co supra.  Indeed, according to Red Sea Insurance v Bouygues SA [1993] 2 HKLR 161, 167, it is permissible to add a “material averment”[5] by amendment (in order to plug a gap caused by an omission in the original pleading)[6] after the expiry of limitation period, if the claim is substantially the same before and after the amendment.

45. In his skeleton submissions, Mr Wong SC emphasizes that Foxconn Parties’ claims here are all made against BYD Parties – they have made no claims against the original 9 employees for breach of employment contracts or otherwise.  Nor are they, by virtue of the proposed amendments, seeking to make a claim against the 3 additional employees now.  This is an important point. 

46. A cause of action against each of the original 9 employees is obviously different from a cause of action against each of the 3 additional employees.  This is because Foxconn Parties would be alleging breaches of 3 different employment contracts against 3 different defendants.  If a claim for breach of contract A and a claim for breach of contract B against the same defendant(s) are two different causes of action, then, a fortiori, a claim for breach of contract A against defendant A must be a different cause of action from a claim for breach of contract B against defendant B. 

47. But that is not what the proposed amendments are about.  They are about the same claims against the same Defendants viz BYD Parties.  The introduction of the 3 additional employees, their additional wrongdoings and the communication of additional confidential information to BYD Parties are further instances of BYD Parties’ wrongs in (i) receiving and making use of Foxconn Parties’ confidential information, (ii) inducing breach of duties of Foxconn Parties’ employees, (iii) conspiring together to obtain and make use of Foxconn Parties’ confidential information and (iv) dishonestly assisted the breaches of duties of Foxconn Parties’ employees.

48. To conclude, taking the matter at the highest level of generality, this court is of the view that Foxconn Parties are not seeking to introduce any new causes of action with the proposed amendments at all.  Rather, they are seeking to add further instances of the same causes of action alternatively to add further and better particulars to the existing allegations of wrongdoings by BYD Parties.  That is permissible under the law.

Stage 3

49. In case this court is subsequently held to have erred in ruling the proposed amendments do not have the effect of introducing new causes of action, it will go on to consider the next question (on the assumption that the proposed amendments do have such an effect): do the new causes of action arise out of the same or substantially the same facts as are already in issue in the existing claims?

50. In this regard, the words “arise out of the same or substantially the same facts as are already in issue in the existing claim” are not to be narrowly construed.  Instead, they should be given a broad and liberal interpretation in order to attain the objective of the rules – a court would be construing RHC O 20 r 5(5) too narrowly by focusing attention on the additionalaverments which a plaintiff makes to establish the new cause of action: Leung Kin Fook v Eastern Worldwide Co Ltd (No 2) [1997] 1 HKC 524, at 528C–D.

51. Mr Joffe submits it is plain that the facts Foxconn Parties now seek to introduce are substantially different and distinct from those which have to be proved under the existing pleaded claim.  They relate to different employees, different wrongful acts committed at different times and involve the disclosure of different “confidential information” to BYD Parties.  If the proposed amendments are allowed, BYD Parties will be in a position where they will be obliged to investigate facts and evidence pertaining to the new factual matters which are plainly outside the scope and ambit of and unrelated to the existing claims pleaded in the RASoC. 

52. Mr Joffe further submits it cannot sensibly be said that in investigating the alleged breaches of duties of the original 9 employees, BYD Parties would also have been expected to have carried out investigations in respect of the 3 additional ones.  To require BYD Parties to carry out these investigations now, notwithstanding the expiry of the relevant limitation periods, would be prejudicial to them. 

53. The rationale of the test at Stage 3 is to avoid placing a defendant in a position where he will be obliged, after the expiration of the limitation period, to investigate facts and obtain evidence of matters completely outside the ambit of and unrelated to the facts which he could reasonably be assumed to have investigated for the purpose of defending the unamended claim: Ballinger v Mercer Ltd supra at [34]; Michael Agapios Diamandis v Sir David Seton Wills supra at [49(3)]; WDA Architects Ltd v MHS Planners, Architects & Engineers & Anor, unrep, HCCL 43/2007, 11 March 2014 Bharwaney J at [10][7].

54. In WDA Architects Ltd v MHS Planners, Architects & Engineers & Anor supra at [11], the learned Judge held that,in order to fall within the scope of RHC O 20 r 5(5),

“The new facts pleaded to support the new causes of action must involve something going no further than minor differences from the facts originally pleaded. To safeguard against the unjustified loss of a limitation defence, an amendment to introduce a new claim can only be allowed if it is based on substantially, or essentially, the same facts that had already been pleaded to support the original cause or causes of action. Another way of putting it is that the greater part of the facts in support of the new cause of action, which is sought to be introduced by the amendment, must already have been pleaded in support of the original cause of action.”

