NAGRAVISION SA v. ZHUHAI GOTECH INTELLIGENT TECHNOLOGY CO LD AND OTHERS

HCA 2297/2016

[2018] HKCFI 1330

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NO. 2297 OF 2016

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D E C I S I O N

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Introduction

1.  In this action the plaintiff makes claims against, originally three but now four, defendants alleging that they have been variously manufacturing, selling, supporting and servicing receiving devices that enable unauthorised persons to view television or video services without making appropriate payment, in the process circumventing security solutions designed, provided and licensed by the plaintiff intended to prevent such unauthorised access.

The plaintiff

2.  The plaintiff is a company incorporated under the laws of Switzerland and a subsidiary of the Kudelski Group, which describes itself as a world leader in digital security and convergent media solutions for the delivery of digital and interactive content.  More particularly, the plaintiff claims to at all material times have been carrying on the business of designing, providing and licensing security solutions for the delivery of its customer’s subscription-based television programmes to subscribers, including the designing and licensing of security-related software and manufacturer of smartcards.  In short, the plaintiff provides software and/or hardware either installed within or which works with the set-top box receiver (“STB”) that is to be found alongside the television or computer monitor in many homes and which allows for the viewing of television or video services, both those provided free to air ("FTA") (i.e. without payment) and, more relevantly for present purposes, those which require payment whether it be one off or an on-going subscription ("pay TV").

The first defendant

3.  The first defendant (“D1”) is a company incorporated under the laws of the People’s Republic of China with its principal place of business in Zhuhai in the PRC.  D1’s legal representative is said by the plaintiff to at all material times been one Miao Ke Liang (“Miao”). According to the plaintiff, D1 has at all material times carried on a business of, inter alia, manufacturing and selling different models and configurations of STBs worldwide.  That D1 produces and supplies a very substantial number of STBs which are used to view both FTA and pay TV services worldwide each year is not disputed; the issue is whether and if so to what extent any part of D1's activities (alone or in conjunction with one or more of the other defendants) are the subject of the claims of the plaintiff in the proceedings.

The second defendant

4.  The second defendant (“D2”) is a company incorporated under the laws of Hong Kong with its principal place of business in Kwun Tong, Kowloon.  It is said by the plaintiff that at all material times Miao was the sole director of D2 and D1 was the sole shareholder of D2.  According to the plaintiff, D2 has at all material times carried on a business of manufacturing, selling, distributing, importing into Hong Kong and exporting out of Hong Kong STBs.

The third defendant

5.  The third defendant (“D3”) is a company incorporated under the laws of Hong Kong with its principal place of business also in Kwun Tong, Kowloon. According to the plaintiff, prior to 30 November 2015 the registered office address of D3 was the same as D2’s registered office address.  However, subsequently it was changed to a different office within the same office building.

6.  According to the plaintiff, Miao was formerly at various times a director of D3.  He was finally replaced as a director by one Lo Kai Yuen (“Lo”) on 27 November 2014 (Lo now being the sole director).  Further, Miao was formerly a director and shareholder of a company by the name Globalsat (HK) Holdings Limited ("Globalsat (HK)") which is the sole shareholder of D3.  However, he resigned as a director, again on 27 November 2014.  He also had previously, in December 2009, transferred his shares in Globalsat (HK) to a British Virgin Islands incorporated company, Globalsat International Holdings Limited ("Globalsat BVI"). Finally, Miao was formerly the sole shareholder and director of Globalsat BVI from when it was incorporated in November 2009 until in or about September 2014.

7.  According to the plaintiff, the business of D3 has been claimed by it to involve the supply of STBs to allow access of television transmission systems including satellite and exporting STBs to markets worldwide.

The fourth defendant

8.  The fourth defendant (“D4”) is a company incorporated under the laws of Hong Kong with its principal place of business in Fotan, New Territories.  According to the plaintiff, the sole director and shareholder is one Zhang Xifeng.  Further, D4 is said by the plaintiff to have at all material times been predominantly involved in the sale or trading of STBs and the sale of subscriptions for services known broadly as “G-Share”, which services are claimed by the plaintiff to enable unauthorised viewing of pay TV services without paying the required subscription fee.

The addition of D4 as a defendant

9.  The plaintiff applied for an order to add D4 as a defendant to the proceedings by a summons dated 16 December 2016.  This application was granted by the Order of Recorder Anthony Houghton SC on 16 May 2017.  His Lordship’s order followed a contested inter partes hearing involving the plaintiff and D4 at which D4 sought, unsuccessfully, the discharge of injunctive relief previously obtained by the plaintiff in respect of a bank account in D4’s name and at which the plaintiff sought the joinder of D4 as a defendant to the action. His Lordship’s order is the subject of the decision in these proceedings dated 16 May 2017.

Relationship between the defendants

10.  The Amended Statement of Claim of the plaintiff dated 17 May 2017 (by which D4 was added) shortly sets out the plaintiff's claims as regards the overall nature and purpose of the relationship between the defendants as follows:

“ …

30. [D1 – D4] are or at all material times were all part of the same group of companies.

31. At all material times, [D1] has authorised, controlled, participated in and received financial benefits from the infringing activities of itself, [D2, D3 and D4] alleged in this action. [D2, D3 and D4] acted in concert with [D1] and each other respectively. [D1 – D4] have acted in concert and/or conspired together in carrying out their wrongful acts complained of in this action. In the circumstances, each of [D1 – D4] is also, in addition to its own acts of infringement, jointly and severally liable with the other defendants for all the acts of [D1 – D4] which the plaintiff complains of in this action.

…”

11.  There are then set out the particulars the plaintiff relies upon for the above claims pending discovery and/or interrogatories.

12.  As appears, in short, the plaintiff claims that whatever be the corporate structure and registered position as regards directors and shareholders the defendants were all involved in and part of a common endeavor to infringe its rights.

13.  The aforesaid claim is further developed by the plaintiff in paragraph 45(b) of the Amended Statement of Claim where it is alleged that:

"The Defendants at all material times operated the "G-Share" service, a service which is used in conjunction with specific models of the Defendant's Receivers to enable unauthorized viewing of numerous channels or video-on-demand contents including those offered by the Plaintiff's customers to their subscribers without paying the required subscription fee."

14.  The plaintiff therefore alleges that the defendants provided what effectively was a full package of products and services, both the hardware and the 'software' (I use the latter term in both a non-technical and technical sense), whereby the ultimate end users could enjoy unauthorised pay TV viewing without payment.

The scale of D1's business

15.  I would observe that the business carried on by D1 (of whose group of companies D2 admittedly forms part) is clearly very sizeable. The business has more than 2,000 employees, operates from substantial factory and other premises mainly located in the PRC, produces and supplies many millions of products, not only STBs (of which though it is a significant supplier), each year and annually earns revenue of many hundreds of millions of Renminbi. Further, since November 2014, D1 became a public company in the PRC listed on the National Equities Exchange and Quotations system which is a form of over-the-counter national securities trading market.

16.  I would further observe that the plaintiff does not claim that all of the STBs manufactured and supplied by D1 at the point they left the factory gate allowed such unauthorised pay TV viewing.  The plaintiff has not had the opportunity to examine the vast majority of the many different types of STBs manufactured and supplied by D1 and as such currently it only claims that certain products allowed such unauthorised pay TV viewing, either of their own accord as manufactured or by subsequent modification of the firmware and/or operating software via updates accessible for download through the “G-Share” service.  Therefore, it is very possible that part and potentially a large part of the STBs manufactured and supplied by D1 may prove to be entirely legitimate products.  The position in this regard will only become known in due course through discovery, evidence and after trial.

The Texas proceedings

17.  On 6 August 2015, the plaintiff commenced a civil action against D1, D2 and D3 (the “US defendants”) before the United States District Court Southern District of Texas (the “Texas proceedings”).

Digital Millennium Copyright Act and Federal Communications Act

18.  The plaintiff’s claims in the Texas proceedings included claims that the US defendants had violated provisions of the US Digital Millennium Copyright Act (“DMCA”) and the Federal Communications Act (“FCA”). I will have regard to and consider relevant provisions of the DMCA later in this decision.

The Texas default judgment

19.  While there appears no dispute that the US defendants were aware of the Texas proceedings, in the event none of them participated in the proceedings at that stage, despite, according to the plaintiff, being properly served as a matter of the procedure of the Texas court.

20.  On 18 August 2016, the Texas court entered a final judgment and permanent injunction against the US defendants, finding that they had violated provisions of both the DMCA and FCA and ordering that, amongst other things, they pay to the plaintiff statutory damages of US$101,850,800 in respect of what was said to be 509,259 violations of the DMCA (the “US judgment”).

21.  While the US judgment can be described as a 'default judgment' in the sense that the US defendants did not appear in the proceedings to contest it, the judgment, which runs to several pages, sets out in detail the court's findings of fact and on the law which are then relied on as the basis for the decisions arrived at as to liability and damages.  It may well be that these findings largely repeat the submissions made on behalf of the plaintiff when it made the motion for judgment, but, in my view, this does not detract from the characterisation by the plaintiff of the judgment as a 'reasoned decision', even if one made without the benefit of hearing argument from the US defendants.  That the Texas court has already found in favour of the plaintiff is a matter I consider that I should have due regard to when assessing the strength of the plaintiff’s claims in these proceedings.

Discovery and enforcement action in the US and elsewhere

22.  In addition to commencing the Texas proceedings and both before and after having obtained the US judgment the plaintiff has taken a number of discovery and enforcement actions in the US and elsewhere (including Hong Kong), seeking the disclosure of information and documents, including by third parties, actions which include requiring the transfer to it of one or more domain names said to have previously been used for the purposes of the violations for which the US judgment was obtained.  By these actions, the plaintiff says it has been able to find out far more about the alleged infringing and wrongful activities of the defendants to the Hong Kong proceedings.  As a consequence, and as the plaintiff's counsel referred to several times, the information and documents now before the court has very substantially enlarged from that available when this action was first commenced.  The plaintiff's counsel submitted that this increasing volume of evidence of what the plaintiff claims are infringing and wrongful acts by D1 and D2 explains what he suggested was a distinct change in D1 and D2’s position in the proceedings, from an original outright denial and rejection of any liability on the facts to instead focusing on attacking legal and procedural issues.

Appeal of the US judgment

23.  After the commencement of the Hong Kong proceedings D1 and D2 at least have taken a number of steps to challenge the US judgment.  First, in October 2016 they filed a motion to vacate and dismiss the US judgment on the basis that the Texas court lacked both personal and subject matter jurisdiction.  This application was dismissed in November 2016.

24.  The application was renewed by D1 and D2 to the same court but their request for reconsideration (and oral argument) was dismissed in early December 2016.

25.  D1 and D2 then appealed to the United States Court of Appeals for the Fifth Circuit, oral arguments on the appeal being heard in November 2017.

