SHARP KABUSHIKI KAISHA also known as SHARP CORPORATION v. ACKER TRADING LIMITED

1987, No.A749

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H E A D N O T E

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Even where a plaintiff has been guilty of inordinate and inexcusable delay in prosecuting his action, the action should not be struck out for want of prosecution unless the court is satisfied that the delay has prejudiced the defendant, or that it has created a substantial risk that a fair trial will not be possible; or that it has added to the existing prejudice, or to the existing risk that a fair trial will not be possible. In this connection there has to be some specific prejudice to which the defendant can point, over and above the obvious prejudice to any litigant in a long delay in the hearing of his claim or defence as the case may be.

1987, No.A749

IN THE SUPREME COURT OF HONG KONG

HIGH COURT

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J U D G M E N T

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1. This is an appeal from a decision of Master Jones pronounced on 15th June 1993 refusing to strike out this action for want of prosecution. The action is an action for passing off and breach of copyright brought by a well- known Japanese manufacturer of electronic goods (the plaintiff) against a Hong Kong company (the defendant).

2. I have had an opportunity of seeing a sample of the small pocket calculator said to be the infringing article. There is no doubt that the plaintiff's small pocket calculator, and the defendant's, are very closely similar.

3. This action was commenced by Writ of Summons issued on 10th February 1987. It is now 26th July 1993. This action, if it comes to trial, will not come to trial for some time yet, possibly not until 1995. That is an unconscionably long time. The reason for this appalling delay appears to be that somebody blundered in the office of the firm of solicitors instructed to act on behalf of the plaintiff. The delay is inordinate, and that explanation does not render the delay excusable. Accordingly, I have no hesitation in holding (and, indeed, I do not think it was seriously contended otherwise) that the delay here has been inordinate and inexcusable. Since the limitation period has, as I understand it, now expired, the defendant's application to strike this action out for want of prosecution is quite understandable.

4. However, given that the delay has been inordinate and inexcusable, ought I to shut the plaintiff out altogether from a trial of its action? The answer is that I should not, unless I am satisfied that the delay has prejudiced the defendant; or that it has created a substantial risk that a fair trial would not be possible; or that it has added to existing prejudice; or to the existing risk that a fair trial would not be possible. In this connection there has to be some specific prejudice to which the defendant can point, over and above the obvious prejudice to any litigant in a long delay in the hearing of his claim or defence as the case may be. There is no difficulty in stating the principles applicable. The only difficulty, if any, in the case, lies in deciding whether or not the defendant has proved either that a fair trial will not be possible or that the delay has some other way prejudiced the defendant. I have seen and heard nothing which suggests to me that, even after this length of time, a fair trial will not be possible; the case for the defendant is based on an allegation of prejudice.

5. The defendant complains of two matters. First, the defendant says there will be difficulty in its finding the evidence which will need to be led on its behalf at the trial of the action in relation to the allegation of passing off, to rebut the allegation "that an ordinary average shopper, shopping in the places in which the article is available for purchase, and under the usual conditions under which a purchase is likely to be made, is likely to be deceived ...": see the judgment of Walton J. in Reckitt & Colman Properties Ltd. v. Borden Inc [1987] F.S.R. 505 at p.512, approved by Lord Oliver of Aylmerton in the House of Lords [1991]1 WLR 491 at p.502.

6. I accept the argument for the defendant that this evidence would be admissible and helpful, and that the defendant will have greater difficulty in finding it now than it would have done if the action had been diligently prosecuted. However, the greater prejudice will be suffered by the plaintiff, not the defendant. The plaintiff has to prove its case; and if any difficulty is going to occur over finding evidence, that difficulty will be a difficulty in the way of the plaintiff rather than in the way of the defendant. Although I accept that there will be some prejudice in this connection to the defendant, I regard it as minimal and certainly not sufficient to justify driving the plaintiff away from the judgment seat without a trial on the merits of its case.