55. The learned Judge further elaborated on the matter at [12]:

“Whilst the question, whether the new cause of action arose out of the same, or substantially the same facts, as originally pleaded, is sometimes a matter of impression, particularly in borderline cases, in most cases, the court must adopt an approach that is guided by a large measure of common sense in its analysis of the facts that have been relied upon in support of the new cause of action. The material facts supporting the new cause of action need not be identical to or be a complete overlap with those supporting the originally pleaded cause of action. Thus, the originally pleaded cause of action may rely on material facts A, B and C, and the new cause of action may rely on material facts A, B, C and D. The addition of new fact D does not necessarily mean that the facts in support of the new cause of action are not substantially the same as those supporting the old cause of action. That must depend on the nature of the causes of action concerned and the nature and importance of the new facts that have been pleaded. There can be no hard and fast rule.” (emphasis added)

56. Whether the new cause of action arose out of substantially the same facts as originally pleaded, is sometimes a matter of impression (per Bharwaney J quoted above) or, more likely than not, involves a value judgment (per Colman J in BP plc v Aon[8]). In all cases, as Bharwaney J rightly pointed out, the court must be guided by a large measure of common sense.

57. Foxconn Parties’ pleaded case has been sufficiently summarised at paragraph 43 above.  By the proposed amendments, the same factual case remains, with additional facts pleaded.  Assuming such additional facts are pleaded in support of new causes of action, did they arise out of substantially the same facts as are already in issue?

58. In this court’s view, the answer is yes.

59. Foxconn Parties have already pleaded facts based on the wrongdoings of BYD Parties and the original 9 employees.  They now seek to plead facts based on the wrongdoings of BYD Parties and the additional 3 employees.  The present case is comparable to a case where a Plaintiff has pleaded and relied on material facts “A, B and C”, and the new causes of action rely on material facts “A, B, C and D”, “D” being the wrongdoings of BYD Parties vis-à-vis the additional 3 employees.  The addition of new fact “D” does not mean the facts in support of the “new” causes of action are not substantially the same as those supporting the “old” ones.  It depends on the nature of the causes of action concerned.  If, as in the present case, the “new” causes of action are the same 4 “old” causes of action, then that is something which militates against BYD Parties.

60. But that is not all.

61. Mr Wong SC submits the proposed amendments cover matters which would have been investigated by BYD Parties in response to the facts pleaded in support of the original 4 causes of action.  As revealed by the documents in the BYD Discovery,BYD Parties did appear to have made at least some investigation into the dealings of the senior officers and employees mentioned in the RASoC, particularly Liu Xiang Jun (“Jun”) and Si Shao Qing (“Si”), and the information they had obtained from other employees of Foxconn Parties and passed on to BYD Parties.  According to Mr Wong SC, Jun and, to a lesser extent, Si were the “prime mowers” who induced his clients’ employees to wrongfully disclose confidential information to BYD Parties.  This is borne out by the pleas in paragraphs 21A to 26C of the RASoC.  Further, Jun and Si were pleaded in the proposed amendments ie Schedules 13B and 13C as the recipients of confidential information from Chen and Wang.  The investigation which BYD Parties did make and/or can reasonably be assumed to have made resulted in the collation of additional relevant documents found in the BYD Discovery.  These documents included documents said to bear striking similarity with and/or modified from Foxconn Parties’ own documents as well as email exchanges among Jun, Si and other employees of Foxconn Parties.

62. This court accepts Mr Wong SC’s submission.  In this court’s view, this is not a case where BYD Parties will be compelled to investigate facts and obtain evidence of matters completely outside the ambit of and unrelated to the facts which he could reasonably be assumed to have investigated already. Rather, the facts and evidence which BYD Parties will be compelled to investigate and obtain are substantially connected with those they could reasonably be assumed to have investigated or obtained and did, to a considerable extent, investigate or obtain.

63. For these reasons, this court concludes that even if the proposed amendments do have the effect of introducing new causes of action, they arose out of substantially the same facts as are already in issue in the existing claims.  That answers the question at Stage 3.

Exercise of Discretion

64. Given this court’s aforesaid conclusions, the present application falls to be decided on the principles summarized in paragraph 15 above.

65. Mr Joffe submits that the court should exercise its discretion to refuse the proposed amendments. Two grounds have been put forward by him.

66. The first ground put forward is that there has been delay on the part of Foxconn Parties in making the present application.  Mr Joffe submits that although Foxconn Parties had all relevant documents by July 2014 at the latest, no explanation has been provided as to why it took them 14 months to come up with the latest draft statement of claim provided to BYD Parties only on 7 September 2015.  If the proposed amendments are allowed, the trial of the action will be further delayed. BYD Parties complain that such delaying tactics of Foxconn Parties are of great concern to them. 

