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HCA 1321/2006
IN THE HIGH COURT OF THE
HONG KONG SPECIAL ADMINISTRATIVE REGION
COURT OF FIRST INSTANCE
ACTION NO. 1321 OF 2006
BETWEEN
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GAIN HILL (HONG KONG) LIMITED |
Plaintiff |
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and |
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LI KIN YIP |
1st Defendant |
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LEGEND GROUP TRADING LIMITED |
2nd Defendant |
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Before : Hon Sakhrani J in Chambers
Date of Hearing : 22 August 2006
Date of Judgment : 31 August 2006
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JUDGMENT
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1. There are two summonses before me. The first in time is the plaintiff’s summons dated 13 July 2006 under O.14 for summary interlocutory judgment for damages to be assessed and for interlocutory injunctions. On the undertakings given by the defendants as recorded in the order of Deputy Judge Gill made on 26 July 2006 the plaintiff does not pursue the application for interlocutory injunctions.
2. The second summons is the 1st defendant’s summons dated 15 July 2006 seeking a declaration that this Court has no jurisdiction in respect of the plaintiff’s claims against the 1st defendant and for an order that the writ and subsequent proceedings be set aside or stayed as against the 1st defendant.
3. Counsel agreed that the 1st defendant’s application should be determined first. It seems to me that it is both logical and desirable that the 1st defendant’s application should be determined first. I proceeded to deal with the 1st defendant’s application. The plaintiff’s summons was adjourned pending the decision on the 1st defendant’s application with liberty to restore.
Background
4. The plaintiff’s claims against the defendants are for injunctive relief and damages as set out in the statement of claim. The plaintiff’s case as pleaded is that it has been carrying on business as a merchandiser and trader sourcing for and supplying its customers with Lycra fibre yarns of various specifications, qualities and colours as required by its customers. Lycra fibre yarn is a synthetic premium stretch fibre invented by Du Pont. There are a limited number of Lycra accredited mills in the world. In the Mainland one such accredited mill is Nanhai Guanxing Knitting Co. Ltd (“Nanhai”).
5. The plaintiff’s case is that in the course of its business the plaintiff spent much time, effort, skill and expenses working with Nanhai to develop and test the composition, knitting process,dyeing materials and process to ensure the yarns meet the strict requirements of each of its customers. Upon the customer’s approval, each customer would be assigned by the plaintiff a specific set of colour numbers for each specific type of yarn required by the customer. The plaintiff’s customers would order yarns in bulk and Nanhai would accept such orders, produce and supply yarns by reference and according to the colour numbers of that customer. The plaintiff’s case is that the plaintiff’s lists of colour numbers for each customer was confidential information and the property of the plaintiff. The plaintiff’s pricing system in respect of each type of Lycra yarn for each customer is also said to be confidential information.
6. Since about 16 February 2005, the 1st defendant was employed by the plaintiff as a sales executive entrusted with the responsibility of accepting orders from the plaintiff’s customers and liasing on behalf of the plaintiff with the customers and Nanhai.
7. The plaintiff’s case is that when the plaintiff employed the 1st defendant the plaintiff made known to the 1st defendant that he would be entrusted with confidential information.
8. Para. 11 of the statement of claim pleads :
“ As an employee, the 1st Defendant owed the Plaintiff the duties or alternatively it was implied term in the contract of employment between the Plaintiff and the 1st Defendant that :-
(a) the 1st Defendant shall serve the Plaintiff with fidelity and in good faith;
(b) the 1st Defendant shall not act to the detriment of the Plaintiff;
(c) the 1st Defendant shall not solicit and/or deal with the plaintiff’s customers on his own behalf and/or for his own benefit; and
(d) the 1st Defendant shall not use the Plaintiff’s property, including the Plaintiff’s Confidential Information for his own personal benefit and/or to the detriment of the Plaintiff.”
9. The complaint is made at paragraph 12 of the statement of claim that : “Wrongfully and in breach of his contract of employment, his said duties as an employee and the obligation of confidentiality and since about April 2006 during his employment by the plaintiff the 1st Defendant secretly and behind the Plaintiff’s back” did the acts complained of. These include whilst in the plaintiff’s employ setting up and operating the 2nd defendant in direct competition with the plaintiff and soliciting the plaintiff’s customers to place order for Lycra yarn with the 2nd defendant by using the plaintiff’s confidential information. There is also the allegation that the 1st defendant misused the confidential information by placing orders on behalf of the 2nd defendant with Nanhai. Particulars are given of orders placed by the plaintiff’s customers with the 2nd defendant these being orders diverted by the 1st defendant to the 2nd defendant whilst in the plaintiff’s employ. On the evidence, the total value of these orders which were diverted to the 2nd defendant is about HK$5.5 million.
10. According to the plaintiff, the plaintiff dismissed the 1st defendant because of his wrongful acts and the employment was terminated on 20 May 2006.
11. There is a claim for an injunction against the defendants to restrain them from using the confidential information. There is also a claim for an injunction to restrain them from soliciting or canvassing the plaintiff’s customers and Nanhai in relation to any business connected with the sourcing and supply of Lycra yarn.
12. Apart from injunctive relief, the plaintiff also claims by prayers 4, 5, and 6 as follows :
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4. |
Damages for breach of confidence to be assessed; |
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5. |
Damages for breach of employment contract or breach of the duties of an employee to be assessed or alternatively an account of profits; |
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6. |
Exemplary damages to be assessed;” |
13. A defence has not yet been served by the defendants. However, on the evidence filed on behalf of the defendants, the plaintiff’s allegations are denied. It is also denied that the information given by the plaintiff to the 1st defendant was confidential information.
The 1st defendant’s application
14. Mr Clough informed me that the 1st defendant was seeking an order on his application that the proceedings be stayed as against the 1st defendant.
15. The application is made on the basis that the plaintiff’s claims against the 1st defendant are within the exclusive jurisdiction of the Labour Tribunal and that the High Court has no jurisdiction over the matter.
16. S. 7 of the Labour Tribunal Ordinance (Cap. 25) (“the Ordinance”) provides that :
“ (1) The tribunal shall have jurisdiction to inquire into, hear and determine the claims specified in the Schedule.
(2) Save as is provided in this Ordinance, no claim within the jurisdiction of the tribunal shall be actionable in any court in Hong Kong.”
17. The Schedule to the Ordinance (“the Schedule”) specifies the claims as follows :
“1. A claim for a sum of money which arises from -
(a) the breach of a term, whether express or implied, of a contract of employment, whether for performance in Hong Kong or …………….....................…….......…….;
(aa) ………………………………………………......…;
or
(b) the failure of a person to comply with the provisions of the Employment Ordinance .............................................
other than a claim specified in the Schedule to the Minor Employment Claims Adjudication Board Ordinance (Cap. 453).
2. A claim for contribution under section 26(2).
3. Notwithstanding paragraphs 1 and 2, the tribunal shall not have jurisdiction to hear and determine a claim for a sum of money, or otherwise in respect of a cause of action, founded in tort whether arising from a breach of contract or a breach of a duty imposed by a rule of common law or any enactment.
4. ……………………………........................................................
5. ……………………………........................................................
6. ....................................................................................................
7. ..................................................................................................”
18. The 1st and 2nd defendants gave undertakings to the Court recorded in the order of Deputy High Court Judge Gill made on 26 July 2006 not to use the plaintiff’s confidential information “as defined in the Statement of Claim” within the next six months from the date of the order and not to solicit or...
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