7. The second complaint of the defendant is that it has been financially prejudiced by the delay. The plaintiff here, before issuing its writ, obtained interlocutory relief in the form of an Anton Piller order, the result of which was to remove from the premises of the defendant a very considerable amount at least of its stock. This virtually put an end to its business. The plaintiff has seized on a few words in an affirmation made by Lee Kwong Chun, a director of the defendant, on 8th March 1993 which suggests that the defendant was carrying on business other than in the allegedly infringing articles. But I am quite prepared to accept that the result of the Anton Piller order was effectively to destroy the defendant's business. All that happened in February 1987. Lee affirmed in the affirmation to which I have just referred that in about April 1987 he obtained employment elsewhere. Plainly the defendant has not carried on business since those events. The defendant has tried to mitigate its loss. It claims to have acted innocently in that, as Lee affirmed :

"The defendant purchased its stock in good faith and in ignorance of the alleged copyright of the plaintiff in the designs of the goods."

According to his affirmation of 8th March 1993, the defendant purchased these goods from a Chinese supplier The International Trade and Trust Company of Xiamen Special Economic Zone (the Xiamen Company). He adds this :

"I believe that if the plaintiff had promptly pursued its claim, it would have been possible for the defendant to negotiate or seek an indemnity from its supplier, despite the fact that the supplier not being in Hong Kong, and the defendant not having the resources at that time for substantial litigation, no Third Party Proceedings were commenced on service of the writ or Statement of Claim. However, after the delay of six years I do not believe it would now be possible to negotiate any indemnity in respect of any part of the defendants Losses, or contribution to any damages which might be awarded to the plaintiff if it should succeed in its claim in this action."

8. On 20th July 1993, just before this appeal came on before me for hearing, Lee made a further affirmation about this aspect of the matter. It is said on behalf of the plaintiff that this evidence ought not to be received at this late stage. In any event, it falls foul, the plaintiff says, of O.41 r.5 of the Rules of the Supreme Court which provides that an affidavit may contain only facts that the deponent is able of his own knowledge to prove, and that such an affidavit, sworn for the purposes of being used in interlocutory proceedings, may contain statements of information or belief only if the sources and grounds thereof are stated.

9. I decided, during the course of the hearing of this appeal, to admit this further affirmation, as I have discretion to do, despite its failings. I do not propose to answer, in the circumstances, the objections to its admissibility raised on behalf of the plaintiff. I am concerned more with the merits of the allegations now made.

10. Briefly, what is now said is that the calculators and the boxes in which they were supplied were in designs supplied by the Xiamen Company. The Xiamen Company was a company with an export licence; but in fact the goods were supplied to the Xiamen Company by another Chinese company called Hunan International Economic Development Company (the Hunan Company). The further affirmation refers to discussions held by Mr Lee with the Chinese parties in Hunan in September 1987. There emanated from this discussion, after a very considerable lapse of time, a letter suggesting that compensation might be paid by the Chinese parties to the defendant in relation to the matters in issue in the action.

11. On 22nd August 1988, a formal agreement was made between the defendant and the Hunan Company in that connection. Briefly, the agreement contained terms which would enable subsequent dealings between the parties to take place on a basis which would allow for some compensation to the defendant for what it had lost. But, in 1993, the defendant received a letter of 25th February 1993 which suggested that it might now be too late to give effect to that agreement.

12. On the basis of this evidence, the defendant invites me to find that it has suffered material prejudice. The ways in which the matter was put by Lee in the affirmation he made on 8th March 1993 and in the affirmation he made on 20th July 1993 are not entirely consistent. But I do not propose to hold against the defendant that the story Lee told in July appears to be different in some respects from that he told in March.

13. What I have to consider is whether the whole story is sufficient to justify the allegation of prejudice which the defendant makes. I have come to the conclusion that it does not. The business of the defendant was ruined in February 1987. It has not carried on any business since then, unless it can be said that its attempts to wrest compensation out of the Chinese parties amount to doing so. I take the view that the evidence is so nebulous that it would not be fair to the plaintiff to conclude that the degree of prejudice suffered by the defendant as a result of losing or perhaps losing the opportunity to follow up the agreement it made in 1988 for compensation is sufficient to justify my striking out the action.

14. Overall, I am simply not satisfied that the prejudice which can be said to have been suffered by the defendant by the delay here is such as would justify me in striking out this action. For the reasons I have attempted to state, I will dismiss this appeal with costs.