26.  The decision on the appeal was still pending at the time of the commencement of the hearing before me (which as I will deal with later in this decision led to the possibility of the hearing being further adjourned being raised by counsel on behalf of D1 and D2).  In the event, the decision of the United States Court of Appeals for the Fifth Circuit, which was to deny D1 and D2’s motion for relief and affirm the US judgment, was delivered on 7 February 2018.  A copy of the decision was provided to the court with the plaintiff's solicitors letter (which was copied to D1 and D2's solicitors) dated 8 February 2018.

The ex parte relief obtained by the plaintiff

27.  The Hong Kong proceedings were commenced by the plaintiff on 5 September 2016 when it applied ex parte for and was granted by the Honourable Madam Justice Mimmie Chan orders as follows:

a)  for delivery up, disclosure of information and prohibiting certain acts (including a 'gag' order) against D2 and D3 (the "Delivery Up Order");

b)  a Mareva injunction against D1, D2 and D3 (which order also expressly referred to an account with HSBC in the name of what is now D4) prohibiting disposal of assets in Hong Kong up to the value of US$101,851,800 (the amount of the US judgment) and requiring disclosure of assets within Hong Kong of an individual value of HK$5,000 or more (the "Mareva Injunction"); and

c)  for leave to issue a concurrent writ of summons against D1 and to serve the writ on D1 at what is said to be its principal place of business in Zhuhai in the PRC (or elsewhere in the PRC) (the "Service Out Order") and also to serve copies of the orders obtained ex parte and supporting documents on D1 by a number of different means including email and delivery to the registered office addresses of D2 and D3. For the application the plaintiff relied on a number of different ‘gateways’ depending upon the cause of action namely Order 11 rules 1(b), (c), (f), (m) and (oc) of the Rules of the High Court (“RHC”).

28.  The three orders granted by Her Ladyship are each dated 5 September 2018.

29.  For completeness, I observe that at the same hearing Her Ladyship declined an application made on behalf of the plaintiff for Anton Piller type relief as against D2 and D3.

The plaintiff's applications for interlocutory relief

30.  Having obtained ex parte relief, the plaintiff issued inter partes applications as follows:

a)  a summons pursuant to Order 29 rule 1 RHC and the court's inherent jurisdiction dated 5 September 2016 (filed on 6 September 2016), by which it sought as against D1, D2 and D3 continuation of the Delivery Up Order;

b)  a summons pursuant to sections 21L and 21M of the High Court Ordinance (Cap. 4 of the Laws of Hong Kong) ("HCO"), Order 29 RHC and the court's inherent jurisdiction dated 5 September 2016 (filed on 6 September 2016), by which it sought as against D1, D2 and D3 the continuation of the Mareva Injunction until judgment in the action or further order; and

c)  a summons pursuant to section 21 of the Evidence Ordinance (Cap. 8 of the Laws of Hong Kong), section 42(1) of the HCO, Order 24 rule 7A of the RHC and the court's inherent jurisdiction dated and filed 7 September 2016, by which it sought as against D1, D2 and D3 as defendants and The Hongkong and Shanghai Banking Corporation Limited ("HSBC") as respondent, information and production by copy of various banker's records relating to accounts said to be held with HSBC in the name of D1, D2 and D3 and also what is now D4 (the "Banker's Record Application").

31.  The plaintiff's three summonses as above formed part of the matters heard before me save that:

a)  D1, D3 and what is now D4 did not appear at the hearing of the Banker's Record Application before the Honourable Deputy High Court Judge Wilson Chan on 15 September 2016 and with HSBC having indicated a neutral position, His Lordship granted the plaintiff's application as regards those defendants and what is now D4.  Therefore, the application only remains pending as regards D2.  I would observe that pursuant to the order the plaintiff has since obtained further banking information and documents which is now the subject of affirmation evidence and on which it relies in support of the several pending applications.

b)  Matters in relation to the Mareva Injunction as regards what is now D4 have proceeded separately and as I have already observed are the subject (along with the joinder of D4 as a party) of the decision of Recorder Anthony Houghton SC delivered on 16 May 2017. Therefore, the hearing before me did not involve D4.

c)  Finally, I was informed that D3 has not played any substantial part in the proceedings as a whole and that as a result the plaintiff has already obtained judgment in default against it. Therefore, the hearing before me did not involve D3.

The applications of D1 and D2

32.  Also before the court were two summonses issued on behalf of D1 and D2 as follows:

a)  a summons pursuant to Order 29 rule 1 RHC, the court's inherent jurisdiction and in the alternative Order 3 rule 5 RHC dated and filed 23 September 2016, by which D1 and D2 sought the discharge, fully or partially, or alternatively the variation of the Mareva Injunction and Delivery Up Order (with the said orders and time for compliance with the Delivery Up Order being continued in the meantime) (the "Discharge Application");

b)  a summons pursuant to Order 12 rule 8 and Order 65 rule 4 of RHC and the court’s inherent jurisdiction dated and filed 17 November 2016, by which D1 and D2 each variously sought several orders to challenge jurisdiction, including, as regards D1 an order discharging or setting aside the Service Out Order (and service out of the Writ of Summons) and a declaration that the Writ has not been properly served and as regards both D1 and D2 a declaration the court has no jurisdiction over them in respect of the subject matter or the relief or remedy of the claim (the "Jurisdiction Summons").  The grounds stated include, as regards D1, claims that there was material non-disclosure and/or misrepresentation of law and fact when the plaintiff obtained the Service Out Order and that the Hong Kong court is not clearly or distinctly the most appropriate forum for the trial of the plaintiff's claims and, as regards D2, the claim that the People's Intermediate Court of Zhuhai in the PRC is clearly and distinctly the most appropriate forum for the trial of the plaintiff's claims and that the proceedings should not be conducted and adjudged by the Hong Kong court based on the principle of forum non-conveniens.

33.  Therefore, there were a total of five summonses before me, three issued by the plaintiff and two issued by D1 and D2, all five, though issued at different points in time, being in effect 'consolidated' to be heard together by two Orders made by the Honourable Deputy High Court Judge Keith dated 20 January 2017.

The commencement of the Hong Kong proceedings

34.  The Writ of Summons in the proceedings was issued on 6 September 2016 the day following the plaintiff obtaining ex parte relief.  As I have previously observed, the writ was later amended on 17 May 2017 to add D4 as a defendant.  It was also amended to enlarge the scope of the injunction sought to include restraining the publication, including via the Internet, of information to enable or assist persons to receive television or video services which they were not entitled to receive, relief that was included in the Statement of Claim filed later but had not been provided for in the writ when issued.

35.  The Statement of Claim of the plaintiff in the Hong Kong proceedings was first filed and served on 18 November 2016. Subsequently, with the amendment of the writ, an Amended Statement of Claim was filed and served on 17 May 2017, the amendments again primarily dealing with the addition of D4 as a defendant.

36.  To date D1 and D2 have not been required to plead to the plaintiff’s claims.  By the Order of Master Ho dated 19 December 2016 time was extended generally pending determination of their respective applications to challenge jurisdiction.

The application for an adjournment

37.  The first matter the court was required to deal with was an 'invitation' (there being no summons issued) on the part of D1 and D2 that the hearing before me be adjourned.  This suggestion was made with regard to the fact that the decision on D1 and D2's appeal of their application to 'reopen' the Texas proceedings was then still pending (as it had been since at least November 2017), and the possibility that the outcome of the decision might have a bearing on the matters I had to decide.  The application was not lightly made not least it took up the first 18 (out of 81) pages of the skeleton submissions of counsel for D1 and D2 submitted prior to the hearing.  I observe that the remainder of the submissions dealt with the substantive matters for consideration at the hearing, as to which counsel for D1 and D2 fairly indicated in the same submissions that if there were no adjournment they were prepared and ready to proceed.

38.  It was only through these submissions and the provision of a bundle of the relevant inter-solicitor correspondence that the court first learnt that the parties had been discussing the possibility of the hearing being adjourned since as far back as 13 December 2017.  The correspondence revealed that both sets of parties had put forward to the other terms on which they were willing to agree to the hearing being adjourned but that in the event there was no agreement.

39.  The possibility of an adjournment having been raised through the submissions of counsel for D1 and D2, the plaintiff's counsel filed and served their own submissions (a further just over 7 pages) in opposition by which they sought either the dismissal of the application in its entirety or at the very least its dismissal as regards the Jurisdiction Summons and an order that the costs of and occasioned by any adjournment as regards all other pending applications be to the plaintiff.

40.  As is apparent from the timetable of events I have previously outlined, by the time the parties appeared before me the hearing of the applications of both sets of parties had already taken more than a year to come on.  However, a review of the history of the proceedings suggests that in a large part this was simply due to the difficulty of scheduling the hearing to match the availabilities of all concerned and not any other reason.  I observe that it was not suggested in the written or oral submissions of counsel for the parties before me that there was any other substantial consideration underlying the scheduling of the hearing and, in particular, that regard had previously been had to the timing and anticipated delivery of a decision in the US appeal proceedings.

41.  Counsel for D1 and D2 sought to put forward a number of arguments in support of the application to adjourn the hearing however, in my view, they all had at their heart one aspect only namely what was said to be the potential impact of the US appeal proceedings on these proceedings.

42.  By the time the hearing commenced before me the efforts of D1 and D2 to challenge the US judgment had already been ongoing for several months even if oral argument at the appeal stage had only taken place in November 2017.  Therefore, in no sense was this a new consideration that represented any sort of substantial change in circumstances.

43.  Further, as was apparent from even the written submissions of counsel for D1 and D2, the pending appeal could have resulted in a number of alternative possible scenarios, and therefore how the outcome would in fact impact on these proceedings was far from certain regardless of whether the decision itself might, at first blush, appear to be in favour of D1 and D2.  The timing of the delivery of any appeal decision, something as to which fairly counsel for both parties were unwilling to even speculate, was also entirely uncertain.

44.  As I observed at the commencement of the hearing, all of the preparations for the hearing before me were complete and the costs thereof (which I have no doubt were substantial, noting that the hearing bundles consisted of some 30 large lever arch files) had already been incurred.  Further, as I have also already observed, while the parties had tried to agree terms for an adjournment, and the plaintiff had been willing to agree to an adjournment, whatever were the terms proposed by the plaintiff they had not been acceptable to D1 and D2.

45.  For the reasons I have set out, in my view no good basis was made out by D1 and D2 for adjourning a hearing which had long been fixed in the diaries of both sets of parties and the court (and for which 4 days had been reserved) and accordingly I dismissed D1 and D2's application and ordered that the hearing proceed.  I will return to the subject of costs later in my decision.

The various thresholds the parties have to meet

46.  Before addressing the substantive issues, I would first observe the nature of the applications before me.

47.  The plaintiff's applications before me are interlocutory and/or interim in nature.  As counsel for the plaintiff emphasised a number of times, in so far as the plaintiff's applications are concerned at the very highest it needs to show a good arguable case as regards the merits of the substantive claim(s).  While this is a higher threshold than is required for there to be a serious issue to be tried, the plaintiff still has to do no more than show a strong case for argument and, in particular, it does not have to persuade the court to even a tentative conclusion that it is probably right and certainly not that on the balance of probabilities it will succeed at trial.

