WONG TO YICK WOOD LOCK OINTMENT LTD v. IMPERIAL CHARITY HALL MEDICINES LTD AND ANOTHER

HCIP 13/2022

[2024] HKCFI 1867

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

INTELLECTUAL PROPERTY PROCEEDINGS NO. 13 OF 2022

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REASONS FOR JUDGMENT

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1.  By way of the Originating Summons filed on 13 April 2022 (“the OS”), the Plaintiff seeks to commit the 1^st Defendant and the 2^nd Defendant, who was at all material times the sole director and shareholder of the 1^st Defendant, for contempt of court in failing to comply with the order by DHCJ MK Liu dated 5 May 2021 and the judgment by DHCJ MK Liu dated 5 May 2021(collectively as “the Order and Judgment”). The terms of the Order and the Judgment are identical.

2.  According to the Plaintiff, the 1^st Defendant is in contempt of court for its failure to file an affirmation pursuant to §4 of the Order and the Judgment, and the 2^nd Defendant is also in contempt of court for his failure to file an affirmation pursuant to §5 of the Order and the Judgment.  The Plaintiff is not pursuing the alleged contempt against the Defendants for non-compliance with the order for delivery up under §3 of the Order and Judgment.

Background leading to the present application

3.  On 14 May 2012, the Plaintiff commenced HCA 793/2012 against the Defendants for trademark infringement and passing-off.

4.  On or around 9 June 2015, the 2^nd Defendant applied for deregistration of the 1^st Defendant which was subsequently declared to be dissolved on deregistration on 23 October 2015.

5.  By order dated 11 October 2019, K Yeung J restored the 1^st Defendant to the Companies Register.

6.  By Notice of Intention of Party to Act in Person in Place of Solicitors dated 22 July 2020, the 2^nd Defendant stated that his address for service was Flat A3, 8^th Floor, Block A, Tak Bo Building, Sai Yee Street, Kowloon, Hong Kong (“the Address”).

7.  On 18 August 2020, the 2^nd Defendant wrote to the Plaintiff stating, amongst other things, that he would not defend the infringement action.  The 2^nd Defendant stated the Address as his address.

8.  By summons dated 18 December 2020, the Plaintiff applied for summary judgment against the Defendants.

9.  On 5 May 2021, in the absence of the Defendants, DHCJ MK Liu granted summary judgment against the Defendants.

10.  On 11 June 2020, the Plaintiff served the Order and Judgment on the 1^st Defendant with penal notices by leaving the same at the 1^st Defendant’s registered office and its last known address.

11.  On or around 27 May 2021, the Plaintiff made several attempts to effect service of the Order and Judgment with penal notices on the 2^nd Defendant at the Address:

(i)  On 27 May 2021, the clerk of the Plaintiff’s solicitors attended the Address to attempt personal service on the 2^nd Defendant.  However, the 2^nd Defendant was nowhere to be found and the clerk was told by the security guard of the building that he did not have knowledge of the 2^nd Defendant.

(ii)  On 24 June 2021, the Plaintiff’s solicitors sent a letter of appointment with Order and Judgment to the 2^nd Defendant at the Address for the purpose of notifying him that the Plaintiff’s solicitors would effect personal service thereof on 29 June 2021.  On 14 July 2021, the said appointment letter was returned with an indication of “Refused” on the cover of the envelope.

(iii)  On 29 June 2021, the same clerk attended the Address again to attempt personal service on the 2^nd Defendant. Again, the 2^nd Defendant was nowhere to be found and the clerk was told by the occupant thereof and the security guard of the building that they did not have knowledge of the 2^nd Defendant nor the appointment letter sent earlier.

12.  On 27 September 2021, this court granted an order, amongst other things, for substituted service of the Order and Judgment with penal notices endorsed thereon on the 2^nd Defendant by: (i)  prepaid ordinary post to the Address; and (ii)  inserting an advertisement of a Chinese notice of the proceedings in Oriental Daily News.  Substituted service of the said documents was duly effected in accordance with the terms of the said order.

