Elijah Saatori and Another v. Cheng Chun Mo and Another

IN THE COURT OF APPEAL

1992, No. 41
(Civil)

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J U D G M E N T

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Godfrey, J.A.:

1. This is the judgment of the court in an appeal against an order of Deputy Judge Stock, Q.C. pronounced on 22 February 1992. The present appellants were the unsuccessful plaintiffs in the action, which the judge dismissed.

2. The first appellant is an individual who now calls himself "Elijah Saatori"; at other times he has called himself "Vince Smith"; "Veenari Saatori"; and (on at least one occasion) "Elijah". We shall refer to him in this judgment as "Mr. Saatori".

3. The second appellant is a company incorporated in England and Wales called Cerebe Design Limited; this is a company of which Mr. Saatori is the sole director. We shall refer to this company as "Cerebe". (Mr. Saatori is, or claims to be, a director of another company called "Cerebe Design International". which, he told the judge, was a company formed in Hong Kong on 30 April 1989. Mr. Saatori told the judge that he used the name of this company in connection with a matter in dispute in the action in order "to show a court later on I was not in accord with the signing of the agreement made on 2 June 1989". We shall have to refer later and in detail to the agreement of 2 June 1989; at this stage it is sufficient to record that we agree with the judge that the use made from time to time by Mr. Saatori of various names such as the name "Cerebe Design International" in fact did nothing to assist his case. If John Doe enters into a contract signing himself "Richard Roe", he cannot disclaim liability under it because he adopted another name in doing so.)

4. The respondents are, first, an individual called Cheng Chun Mo alias Peter Cheng and, secondly, a company called Pioneer Advertising Company Limited, a company incorporated in Hong Kong. We shall refer to these respondents respectively as "Mr. Cheng" and "Pioneer". Mr. Cheng was at all material times and is still the Managing Director of Pioneer.

5. The facts (so far as it is necessary to state them for present purposes) are as follows.

6. In about 1982, Mr. Saatori invented a board game which he called "Galaxion". In 1983, he caused Cerebe to be incorporated, and he obtained the promise of a bank loan to finance Cerebe's production of the game. In the summer of 1983, he came to the Far East to find a manufacturer and (as the judge put it) he "alighted" upon Pioneer, which Mr. Cheng held out to him as a printing company with a factory in the New Territories competent to do the work. Mr. Cheng gave Mr. Saatori (then calling himself "Vince Smith") a favourable quotation for the manufacture of the game and, believing that Pioneer would do the work itself and happy with the price, Mr. Saatori caused Cerebe to enter into a written contract with Pioneer dated 24 August 1983 to supply Cerebe with 250,000 units of the game in four batches, the first of 10,000 units. The price to be paid by Cerebe to Pioneer for all the units was $80.70 per unit. A deposit of $100,000 was required. The balance for the first batch was to be paid by documentary credit.