48.  It follows that at the interlocutory stage the court is not seeking or certainly should be slow to determine detailed and disputed legal and factual issues as it would at trial.  In particular, as regards factual issues, it is not appropriate to attempt to resolve serious dispute of fact on the basis of affirmation evidence only.  And as regards legal issues, at the interlocutory stage it is rarely appropriate for the court to attempt to determine complex points of law unless the position is clear.

49.  For the plaintiff to succeed on its application to continue the Mareva Injunction until trial it must demonstrate by strong evidence that:

a)  there is a good arguable case on a substantive claim;

b)  there are assets within the jurisdiction;

c)  there is a real risk of dissipation or the removal of assets that might result in a future judgment going unsatisfied;

d)  it is just and convenient to do so.

In addition, the plaintiff will usually be required to provide a cross undertaking in damages, which it has done in this case.

50.  As regards the plaintiff's application for the Delivery Up Order, which includes elements that are both mandatory (which is the more intrusive order) and prohibitory injunctions, it must show:

a)  that there is a serious issue to be tried;

b)  that damages are not an adequate remedy for the plaintiff;

c)  on the balance of convenience it is just and convenient to make the order.

51.  Finally, with regard to D1 and D2's Jurisdiction Summons, to obtain leave to serve out of the jurisdiction under Order 11, rule 1 RHC the plaintiff has to show:

a)  there is a serious issue to be tried on the merits of the case;

b)  Hong Kong is the appropriate forum under the forum non conveniens principles;

c)  there is a good arguable case that the claim comes within one or more of the gateways provided for.

52.  In a large part counsel for the parties were in agreement as to the appropriate thresholds and considerations that the court was required have regard to in relation to the several applications.  Instead, the argument before me was largely centred on whether the plaintiff had met the threshold of a good arguable case on the substantive merits of any of its various claims and, in particular, the claim to enforce the US judgment in Hong Kong, the primary claim relied upon by the plaintiff to obtain and now to continue the Mareva Injunction.  In the event, the argument as to the enforceability of the US judgment took up the majority of the time allocated for the hearing.

Enforcement of the US judgment in Hong Kong

53.  The Mareva Injunction was granted in support of the plaintiff's claim at common law to enforce the monetary element of the US judgment in Hong Kong by way of this action (there being no provision in Hong Kong allowing for the enforcement by way of registration of a foreign judgment of the US courts).

54.  The judgment of the Court of Final Appeal in Compania Sud Americana de Vapores v Hin-Pro Logistics Ltd (2016) 19 HKCFAR 586 (FACV 1/2016) provides that as a first stage before any consideration of the grant or continuation of an injunction pursuant to section 21M of the High Court Ordinance the court should consider whether the relevant foreign judgment would be enforced in Hong Kong.  As was stated by the Court of Final Appeal:

“ If the nature of the foreign proceedings is such that the Hong Kong court will not enforce any judgment to which they give rise — e.g. because the exercise of the foreign jurisdiction is exorbitant or for some other reason of public policy, then there can be no question of granting relief under section 21M.”

55.  Counsel for the parties were largely in agreement as to the applicable principles, namely the foreign judgment sought to be enforced must be:

a)  final and conclusive;

b)  for a debt or definite sum of money not being a sum payable in respect of taxes or a fine or other penalty;

c)  have been given by a court of competent jurisdiction.

56.  In addition to these agreed principles, counsel for D1 and D2 also sought to rely on what he suggested was a further and it would seem potentially wider limb, namely whether the judgment is impeachable according to Hong Kong conflict of laws, which in this case it was submitted was not because of the express terms but because the outcome in terms of US dollar amount is "so grossly excessive or disproportionate that it amounts to a penalty" (submissions of counsel for D1 and D2 at paragraphs 82(4) and 147).  The words quoted are taken from Johnston and Harris, The Conflict of Laws in Hong Kong (3rd edition 2017, at paragraph 4.025).  This is an issue that I shall return to later in my decision.

Did the Texas court have jurisdiction over D1 and D2?

57.  I will follow the order in which the issues were dealt with before me and consider the issue of jurisdiction first, observing, as I have previously noted, that at this stage the issue I have to decide is whether the plaintiff has shown that it has a good arguable case.

58.  38" id="_Hlk514758738">58.    Dicey, Morris & Collins, The Conflict of Laws, (15th edition, at Rule 43, Volume 1 page 689) refers to a court of a foreign country having jurisdiction to give a judgment in personam capable of enforcement or recognition where:

" …

First case – if the person against whom the judgment was given was, at the time the proceedings were instituted, present in the foreign country;

…..

Third case – if the person against whom the judgment was given, submitted to the jurisdiction of that Court by voluntarily appearing in the proceedings."

59.  Jurisdiction for these purposes is to be assessed by reference to Hong Kong conflict of law principles.  That the Texas court considered that it had jurisdiction as a matter of local law is at most a matter to be taken into account and in particular is not a bar to the Hong Kong court concluding that there was no jurisdiction as a matter of Hong Kong law. Were the position otherwise citizens of Hong Kong who had never set foot in or had any dealings of any sort with a foreign jurisdiction might find themselves at risk of the 'long-arm' jurisdiction of a foreign court.

Presence

60.  During the course of the hearing counsel for both parties took me to a large number of authorities on the issue of what form or degree of presence was sufficient to found jurisdiction, the more significant of which were helpfully drawn together by counsel for D1 and D2 in the table which for convenience I repeat below (the commentary on each decision is that of counsel for D1 and D2).

Case	Presence of human agents
1. Emanuel v. Symon [1908] 1 KB 302	Facts: Defendant individual had resided and carried on business in Australia, and contracted as partner for the purpose of developing a gold mine in Australia. By the time of the writ, he left Australia permanently and lived in England  Held: Defendant was not domiciled or resident in or the subject of Australia (despite property situate there) amenable to its jurisdiction
2. Singh v. Rajah of Faridkote [1894] AC 670	Facts: Defendant individual ceased to reside in the State of Faridkote (where he served the Rajah) and never returned after he left there Held: There was nothing to take this case (despite the claim arising out of contract made by the defendant in Faridkote) beyond the general rule that the Plaintiff must sue in the court to which the defendant was subject at the time of suit; set aside judgment by Lahore court which enforced judgments of Faridkote courts
3. Wendel v. Moran [1992] ILPr 579	Facts: Defendant individual was not present in the US when writ served on him Held: Defendant not resident or present in US when the action commenced. The fact that a tort was committed there did not give the US court jurisdiction
4. Adams v. Cape Industries Plc [1990] 1 Ch 433	Facts: Defendants were companies registered in England. Plaintiffs contended that defendants were present in Illinois, US by a subsidiary (NAAC) and another company (CPC) that acted as their US agent. Employees of NAAC and CPC worked at an office in Chicago, Illinois  Held: Defendants were not present in Illinois through NAAC and CPC; US judgment cannot be enforced as its courts had no jurisdiction over the defendants
5. Vogel v. R & A Kohnstamm [1973] QB 133	Facts: Defendant company incorporated in England sold goods through an individual (Mr Kornbluth) who had an office in Israel Held: Defendant was not resident in Israel, through Mr Kornbluth or otherwise, so the Israeli court did not have jurisdiction over it and its judgment should not be enforced in England
6. The Artemis [1983] HKLR 364	Facts: Defendant company registered in Liberia. Plaintiff attempted to serve the defendant with a writ at the HK address of its agent (Barbers). It was assumed that the central management of the defendant was in Liberia as there was no evidence where its directors resided  Held: Barbers was the defendant’s agent in HK but it at no time did the defendant’s work. In any event, the ship never touched HK and no work was done in HK. Service of the writ on the defendant through Barbers in HK was bad
7. Okura v. Forsbacka Jernverks [1914] 1 KB 715	Facts: Defendant company was Swedish and carried on business in Sweden. Writ was served in London on an individual (Mr. Svedburg) who was the partner of a firm that was the sole agent for the defendant in England Held: The defendant was not “here” in England for the purposes of service of the writ in England
8. Campbell v. Gebo Investments (2005) 190 FLR 209	Facts: Defendant company was incorporated in Malaysia and operated an internet share market game. No evidence that individuals uploaded content in Australia. However, the defendant acted via directors of parent company (Messrs. Kotlar, Campbell, Levick and Walker) who were resident and conducted corporate acts of the defendant from a fixed address in Australia Held: Defendant company carried on business in Australia and that gave the Australian court jurisdiction to wind up the company
9. Lucasfilm v. Ainsworth [2010] Ch 503 (C.A.)	Facts: Defendant individual present in England, produced plastic replicas of Stormtroopers helmet in England and had through a website advertised the helmets for sale to US customers Held: Defendant was not present in the US
10. South India Shipping v. Export Import Bank of Korea [1985] 1 WLR 585	Facts: Defendant company employed staff to carry on business in leased offices in London Held: Defendant had staff and premises within the jurisdiction and had established place of business in Britain for purposes of service there
11. Actiesselskabet “Hercules” v. Grand Trunk Pacific Railway [1912] 1 KB 222	Facts: Defendant company had four directors who resided in London at a fixed residence and who circulated defendants’ advertisements Held: Defendant company was present in England for the purposes of service there

61.  Relying on the aforesaid authorities counsel for D1 and D2 set out and made submissions in support of a number of propositions as follows:

"…

a)   First proposition - the competence of foreign court only determined by the presence in foreign country or submission of the defendant;

…

b)   Second proposition - company cannot be regarded as physically present through servers or anything other than human agents;

   …

c)   Third proposition - fixed place of business requires degree of regularity and permanence of location;

…

d)   Fourth proposition - important whether agent has authority to enter into contracts on behalf of the corporation;

…

e)   Firth proposition - presence or submission in another state."

62.  The last proposition above is in response to an alternative case advanced by counsel for the plaintiff namely that D1 and D2, in the course of their challenge to the jurisdiction of the Texas court, had indicated that they would submit to the jurisdiction of the Californian court if the plaintiff recommenced the US proceedings in that state and that this submission was sufficient for the Hong Kong court based on the Third  case under Dicey, Morris and Collins’ Rule 43 that I have referred to previously.  I shall address this issue separately later in this decision.

63.  As described by counsel for the plaintiff, all but the last of the propositions put forward on behalf of D1 and D2 have essentially the same core requirement namely that there must be something akin to 'boots on the ground' or at least what is referred to in the authorities as ‘human instrumentalities’ in order for there to be a presence sufficient to give a foreign court competent jurisdiction.

