PAK KO BATTERIES FACTORY LTD AND OTHERS v. NEW LEADER BATTERY INDUSTRY LTD

HCA 1139/2007

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NO 1139 OF 2007

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D E C I S I O N

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1.  The principles of striking-out are clear. It is only in plain and obvious cases that the court should exercise its summary powers to strike out the endorsement on any writ or any pleading under Order 18 rule 19. Disputed facts are to be taken in favour of the party sought to be struck out. The court should not decide difficult points of law in striking-out proceedings. The claim must be obviously unsustainable, the pleading unarguably bad, and it must be impossible, not just improbable, for the claim to succeed before the court will strike it out. It is for the party seeking to strike out to demonstrate that the case is a plain and obvious one in which the other party’s claim is bound to fail.

2.  As the Chief Justice made it clear in the case of Wing Fai Construction Company Limited [2012] 1 HKLRD 589, one of the main objectives of the CJR is to enable parties to proceedings to have their disputes resolved as expeditiously, effectively and efficiently as reasonably practicable. The primary responsibility of the court, as made clear by Order 1A, rule 2(2), is to secure the just resolution of disputes in accordance with the substantive rights of the parties.  The role of the court is therefore not, of course, to prevent actions being litigated; quite the opposite.  As such, striking-out should only be used in plain and obvious cases.

3.  On the question of whether the plaintiffs’ claims should be struck out as being scandalous, frivolous or vexatious, or otherwise an abuse under Order 18 rules 19(1)(b) and (d), the basis of the defendant’s application is that the plaintiffs’ claims in this action are unsustainable.  The defendant claims that its patent was at all material times valid, that its statements that the plaintiffs were involved in proceedings relating to infringement of its patent can be justified, and hence the plaintiffs’ claims of defamation cannot possibly succeed. 

4.  According to the plaintiffs, the defendant’s patent was declared by the Patent Re-examination Board (“PRB”) on 31 May 2004 to be invalid.  The defamatory letter and the article, alleging that the plaintiffs had infringed the patent, were nevertheless published in September 2004.  The parties do not dispute that there have been related proceedings in Mainland China on the patent.

5.  The defendant’s case is that the PRB’s decision and declaration of the patent’s invalidity dated 31 May 2004 was in fact dismissed by the Chinese court in February 2005.  There was a further decision of the PRB dated 23 April 2007, again declaring the patent to be invalid, but this decision, although upheld by Beijing’s Intermediate Court, was again dismissed by the Beijing Higher Court in August 2008.  The PRB issued a third decision in June 2009, again declaring the patent to be invalid upon its reconsideration, but such declaration of invalidity was yet again dismissed by the Intermediate Court in December 2010, which dismissal was upheld by the Higher Court in October 2011.

6.  Expert evidence on Chinese law has been filed by each of the parties. The experts apparently differ as to whether the patent may yet be declared invalid by the PRB.  The defendant’s expert considered that this is unlikely, whereas the plaintiffs’ expert considered that it is possible.  There is also dispute as to whether the patent can be said to be invalid during the period when its validity was being challenged, or when it was declared invalid. 

7.  Issues of foreign law are regarded as issues of fact.  There is hence a dispute of fact of foreign law as to whether, at the time of the publication of the allegedly defamatory statements, the patent was valid or rendered invalid as a result of the PRB decision, as the plaintiffs claim. 

8.  As counsel for the plaintiffs has emphasised, disputes of facts should be taken in favour of the party sought to be struck out.  On that basis, the patent is to be taken as invalid for the purposes of this striking-out.  If the patent is invalid, I am not satisfied that it is plain and obvious that the statements complained of are incapable of bearing a defamatory meaning as the plaintiffs contend, or that the plaintiffs’ claims are obviously unsustainable, unarguably bad or impossible to succeed.

9.  As for the claim that the action should be struck out for inordinate delay and/or for being an abuse of process, it is clear from the Court of Final Appeal’s decision in Wing Fai Construction that mere delay is not sufficient to justify an order to strike out.  A party’s mere commencement of proceedings, followed by delay, would not necessarily amount to warehousing, or an abuse so as to justify an order to strike out. 

10.  On the facts of this case, although there is inordinate delay, the defendant has not adduced evidence of any prejudice it has sustained as a result of the delay.  The defendant complains that the plaintiffs failed to take any step after the filing of the Defence in July 2007.  However, the defendant also failed to take any step in the action until 2011.  It was happy before then to let sleeping dogs lie, an attitude which the Court of Final Appeal made clear, in Wing Fai Construction, would no longer be tolerated after the Civil Justice Reform. 

11.  I cannot say, from the evidence, that the plaintiffs’ conduct shows a wholesale disregard of the court rules or orders.  Nor can I say, in view of the PRC proceedings, and the development of events there, that the plaintiffs have simply no intention to bring these proceedings to a conclusion. 

12.  In all the circumstances of this case, I am not satisfied that there is any real risk that a fair trial of this action is not possible as a result of any inordinate delay on the part of the plaintiffs.  The issues for determination at trial would be whether the patent was valid at the time of the publication of the defamatory statements, and infringed by the plaintiffs, such that the defendant has a defence of justification and/or qualified privilege. This should not depend on the memory of witnesses, but would rather depend on questions of PRC law on the validity and effect of the patent, amongst other things.

13.  I am not satisfied that this is an appropriate case for striking-out and will, accordingly, dismiss the defendant’s summons.

14.  Since both sides are culpable of delay in bringing this action to trial, instead of ordering costs to follow the event of the unsuccessful application for striking-out, I consider that a fair order would be for each party to bear its own costs, unless I hear submissions from the parties that some other costs order should be made. 

Submissions on costs

15.  I will maintain my order that each party should bear its own costs. 

16.  I hope the parties can now put their house in order and proceed diligently with trial.  If the plaintiffs indeed, as a result of developments in China, consider not to pursue this action further, then it should take appropriate steps to discontinue these proceedings.  In the event of further delay, on the next occasion when the parties come back to court, I cannot say that the court will not make an unless order or such other appropriate order.