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Chinacast Education Corporation And Others v Chan Tze Ngon And Others

Judgment Cited authorities 5 Cited in Precedent Map Related
Vincent
Judgment Date15 August 2014
Year2014
Judgement NumberHCA1062/2012
Subject MatterCivil Action
CourtHigh Court (Hong Kong)
HCA1062B/2012 CHINACAST EDUCATION CORPORATION AND OTHERS v. CHAN TZE NGON AND OTHERS

HCA 1062/2012

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

HIGH COURT ACTION NO 1062 OF 2012

_________________________

BETWEEN

CHINACAST EDUCATION CORPORATION 1st Plaintiff
CHINACAST TECHNOLOGY (BVI) LIMITED 2nd Plaintiff
CHINACAST TECHNOLOGY (SHANGHAI) LIMITED
双巍信息技术(上海)有限公司		 3rd Plaintiff
YUPEI TRAINING INFORMATION
TECHNOLOGY LIMITED
语培信息科技(上海)有限公司		 4th Plaintiff
CHINACAST (BEIJING) EDUCATION TECHNOLOGY LIMITED
盛世汉洋(北京)教育科技有限公司		 5th Plaintiff
AND
CHAN TZE NGON (陳子昂) 1st Defendant
ANTONIO SENA 2nd Defendant
MA JIM LOK JIM (馬詹諾) 3rd Defendant
JIANG XIANGYUAN (江洋源) 4th Defendant
FU WAI FAN (傅慧芬) 5th Defendant
WONG DORA WING MAY (黃詠薇) 6th Defendant
KWOK SHUK YIN ( 郭淑賢) 7th Defendant
CHIN SWE DEE 8th Defendant
THRIVING BLUE LIMITED 9th Defendant
BEST DESTINY LIMITED 10th Defendant
ISTHOCH ASSETS LIMITED 11th Defendant
CAST GREAT LIMITED 12th Defendant
NEW SHANGHAI INVESTMENTS LIMITED 13th Defendant

_________________________

Before: Mr Registrar K.W. Lung in Chambers (Open to the public)

Date of Hearing: 24 July 2014

Date of Decision: 15 August 2014

_____________

D E C I S I O N

_____________

THE APPLICATION

1. By application, the plaintiffs seek an order against the 1st to the 5th defendants for documents as set out in the schedule annexed with the summons dated 15 April 2014. Part of the documents requested are electronic documents.

2. The plaintiffs have come to an agreement with the 1st and the 5th defendants[1]. Therefore, the plaintiffs’ application for discovery only concerns the 2nd, 3rd and 4th defendants (collectively called “the defendants” unless otherwise stated).

3. The 2nd defendant applies for leave to take out a summons for discovery against the plaintiffs out of time. Leave was given to the 2nd defendant to do so.

4. Pursuant to leave having been granted, the 2nd defendant’s summons for discovery from the plaintiffs had been adjourned to be heard on a date fixed.

5. The parties are legally represented.[2]

E-DISCOVERY

6. The plaintiffs specifically apply for electronic discovery of the various emails and other documents from the defendants. According to the supporting affidavits for this application, the plaintiffs had already retrieved about 120,000 emails and documents from a hard-disk of the computer of the Group of companies of the plaintiffs where the defendants had worked. The plaintiffs now ask for electronic documents from the defendants’ personal accounts, but they have not disclosed the number of such electronic documents will be involved. However, the plaintiffs’ application has also involved other hard-copy documents, which are to be dealt with in the same application.

7. Although electronic discovery is governed under Order 24 of RHC, because of the nature of the documents, the volume involved and their accessibility, the treatment of electronic discovery is different from the treatment of hard-copy documents discovery. In Digicel (St Lucia) Ltd & Others v Cable & Wireless plc and Others Morgan J. 23 Oct 2008 [2009]2 All ER 1094, which will be discussed further below, Morgan J. discussed the reasons for special treatment for electronic discovery. At §38 of the judgment, he said:

“The Cresswell Report (Electronic Disclosure: A Report of a Working Party Chaired by the Honourable Mr Justice Cresswell, 6 October 2004, http://www.hmcourts-service.gov.uk/docs/electronic_disclosure1004.doc) makes a number of points which it is useful to record. At para 3.3, the report explains why the issues which arise in relation to disclosure of electronic documents are different from the issues which arise in relation to disclosure of paper documents. These reasons include the huge volume of documents which are created and stored electronically, the ease of duplication of electronic documents, the lack of order in the storage of electronic documents, the differing retention policies of the parties, the existence of metadata and the fact that electronic documents are more difficult to dispose of than paper documents.”