64.  However, counsel for the plaintiff submits that the line of cases, the factual circumstances of which all involve varying differing natures and degrees of 'presence' in the foreign jurisdiction and which consider their impact in the particular factual context of that case, do not lay down a guiding and more importantly limiting principle that it is only in such circumstances as are described that jurisdiction can be found.  In particular, counsel emphasised the very different factual circumstances of the activities of D1 (and the other defendants), which, in a large part and especially as regards the "G-Share" aspect, are claimed to be conducted entirely or at least in a very large part only via the internet and, in particular, without any need for a physical presence of the same nature or degree as the 'boots on the ground' analogy or the same or similar evidence of ‘human instrumentalities’ that were considered in the previous cases.

65.  With due respect to both sets of counsel, in my view the issue that I must decide for the purposes of the interlocutory and/or interim applications before can be addressed by reference to the three authorities I consider below.

66.  The English Court of Appeal held in Adams v Cape Industries [1990] Ch 433 (at 530) that it was only when a company established and maintained a fixed place of business from which it carried on its business for more than a minimal period of time in the relevant jurisdiction through its servants or agents or through a representative that it would be treated as being present in that jurisdiction and, therefore, subject to the jurisdiction of its courts.  However, I observe that the main issue in that case was distinguishing the claimed 'presence' i.e. activities conducted by or on behalf of the companies concerned, from those of a separate but nevertheless group company which undeniably conducted a related (but its own) business in the jurisdiction.  I further observe that the Court of Appeals' decision also emphasises the need for a full investigation and careful consideration of the facts of each case and, in particular, where the business of the overseas corporation has been carried on by a representative, of the functions being performed and all aspects of the relationship between any entity present on the ground and the overseas party against whom the judgment is sought to be enforced.

67.  More recently, in Campbell v Gebo Investments (Labuan) Limited (2005) FLR 209 the Honourable Mr. Justice Barrett of the Supreme Court of New South Wales, Australia had to consider whether acts of uploading documents from outside of Australia in order to make them available for downloading in Australia through a website which could be accessed by persons in Australia (and via which such persons could make credit card payments) constituted carrying on business in Australia.  The matter concerned the jurisdiction of the Australian courts to wind up the company.  The decision does not record where the server on which the website was hosted was located but presumably it was not thought to have been in Australia.  The court therefore considered whether the uploading of documents from outside of Australia (to a website most likely outside of Australia) but accessible in Australia could amount to sufficient presence to find that the company had been carrying on business.

68.  His Lordship answered the above question in the negative finding that there was a need for some physical activity in Australia through "… human instrumentalities, being activity that itself forms part of the course of conducting business." [Underlining added] (at paragraph 33 of the decision).  However, His Lordship went on to observe that it would have been relevant had there been "… evidence of activities in Australia of placing material on the Internet or processing and dealing with inquiries or applications received by Internet … " (at paragraph 34 of the decision).  In my view, the decision lends weight to the submission of counsel for the plaintiff that even if the court is bound to find evidence of human instrumentalities within the jurisdiction, being, as His Lordship had found, “… activity that itself forms part of the course of conducting business.”, what these might consist of and whether such activities amounted to 'presence' is a matter to be determined on the facts of each case.

69.  Finally, and more recently still, the issue of presence was considered by the Court of Appeal in England and Wales in Lucasfilm v Ainsworth [2010] 1 Ch 503 in a case that has a number of parallels with the present case.  It concerned an individual resident in England who advertised items for sale on a website which led to sales had been made to customers in the United States and the issue of whether this amounted to having a presence in the United States.

70.  The decision of the Court of Appeal again does not refer to the physical location of the server on which the subject website was hosted; it would appear to have been located in the United Kingdom or in any event outside the United States.  Accordingly, the court considered whether the universal, in effect worldwide, accessibility of a website operated by Mr Ainsworth from the United Kingdom but on the evidence accessed by customers in the United States, with the result that the customers had placed orders and had received the product shipped to them in the United States, amounted to sufficient presence to permit Lucasfilm to enforce a judgment it had obtained in California in the United Kingdom.

71.  In decision of the Court of Appeal, when considering what would amount to presence, there appears:

"191.   …. However, such presence, although it may be temporary, reflects some form of concept or metaphor of allegiance to the laws of the country concerned, and, in the case of a company as distinct from an individual, requires the establishment of a fixed place of business from which either the company defendant itself or its agent on its behalf carries on business (see at 530C/531B). Thus, Slade LJ giving the judgment of the court said this:

Nevertheless, while the use of the particular phrase "temporary allegiance" may be a misleading one in this context, we would, on the basis of the authorities referred to above, regard the source of the territorial jurisdiction of the court of a foreign country to summon a defendant to appear before it as being his obligation for the time being to abide by its laws and accept the jurisdiction of its courts while present in its territory. So long as he remains physically present in that country, he has the benefit of its laws, and must take the rough with the smooth, by accepting his amenability to the process of its courts. In the absence of authority compelling a contrary conclusion, we would conclude that the voluntary presence of an individual in a foreign country, whether permanent or temporary and whether or not accompanied by residence, is sufficient to give the courts of that country territorial jurisdiction over him under our rules of private international law (at 519A/B)." [Underlining added]

72.  The Court of Appeal further stated:

"193.  It is true that the internet and its uses take us into a new world, and that its existence as it were in the ether (but based on servers physically located in the real world) has in general presented novel difficulties to the law and to regulators. It is also true that a website can be both wonderfully expressive and can also, subject to change and removal, be found repeatedly at its web address. The question, however, is whether for current purposes the internet or a website are fundamentally different from other matters which have enabled business persons to present themselves and their products where they are not themselves present: such as advertisements, salesmen, the post, telephone, telex and the like. We do not believe so, and Mr Bloch has been unable to show us any material from other jurisdictions, although he has searched for it, to suggest that a different answer is necessary. (Our own researches have led us to Dow Jones v. Gutnick [2003] HCA 56, 210 CLR 575, where the internet is discussed by the High Court of Australia in the different context of defamation. However, that Court was not there driven by the revolutionary omnipresence of the internet to a view of jurisdiction which was other than answerable to well-established principles.)

194.  On the contrary, it might be said that the sheer omnipresence of the internet would suggest that it does not easily create, outside the jurisdiction or jurisdictions in which its website owners are on established principle already to be found, that presence, partaking in some sense of allegiance, which has been recognised by our jurisprudence and rules of private international law as a necessary ingredient in the enforceability of foreign judgments." [Underling added]

73.  Counsel for the plaintiff argued that the term 'human instrumentalities' as relied upon the counsel for D1 and D2 to underlie his previously stated propositions is not as limiting as submitted and instead argued that presence could be founded on evidence of "allegiance" (adopting a term used by the Court of Appeal in Lucasfilm v Ainsworth) to the laws and thereby the jurisdiction of the country concerned.  As I have previously observed, counsel for the plaintiff also relied on the court's observation in Campbell v Gebo Investments (Labuan) Limited that suggested it might have reached a different view had there been evidence of activities in Australia such as placing material on the internet or processing and dealing with inquiries or applications received by the internet.

The factual evidence relied upon the plaintiff

74.  The factual evidence in the present case (even at this interlocutory stage) of activities undertaken in the United States is substantial, and certainly appears to be considerably greater than in any of the previous authorities relied upon by counsel for the parties before me. Further, and most importantly in my view, it also appears to show a far greater degree of local and physical connection and activity in the jurisdiction than was the case in the previous authorities.

75.  The plaintiff's evidence refers to and it makes claims with regard to the following matters in particular:

a)  Servers located in several states in the United States hosting websites by which payment could be made;

b)  Servers located in several states in the United States which operated an 'internet key sharing' ("IKS Service") which allowed the harvesting and distribution of certain necessary control words (said to be proprietary to the plaintiff);

c)  A server located in the United States from which the defendants operated a “G-Share” bulletin board service which allowed users to obtain various support services, including instructions to download the latest software required to access the “G-Share” service;

d)  A server located in the United States from which control words used to allow access to pay TV signals were transmitted;

e)  A server located in the United States from which the defendants could monitor the status of subscriptions.

76.  The evidence also shows that it was very far from chance where these servers were located.  That they were in the United States and even the specific state concerned seems to have been directed by the defendants or on their behalf.  Further, in the process, the defendants contracted on the terms of the server providers in the United States, which contracts contained provisions that the governing law and dispute resolution process as regards that contract was to be that of a state in the United States.

77.  I also have regard to the very nature of the “G-Share’ business of the defendants that gives rise to the claims of the plaintiff.  It is not comparable to an old style 'bricks and mortar' business nor does it require anything in the nature of 'boots on the ground' to operate.  It is also very different from the business of Mr Ainsworth that simply involved making use of the world-wide nature of the internet in order to advertise his product for sale to anyone worldwide.  And finally it is also very different from the business of the company which is the subject of the decision in Campbell v Gebo Investments (Labuan) Limited which sought to solicit customers (who might have been anywhere in the world, though the court there was only concerned with Australia) to purchase (making payment by credit card over the internet) imaginary shares on a simulated stock market (which was later described as nothing more than a pyramid scheme i.e. fraud).

78.  The alleged illicit business of the defendants, while in part internet based, does not operate by making use of a single server or small number of servers that might be located anywhere in the world but consists of a substantial and sophisticated network of computer infrastructure both software and hardware that seemingly was deliberately positioned in the United States and was operated both locally by contractors in the United States acting on instructions as well as remotely.  And in so far as the business was operated ‘remotely’, the evidence so far available as to from where in fact such remote control was exercised is also far from clear.  It certainly does not appear to follow that it was only ever from within the PRC or was never in fact from within the United States itself.

79.  I also observe that given the claimed illicit nature of the business, it is not surprising that it was not one that publicised itself in a way that allowed anyone, customers or third parties, to easily identify either those running the business or their claimed principal business location(s). Not least if it had very likely it would not have taken the plaintiff as long as it did to bring and pursue the present proceedings.

80.  As I have previously observed, for present purposes I am only required to determine if the plaintiff has made out a good arguable case.  In particular, I am not required to decide whether the applicable test to determine what is sufficient to constitute presence on the part of a corporate entity is best determined by reference to evidence of either 'human instrumentalities' or allegiance within or to the jurisdiction concerned (and if these each might produce a different result).  In my view, even if the requirement is for evidence of 'human instrumentalities', given the substantial evidence of a local and/or physical connection or activities “… that form part of the course of conducting business.” (adopting the term used by the court in Campbell v Gebo Investments (Labuan) Limited) of one form or another in the United States I am satisfied that the plaintiff has at least made out a good arguable case.  As was said by the Court of Appeal in Adams v Cape Industries, each case requires careful investigation and consideration of the particular facts including the nature of activities undertaken and the relationship between any entities or persons within the jurisdiction and those overseas against whom judgment is sought to be enforced and, in my view, if the necessary threshold is achieved at the interlocutory stage such investigation and consideration is a matter for trial.

Submission to United States jurisdiction

81.  As I have found in favour of the plaintiff as regards jurisdiction based on presence, it is not necessary that I deal with the plaintiff’s alternative case that at least D1 has submitted to the United States court’s jurisdiction through its submissions in the Texas proceedings as part of the efforts to set aside the US judgment.  As I have previously referred to, such submission could potentially found jurisdiction under the Third case of Dicey, Morris and Collins’ Rule 43.

