XCHRX BPI COMMUNICATIONS INC. v. STARNICE LTD. AND OTHERS

HCA 5301/98

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NO. 5301 OF 1998

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J U D G M E N T

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Background to this application

1. The Plaintiff is a Delaware corporation and is part of a group of companies involved in the marketing of a well-established music industry magazine called "Billboard". It also licenses the marketing by others of music compact discs ("CDs") bearing the Billboard trade mark which, on the evidence, the Plaintiff was applying to have registered in Hong Kong in April 1998.

2. The 1st Defendant is a Hong Kong company carrying on the business of importing and distributing music CDs. The 2nd and 3rd Defendants are directors of 1st Defendant.

3. On 3rd April 1998, the Plaintiff issued a Writ and obtained an ex parte injunction restraining the Defendants from dealing with music CDs and other articles so as to pass them off as the property of the Plaintiff by using the Billboard trade mark. The Plaintiff's essential allegation, based partly on disclosures made by certain Defendants sued in an earlier action, is that the Defendants in the present case were selling pirate CDs bearing a bogus Billboard trade mark.

4. On the return day, 17th April 1998, the Defendants were absent. Findlay J. continued the injunction until further order and ordered that the costs of the Plaintiff's application to be taxed and paid forthwith.

5. It was not until 25th May 1998 that Messrs. Liu, Chan and Lam, the Defendants' previous solicitors, came on the record and acknowledged service. Thereafter, on 19th June 1998, an Order was made by Sakhrani J. by consent, whereby the 1st and 2nd Defendants consented, among other things, to a permanent injunction against dealing with the pirate CDs; to an inquiry as to damages in respect of their acts of infringement; and to pay to the Plaintiff sums found due upon the taking of such inquiry. Most importantly for the purposes of this appeal, there was also the following order as to costs, namely that :-

"the 1st and 2nd Defendants do pay the Plaintiff all costs of and occasioned by this action, including the costs of the ex parte injunction and including the costs of and occasioned by this application, such costs to be taxed if not agreed."

6. Thereafter, matters proceeded in two separate streams: the first concerning the inquiry as to damages; and the second, involving the order as to costs.

7. In relation to the inquiry as to damages, directions were obtained from Master Betts on 24th July 1998 and statements of contentions were served by the parties in August and September 1998.

8. On 8th December 1998, Messrs. Pang, Wan & Choi came on the record for the Defendants in place of Liu Chan & Lam.

9. In relation to costs, on 26th January 1999, Master Cannon conducted a taxation and quantified the costs payable by the Defendants under the consent order in the sum of $143,055.30. An allocatur was duly sealed on 13th February and, on 23rd February, Messrs. M. Grewal & Co., acting for the Plaintiff, wrote to Messrs. Pang, Wan & Choi, demanding payment of the taxed costs and threatening to levy execution in default. Payment was not made and, on 9th March 1999, a praecipe was taken out for a writ of fi-fa to enforce the judgment for costs. This proved fruitless and, on 27th August 1999, a charging order nisi was obtained against a flat in a Shatin development called Saddle Ridge Garden whose registered owners were the 2nd and 3rd Defendants as joint tenants.

10. While the charging order nisi was pending, further developments were occurring in relation to the inquiry as to damages, in particular, on 23rd September, the Defendants applied for security for costs on the ground that the Plaintiff is a foreign corporation. In support of their application, the Defendants referred to their having paid certain sums into court against their potential liability in damages and argued that any award produced by the inquiry was unlikely to exceed the payment in. They therefore sought security for costs on the basis that they were potentially beneficiaries of such a costs order.

11. Returning to the charging order nisi, this came up for further consideration on 5th October 1999, when Master Lok made the following orders:-

"1. The charging order be discharged on condition that the 2nd Defendant pay into court a sum of $143,055.30 plus interest in the sum of $23,136.56 within 7 days.

2. In the event of non-payment the charging order be made absolute.

3. There be liberty to apply for payment out of the said sum of money.

4. Costs of this application be reserved to the hearing for the security for costs.

5. Certificate for counsel refused."

12. On 8th October 1999, the Defendants served notice on the Plaintiff that they had paid the sum of $166,191.87 into court "pursuant to the Order of Master Lok made on 5th October".

13. On 15th October, Master Jones, in the course of giving directions for the hearing of the application for security for costs, made an order stating that:-

"there be an interim stay of proceedings without objection."