13.  On 1 March 2022, as no affidavit was filed before the time expired as required under the Order and Judgment, the Plaintiff applied for leave to commence committal proceedings against the Defendants which was granted by the court on 11 March 2022.

14.  Thereafter, the Plaintiff made several attempts to effect personal service of: (i)  a sealed copy of the OS; (ii)  a copy of Notice of Appointment to Hear OS; (iii)  a copy of the statement in support of the contempt proceedings; and (iv)  a copy of the 2^nd Affirmation of Tang Kwok Fai together with exhibits (collectively “the Committal Papers”)  on the 2^nd Defendant as the sole director of the 1^st Defendant and the 2^nd Defendant personally at the Address:

(i)  On 25 April 2022, another clerk of the Plaintiff’s solicitors attended the Address to attempt personal service of the Committal Papers on the 2^nd Defendant.  However, the 2^nd Defendant was nowhere to be found and the clerk was told by the occupant thereof that she did not have knowledge of the 2^nd Defendant.

(ii)  On 29 April 2022, the Plaintiff’s solicitors sent a letter of appointment with copies of the Committal Papers to the 2^nd Defendant at the Address for the purpose of notifying him that the Plaintiff’s solicitors would effect personal services thereof on 10 May 2022.  The envelope of the appointment letter served to the 2^nd Defendant has not been returned through dead letter post.

(iii)  On 10 May 2022, the same clerk attended the Address again to attempt personal service of the Committal Papers on the 2^nd Defendant.  Again, the 2^nd Defendant was nowhere to be found and the clerk was told by the occupant thereof and the security guard of the building that they did not have knowledge of the 2^nd Defendant.

15.  On 18 May 2022, the court, upon the Plaintiff’s application, granted an order of substituted service of the Committal Papers on the 2^nd Defendant both in his personal capacity and as sole director of the 1^st Defendant, and substituted service of the Committal Papers was duly effected in accordance with the terms of the order.

Whether the Plaintiff has proved the contempt charges against the Defendants?

16.  Where proper notice by way of substituted service of the contempt application has been given to the defendant, the court can infer and can be satisfied, in the absence of any evidence to the contrary, that the defendant is aware of the present application and that he or she deliberately chooses not to appear before the court and has no intention of opposing the present application.  Under the circumstances of the present case, leave should be granted to the Plaintiff to proceed with the application in the Defendants’ absence.  Moreover,  personal defendant who is absent at the hearing can be found guilty of contempt for breach of orders notwithstanding that the orders, the originating summons and the notice of appointment were all served by way of substituted service.[1]

17.  Likewise, where the court has exercised its discretion under O 45 r 7(7)  dispensing with service of the order and where there is an absence of any evidence from the director that he or she was unaware of the order, the court can conclude that the director knew of the terms of the order before the time expired when it had to be complied with and that the director knew that the plaintiff required him or her to exercise the powers as a director to ensure the company complied with the order.[2]

18.  It is trite that the burden is on the applicant to prove the contempt beyond reasonable doubt.  In hearing a committal for civil contempt, the court adopts a 3-stage test to: (1)  construe the relevant court order or undertaking to ascertain its meaning and operation; (2)  determine whether the respondent has in fact complied with the order or undertaking as so construed; and (3) consider whether any failure to comply was accompanied by a state of mind necessary to establish punishable contempt.  With regard to the state of mind, it is not necessary to prove that the alleged contemnor's conduct was contumacious, ie that he or she deliberately intended to disobey the order.  It is sufficient to prove that the act constituting breach was done intentionally, not casually or accidentally, and the defendant knew of the facts which rendered it a breach of the relevant order or undertaking.[3]

19.  It is beyond doubt that the 1^st Defendant is in contempt of court.  Under §4 of the Order and Judgment, the 1^st Defendant was required to file by 9 July 2020[4]: (i)  an affirmation verifying compliance with the order for deliver up; and (ii)  a disclosure affirmation with all relevant documents.  It had not done so and such affirmation remains outstanding.