82.  The submissions of counsel for D1 and D2 refer to this alternative case as being an argument newly raised in the submissions of the plaintiff.  However, as counsel for the plaintiff correctly pointed out it was a matter raised in the plaintiff’s evidence filed in the proceedings as far back as 12 January 2017 (evidence which it appears that D1 and D2 chose not to respond to).

83.  In any event, whatever the reason, as the matter came on before me, the arguments in relation to submission were not fully developed and made out on either side, in particular there was no evidence before me from the United States attorneys directly involved in the various proceedings or as regards the status and significance of any submissions made in those proceedings as a matter of United States law.  At most the court had the benefit of the written submission of the attorneys for D1 and D2’s on their renewed motion for oral argument and reconsideration of their application to vacate the US judgment and dismiss the Texas proceedings, which submission was filed in the Texas proceedings on 30 November 2016.

84.  In such circumstances, and although as I have said I do not now need to decide the issue, had I been required to do so I would have found it very difficult to come to a clear view without more assistance. As counsel for D1 and D2 observed, in Hwoo Huang Linda v Fu Being San [2013] 1 HKLRD 250  Deputy High Court Judge Reyes SC held as follows:

“A party may be able to preserve an option to challenge forum, despite having engaged in conduct which might be regarded as submission to the jurisdiction, if before or at the time of such conduct he makes it clear that his action is without prejudice to the bringing of a challenge to forum.

The Court should adopt a common sense approach.  It must not be overly subtle or astute to find that the party has submitted to the jurisdiction.  Otherwise the question of submission could easily become a technicality trap for the unwary.  The real question is whether a party’s conduct is so inconsistent with maintaining an option to challenge forum that the party should be assumed to have waived such option. In the case of any doubt, the party proposing to challenge forum should probably be given the benefit of that doubt.”

85.  In the present case, the issue of jurisdiction which the US attorneys for D1 and D2 were apparently seeking to deal with related to whether the US judgment was void and therefore should be vacated because the Texas court had wrongly assumed jurisdiction in preference to any other US State without the necessary US statutory basis for doing so.  Certainly, they do not appear to have been addressing any issue regarding jurisdiction as between the United States and Hong Kong.  Therefore, as observed by DHCJ Reyes SC, in my view the court should be slow to come to a view without the necessary evidence and hearing fully developed argument.

86.  I would also observe that in the decision of the United States Court of Appeals for the Fifth Circuit, which was to deny D1 and D2’s motion for relief and affirm the US judgment, delivered on 7 February 2018, the court said as follows:

“Gotech [D1] had to affirmatively establish that the [Texas] court lacked personal jurisdiction under 4(k)(2) because there was a state where its courts of general jurisdiction could properly exercise jurisdiction over it. See Adams, 364 F.3d at 650. Gotech did nothing of the kind. At most, it alleged that California was a state of such jurisdiction, but it did nothing to prove that the [Texas] district court’s implied finding [that there was no such other state] was wrong making the judgment void. Accordingly, the district court did not err in denying [the motion for relief from the default judgment].”

The US judgment as to damages

87.  The US judgment deals with the issue of damages in the following terms:

"n.  Defendant’s acts violate the Digital Millennium Copyright Act (“DMCA”), 17 U.S.C. sub-section 1201 (a)(2) and the Federal Communications Act (“FCA”), 47 U.S.C. sub-sections 605(e)(4) and 605(a), as alleged in Counts I, II and II of Nagravision’s amended complaint;

o.   Nagravision elected to recover statutory damages in the amount of $200 for each of the Defendants violations of the DMCA. The damages sought by Nagravision are at the very bottom of the range authorised by 17 U.S.C. sub-section 1203(c)(3)(A), substantially less than the $10,000 per violation statutory minimum allowed by the FCA, in line with statutory damages awarded in similar cases, and reasonable given Defendants’ misconduct. Nagravision submitted evidence that Defendants provided their IKS services to at least 501,985 end users, and distributed at least 7274 Limesat and Captiveworks receivers, for a combined total of 509,259 violations of the DMCA.

…

4.  In accordance with 17 U.S.C. sub-section 1203(c)(3)(A), statutory damages of $101,851,800 are awarded to Nagravision. The statutory damages are calculated based on Defendants’ 509,259 violations of section 1201(a)(2) of the DMCA at $200 per violation.”.

Statutory damages under the DMCA

88.  The aforesaid process of quantification is in accordance with the quoted provisions of the DMCA which provide as follows:

"(c) Award of Damages.—

(1) In general.—Except as otherwise provided in this title, a person committing a violation of section 1201 or 1202 is liable for either—

(A) the actual damages and any additional profits of the violator, as provided in paragraph (2), or

(B) statutory damages, as provided in paragraph (3).

(2) Actual damages.— The court shall award to the complaining party the actual damages suffered by the party as a result of the violation, and any profits of the violator that are attributable to the violation and are not taken into account in computing the actual damages, if the complaining party elects such damages at any time before final judgment is entered.

(3) Statutory damages.—

(A) At any time before final judgment is entered, a complaining party may elect to recover an award of statutory damages for each violation of section 1201 in the sum of not less than $200 or more than $2,500 per act of circumvention, device, product, component, offer, or performance of service, as the court considers just.

(B) At any time before final judgment is entered, a complaining party may elect to recover an award of statutory damages for each violation of section 1202 in the sum of not less than $2,500 or more than $25,000.

(4) Repeated violations.— In any case in which the injured party sustains the burden of proving, and the court finds, that a person has violated section 1201 or 1202 within 3 years after a final judgment was entered against the person for another such violation, the court may increase the award of damages up to triple the amount that would otherwise be awarded, as the court considers just."

89.  The damages award is therefore of what is termed "statutory damages" rather than "actual damages" of the nature a plaintiff would be required to prove in a case before the Hong Kong court.  In the Texas proceedings it appears that it was sufficient for the plaintiff to produce evidence of what was said to be the number of "violations" (what constitutes a violation seemingly being a subject of previous United States case authority).  In the event, the court found that the US defendants were liable for a total of 509,259 violations, of which 501,985 related to unique IP address hits on various servers claimed to be operated by the defendants which the plaintiff had identified, each of which was said (apparently based on previous United States case authority) to correspond to an individual end user and 7,274 related to sales of particular types of STBs which the plaintiff claimed had been sold to customers in the United States.  To the total number of 509,259 violations the court then applied a statute prescribed multiplier, in this case the figure of US$200 (which is the lowest possible of the potential range), to arrive at the final damages figure of US$101,851,800.

90.  First, I will make a number of observations regarding the scheme of damages under the DMCA:

a)  A plaintiff is free to seek either actual or statutory damages.  At a certain point it is required to make an election but there is no presumption in favour of one or the other type of damage.  Therefore, in the normal course one can expect a plaintiff to frame its damages claim by the method which results in the highest award when weighed against the legal and other costs involved.

b)  There is no wording in the statute which refers to or even implies that statutory damages denote any form of aggravated or increased culpability on the part of the defendant due to the factual circumstances.  The wording of the statute is entirely neutral in this regard.  While not immediately relevant, as it concerns subsequent repeated violations which is not a factor in the present case, I observe that the later provision of the DMCA set out above expressly refers to the potential for an award of up to triple the amount of damages (actual or statutory) that would otherwise be awarded.

c)  At the hearing before me no evidence was put forward by either side as to the law of the United States as regards statutory damages under the DMCA beyond the statute itself and limited evidence of the course the Texas proceedings followed through to the US judgment.  In particular, the underlying rationale and whether such damages are considered purely compensatory or punitive and/or penal or a combination of the two was not the subject of evidence.  Equally, there was no evidence before me that the approach (in particular, as regards the determination of the number of violations) and the calculation method adopted in the US judgment was flawed in any respect as a matter of United States law.

Are the statutory damages awarded penal, unjust and unenforceable?

91.  Counsel for D1 and D2 submitted in the alternative that the US judgment should not be enforced in Hong Kong because either it was of itself penal in nature or it was so grossly excessive or disproportionate that it amounted to a penalty.

92.  It was submitted that the very large size of the award could not be supported based on any of the available evidence as to the plaintiff’s likely actual loss and damage.  Counsel for D1 and D2 referred to amongst other matters evidence of the plaintiff’s finances as shown by its published financial statements, the investment it had declared that it had made to develop the technology that lies at the centre of its claims and its recent profits and those of the group of companies of which it is part.

93.  Relying on such evidence, counsel for D1 and D2 submitted that the US judgment was self-evidently out of all proportion to the plaintiff’s likely actual loss and damage and therefore was clearly not compensatory in nature but was intended as a deterrent and was penal.

94.  However, counsel for the plaintiff rejected the notion that inherently there is anything penal or punitive about an award of statutory damages.  Instead he submitted that they provide a simple and convenient means to calculate damages caused by acts of infringement that would otherwise be hard (or I would add, costly) to prove in accordance with the normal principles that apply to proof of actual damage.  Counsel referred to the fact that statutory or pre-established damages are well recognised and permitted by international law even if they have not been adopted as a matter of Hong Kong law.  Counsel further referred to the scheme of damages under the DMCA, noting, as I have already referred to, that it is entirely at the plaintiff’s option whether to seek actual or statutory damages and that there is nothing in the legislation which suggests that statutory damages are intended to be of a different nature or character, in particular any more of a deterrent or penal, than an award of actual damages.

95.  Counsel for both the plaintiff and D1 and D2 indicated that they had been unable to identify any decision of another court in Hong Kong or elsewhere in which the same issue had been considered as regards an award of statutory damages under the DMCA.  Instead, each in turn referred to number of well-known authorities, including the decision of the Court of Appeal in Hung Fung Enterprises v Agricultural Bank of China [2012] 3 HKLRD 679 in which Her Ladyship Kwan JA held as follows:

“91. The judge did recognise that the double interest was to penalise the plaintiffs for not complying with the orders of the PRC courts to pay the judgment sums within 10 days of the judgments coming into effect. Where he has gone wrong is to attach undue significance to the fact that double interest is recoverable at the instance of the judgment creditor in a civil litigation, and not by the state under a penal law or other public law. That the sum is not payable to the State is not a determinative factor. If the Court is satisfied that the purpose of the amount ordered was not to compensate for the loss suffered but to punish the defendant and deter others from acting in the same way, this could properly be regarded as a penalty. The award of punitive damages which the court in Schnabel v Lui declined to enforce is an example of this.”

96.  Therefore, it follows that a penal award is not limited to one payable under a penal or other public law but includes damages (recoverable by a civil claimant pursuant to statute) which are intended to punish the defendant and deter others rather than merely compensate the plaintiff.

