TANDY/RANK VIDEO AND ANOTHER v. YEE HING CASSETTE FACTORY LTD.

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JUDGMENT

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Fuad, V.-P. (giving the judgment of the Court):

1. This is an appeal by the two plaintiffs, Tandy/Rank Video and Tandy Corporation against the decision of Judge Daniell, sitting as a Deputy Judge of the High Court, dated 24th December 1990 whereby he gave the defendant, Yee Hing Cassette Factory Ltd. ("Yee Hing") unconditional leave to defend under RSC O.14, r.4.

2. We allowed the appeal at the conclusion of the hearing on 8th March 1991. We set aside the judge's order and entered judgment for the plaintiffs under O.14, r.3 on the terms asked for in their notice of appeal. We now give our reasons.

3. Yee Hing were unrepresented before us. We note for the record that the solicitors acting for them informed the court by letter dated 7th March that on the previous day they had received express instructions not to attend the hearing of the appeal despite the fact that the consequences of "not responding" to the appeal had been fully explained.

4. The plaintiffs issued their writ on 16th November 1989, and their statement of claim was filed and served on 8th February 1990. The 1st plaintiff is an American joint venture partnership and the 2nd plaintiff is an American based organisation. The 1st plaintiff claimed to be the proprietor of two United Kingdom patents relating to two component parts of a video cassette, which we will call for convenience a "reel lock mechanism" and a "door latch mechanism", patents which had been registered in Hong Kong in accordance with the provisions of the Registration of Patents Ordinance, Cap. 43. Details are given.

5. The 2nd plaintiff claimed to be the owner of the copyright in three specified engineering drawings relating to those components. Particulars of subsistence and ownership are fully pleaded.

6. The statement of claim averred the infringement by Yee Hing of the patents and the copyright. Full particulars of the alleged infringements were served with the pleading. There are also allegations of conversion, loss and damage and of flagrant infringement. The usual relief is claimed.

7. By their defence filed on 23rd March 1990 Yee Hing denied the lst plaintiff's ownership of the patents and that the certificates of registration of the patents were in their name. They denied that the 2nd plaintiff was the owner of the copyright in the three relevant drawings and that copyright subsisted in them. They denied that any privileges or rights had been conferred upon the 1st plaintiff by the two United Kingdom patents. Infringement is denied. In practical terms, every averment in the statement of claim was denied.

8. The plaintiffs took out their O.14 summons for summary judgment on 20th July 1990. It was supported by an affidavit sworn by Mr. Samuel Yu, a partner in the firm of solicitors representing the plaintiffs. It is only necessary to say that this affidavit, when read together with the affidavits of Mr. Anthony Rackham, a Chartered Patent Agent, and of Mr. Simon Cheetham, the manager of the firm of investigators (an employee of which bought the allegedly infringing video cassette from Yee Hing) fully supports, prima facie, the claims made in the statement of claim. As regards the engineering drawings, it must be borne in mind that the 2nd plaintiff can rely on s.9 of the Copyright Ordinance, Cap. 39, since Mr. Yu's affidavit, made on its behalf, was sworn before a notary public. The court, under s.9(2), is required to presume, until the contrary is proved, that the statements therein are true and these embrace the claimed subsistence and ownership of the copyright in the drawings.

9. In seeking to show cause against the plaintiffs' application for summary judgment, Yee Hing relied on an affirmation made on 17th December 1990 by their manager, Mr. Joseph Mok. He said that Yee Hing's major line of business was the manufacture, sale and supply of blank VHS video cassette housings. One of their customers was Acme Cassette Manufacturing Limited ("ACME"), a manufacturer of cassette housings from whom Yee Hing received sub-contracts from time to time. Reel lock and door latch mechanisms for video cassette tapes had been in existence since the original VHS cassette housings had been designed by JVC of Japan. The original mechanisms designed by JVC, referred to by the plaintiffs as the conventional mechanisms, were in fact still often used. All licensees of JVC were specifically authorised to reproduce video cassette tapes of that design. Since entering into a licence agreement with JVC in November 1987, Yee Hing had exclusively used the conventional mechanisms.

10. Mr. Mok went on to affirm that in about May or June 1989, they had obtained a few samples of all-plastic reel lock and door latch mechanisms from ACME, made by ACME after they had entered into a licence agreement with the 1st plaintiff. These samples had been obtained for the purposes of study and reference as well as trading. He said that his experience with all-plastic reel lock and door latch mechanisms had taught him that they were not as reliable as the conventional ones, and so Yee Hing still continued to manufacture cassette housings which contained only the conventional mechanisms.

11. Mr. Mok then referred to the affidavit of Mr. Cheetham regarding the circumstances in which the allegedly infringing cassette had been sold on 12th October 1989 by Miss Louisa Hui of his company. He explained that Miss Hui had begun to work for Yee Hing only in about September 1989. Before that, she had had no experience in the industry. Her duties were essentially those usually performed by a clerk. After the present proceedings had been commenced, he had discussed the events of the 12th October 1989 with her. He believed that the following was a true account of what happened on that day:

12. Mr. Mok concluded his affirmation by confirming that at all material times Yee Hing had used (and intended to use in future) only the conventional mechanisms. In the unlikely event that a customer might insist on all-plastic mechanisms, Yee Hing could fulfill such orders by buying fully assembled housings directly either from ACME or from other manufacturers licensed to produce the same.