20.  It is also beyond doubt that the 2^nd Defendant is in contempt of court.  Under §5 of the Order and Judgment, the 2^nd Defendant was required to file by 29 November 2021[5] a disclosure affirmation with exhibits of all relevant documents.  He had not done so and such affirmation remains outstanding.

21.  Given that proper notice of the Order and Judgment had been given to the Defendants, it is beyond reasonable doubt that they had wilfully failed to comply with the same and are therefore in contempt of court.

Sentencing

22.  There is authority that in the absence of the defendant, sentencing should be adjourned so that a warrant of committal can be issued for the defendant’s arrest to be brought before the court as soon as practicable and the defendant can then be heard on the issue of penalty.[6]  However, there are another line of authorities both at Court of First Instance and the Court of Appeal that this is a matter of court’s discretion.[7]  In Wong To Yick Wood Lock Ointment Ltd v Kin lam Medicine Co Ltd[8], the Court of Appeal, in dealing with one of the grounds of appeal that the judge below ought to have issued a warrant for arrest so that the defendants could be heard in mitigation before sentencing, said:

“The proceedings on contempt had been duly served and notice of hearing had been duly given. It is difficult to see how the Respondents could benefit from their own non-appearance at the contempt hearing purportedly by shifting the responsibility to the judge in not issuing any warrant of arrest.”

I agree with the dicta of the Court of Appeal and proceeded with the sentencing in the absence of the Defendants.

23.  The starting and primary penalty for contempt of court in breaching an order in the nature of an injunction or a mandatory disclosure is imprisonment measured in months.[9]

24.  In sentencing, the court will consider if there are: (a)  aggravating factors; (b)  mitigating factors; and (c)  acts to purge the contempt, ie acts to atone for a contempt, eradicate it or cleanse it of its previous ill-effect which, in the case of a mandatory order, may be fulfilled if the contemnor thereupon does the act or causes it to be done.[10]  Relevant factors (which are not exhaustive)  include:

(i)  the nature of the order and breach in question, and the extent of the breach;

(ii)  whether the contempt was contumacious or unintentional, the reasons, motives and state of mind;

(iii)  whether the claimant has been prejudiced by virtue of the contempt and whether the prejudice is capable of remedy;

(iv)  whether the contemnor appreciates the seriousness of the deliberate breach; and

(v)  whether the contemnor has cooperated.

25.  I agree with Mr Tse, counsel for the Plaintiff, that the Defendants’ breach was deliberate and intentional.  There are no mitigating factors in this case and none has been proffered by the Defendants.  There is no difficulty in making an affirmation and yet they have chosen not to for reasons best known to them. There were also no attempts to purge the contempt. As a result of the Defendants’ breach, the Plaintiff has been severely prejudiced in that: (i)  assessment of damages had been substantially delayed; and (ii)  pursuit of other infringers have been stifled without the Defendants’ full disclosure.

26.  Having considered authorities such as Wong To Yick Wood Lock Ointment Ltd v Kin lam Medicine Co Ltd[11] (4 months’ imprisonment), La Dolce Vita Fine Dining Co Ltd v Zhang Lan[12] (12 months’ imprisonment for failure to provide disclosure under a Mareva injunction)  and Wong To Yick Wood Lock Ointment Ltd v Brooklye Ltd & Anor[13] (6 months’ imprisonment for failure to comply with various disclosure orders), I decided to impose a sentence of 4 months’ imprisonment in the case of the 2^nd Defendant.  I also granted leave to the Plaintiff to issue Writ of Sequestration against the 1^st Defendant.  For costs, I awarded costs in favour of the Plaintiff to be taxed on an indemnity basis.