97.  While the US judgment itself contains no reference to the award being intended to deter or penalise the US defendants, counsel for D1 and D2 referred to the memorandum of the plaintiff’s attorneys in support of the motion for default judgment in which there are several references where the court is invited to take the need for deterrence into account when fixing the amount of damages awarded.  However, as I have previously observed, in the event the amount of the award involves the lowest possible multiplier for each violation under the DMCA and a reasoned finding as to the applicable number of violations (albeit in the absence of the defendants).  Therefore, I agree with counsel for the plaintiff that there is nothing on the face of the award itself which could lead one to conclude that it was intended to serve as a deterrent or be penal.

98.  Counsel for D1 and D2 submitted that in appropriate circumstances a Hong Kong court may conclude that even an award which is apparently compensatory should not be enforced.  I have previously referred to an extract from a passage that appears in Johnston and Harris, The Conflict of Laws in Hong Kong (3rd edition 2017, at paragraph 4.025) and now set out the passage in full:

“ … It is further suggested that it is legitimate for a Hong Kong court to conclude that although an award is ostensibly compensatory in nature, it is in substance so grossly excessive or disproportionate that it amounts to a penalty: this point may be of particular relevance in cases involving very large foreign jury awards.”

99.  In response, counsel for the plaintiff submitted that the proposition as set out above is unsupported by any authority directly on point (something I note that is fairly acknowledged by the authors) and in any event that the proposition set out is not made out on the facts of the present case.  He further submitted that, as with the issue of presence, for present purposes he need to do no more than satisfy me that the plaintiff had a good arguable case.

100.  As counsel for the plaintiff submitted, in effect counsel for D1 and D2 challenges the enforcement of the US judgment solely on the basis of its very large value and the argument that such an award would not be possible were the claim brought under Hong Kong law, which would require that the plaintiff prove the actual loss and damage it had suffered. However, in my view this is not just tantamount to asking the court to look behind the US judgment but leads ultimately to asking the court to question the entire scheme of statutory damages under the DMCA.  This is not something that I consider it appropriate that I do, certainly not at the interlocutory stage.

101.  For the reasons set out, I am satisfied that the plaintiff has a good arguable case to enforce the US judgment and to do so in the amount in which it was awarded.

102.  As a concluding comment, I would observe that the US judgment which was the subject of Lucasfilm v Ainsworth itself involved a very substantial award of damages amounting to US$20 million.  Of this sum US$10 million was apparently intended, being described as such, as ‘compensatory damages’.  The nature of the second US$10 million is not directly referred to in the Court of Appeal or Supreme Court's decisions but presumably it was intended to be punitive or penal in nature.  In any event, in the Court of Appeal’s decision Lord Justice Jacob observed as follows:

“9. Lucasfilm has obtained a default judgment for trade mark and copyright infringement in California against him in the sum of US$20m. That sum sounds strange to English ears given that he sold only about US $14,500 worth. No less than $10m of the $20m is “compensatory damages” by US law. Lucasfilm claims that the English court should recognise and enforce the judgment to the extent of the $10m “compensatory” element. Perhaps not wanting to seem oppressive, it only seeks to enforce its US judgment to the extent that it cannot succeed on its claim to enforce its US copyright directly in the English courts.” [Underling added]

103.  The decision in Lucasfilm v Ainsworth did not involve an award of statutory damages under the DMCA and therefore is not directly in point.  However, I observe that despite the large size of even that part said to be “compensatory”, which appears to have caused what might be said to be raised eyebrows on the part of Lord Justice Jacob, no argument was made in that case that the judgment should not be enforced because it was manifestly excessive or disproportionate and therefore should be viewed as of a penal nature.

Actionability of the plaintiff’s claims under US law

104.  In addition to suing to enforce the monetary element of the US judgment, the second substantial cause of action relied upon by the plaintiff in the present proceedings is a claim against D1 – D3 for breach of the same provisions of United States intellectual property law that were the basis for the Texas proceedings, in respect of which it claims damages (in particular statutory damages as provided for under United States law).

105.  The claim is set out in paragraphs 42 and 43 of the Amended Statement of Claim of the plaintiff dated 17 May 2017.  For this claim the plaintiff relies on the same facts and matters it relied upon in the Texas proceedings and/or the findings of the Texas court in the US judgment.  After setting out the relevant statutory provisions of the DMCA and FCA, the plaintiff pleads as follows:

“43. The plaintiff relies on the facts and matters pleaded in paragraphs 33 to 35 and 39 above either as findings of the US Court or as averments in their own right. The plaintiff further avers that [D1 – D3] caused, enabled, procured, directed, instigated, assisted or conspired with each other to violate the laws of the United States. The plaintiff will rely, pending discovery and/or interrogatories, upon the following [whereupon the plaintiff repeats the particulars set out in paragraphs 30-32]”.

106.  Counsel for both parties readily acknowledged that the plaintiff’s claims in this regard are dependent upon the Hong Kong court reaching the same conclusion as was reached by the Supreme Court in the United Kingdom in Lucasfilm v Ainsworth [2011] 3 WLR 487 to the effect that the previous common law rule that an English court had no jurisdiction to entertain an action for damages for infringement or invasion of property rights in a foreign land did not apply to claims for infringement of foreign copyrights.  In that decision the court held as follows:

“105 We have come to the firm conclusion that, in the case of a claim for infringement of copyright of the present kind, the claim is one over which the English court has jurisdiction, provided that there is a basis for inpersonam jurisdiction over the defendant, or, to put it differently, the claim is justiciable.”

107.  While I am conscious that I will not be doing justice to the detailed submissions made before me by counsel for both parties, in my view this issue can be dealt with very shortly.  While, but perhaps only due to the lack of opportunity, the United Kingdom Supreme Court decision has not been considered and applied in Hong Kong, given the long and close history, including in particular as regards the law of copyright and other forms of intellectual property, between the legal systems of Hong Kong and the United Kingdom, in my view, there must be at least a good arguable case that the law in Hong Kong should similarly evolve.

108.  Counsel for D1 and D2 while not significantly demurring as regards the need for appellate determination of the aforesaid issue nevertheless sought to argue that the plaintiff’s residual claims under United States law would still fail as they fell foul of the double actionability rule.  However, counsel for the plaintiff both argued that in respect of claims of copyright infringement there is no longer a requirement that the court consider whether the acts complained of are also actionable under Hong Kong law and, in any event, submitted that on proper analysis the provisions of the DMCA and FCA do have parallels under Hong Kong law.

109.  With due respect to the detailed and lengthy submissions of counsel, in particular counsel for D1 and D2, in my view the above issues again are not ones suitable for determination at the interlocutory stage.  As counsel for both sets of parties made their respective submissions before me it was evident that consideration and determination of the relevant issues will involve detailed both factual and legal analysis, including relatively technical aspects of broadcasting technology and the related rights.  These matters again will need to be dealt with at trial as, in my view, at this interlocutory stage the plaintiff has done sufficient to show that it has a good arguable case.

The plaintiff’s other claimed causes of action

110.  The plaintiff’s Amended Statement of Claim dated 17 May 2017 sets out three further causes of action in addition to those I have referred to above.

111.  In paragraphs 44 - 46, the plaintiff sets out a claim under section 275 of the Copyright Ordinance.  That section provides that:

“(1) A person who—

(a) makes charges for the reception of programmes included in a broadcasting or cable programme service provided from a place in Hong Kong or elsewhere; or

(b) sends encrypted transmissions of any other description from a place in Hong Kong or elsewhere,

is entitled to the following rights and remedies.

(2) He has the same rights and remedies against a person who-

(a) makes, imports, export or sells or lets for hire any apparatus or device designed or adapted to enable or assist persons to receive the programs or other transmissions when they are not entitled to do so; or

(b) publishes any information which is calculated to enable or assist persons to receive the programs or other transmissions when they are not entitled to do so

as a copyright owner has in respect of an infringement of copyright.

(3) Further, he has the same rights and remedies under section 109 (delivery up) in relation to any such apparatus or or device as a copyright owner has in relation to an infringing copy.”

The plaintiff claims that the “G-Share” services provided by D1 and D2 contravene the above section in that in simple terms that they provide the means by which an unauthorised user can obtain the necessary information to overcome the security services that it provides to broadcasters of pay TV.  That persons were able to obtain such information as a result of the activities of one or more of the defendants is strongly supported by the evidence.

112.  While counsel for D1 and D2 spent quite a lot of time in submissions seeking to show why section 275 could not apply to the circumstances of the plaintiff’s business, in a large part the submissions made again only served to demonstrate that the issue was one that should not be determined at the interlocutory stage and indeed required the careful factual and legal analysis of a trial.

113.  In paragraphs 47 - 49, the plaintiff sets out claims under sections 30 and 31 of the Copyright Ordinance, which prohibit respectively the import and export or the possession or sale or offer of infringing copies of a copyright work.  For such claims the plaintiff relies on allegations that D1 - D3 have manufactured, offered for sell and sold various models of STB that contain unauthorised copies of the plaintiff’s copyright works, and evidence that at least a small quantity may well have been transhipped through Hong Kong.

114.  In response, counsel for D1 and D2 primarily focused on what was said to be the lack of evidence to show that any STB’s imported or exported from Hong Kong or possessed by D1 and D2 contained the infringing copyright works of the plaintiff and D1 and D2’s evidence that D2 maintains no infrastructure e.g. a warehouse etc. in Hong Kong connected with the import and export of STBs.  It was further submitted that any transhipment, if such occurred, was minimal and was not as result of any action on D2’s part but a decision of the shipping agent or entity involved.  However, the evidence obtained by the plaintiff after these proceedings were commenced through the production of bank records and other discovery provides strong support for the plaintiff’s claim that D2 was closely involved in the alleged illicit activities of the defendants and indeed actively seeking to sell STBs packaged with subscriptions to the defendants “G-Share” service.  While the evidence so far obtained and relied upon by the plaintiff suggests that only a small number of STBs may have passed through Hong Kong, in my view this is sufficient.

115.  And finally, in paragraphs 50 - 51, the plaintiff claims that the defendants are joint tortfeasors in that their individual and combined efforts as particularised in support of the previous causes of action have been in furtherance of a common design to infringe the plaintiff’s rights with the result that they are jointly and severally liable for the acts complained of.

116.  In respect of each of the above causes of action, I am satisfied that while the evidence in support of the plaintiff’s claims is currently limited and there is potential for substantial factual and legal analysis and argument regarding the application of the statutory provisions, in particular how the particular circumstances of the plaintiff’s business fall within section 275 of the Copyright Ordinance, the plaintiff has again made out at least a good arguable case.

Serious issue to be tried

117.  In the light of my decisions as set out above, there is no need for me to separately consider in the context of the plaintiff’s application for the Delivery Up Order or D1 and D2’s Jurisdiction Summons whether the plaintiff has established a serious issue to be tried.

Amount of the Mareva Injunction

118.   Similarly, in the light of my decision as regards the enforcement of the US judgment and in the amount of US$101,851,800, there is no need for me to separately consider whether an injunction in a different, perhaps lower, amount would be appropriate, in particular were the plaintiff's claims limited to one or more of its alternative causes of action.