7. Mr. Saatori had brought with him from England some artwork produced from his designs, but there was much to be done before the final product could emerge. Plastic pieces representing space craft had to be manufactured. This task was the subject of a separate contract between Cerebe and one Mr. Tsui. As for Pioneer, its responsibility was to produce a playing board, an instruction book, score sheets, various playing items described as cards, tokens and disks, and a packaging box. All these component parts had been designed and were the subject of the artwork Mr. Saatori had brought with him to Hong Kong. It was for him to instruct Pioneer what colours were to be used for each component part and he did so. There then had to be produced colour separation films, from which colour proofs of the items would be printed for Cerebe's approval. From approved proofs, the work would move to printing of the final product, mounting prints on to suitable material, and mass production of the component parts. The colour separation work was an important and difficult part of the job. (The box, and the board, are very large as far as board games go; indeed, Mr. Saatori told us that the board is so large that it is to be noticed in that connection in the Guiness Book of Records.) It was thought at the time that there was not a company in Hong Kong with the facilities to do the colour separation work for the board and the box and it was agreed between Cerebe and Pioneer that this work would be sub-contracted to a Japanese company with a Hong Kong subsidiary Daichi Scihan Co. (Hong Kong) Limited ("Daichi") to be done in Tokyo. The rest of the colour separation work could be carried out in Hong Kong. Having made these arrangements, Mr. Saatori left Hong Kong in mid-September 1983. He left his instructions for the colour separation work; paid the deposit; and went to Tokyo to discuss with Daichi the work for the board and the box. He then went to Hawaii for a rest and to await the colour proofs from Hong Kong and Tokyo. Proofs were sent, but Mr. Saatori was not happy with them. They contained mistakes and in any case he wanted to make some amendments of his own. So he returned the proofs with appropriate instructions. But, in the meantime, Mr. Cheng had written to Mr. Saatori in October and November 1983, calling for the documentary credit for the balance of the purchase price for the first batch of 10,000 units. He threatened to break off the business if the appropriate letter of credit was not opened. A letter of credit was opened in November 1983; but Mr. Cheng rejected it, saying that it did not accord with the terms agreed by the parties for the letter of credit. In late December 1983, Pioneer demanded a new and increased price structure for production of the game if the business was to continue. Mr. Saatori returned to England to see if he could raise money to meet the new demand, but he could not. Later that year he flew back to Hawaii, again (so he told the judge) to raise money and again without success. Despite some correspondence between the parties in 1984, the work never got beyond the colour separation stage, and Pioneer never printed the game. Mr. Saatori stayed in Hawaii until 1988 when he returned to England and then, for the first time since 1983, to Hong Kong. When in Hong Kong, he discovered that Mr. Cheng had formed a company called "Galaxion Amusement Production Limited". Mr. Saatori asked Mr. Cheng for the return of his artwork and the colour separation films retained all these years by Pioneer and Daichi. After negotiations over some weeks, the parties signed the above-mentioned agreement dated 2 June 1989 ("the 1989 agreement") by which certain monies would be paid by Cerebe to Pioneer and to Daichi; the artwork and films ("the inventory") were to be delivered to Cerebe; and the parties agreed to release each other from claims arising from the contract. The inventory was duly handed over.

8. Despite the 1989 agreement, Mr. Saatori (in August 1989) instituted the proceedings which eventually came before the judge. By the time the judge came to deal with them, the proceedings were based on a number of different causes of action. The total claim was for damages in excess of ￡9 million. The judge helpfully summarised the essential contentions and claims of Mr. Saatori (who appeared in person at the trial, as he did before us) as follows:

"1. That Cerebe was induced to enter upon the 1983 contract by false representations that Pioneer was a printing company, that it had a printing factory in the New Territories, and that Mr. Cheng was himself a printer.

The representations are said to be fraudulent. Cerebe seeks to hold both Pioneer and Mr. Cheng liable so that, given the absence of a contract between Cerebe and Mr. Cheng, the claim against him lies in deceit. Cerebe seeks damages, but not rescission.

2. That Pioneer is in breach of the August 1983 agreement on a number of counts:

(i) in failing to supply the first batch of 10,000 units of Galaxion (or, indeed, any subsequent batch);

(ii) in wrongfully rejecting the letter of credit opened by Cerebe in November 1983;

(iii) in insisting on increases in price for the first 10,000 units, in December 1983, and again in May 1984;

(iv) in failing to supply any written quotation or invoice;

(v) in failing to complete colour separation work, or to carry out any final printing work;

(vi) in failing to cooperate in arranging shipment of the first batch;

(vii) in failing to return the artwork after the contract had been breached.

3. That Pioneer is liable in conversion in respect of the artwork and films the return of which, says Cerebe, was demanded on a number of occasions in and after 1985.

4. That in using the name "Galaxion" for the company Galaxion Amusement Productions Limited, [Mr. Cheng has] infringed Mr. Saatori's copyright in the word "Galaxion" and Cerebe's trade mark which, it is contended, applied at the material time to the name "Galaxion"."

(There was also a contention that Cerebe was caused loss by the failure of Pioneer to return part of the deposit of $100,000 which, in 1984, it had been agreed should be returned.)

9. Mr. Cheng and Pioneer joined issue with Mr. Saatori and Cerebe on all these claims and contentions; and, most importantly, relied in any case on the 1989 agreement as a settlement or compromise of the issues between the parties arising from the 1983 contract. It is common ground that the compromise agreement did not extend to the trade-mark or copyright claim, nor to the claim in deceit against Mr. Cheng.