At §§41 and 42, he referred to the experiences of the United States where he said:

“It is worth quoting from two decisions of the United States courts. In Byers v Illinois State Police (2002) 53 Fed R Serv 3d 740 the court stated:

'Computer files, including e-mails, are discoverable … However, the Court is not persuaded by the plaintiffs' attempt to equate traditional paper-based discovery with the discovery of e-mail files … Chief among these differences is the sheer volume of electronic information. E-mails have replaced other forms of communication besides just paper-based communication. Many informal messages that were previously relayed by telephone or at the water cooler are now sent by e-mail. Additionally, computers have the ability to capture several copies (or drafts) of the same e-mail, thus multiplying the volume of documents. All of these e-mails must be scanned for both relevance and privilege. Also, unlike most paper-based discovery, archived e-mails typically lack a coherent filing system. Moreover, data archival systems commonly store information on magnetic tapes which have become obsolete. Thus, parties incur additional costs in translating the data from the tapes into useable form.'

The question of the cost of e-disclosure and in particular the cost of restoring back-up disks was discussed in Zubulake v UBS Warburg LLC (2003) 217 FRD 309. The court said:

'The application of these various discovery rules is particularly complicated where electronic data is sought because otherwise discoverable evidence is often only available from expensive-to-restore back-up media. That being so, courts have devised creative solutions for balancing the broad scope of discovery prescribed in [the rules] with the cost-consciousness of [the relevant rule]. By and large, the solution has been to consider cost-shifting: forcing the requesting party, rather than the answering party, to bear the cost of discovery.'”

Practice Direction PDSL 1.2

8. The Judiciary has issued the Practice Direction PDSL 1.2 on E-Discovery (“the Practice Direction”), which will be operative on 1 September 2014 for complicated commercial cases. But it is also applicable to other cases where the Court may direct.

9. The Practice Direction is designed for practical solutions for the problems that may arise out of e-discovery as paragraph A2 of the Practice Direction sets out the purposes:

“The purpose of this Practice Direction is to provide a framework for reasonable, proportionate and economical discovery and supply of Electronic Documents under Order 24 of the Rules of the High Court (RHC). It is also to encourage and assist the parties to reach agreement in relation to the discovery of such documents in a proportionate and cost-effective manner.”

10. Therefore, although the Practice Direction has not been in operation as of today, this Court will make reference to those practical guidelines as set out in the Practice Direction, which are general principles so far as they are applicable to the present application for the electronic documents. For example, the following general principles are applicable to the present application:

“C General principles, scope of discovery and privilege

4. When considering discovery of Electronic Documents, the parties and their legal representatives should bear in mind the underlying objectives under Order 1A, rule 1 of the RHC including the following general principles :

(1) the cost of discovering Electronic Documents must be proportionate to the amounts claimed in the proceedings;

(2) Electronic Documents should be managed efficiently in order to minimise the cost to be incurred;

(3) technology should be used in order to ensure that document management activities are undertaken efficiently and effectively;

(4) discovery should be given in a manner which gives effect to the underlying objectives under Order 1A;

(5) Electronic Documents should generally be supplied in a form which allows the party receiving the Electronic Documents the same ability to access, search, review and display the Electronic Documents as the party giving discovery; and

(6) discovery of Electronic Documents which are of no relevance to the proceedings may place an excessive burden in time and cost on the party to whom discovery is given.”

Reference should be made to the Court’s observations to encourage parties to have strong case management by identifying and simplifying the issues in order to avoid unnecessary massive discovery in Cable & Wireless HKT Telephone Ltd. (formerly Hong Kong Telephone Company Limited) and Another v City Telecom (HK) Ltd. CACV 197/1999 [2000] HKEC 386 C.A. See HKCP 2012 edition paragraph 24/0/12.

11. From the proposed directions of the plaintiffs’ summons, it is apparent that they had not taken into consideration the practical issues set out above. It is therefore envisaged that those proposed directions may not be practicable for electronic discovery. It is for this reason that this Court has, before the hearing, invited the parties to consider and discuss the matter. This will be discussed in more detail below.

THE FACTUAL BACKGROUND

12. The facts of the matter are summarized in the Decision of Mr. Justice A. Chan delivered on 11 November 2013, which I shall respectfully adopt as follows:

“The parties

3. The 1st plaintiff (“P1”) is a Delaware company which is the ultimate parent company of the CEC Group (“Group”). Until May 2012 it was listed on NASDAQ.

4. The business of the...

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