Service out of the jurisdiction and forum non-conveniens

119.  I can deal very shortly with the submissions made on behalf of D1 and D2 as regards service on D1 out of the jurisdiction under Order 11 rule 1 RHC.  In the light of my findings as to the plaintiff having at least a good arguable case in respect of all of the causes of action it relies on, in my view, it is clear that there was a proper basis for an order for the service of D1 out of the jurisdiction under several different ‘gateways’ provided for by the rule.

120.  I also find no force in the submissions of counsel for D1 and D2 that this action should not be pursued before the Hong Kong court but instead pursued before the People's Intermediate Court of Zhuhai in the PRC where D1 is located.  I observe that all the defendants save D1 are Hong Kong incorporated companies.  The evidence also strongly suggests that the roles of D2, a wholly owned subsidiary of D1, and D4 who appears to have performed as ‘banker’, both Hong Kong incorporated companies operating in Hong Kong, were central to the claimed illicit activities of the defendants.  If on no other basis, Hong Kong jurisdiction can be founded on the fact that D1 is a necessary and proper party to the proceedings being pursued in Hong Kong against the Hong Kong incorporated defendants.

121.  And the fact that of the defendants D1 is the most substantial in financial terms and is incorporated elsewhere does not make Hong Kong any less of an appropriate jurisdiction.  The claims against all the defendants are closely intertwined and indeed all of them are alleged to be joint tortfeasors jointly and severally liable for the acts of each of them.  As such, in my view, their relative size or indeed claimed culpability is not relevant.  Hong Kong is the place of incorporation of 3 of the 4 defendants and where the evidence strongly suggests that much of the commercial and financial activities took place in relation to the "G-Share" business which give rise to the plaintiff’s claims.  In my view, it is clearly the most appropriate forum for the trial of the plaintiff’s claims.  I also observe that there is no evidence that D1 has encountered any difficulty or obstacles to participating in the Hong Kong proceedings to date.

Damages not an adequate remedy

122.  During the oral argument before me regarding the claimed penal or excessive amount of the US judgment, I invited both counsel to address me both as regard to the applicable principles and applying those principles the potential amount of any Mareva Injunction were I to conclude that while an injunction was appropriate it should not be in the same amount as the US judgment.

123.  In addition to the submissions made during the course of oral argument, pursuant to my directions, at the conclusion of the oral argument each of the plaintiff and D1 and D2 submitted written submissions through their solicitors by letters dated 29 January 2018 and 8 February 2018 respectively.  Though not expressly provided for by my previous directions, the plaintiff submitted further written submissions in reply to those of D1 and D2 through their solicitors by a letter dated 20 February 2018 (without, I note, any objection on the part of D1 and D2).

124.  As regards the applicable principles, both counsel were in agreement that the amount of any injunction is ultimately a matter in the court’s discretion and, in particular, even if my decision were that the plaintiff has a good cause of action to enforce the US judgment, I was not bound to grant an injunction in the same amount.

125.  This lead to both parties, in particular in their written submissions submitted after the hearing, analysing in quite some detail the issue of potential damages (or an alternative claim for an account of profits) and the several different basis on which they might be calculated. Perhaps inevitably, the parties’ positions differed very substantially.

126.  With all due respect to the efforts of counsel for both parties, I do not propose to review their respective submissions in any detail.  In my view, both sides written submissions in fact served to demonstrate even more clearly that at this stage of the proceedings it is not possible to say that damages will be an adequate remedy for the plaintiff.

127.  I have particular regard to the fact that the plaintiff’s business is very dependent upon its reputation and that of its products.  It sells security to clients, whose own businesses are measured in the many hundreds of millions, even billions, of dollars.  If the plaintiff’s reputation is severely damaged the losses that it might suffer could be very substantial, indeed irreparable, and certainly at this stage they appear very difficult to measure in money terms.

128.  The proceedings, though they have been ongoing for more than a year and a sizeable volume of evidence has been filed on the present applications, are still at a very early stage.  The issues are not yet even framed by pleadings and discovery is a long way away.

129.  As I have already found, the plaintiff has demonstrated a good arguable case on several different basis, and further been able to support the claimed causes of action with strong evidence. There is also force in the plaintiff’s argument that the position of D1 and D2 in response to the proceedings appears to have undergone something of a change.  From an early outright denial of any wrongdoing, D1 and D2 now seem to have come close to admitting that it is possible that a number of employees may have been involved in infringing activities (albeit the scale and their significance in the context of what is said to be D1’s legitimate business is disputed).

130.  That the plaintiff may ultimately succeed at trial in relation to its claim to enforce the monetary amount of the US judgment and it be shown that the amount of that judgment exceeds the plaintiff’s otherwise provable loss and damage in relation the claims pursued under Hong Kong law, in my view, is no answer to the question I have to decide on the present application.

Assets within the jurisdiction

131.  I need not spend any time on this issue as it is clear that D1 (the parent of Hong Kong incorporated company D2) and D2 itself, which has been revealed to hold substantial bank balances with Hong Kong banks, have assets within the jurisdiction.

Risk of dissipation

132.  For the plaintiff to obtain the Mareva Injunction it seeks counsel for the plaintiff accepts that it must show that there is a real risk of dissipation of assets or removal of the assets from Hong Kong such that a future judgment would go unsatisfied.

133.  The primary cause of action relied upon by the plaintiff is the US judgment (in my view, a reasoned decision) that it has already obtained.  That judgment is for a very sizeable sum, even relative to the scale of the business operations of D1 which the evidence shows are clearly very substantial.   However, if the judgment is enforced by the Hong Kong court the impact on at least the Hong Kong incorporated defendants is likely be very significant.

134.  In my decision, I have already found that the plaintiff has good causes of action against D1 and D2 on a number of different basis.  Further, that the plaintiff’s claims against D1 and D2 (and the other defendants) at this interlocutory stage are supported by strong factual evidence of potential wrongdoing.  Indeed, as I have previously observed, the response of D1 and D2 to the proceedings has undergone an apparent change, from an outright denial on the facts to one more focused on legal arguments.  I also agree with counsel for the plaintiff that even putting it at its lowest, the early affirmation evidence made on behalf of D1 and D2 appears to have been less than full and frank. 

135.  During the hearing before me I enquired of the parties regarding any amounts that had been revealed and restrained by the injunction granted ex parte.  I was informed that the total amount restrained was originally in the order of Hong Kong $59.5 million, Hong Kong $47 million being for the account of D2 and Hong Kong $12.5 million being for the account of D4.  I understand that these amounts have since been significantly reduced as a result of the day-to-day expenses and legal costs permitted by the terms of the injunction but sizeable sums currently remain restrained.

136.  I also observed during the hearing, and the parties counsel did not correct me, that in all likelihood little or nothing in the way of substantial sums would have been brought into Hong Kong for the account of any of the defendants after the date of the injunction.  Therefore, as things stand at present, even if the plaintiff is ultimately successful in this action, at least as regards cash assets, it may well recover only a relatively small proportion of the US judgment.

137.  Counsel for D1 and D2 argued that the risk of dissipation should be viewed against the background of what was said to be a long delay on the part of the plaintiff in bringing action in Hong Kong, even after the commencement of the Texas proceedings.  However, the inescapable inference from the evidence is that D1 and D2, for whatever reason, decided to ignore the Texas proceedings even though served with them, and instead simply carried on business.  It would appear that at that stage D1 and D2 did not contemplate that they would face enforcement in Hong Kong of a United States judgment of the current magnitude or at least were prepared to take the risk.

138.  As regards any earlier alleged delay, the plaintiff explains, with, in my view, good justification, that it was only as a result of the Texas proceedings and the evidence obtained at or about the same time either within those proceedings or through separate actions that it became aware of the extent of the activities of the defendants sufficient to be able to frame these proceedings against them.  Indeed, as is apparent from how these proceedings were first constituted, at the time that they were commenced the plaintiff did not fully appreciate what it now claims is the role of D4. Therefore, I do not consider that the complaint of delay is made out.

139.  I also have regard to the plaintiff’s claims regarding the apparently concealed nature of the defendants’ activities and identities as to the “G-Share” business which is at the centre of the claims.  In this respect, I note the use of first D2, a wholly owned subsidiary of D1, and then D3, a company which previously appeared to be under common ownership and control, but with which apparently links were severed sometime in 2014, and what is now D4, which is said to be an independent company but which apparently to a large extent operated as the ‘banker’ for the defendants’ collective activities.

140.  In the circumstances as I have set out, I am satisfied that the plaintiff has shown that there is a real risk of dissipation or removal of assets from the jurisdiction that might result in a future judgment of the Hong Kong court going unsatisfied.

Balance of convenience

141.  I am further of the view that the balance of convenience is clearly tilted in favour of interlocutory injunctive relief. Weighing the potential, possibly irreparable, harm that might be suffered by the plaintiff against that which might be suffered by the defendants if restrained, leads to the clear conclusion that the interim restraints sought by the plaintiff are appropriate.

142.  The opening position of D1 and D2 in the action was that they were not in any respect liable as claimed and in particular did not possess or deal in and therefore could not deliver up any infringing products of whatever nature.  However, the evidence at this interlocutory stage now strongly suggests that the plaintiff has at least a good arguable case against the defendants and, in my view, D1 and D2, who combined are sophisticated and sizeable business, should not face any substantial difficulties separating out that part of their business which is the subject of the plaintiff’s claims from any other legitimate business.

143.  I would observe that the plaintiff first obtained ex parte interlocutory relief as far back as 5 September 2016, relief which has been continued by consent orders agreed between the plaintiff and both D1 and D2 since 29 September 2016.  While in the meantime D1 and D2 have issued the Discharge Application, they have not sought an expedited hearing and indeed at the outset of the hearing before me were seemingly content that their application be further adjourned while the interlocutory relief continued in the meantime.  Though it has been suggested that D1 and D2 are suffering adversely as a consequence of the interim relief obtained by the plaintiff, in particular the Mareva Injunction, there is no substantial evidence to this effect and certainly it appears that the business of D1 continues without any apparent disruption.

Second limb under Section 21M HCO

144.  In respect of an application made pursuant to section 21M (1) HCO, the court may refuse an application for interim relief if, in the opinion of the court, the fact that the court would have no jurisdiction but for the section in relation to the subject matter of the proceedings makes it unjust or inconvenient for the court to grant the application.  However, for the reasons I have set out, I am satisfied that the circumstances of this matter warrant the court exercising its discretion and granting the plaintiff’s application.

Material non-disclosure

145.  Counsel for D1 and D2 submitted that on the ex parte application the plaintiff was in breach of the duty of full and frank disclosure on a number of different basis.  I will shortly summarise the specific matters relied upon below.

146.  In paragraph 167 of the written submission of counsel for D1 and D2, four matters which were said to be examples of material nondisclosure of both law and fact were set out.  Of the four, two concerned the legal issue as to whether the US judgment could be enforced in Hong Kong both on the ground of presence and/or the penal or unenforceable amount.  The third concerned an issue regarding whether D1 had a correspondent bank account in the United States.  And the fourth concerned the effective allegation that the Texas court was wrong to base the award on IP addresses which originated from markets not served by the plaintiff.