10. In answer to the contention that the claims of Cerebe under the 1983 contract had been compromised by the 1989 agreement, Mr. Saatori on behalf of Cerebe (being allowed to do so) argued before the judge, and before us, that the 1989 agreement lacked consideration and was vitiated by economic duress.

11. Although the judge, understandably thought, it appropriate to hear the whole of Cerebe's case as to the alleged breaches of contract by Pioneer as well as its case for disputing the compromise, we decided that the convenient course in this court would be to consider the rival contentions of the parties as to the validity of the compromise before considering Cerebe's case against Pioneer for breach of contract; for, if the compromise was to be upheld by this court, no useful purpose would be served by examining Cerebe's case for damages for breach of contract. If, on the other hand, Cerebe's case for repudiating the compromise agreement was upheld, the appeal could be restored to the list for further argument as to the correctness or otherwise of the judge's conclusions as to Cerebe's allegations of breach of contract against Pioneer.

12. We indicated accordingly at the conclusion of the hearing before us that we would reserve judgment and deal in our judgment with the issues of (1) the validity (or otherwise) of the 1989 agreement; (2) the alleged conversion; (3) the alleged infringement of copyright; (4) the alleged infringement of trade-mark; and (5) the alleged deceit.

13. This is that judgment.

(1) The validity of the 1989 agreement

14. If the 1989 agreement lacked consideration, or was entered into under economic duress, it cannot be treated as valid.

15. As to want of consideration, Mr. Saatori argues in effect that Pioneer never had, and never thought that it had, any claim against Cerebe; the boot was on the other foot. He says that Pioneer never asserted any such claim until he asked for the return of "the inventory". Pioneer had no foundation in fact or law for asserting any claim against Cerebe, and knew that its assertion that it had such a claim was unfounded. If this was the case, then we would accept that the 1989 agreement was indeed unsupported by consideration and that accordingly the court will not enforce it: Callisher v. Bischoffsheim (1870) LR 5 QB 449.

16. But the facts are that, back in 1984, Pioneer had threatened to take its own legal proceedings if the matters then in dispute were not clarified and that Mr. Saatori had invited Pioneer to "calculate your loss based on our written contract ....." Mr. Cheng accepted in evidence that he had not in fact prosecuted Pioneer's claim (if any) but said that if Mr. Saatori had been in Hong Kong and had a company in Hong Kong he "would definitely have instituted proceedings". The judge, after carefully reviewing all the evidence, said that in all the circumstances he found it impossible to say that there was no consideration moving from Pioneer in relation to the 1989 agreement. We agree with this conclusion.

17. As to economic duress, Mr. Saatori argues in effect that Pioneer coerced him into entering into the 1989 agreement as the price for procuring the return to him of "the inventory" to which Pioneer had no shadow of a claim. He suggested that Mr. Cheng had threatened to lose or destroy "the inventory"; but the judge rejected this and we see no reason to interfere with the judge's conclusion. More importantly, he suggested that since (as the evidence established) he urgently needed the material to be returned to him and that Pioneer knew this, he had no choice but to submit to Pioneer's demands. The judge rejected Mr. Saatori's suggestion that he urgently wanted the return of this material to satisfy a number of contractual commitments. The judge was sceptical about these; but we do not think it matters whether he was right or wrong about this, since Pioneer itself accepted that, whatever the reason may have been, Mr. Saatori did in fact urgently require the return of the material. The nub of the matter is that Mr. Cheng was refusing the return of the material without first obtaining a discharge from the claims made by Cerebe against Pioneer. He said in evidence that he refused to return the inventory when Mr. Saatori asked for it (in May 1989) "because I felt he was very troublesome. I needed protection."

18. However, the judge found, on the evidence, that Mr. Saatori (who had the benefit of legal advice during the negotiations for the 1989 agreement), had in effect agreed, or acquiesced, in a proposal by Pioneer that it should retain "the inventory" pending settlement of the dispute between the parties. Mr. Saatori's agreement, or acquiescence, in this connection was voluntary, as distinct from being the product of coercion of his will. As the judge said "He may well have preferred it otherwise, but that is what he agreed .....". In our judgment, these findings (with which we agree) negate Mr. Saatori's allegation that he entered into the 1989 agreement under economic duress.

