EIICHIRO ODA AND OTHERS v. PO FUNG DEVELOPMENT (HK) LTD

HCA3358/2001

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NO.3358 OF 2001

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J U D G M E N T

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1. P9 claims to be the exclusive licencee of P1 to P8 in Hong Kong in respect of certain comic books.  The ownership and subsistence of P1 to P8’s copyright is admitted.  The copies complained of by P9 were printed in Taiwan.  It is the defendants’ case that they were lawfully published in Taiwan.

2. The defendants did not admit that P9 was P1 to P8’s licencee in Hong Kong in respect of the comic books, exclusively or otherwise.

3. As I understand it, P9’s case depends on the following provisions of section 35 of the Copyright Ordinance, Cap.528 :

“(2)    A copy of a work is an infringing copy if its making constituted an infringement of the copyright in the work in question.

(3)    Except as provided in section 35A, a copy of a work other than a copy of an accessory work is also an infringing copy if––

(a)    it has been or is proposed to be imported into Hong Kong; and

(b)    its making in Hong Kong would have constituted an infringement of the copyright in the work in question, or a breach of an exclusive licence agreement relating to that work.”

4. In order to succeed, P9 has to show that the making of the comic books in Hong Kong would have constituted an infringement of the copyright in the work in question.

5. P9 seeks to do so by proving that it was P1 to P8’s exclusive licencee and that they had P1 to P8’s exclusive licences to make the comic works in Hong Kong.  The evidence relied on by P9 are the written licence agreements which have been disclosed.  What right P9 enjoyed under those licence agreements is a matter of construction.  Although those agreements were expressly made subject to Japanese law, there is no evidence of any relevant Japanese law, therefore, I should proceed on the basis that there is no difference between Japanese law and the law of Hong Kong so far as construction of the licence agreements is concerned.

6. However, P9 also seeks to admit four affirmations by four officers of four different Japanese publishers without cross-examination under Order 38, rule 2.  

7. P9’s application is opposed by the defendants.  The defendants wish to cross-examine these officers on video link.

8. Mr Kent Yee, counsel for the plaintiffs, has submitted that the plaintiffs wish to rely on the four affirmations in order to supplement the licence agreements so far as the scope and limit of those licence agreements were concerned.  It is for that reason that Miss Tam, for the defendants, has submitted that cross-examination of those witnesses should be permitted.  

9. The defendants’ case, as Miss Tam put it in her skeleton submissions, is that “the books are legitimately published and sold in Taiwan” and that it was in that belief of knowledge that the defendants bought them from distributors in Taiwan.  It is the defendants’ case that the licence agreements granted in favour of P9 or the Taiwanese publishers did not stipulate where the comic books must be made or printed because “at the time of the agreement, nobody really cares”.  According to Miss Tam :

“In other words, in order to succeed Ps have to prove either of the following :-

a.    That the books are completely unlicensed, i.e. not even licensed to be published in the Taiwan market (in which case they will be infringing copies anyhow) OR

b.    In so far as Taiwan licence agreements are granted for publishing and selling of copies of the works, they do stipulate where the works are to be printed (e.g. only in Taiwan), such that printing them in Hong Kong (under the hypothetical test) would constitute breach of the exclusive licence agreement or infringement of copyright.”

10. Miss Tam said that cross-examination is necessary because the existence and the effect of the licence agreements are put in issue.

11. She also said :

“The deponents of each affirmation deposes to certain master agreements under which the aforesaid exclusive rights were granted to P9.  The following observations may be made of the affirmations proposed to admitted without cross-examination:-

a.    Despite the fact that each affirmation is deposed to by a different person representing a different company which have purportedly entered into licence agreements about different subject matters at different times, these affirmations are identically worded for all practical purposes in describing crucial matters such as matters unsupported by any document (paras. 3, 4, 6, 7), and matters amounting to opinion on the construction of the different documents (paragraphs 11, 12).

b.    The proper law for the master contracts in issue is Japanese law (e.g. see B64).  The affirmations depose to identically worded opinion and/or conclusions on construction of contract which are matters of foreign law, while the deponents have no apparent stated qualification to render any legal opinion on foreign law, which are facts to be proved with admissible evidence.

c.    Parts of the contents of the Affirmations are directly contradictory to the contents of the respective licence agreements which each of the deponents seeks to refer to and rely on, and are further inconsistent with Ps’ pleadings.  More specifically:-

the Re-amended Statement of Claim refers to P1 to P8 being owner of the copyright in the respective works issue, the licence agreements having been entered into ‘on behalf of’ Ps respectively,

the affirmations describe the deponent’s company as the exclusive licensee with rights to sub-licence the relevant rights,

the licence agreements (see B53) states that the deponent’s company granted the licence as ‘owner’ of publication rights), not as agent on behalf of the copyright owners, not as head licensor.

            Ps’ counsel’s skeleton argument called the deponent’s companies ‘exclusive agents’.

d.    The above inconsistencies are set against the background of a complete lack of discovery on whatever documents that govern the relationship between P1 to P8 and their respective ‘agents’, the deponents’ companies.

e.    It is not clear to what extent the deponents understood the contents of the affirmations, which are in English.  There is no evidence of their ability in the English language, and the affirmations contain no interpretation clause.  Can we really be assured that they know what they are talking about in English terminology?  Or is it merely the lawyers running the litigation saying it for them in their own language (See #12 at B206)?”