147.  In paragraph 183, reference was made to the potential argument as to whether the decision in Lucasfilm v Ainsworth regarding maintaining an action for infringement of foreign copyright would in fact be followed in Hong Kong.

148.  In paragraph 188, reference is made to the issue of where the claimed torts were committed and the double actionability rule.

149.  In paragraph 190, the point made is of a negative nature, it being claimed that relevant torts were committed in the PRC and there was no evidence as to whether such torts are in fact actionable in the PRC.

150.  In paragraph 194, reference is made to the failure to show that in relation to the claims under section 275 of the Copyright Ordinance there is a corresponding cause of action in the United States or the PRC (depending on where the tort occurred) .

151.  And finally, in paragraph 206, reference is made to the argument as to whether the plaintiff has locus standi to pursue a claim under section 275 of the Copyright Ordinance.

152.  As appears, in a very large part the submissions of counsel for D1 and D2 as regards what is said to be matters of material nondisclosure relate not to factual matters but legal issues in respect of which for the purposes of the present applications I have found in favour of the plaintiff.  In my view, this disposes of D1 and D2’s application in these respects.

153.  As regards the factual matters relied upon, I do not believe that the issue in relation to whether D1 had a correspondent bank account in the United States was at all material in relation to the decision of the learned ex parte judge.  Further, the factual issue of where the IP addresses referred to in the US judgment are located appears essentially to amount to an argument that the Texas court was wrong to arrive at the judgment that it did.  If this is an issue that the Hong Kong court is at liberty to address at all, in my view it is certainly not one that should be dealt with on an interlocutory basis and/or without substantial evidence, including of United States law, and was no such evidence before me.

154.   Therefore, in my view, the criticisms of D1 and D2 as regards what is said to have been material non-disclosure are not made out and thus provide no basis for setting aside the orders obtained ex parte.

Banker's Record Application

155.  The Banker’s Record Application which as I have previously noted concerns only D2 was issued on 7 September 2016.  That it only came on to be heard before me in January 2018 is as a result of the various agreements reached between the parties regarding the several pending applications, including the D1 and D2’s challenge to jurisdiction.  However, in my view, the long delay in the application finally being determined does not materially change the approach the court should adopt.

156.  In two recent decisions of Deputy High Court Judge Keith Yeung SC, AKBANK T.A.S. v Mainford Limited and Ors [2018] HKCFI 363 and Tiger Resort Asia Limited v Kazuo Okada and Others [2018] HKCFI 472, the learned deputy judge considered the principles applicable to applications pursuant to Section 21 of the Evidence Ordinance.  The key test is relevance and thus whether in all probability information to be revealed will be material to an issue between the parties in the action.

157.  The plaintiff’s counsel submitted that based on the examples of the orders already obtained as regards the bank accounts of D1, D3 and what is now D4 there is a strong indication that potentially relevant information is likely to be forthcoming.

158.  Such information is not limited to identifying other potential defendants against whom action might also be pursued but includes helping a better understanding of the activities of those defendants already identified that are the subject of the plaintiff’s claims, both as between themselves and third parties.  This is clearly the case as regards the disclosure orders already obtained which appear to have served to greatly inform the plaintiff’s claims in the action.

159.  That the information obtained through such an application is likely to overlap, in part, with that which the existing defendants in due course will be required to produce on discovery is not, in my view, an answer to whether the application should be granted.  Not least the application is addressed to a third party, not the defendant, and it is limited to the circumstances and bank record information prescribed by the ordinance as explained through the relevant case authorities.  Therefore, the present application is not an alternative to or in lieu of discovery by the defendants in the proceedings.

160.  As is well established, such an application must be supported by evidence to show that there had been serious tortious or wrongful activities.  In my view, for the reasons I have set out, there is such evidence in the present case.

161.  And based not least on the evidence of the information and documentation obtained as a result of the applications already granted against other defendants, I am also of the view that the order sought will likely reveal relevant material.

162.  The only remaining consideration is to ensure that the scope of the order is appropriate and cannot be criticised, as counsel for D2 has suggested, of being so widely drawn as to be in the nature of a fishing exercise.  Following the hearing before me the parties' respective counsel submitted further written submissions as to the wording of the potential order, first from the plaintiff under cover of the plaintiff's solicitor's letter dated 29 January 2018, submissions which D2's counsel responded to on 8 February 2018.

163.  The draft order sought by the plaintiff is in a different form to the order sought by the Banker's Record Application but the effect is little changed.  The only substantial but still small amendment is that the proposed order, in so far as it seeks what might be described as transactional documents, applies from 3 January 2012 rather than 1 September 2011 which is the date used in the summons (and which appears in the similar orders already obtained as regards D1, D3 and what is now D4).  The explanation is that D2 was only incorporated on 3 January 2012.  In particular, as drawn, the proposed draft order would allow the plaintiff to obtained details of all transactions both inward and outward right up to the present day.

164.  The submissions of D2 complain that the proposed order of the plaintiff is far too wide and that, as I have observed, it will allow the plaintiff to obtain essentially everything that HSBC has on record that relates to the entire period whether in fact relevant to the plaintiff's claims or not.

165.  I accept that it must be highly likely that the records covered by the order will ultimately be shown to include items that are not relevant to the plaintiff's claims.  However, in my view, this is almost invariably the position with any such order.  For the plaintiff to be able to draw an order that was entirely free of such a risk it would likely already have much of the information that it seeks and thus perhaps not need the order at all.  Clearly there is a balance to be drawn but it does not follow that just because an order may in part have this consequence that it should not be granted.

166.  The evidence of the plaintiff strongly supports the claim that D2 played a central role in the activities of which it makes complaint.  That evidence includes information and documents obtained by a similar order as regards the banking records of D1, D3 and what is now D4 which has already revealed information material to the issues between the parties in the litigation.  The evidence also shows that substantial sums are involved, amounts in the millions of US dollars having passed through D2's accounts in the past.

167.  In relation to that which is not relevant, what appear to be largely speculative suggestions as to either the potential harm (through the disclosure of confidential information) that might be suffered by D2 or some unspecified commercial advantage that might be obtained by the plaintiff through it becoming aware of the infringement by the defendants of the rights of its competitors do not, in my view, carry any significant weight.

168.  For the reasons I have set out, I am satisfied that both the scope and extent of the order proposed by the plaintiff is appropriate.

169.  I should note that prior to the hearing HSBC had indicated that it did not contest the plaintiff's application and would not attend the hearing.  Further, the court has been informed by the plaintiff solicitor's letter dated 15 February 2018 that subsequent to the hearing HSBC has been provided with the proposed order and had indicated that it had no comment on it other than to note that it may need more time than the 28 days provided to fully comply.  If timing is later an issue I very much hope that this can be resolved without needing to involve the court.  In conclusion, HSBC said that it would abide by whatever order the court might make.  Finally, the costs of HSBC are already addressed by the proposed order.

The plaintiff’s applications

170.  The plaintiff's application to continue the Delivery Up Order is granted.  However, I direct that the plaintiff's solicitors apply through the court listing office to obtain a 30 minute appointment before me to consider and settle the terms of the order with reference to the draft order forwarded with the plaintiff's solicitor's letter to the court dated 20 February 2018.  The appointment is to be fixed not in consultation with counsel's diaries.  For the avoidance of doubt, in the meantime the order of Deputy High Court Judge Keith of 20 January 2017 continues in effect.

171.  The issue that most concerns me as regards the draft order is the lists of items or references which appear in paragraph 1(a) (they are listed as items (1) – (13)) to which further reference in whole or in part also appears in paragraph 2 of the draft and also those items or references that appear in paragraph 3 (both the body of that paragraph and as are listed as items (a) – (f)).  As regards the items or references listed as (1) – (13) and (a) – (f), I am not satisfied that these references are required in the order.  The previous general wording appears to adequately identify the intent and effect of the order and the additional items or references greatly increase the length and apparent complexity (and, in some instances, in order to be understood, require cross reference to other documents).  As regards the references in the body of paragraph 3, currently I am of the view that the "Plaintiff's Proprietary Codes" would be better set out in a further schedule to the order.  Accordingly, and unless the parties are able to deal with these matters by agreement, I will hear any further submissions they may have.

172.  The plaintiff's application to continue the Mareva Injunction is granted as provided for in paragraph 8 of the aforesaid draft order.

173.  The Banker's Record Application is granted in the terms of the draft order submitted with the plaintiff's written submissions dated 29 January 2018 (and the subject of the plaintiff's solicitor's letter to the court dated 15 February 2018 confirming HSBC's agreement to the terms).

D1 and D2’s applications

174.  The Discharge Application and the Jurisdiction Summons are both dismissed.

The filing of the defence of D1 and D2

175.  With the dismissal of the Jurisdiction Summons, I order that D1 and D2 do have leave to serve and file a defence within 28 days of the date of handing down of this decision.

Costs of the adjournment application

176.  For the reasons set out in my decision, I consider and order that the costs of the application by D1 and D2 to adjourn the hearing before me that commenced on 16 January 2018 should be paid by D1 and D2 to the plaintiff forthwith to be taxed if not agreed.

Costs

177.  The plaintiff's draft order in respect of the Banker's Record Application provides that as between the parties to the application costs be in the cause to be taxed if not agreed and I so order.

178.  I consider that the costs of both the Discharge Application and the Jurisdiction Summons should follow the event and order that they be paid by D1 and D2 to the plaintiff forthwith to be taxed if not agreed.

179.  D1 and D2 opposed the plaintiff's applications for continuation of the Delivery Up Order and the Mareva Injunction strenuously, arguing through written submissions and at the hearing before me on numerous basis, in some instances, in my view, almost as if the matter had reached the trial stage rather than the interlocutory stage.  While it is fair to say that the case raises a number of significant factual and legal issues, in the event, I have not had difficulty concluding that at the interlocutory stage the plaintiff has shown the good arguable case(s) required.  Therefore, in the circumstances, I am of the view that the appropriate costs order is plaintiff's costs in the cause, these costs to include:

a)  the costs of the ex parte hearing on 5 September 2016;

b)  any costs previously reserved by orders continuing the ex parte relief pending the determination of the plaintiff's applications;

c)  the costs of the hearing of the plaintiff's inter partes summonses before me.

180.  However, as the parties did not address me on costs at the hearing, the aforesaid order relating to the Delivery Up Order and the Mareva Injunction is made as a costs order nisi and I direct that if any party seeks a different costs order they do file and serve written submissions setting out the basis and the order they seek no less than 7 days prior to the inter partes appointment I have directed be fixed to address the issue of the terms of the Delivery Up Order.

181.  In case it be necessary I order that all of the aforesaid costs orders include a certificate for two counsel.

182.  Finally, I would like to thank both sets of counsel (senior and junior) and those instructing them for the very comprehensive and helpful submissions they provided both in writing and at the hearing.