KISHIMOTO SANGYO CO LTD AND ANOTHER v. AKIHIRO OBA AND OTHERS

IN THE COURT OF APPEAL

1995, No. 211
(Civil)

----------------------------------------------

----------------------

J U D G M E N T

----------------------

Litton, V.-P.:

1. There are three matters before us. The first is the claim against D3. There was an omission in my judgment in that I made no reference to that claim. Obviously it follows from the judgment that the claim against D3 must be dismissed.

2. Secondly, the question of the inquiry as to damages. The order we should make is that there be leave to the defendants to apply to the High Court for an inquiry as to damages arising from the grant of the injunction.

3. Thirdly, the question of costs.

4. The result of the appeal is that the plaintiffs have in effect lost on all their causes of action except this: They established their claim against D1 and D2 for breach of their contractual duties of fidelity as employees, but obtained only nominal damages.

5. In these circumstances what is the proper order to make as regards the costs in the court below?

6. Mr Thomas QC argues that the fact that only nominal damages have been awarded by this court is irrelevant because the trial was split: the judge was only concerned, he said, with liability. This argument is in my view unsound because, as we have pointed out in our judgment at p22, special damage for breach of contractual duty was never pleaded. The judge never in fact ordered any assessment of damages arising from the breach of D1 and D2's contractual duties as employees. To say therefore that the plaintiffs have succeeded against D1 and D2 is wrong. Clearly the focus of the trial was on the first relief claimed in the statement of claim: an injunction to restrain the defendants from benefiting from the business opportunity they were cultivating with Prime View. In our judgment this injunction order was wrongly made.

7. Evidence led as regards what D1 did in 1993 was directed essentially to establishing this primary case against D1: that is, an action to prevent a fiduciary from benefiting from a "maturing business opportunity" which, it was alleged, properly belonged to the plaintiffs. The plaintiffs had not started the proceedings in January 1995 to claim damages against D1 and D2 for their actions as employees in 1993. The writ was aimed at the contract D3 was about to make with Prime View in 1995.

8. The effect of our judgment is that the defendants should have won in the court below, and should in principle get the costs of the action. But as some time was taken in exploring the factual issues, on some of which D1 had lost, it would not be right that he should get all his costs.

9. The order I propose therefore is as follows:

(1) That paragraph 1 of the Judge's order for costs be discharged and be replaced by the following: that the plaintiffs should pay 75% of D1's costs of the action and all of D2 and D3's costs of the action.

(2) The plaintiffs should pay the defendants' costs of the appeal.

Godfrey, J.A.:

10. I agree.

Ching, J.A.:

11. I too agree and have nothing to add.

Litton, V.-P.:

12. The plaintiffs apply for leave to appeal to Her Majesty in Council under Rule 2(b) of the Order-in-Council governing appeals to the Privy Council. It is conceded that there is no appeal as of right under Rule 2(a).

13. It is said that a large sum of money is in fact involved in the litigation: well in excess of $1/2m: a factor of some relevance, says Mr Thomas QC, relying on Zuliani v. Veira [1994]1 WLR 1149 at 1155. But as it has been rightly conceded that Rule 2(a) is not relevant, we cannot allow the matter to go forward, as it were, by the back-door without consideration of the "points of law" involved.

14. So, turning to the questions of law of great general or public importance said to be involved in this litigation, Mr Thomas submits as follows:

(1) It involves a consideration of the scope of the principle of law applied in Canadian Aero Service v. O'Malley [1973] 40 DLR (3rd) 371. Mr Thomas says that this "principle of law" has not been explored in the courts of Hong Kong - or, for that matter, to any degree, in other common law jurisdictions and is therefore fit for consideration by their Lordships in the Privy Council.

In my judgment, the scope of the so-called principle in Canadian Aero Service v. O'Malley is clear enough. As the judge stated in the court below, it is founded upon the well-known case of Regal (Hastings) Ltd. v. Gulliver [1967]2 AC 134. Plainly the fiduciary duties, if they are owed, do not terminate on the day the employment ends. The question whether an opportunity can be categorised as a "maturing business opportunity" is a matter of degree. It is a question of fact. We differed from the judge in applying the law to the facts as found by him and as established on the evidence. I can see no question of law involved, upon which leave to appeal should be granted.

(2) Alternatively, the point of law is said to be this: is the fiduciary immune from liability for breach of fiduciary duty after leaving office?

I cannot begin to see how such a question can arise from our judgment.

(3) On the court's finding that D1 had "wooed" the suppliers, and "cultivated" Mr S.N. Lee, has this court erred in not ordering an inquiry as to damages in that regard?

This, as I see it, is the first point put in another way. This court has found upon the facts that the plaintiffs had come nowhere near showing breach of fiduciary duty resulting in substantial loss to the plaintiffs which might be compensated in equity. In other words, D1 and D2 had not diverted a "maturing business opportunity" into their own pockets as the defendants in Canadian Aero Service v. O'Malley had done. This is a pure question of fact.

(4) The scope of equitable relief: it is said that this is obscure in the law and needs clarification. This in my judgment is far too imprecise, and is not a point that we can allow to go forward, as if a court of law were a school-room.

15. In my judgment no grounds for granting leave under Rule 2(b) have been established. If their Lordships are of the opinion that the so-called principle in Canadian Aero Service v. O'Malley needs greater refinement, or more precise definition, or that the scope of equitable relief in the law needs clarification, they can always grant special leave on application for any of those purposes.

16. I would dismiss this motion.

Godfrey, J.A.:

17. I agree.

Ching, J.A.:

18. I agree also.

Litton, V.-P.:

19. The motion is dismissed with costs.