67. This court is not satisfied that what had happened was part of Foxconn Parties’ delaying tactics in order to “prevent this case from moving forward to trial.” as submitted.[9]  In his 2^nd affirmation, Mr Xiong Yong Ai, for Foxconn Parties, explained how the BYD Discovery had triggered various investigations which eventually led to the proposed amendments. Given the enormous scale of the discovery, it is understandable that the time taken to complete the investigations would be proportionally lengthened. On the evidence, this court is not satisfied that 14 months are necessarily an undue amount of time for Foxconn Parties to formulate the proposed amendments. But even if there was some delay on the part of Foxconn Parties (in the sense they or their legal advisers could have worked faster), mere delay is not sufficient to bar an application for leave to amend: Honey Bee Electronic International Ltd v Golden Lucky Co Ltd [2007] 3 HKLRD 524 at [16]; Topwell Corp Ltd v Kwan Kam Kee [2014] 5 HKLRD 1 at [34].  What is more important is this court must consider what prejudice to BYD Parties, if any, has been or will be caused by the proposed amendments. To that this court must now turn. 

68. The second ground put forward is that BYD Parties will suffer significant prejudice if the proposed amendments are allowed. In this regard, the burden is on BYD Parties to show prejudice and to satisfy this court that such prejudice cannot be compensated by an appropriate order for costs.

69. Mr Joffe submits that, given the passage of such a long time since the newly pleaded events, BYD Parties are likely to be prejudiced in conducting investigations and collating evidence for their defence. In particular, of the 3 additional employees:

(1)   Dong joined BYD Parties in 2003 and is still under their employment. However, given the passage of time, it is unlikely that he would have any worthwhile recollection of the material events.

(2)   Chen was employed by BYD Parties for only 7 days between 19 and 26 September 2005 and BYD Parties have no information on his current whereabouts.  According to a Judgment of the Shenzhen Court, Chen re-joined Foxconn Parties after leaving BYD Parties.

(3)   Wang was never an employee of BYD Parties, but it is thought that he may be employed by Foxconn Parties.

70. Further, given the passage of time, BYD Parties would be severely handicapped in locating other relevant witnesses and/or documentary evidence to rebut the new allegations.

71. As far as Dong and his alleged dimming of memory is concerned, this court agrees with Mr Wong SC that BYD Parties’ bare assertion is unconvincing. As observed by G Lam J in Tsang Foo Keung v Chu Jim Mi Jimmy,unrep, HCA 7140/1995, 12 July 2013 at [80(5)], where the prejudice relied on is the dimming of witnesses’ memories due to lapse of time, a generalized assertion that memories must have grown fainter will usually not be sufficient.

72. In the present case, BYD Parties’ evidence on Dong’s fading memory came not from Dong himself, nor from anyone employed by BYD Parties at the material time. The evidence came from BYD Parties’ current handling solicitor. In this court’s view, very little weight can be placed on the handling solicitor’s evidence as to what Dong can or cannot remember.  Further, since Dong is still in the employ of BYD Parties and the relevant documents pertaining to the new allegations, including in particular, those documents signed and approved by Dong himself, are still available, there is no reason why Dong cannot at least try to refresh his memory by perusing the same.

73. As for Chen and Wang, Foxconn Parties’ case against them is that they had wrongfully disclosed confidential information to BYD Parties via Jun and Si. Such disclosure is documented by 4 emails disclosed by BYD Parties themselves. It was stated in BYD Parties’ Timetabling Questionnaire filed on 22 June 2015 that Jun and Si were among their proposed witnesses. If so, BYD Parties have had and still have the opportunity and could reasonably be expected[10] to obtain evidence from Jun and Si concerning the circumstances under which they exchanged emails with Chen and Wang and what use, if any, they had made of the attachments to the emails.

74. Witnesses’ fading memory is a common occurrence at trials.  Inability to locate some relevant witnesses is also a common occurrence. However, the impact of fading memory and unavailability of witnesses varies from case to case, depending on the significance of the viva voce and documentary evidence deployed by the parties. In the present case, where an abundance of contemporaneous documentary evidence is available, it is all the more important for BYD Parties (the burden being on them) to clearly demonstrate the existence of real prejudice which cannot be compensated by an appropriate costs order. In this court’s view, BYD Parties’ evidence falls far short of demonstrating that.

75. For the above reasons, and in view of the principle of cardinal importance that all amendments ought to be made for the purpose of determining the real question in controversy between the parties, this court shall exercise its discretion in favour of Foxconn Parties and grant leave to amend.

Disposition

76. There shall be an order in terms of paragraphs 1 and 2 of Foxconn Parties’ summons dated 30 September 2015.

77. The question of costs shall be dealt with as indicated at the hearing of expert directions on 5 July 2016.

78. Lastly, I thank counsel for their helpful submissions.