13. Mr. Samuel Yu responded to that affirmation by his second affidavit dated 19th December 1990. He exhibited a standard form licence again made between the 1st plaintiff and its licensees and stated that these licences allowed the licensees to make, use and sell complete cassettes which contain the patented mechanisms - the supply of the mechanisms themselves was outside the scope of the licence.

14. In dealing with Mr. Mok's affirmation, Mr. Yu pointed out that it was not clear whether he meant that the entire housing (including the patented mechanisms) or just the patented mechanisms themselves were obtained from ACME. If it was being suggested that the entire housing was supplied by ACME, this was wrong. He deposed that he had dismantled and inspected the cassette bought by Mr. Cheetham's employee and found that its upper and lower housings both bore the defendant's initials "YH" in the extrusion circles on one of the corners of the housings. Mr. Yu exhibited a sample of a video cassette manufactured by ACME. This demonstrated that the housings came from different moulds. In fact the extrusion circles were in different positions and those bearing the "YH" initials in the defendant's housings did not even exist in the ACME cassette. Moreover, the patented mechanisms in the ACME cassette were clearly not identical to those found in the defendant's cassette.

15. Mr. Yu said that his conclusion was that neither the defendant's cassette nor the patented mechanisms in it could have come from ACME.

16. Mr. Mok made his second affirmation on 20th December 1990. In it he confirmed that the cassette sold to the investigator was one of the samples supplied by ACME and exhibited a sample invoice dated 8th June 1990 issued by ACME. He explained its appearance by saying: "Having searched the records of my company, I have found the sample invoice...

17. At the hearing of the O.14 summons, counsel then appearing for Yee Hing conceded that for the purposes of the application they were not challenging the ownership, subsistence and validity of the patents and the copyright.

18. The following is a copy of the judge's note of his decision:

                "Reasons:

19. We acknowledge and adhere to the approach to an appeal of this kind adopted by this court in Worldcap Investment Ltd. v. Bosswell Estates Ltd., Civil Appeal No. 108 of 1988, 20th October 1988 (unreported), following Lloyds Bank Ltd. v. Ellis-Fewster [1983] 1 WLR 559 (CA). Referring to what sir John Donaldson, M.R. had said in that case at p.562, Hunter, J.A. said:

20. On the other hand, as Hunter, J.A. pointed out in Bhagwandas Kewaleram Murjani and Others v. Bank of India [1990] 1 HKLR 586, at p.589, O.14, r.3 puts an onus upon a defendant to satisfy the court "that there is an issue or question in dispute which ought to be tried ..." which he described as a threshold onus. We will not here set out what Hunter, J.A. had to say at pp.588H to 590H but gratefully adopt Mr. Garland's accurate formulation of what that case decided:

21. The plaintiffs complain that the judge's reasons show that he thought that the onus upon them was to prove their case to the criminal standard. It seems likely that the judge took the phrase he used about "reasonable doubt" from the beginning of paragraph 14/3 - 4/8 of the white Book where there is a reference to Jones v. Stone [1894] AC 122 and a brief extract from the judgment where it was said that summary judgment is "intended only to apply to cases where there is no reasonable doubt that a plaintiff is entitled to judgment...". We doubt whether the learned judge really thought that he had to apply the criminal standard of proof to the plaintiffs' case, but where the judgment is so brief it is not surprising that they feel aggrieved by the apparent imposition of too high a burden upon them, just after the judge had said that they appeared to have a strong case. Moreover, having regard to the failure of the judge to refer to the highly material matters mentioned below, we are driven to the conclusion that he was plainly wrong and that we are, therefore, entitled to exercise our own discretion.

22. It seemed to us that the most glaring omission in the evidence relied upon by Yee Hing was any explanation as to now or why their initials came to be on the cassette bought by the investigator if their case were true.

23. We think, too, that the story Mr. Mok gave on behalf of his firm's Miss Hui about the circumstances in which the allegedly infringing cassette was sold by her to the investigator was simply not sufficiently credible. We also note that Mr. Mok did not condescend to explain now it came to be that the "sample invoice" he exhibited to his affirmation of 20th December 1990 (and upon which he somewhat belatedly relied to bolster his case) did not come to light earlier.

24. We also mention that the learned judge did not seem to appreciate that Mr. Mok's assertion that Yee Hing only used conventional reel lock and door latch mechanisms, and his statement about the reliability and efficiency of the components in question when compared with the conventional ones, are hardly reconcilable with what Mr. Mok himself wrote in his letter of 18th March 1989 to Mr. Rachman's firm:

                "Dear Sirs,

25. With great respect, we are not able to accept the judge's view that the defendant was entitled to examine a representative of ACME. We agree with Mr. Garland that if Yee Hing wished to raise any point about ACME not raised in their defence, it was incumbent upon them and not upon the plaintiffs to adduce evidence from ACME to support it.

26. We reached the conclusion that upon a proper evaluation of the material before the court and by approaching the respective burdens placed upon the parties in O.14 proceedings in the way laid down by the authorities, a discretion properly exercised could only have resulted in summary judgment being entered for the plaintiffs. It was very clear indeed that there was no reasonable probability that Yee Hing had a bona fide defence.