I should add that in resisting the application for security for costs, the Plaintiff has filed evidence disputing the Defendants' allegations and contending that far more extensive infringements than those acknowledged by the Defendants are involved. The Plaintiff therefore obviously rejects the Defendants' contention that the Plaintiff is unlikely to recover damages in excess of the amounts paid in. In due course, the application for security for costs will be heard.

The present hearing

14. The Plaintiff now appeals against the Order of Master Lok whereby the charging order has been discharged in consequence of the Defendants making the payment into court as I have mentioned. The Plaintiff seeks to set aside that Order and to have a charging order absolute made in its place.

15. In my judgment, the appeal must succeed. With respect to the learned Master, I cannot see any basis for an order which effectively relieves the Defendants of their obligation to pay the taxed costs to the Plaintiff, as had been ordered by Sakhrani J., allowing them instead to pay the relevant sum into court.

16. The Order of Sakhrani J. was unconditional and authorized the Plaintiff to proceed to taxation to determine the amount of the payment if it could not be agreed. Once taxed, the Defendants' obligation was crystallised and, having failed to pay, they are in default. The Plaintiff is entitled to take enforcement proceedings to give effect to the Order and the charging order nisi was properly obtained to this end.

17. Under O. 50 r. 3(1), it is provided that on the further consideration of the matter:-

"the Court shall either make the order absolute, with or without modifications, or discharge it."

As the learned editors of the Supreme Court Practice 1999, point out at p. 859, the decision lies within the discretion of the court. Various factors commonly encountered are set out.

18. The 2nd Defendant made an affirmation on 20th September 1999 opposing an order absolute. The opposition is based on the contention that the Defendants may, as a result of their payment into court and the pending security for costs application, acquire an Order for costs as against the Plaintiff so that this, in some way, can be relied on as a reason for withholding payment of the taxed costs. The affirmation also complains that the Plaintiff has refused to compromise or settle the claim and, because of this, accuses the Plaintiff of oppressive conduct.

19. In my judgment, there is no merit at all in the allegation of oppressive conduct. Furthermore, the allegations made in the affirmation generally have no bearing on the question whether the charging order nisi should be made absolute. In my judgment, the learned Master should therefore have made the order absolute. I can see no basis for ordering payment of the taxed costs amount into court instead.

20. I say nothing now as to the viability or otherwise of the application for security for costs. I think, however, that it is important to emphasise that whether or not security is ordered, the stream of activity relating to security is quite separate from and poses no impediment to completion of the procedures for enforcement of the existing costs order. There is no basis for any set-off against a possible order for provision of security for costs against the Plaintiff's accrued, unconditional and final entitlement to payment of its taxed costs.

If the Defendants do obtain an order for security, then the inquiry as to damages will be stayed pending provision of that security. If they fail to get such an order, the inquiry will proceed without any money being paid into court by the Plaintiff. To my mind, neither contingency in any way impinges upon the entitlement of the Plaintiff to enforce the taxed costs order.

21. Mr. Ng, who appears for the Defendants, also sought to argue that the order of Master Jones made on 15th October that "there be an interim stay of proceedings without objection" prevents the Plaintiff from proceeding with this appeal. I am unable to accept that argument.

22. Master Jones made that order as part of the directions that he was giving for the security for costs application and it must be understood in that context. The stay that he granted was an interim stay. It was in fact an interim order made pending determination of the Defendants' application for security for costs, which, if established, could lead to a substantive stay of the inquiry as to damages until or unless the security required is provided. It follows, in my view, that the proceedings which are subject to the interim stay are those in respect of the inquiry as to damages. The interim stay has nothing to do with the charging order and can, in my view, in no meaningful sense be "interim" in that context. The costs order had already reached the stage of taxation and the issue of a sealed allocatur.

23. Mr. Ng also invited me to exercise my discretion to refuse the charging order absolute on the ground (as stated in his skeleton argument) that "the Plaintiff's claim for costs is already secured by the payment into court". With respect, that argument is misconceived. The Plaintiff does not merely have an undetermined "claim for costs", but as I have said already, a crystallised and final order entitling it to payment of such costs. Accordingly, to suggest that the Plaintiff should be content with having security misses the point. The entitlement is to receive payment and not merely to have security for a claim. Indeed, I find it difficult to see what is the status of the money now in court or what particular determination or event it is awaiting.

24. For the reasons which I have outlined, I will allow the appeal and I will now hear counsel as to costs and as to the orders which ought to be made.