12. The licence agreements relied upon by P9 were not granted by P1 to P8.  They were purportedly granted by the four publishers.  What is the evidence that the four publishers had the right to do so?  What is the evidence relating to the status and authority of the four publishers?  The only evidence, it seems, is to be found in the affirmations which, in this respect, are identically worded.  The relevant paragraph is paragraph 6, I take as an example from the affirmation of Mr Shimizu :

“In particular, I also confirm that Shueisha at all material times has been the exclusive and sole agent of the 1^st, 2^nd, 3^rd, 7^th and 8^th Plaintiffs to grant licence for reproduction and publication of the 1^st, 2^nd, 3^rd, 7^th and 8^th Sets of Artistic Works in Hong Kong and Macau.”

13. In order to succeed, P9 has to prove paragraph 6.  Mr Yee has accepted that this is a significant issue at trial. 

14. On this application, I believe the approach I should adopt is that which was stated by Lam DJ (as he then was) in the case of High Fashion Garments Co. Ltd v. Ng Siu Tong & Others [2003] 2 HKC 562 :

“7.   …. In the exercise of my discretion under O 38 r 2, I must take into account of the legitimate interest of the defendants in cross-examining crucial witnesses.  In my judgment, on balance, the defendants in the present case should not be deprived of such an opportunity when cross-examination could be achieved through video-link although this might result in some delay of the trial. ….”  

And he continued in paragraph 12 :

“…. The discretion must be exercised in the light of, amongst other things, the impact of that piece of hearsay evidence, the relationship of the maker with either party, the history of the case, the practicalities as to the procurement of the maker to give evidence and other relevant considerations.  I am of the view that the factors set out in s 49 of the Evidence Ordinance (albeit in the context of weighing hearsay evidence) would also be relevant.”

In that case, the learned judge concluded that it did not matter whether the rules governing the admission of the affirmations were Order 38, rule 2 or section 47 of the Evidence Ordinance since he would have ordered cross-examination in either case.  

15. Further, as was said by Burrell J in Grand Empire Holdings Limited v. Marco International (HK) Ltd, HCA14891/1999, 7 December 1999, at page 2 of his judgment :

“      The court has an unfettered discretion to order cross-examination and that discretion should be exercised in favour of the party seeking it when the court is satisfied that it is necessary in the interests of justice.  In other words, if there is a real risk that justice will not be done if cross-examination is not allowed, then leave should be granted.”

The learned judge was there dealing with an application under Order 38, rule 2.  

16. Mr Yee submitted that the affirmation should be admitted, they were admissible any way under section 47 of the Evidence Ordinance, and the trial judge could be left to decide what weight to be given to the evidence.  However, I believe that is not a satisfactory approach.  The plaintiffs might be prepared to take the risk of the trial judge giving little or no weight on the affirmations.  But on an important issue in the proceedings, I also have to consider the right of the defendants to have the evidence properly tested.  Section 35(3) is not an easy section.  As Miss Tam has put it, at the time when the relevant licences were granted, whether to the Taiwanese publishers or to P9 (if indeed P9 had been granted exclusive licences by P1 to P8), insufficient attention might have been placed on the fact that appropriate restrictions on the place where the comic books were to be printed were necessary in order to bring section 35(3) into play.  

17. However, insofar as the four affirmations purported to supplement the language of the exclusive licences by oral evidence, I am inclined to the view that such evidence is not admissible.  However, both Mr Yee and Miss Tam have proceeded on the basis that such evidence were admissible.  If such evidence were admissible, then I agree with Miss Tam that cross-examination of the deponents should be permitted.

18. However, if such evidence has stood alone, I think I would have wished to be satisfied with the admissibility of such evidence before I would permit cross-examination.  But neither party was keen that I should do so.  So, rather to preempt the trial judge, I would permit cross-examination, leaving it to the trial judge to decide whether the evidence was admissible.

19. Insofar as the power or authority of the four publishers to grant the exclusive licences to P9 is concerned, as I have said, the only evidence is paragraph 6 in the affirmations.

20. This is clearly relevant and cross-examination should be permitted.

21. Mr Yee submitted that the plaintiffs might make discovery of documents showing that the four publishers did indeed have the authority to grant the exclusive licences.  I can only say that if such documents existed they should have been disclosed.  Mr Yee did not wish an adjournment to make discovery and I must proceed on the material before me.

22. The only contrary considerations are costs and delay.  On neither do I have evidence which show that they outweigh the benefit of cross-examination.  It has been suggested that the deponents might not agree to be cross-examined without separate legal evidence.  But that is hardly a reason to refuse cross-examination.  As for delay, this action is not marked by expedition.  Nor is there evidence of any real prejudice.  In the circumstances, I would direct that the affirmations be not admitted in evidence unless the deponents were available for cross-examination on video link.

23. I will hear the parties on the appropriate directions as well on costs.