(2) The alleged conversion

19. The claims made by Mr. Saatori in this connection were (as the judge put it) "encompassed in the 1989 agreement". It is not necessary further to examine the matter but we note that the judge held (and we see no reason to disagree with him) that even if the conversion claim was not so "encompassed" it was not established on the evidence.

(3) The alleged infringement of copyright

20. The word "Galaxion" is an invented word and the inventor was Mr. Saatori; but the law does not recognise any copyright or other species of property in words, whether invented or not. We agree with the judge that the (repeated) use of the invented word "Galaxion" in the rule book of the game makes no difference. We accept that the law should afford protection to those who invent names for games and indeed it does; the name may be registered as a trade-mark and in any case anyone who attempts by copying it to pass off his work as the original may be restrained from doing so. In dismissing the claim based on infringement of copyright, the judge was plainly right, but we share the judge's obvious disapproval of the action of Mr. Cheng in using for his own benefit the word "Galaxion" in the name of the company he incorporated in 1984. He received this name from Mr. Saatori and he received it for the benefit of Cerebe, not for his own benefit. It was, we think, a breach of confidence for him to use it for his own benefit and, if Mr. Saatori had been able to prove any loss resulting from this, Mr. Cheng would have had, as it seems to us, no answer to a claim for damages from Mr. Saatori on this score. But no such claim has been made and no such loss has been asserted and we say no more about the matter.

(4) The claim for infringement of trade-mark

21. The judge disposed of this (as he said) "very briefly". He said "there has never been registered by either plaintiff such a trade-mark nor was there even an application in Hong Kong to register such a mark. The claim therefore fails." We agree.

(5) The alleged deceit

22. The substance of Mr. Saatori's complaint in this connection is that Mr. Cheng told him that Pioneer was itself a printer, competent to do the necessary work, knowing however that in fact Pioneer would use sub-contractors for at any rate some of it. The judge was not satisfied, on the balance of probabilities, that Mr. Cheng made the representations alleged; but even assuming in Mr. Saatori's favour that they were, we do not think Mr. Cheng's conduct can or should be characterised as fraudulent. If B, who has contracted to do work for A, arranges that C shall perform part (or even all) of this obligation, then A is bound to accept C's acts as performance, if in fact it fulfils all that B has agreed to do : see British Wagon Co. v. Lee (1880) 5 QBD 149. The evidence clearly demonstrated that if the work had all been done and had been done properly Mr. Saatori would have happily accepted it, no matter by whom it had been done. There is nothing in the claim for deceit. The judge found that Mr. Saatori's "motivations" (as he put it) for giving the job to Pioneer was that Pioneer were providing the cheapest quote for the price and that Mr. Cheng clearly had sufficient relevant experience to co-ordinate the project. There was no material misrepresentation made by Mr. Cheng to Mr. Saatori which had the effect of inducing Mr. Saatori to give Mr. Saatori the work. As Mr. Saatori himself put it in evidence "I guess as long as I received the job exactly as it was supposed to be, there would never have been any problems." Apart from all this, the judge found (rightly) that the claim for deceit was anyway barred by limitation, since action was not brought on it until a date in 1989 more than 6 years after the representations were made.

23. That concludes our judgment on this appeal. Mr. Saatori will, of course, be disappointed by our decision but the fact is that he received a very full and fair hearing before the judge, whose masterpiece of a judgement exhibits a full and careful analysis of both the facts and the law in a case which must have been extremely difficult to try. This court is placed here, not to give disappointed litigants a second bite at the cherry, but to review decisions at first instance as to which there are reasonable grounds for thinking that the court of first instance fell into some error of law or failed, in coming to its findings of fact, to take proper advantage of its opportunity to see and hear the witnesses of fact, an opportunity which this court does not enjoy. Our study of the judge's judgment leaves us quite satisfied that he fell into no error of law and did not in any way fail to take proper advantage of the opportunity afforded to him, over many days, of seeing and hearing the witnesses of fact.

24. We dismiss the appeal; and pursuant to Order 45 rule 5B(6) we order that the costs of the respondents be taxed and paid by the appellants to the respondents.