COMTRAD INDUSTRIES LTD AND ANOTHER v. RJP INTERNATIONAL LTD

1992, No.A3948

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H E A D N O T E

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    Where a line of demarcation can be drawn between different parts of an ex parte order in such a way that the non-disclosure which appears can be seen to have been material to one part but not the other, then it is right to discharge only the part to which the non-disclosure was material, for there would be no material non-disclosure, the emphasis being on the word "material", as to the other Part.

1992, No.A3948

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. Stating it so broadly as to verge upon stating it crudely, the background in this matter appears to stand thus. The plaintiff companies have certain intellectual. Property rights - or may have certain intellectual property rights - in relation to a certain toy. And at one stage, the defendant company was possibly going to manufacture that toy for the plaintiff companies. That arrangement has fallen through; and the defendant company has manufactured and intends to export a toy of its own, which, according to plaintiff companies, involves infringement of some or all of their intellectual property rights to which I have made reference.

2. The plaintiff companies have obtained certain injunctive relief ex parte from Deputy Judge J. Chan and the defendant company seeks to discharge such ex parte relief on the grounds of material non-disclosure.

3. Not very long ago, in the course of the judgment which I delivered on April 23 this year in Commercial List No.195 of 1991, A.M.D. Pack Rack Ltd and Others v. The Barrons Leasing Comeany Ltd and Others, I said that there "is a discretion to decline to intervene to discharge injunctive relief on the ground of inadequate ex parte disclosure where : dishonesty does not appear to be involved; it is by no means obvious that there has been any failure to make material disclosure; it would be necessary to comb through a large body of disputed evidence to discern whether adequate disclosure had or had not been made; and the nature of the alleged failure is not so serious as to demand immediate investigation." Those are the four elements involved.

4. That discretion is quite sufficient, in the circumstances as I view them, to dispose of all the points raised by Mr Rogers for the defendant company in regard to material non-disclosure save as to one point. That one point arises in this way. In the principal affirmation placed before the ex parte judge, that is to say the affirmation of Mr Albert El-Faks dated June 10, 1992, this is said by the plaintiff companies deponent about the plaintiff companies toy, in paragraph 19:-

"Our Model PS-635 is an attractive design specially designed with children in mind. It complies with the standards set by the American Society for Testing and Material (ASTM) which is a highly respected institute in the United States widely recognized by many countries in the world for setting safety standards for toys and other products. The product has also received CE approval which are the safety standards required for this type of product by the European countries. Model PS-635 it has no sharp edges, is stout and therefore not easily damaged. I have examined the sample exhibit 'MWCJ-4' to the said affirmation of Mak Wing Chi, Johnny. While it looks like the Plaintiffs' Model PS-635, it.has not incorporated many of the above features designed by the Plaintiffs. A copy of the evaluation comments on the Defendant's Model 852 is now produced and shown to me and marked 'AE-15'."

I need not rehearse - but have of course considered ?the contents of that exhibit.

5. In paragraph 22 of his same affirmation Mr El-Faks says, among other things, this

"The Plaintiffs have no control over the standard of the Defendant's product and any unsafe-product manufactured and sold by the Defendant will seriously damage the Plaintiffs reputation."

6. Now let us examine that in light of what I have quoted from my judgment in A.M.D. Pack Rack Ltd and Others v. Barrons Leasing Company Ltd and Others (supra).

7. Before embarking upon that examination, it is necessary to note only one fact, which is this. It appears that the defendant company also complies, or largely complies, with the "CE" standards to which Mr El-Faks had made reference.

8. Now, it seems to me quite plain that the implication of what the plaintiff companies were saying is that the defendant company does not meet those standards, or at least that there is no reason to think that they may do so. But if the plaintiff companies servants or advisers had but looked at the box in which the defendant company sells its toy, they would have seen a "CE" mark on it.

9. So it does not seem to me that the failure to make material disclosure is anything other than obvious in the present case. Nor is it necessary to comb through a large body of disputed evidence to discern whether or not adequate disclosure had or had not been made in regard to the question of safety. Finally, it seems to me that the alleged failure is extremely serious, because I cannot imagine any allegation against a toy - by definition meant for children - which could be more serious than an allegation that the toy is unsafe or may well be unsafe.

10. So of the four elements - all the which are necessary - the plaintiff companies can meet only the first one, the absence of dishonesty. Certainly, there is no reason to suspect that they were in any way dishonest; and I hardly need to say that nobody would dream of suggesting that their legal advisers were dishonest. But nevertheless, in order to invoke that special discretion, all four elements have to be met; and only one has been I need not emphasize the heavy burden on a party to make full and frank disclosure when coming before the court in the absence of the other party. The burden is heavy one, for it needs to be a heavy one. And in my   judgment, it has not been discharged in the present case by the plaintiff companies.

11. What I think I ought to do therefore, is to discharge the ex party order in so far as it is prohibitory, in other words, calculated to stop any act which arguably infringed the plaintiff companies intellectual property rights.

12. This aspect of non-disclosure was highly material to what the consequences would be if the toys in question were unsafe but allowed to get on to the market. On the question of whether or not there ought to have been Anton Piller relief however, other considerations applied. It is not for me to say whether if I had been the judge hearing the matter ex parte, I would or would not have been satisfied that there was the risk of destruction or concealment of evidence of which I would have had to be satisfied before granting Anton Piller relief. The fact is that the discretion was for the ex parte judge to exercise. And I do not think that the failure to make disclosure which I find here impacts upon the different considerations which arose in regard to the Anton Filler relief as opposed to the prohibitory relief That being so, I confine the discharge to the prohibitory part of the injunction. Where a line of demarcation can be drawn between different parts of an ex parte order in such a way that the non-disclosure which appears can be seen to have been material to one part but not the other, then it is right to discharge only the part to which the non-disclosure was material, for there would be no material non-disclosure, the emphasis being on the word "material", as to the other part.

13. The inter partes application will be heard by me tomorrow morning; and the discharge will not take effect until I have heard an application which I apprehend that Mr Tang for the plaintiff companies is now going to make to stay the discharge until the determination of the inter partes application or further order. It is stayed until I can hear counsel on that; and after I have heard them both on the matter, we will see whether it will be stayed until the determination of the inter partes application or further order.

[Submissions on stay]

14. Mr Rogers has pointed out that if the rule is that a party ought not to be able to retain any relief which it obtained without making full and frank disclosure, then logically perhaps one ought not to grant any stay whatsoever, because doing so might run counter to that rule .or principle But I regard that rule or principle as part and parcel of doing justice in a practical and realistic sort of way. And in the circumstances of the present case - and these circumstances include the fact that there is going to be an application before me tomorrow morning anyway - I think that it is legitimate to grant a stay. So I do propose to stay the discharge until the determination of the inter partes application or further order.

[Submissions on costs]

15. I think Mr Rogers is right in saying that he has a substantial victory. But he has not achieved a victory, because the Anton Piller relief remains. Mr Tang, realistically as always suggests that Mr Roger should should receive partial costs. He suggests 60%. But I think that 75% would better reflect the true result in this case, all things taken into account. So I will award the defendant company 75% of its costs of and incidental to the application to discharge. I am of course grateful to counsel on both sides for their most helpful arguments.

[The defendant company sought a certificate for two counsel, which was not opposed and which was granted]