BURBERRY LTD AND ANOTHER v. POLO SANTA ROBERTA LTD AND OTHERS

HCA1617/2010

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NO. 1617 OF 2010

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D E C I S I O N

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1.  There are 2 applications before me:

(i)  The plaintiffs’ summons for judgment against D2 and D3 in default of defence.

(ii)  D2 and D3’s summons for a stay of proceedings until conclusion of the criminal trial against D3, alternatively for an extension of time for them to file their defence.

BACKGROUND

2.  The plaintiffs’ case is that D1 and D2 have passed off various goods as those of the plaintiffs’ and infringed P1’s trade mark and copyright. D3, being the director and shareholder of D2 and de facto owner of D1, was alleged to have authorized, directed, procured and induced the acts of D1 and D2.  The infringing acts allegedly occurred between 2005 and December 2009. 

3.  The writ was issued on 29 October 2010 and served on D2 and D3 on 1^st and 2^nd November respectively.  The statement of claim was amended and served on 8 December 2010.  The time for serving the defence expired on 22 December 2010.  The plaintiffs took out a summons for default judgment under Order 19, rule 7 on 5 January 2011. 

4.  Five days before the hearing of the application for default judgment, D2 and D3 applied for stay of these proceedings until conclusion of the criminal trial of D3.  It is claimed that D3’s right of silence and right not to incriminate himself would be prejudiced if he were to disclose his defence in the present proceedings. 

5.  D3 was arrested on 31 August 2010.  A total of 26 charges were laid against him under the Trade Descriptions Ordinance, Cap. 362, for manufacture, supply and/or possession for sale goods with a forged trademark or a trademark so nearly resembling a trademark as to be calculated to deceive.  The trademarks in question were those of the plaintiffs.  Although the date of the alleged offences were all on 31 August 2010, the alleged infringements of the plaintiffs’ intellectual property rights took place between April 2006 and December 2009.  Judging from the goods concerned, the places of the alleged offences and other particulars in the charges, there appears to be a substantial overlap between the allegations in the present proceedings and the criminal proceedings.  In addition, D3 is also charged with money laundering.

6.  On last Friday (6 May), the criminal proceedings were transferred to the District Court for plea to be taken on 3 June 2011.  Mr Chan, counsel for D2 and D3 suggests that trial dates are likely to be at the end of the year.  On 4 May, 27 box files of papers have just been served by the prosecution in preparation for the transfer to the District Court.

7.  I accept, on the evidence, that the fact that no plea has yet been taken and that no trial dates had been fixed were not caused by D2 and D3.

THE LAW ON STAY PENDING RESOLUTION OF CRIMINAL PROCEEDINGS

8.  The right to reserve one’s defence up to the last minute until the prosecution has completed its evidence, except so far as it may be necessary to put matters in cross-examination, is a basic fundamental of the criminal process that should not be so lightly dismissed.  Breach of that right does not necessarily amount to an injustice.  It may at times be no more than a disadvantage and at others there may be facts by which it is completely outweighed.  But it is always a matter for some consideration, the precise weight to be determined by the individual judge in all the circumstances as he sees them.  See Petroliam Nasional Berhad & others v. Tan Soon-gin & others.  The grant of a stay is thus discretionary.  The defendant is not entitled as of right to have the civil proceedings stayed pending resolution of the criminal proceedings. The principles have recently been summarized in the case of China Sciences Conservational Power Limited v. Chat Tat Chee, HCA 870/2009, by Reyes J:

“24.  Where there is an overlap between a civil action and pending criminal proceedings, there is no general rule that the former should be stayed pending the outcome of the latter.  The Court has a discretion to stay the civil proceedings:-

“if it appeared to the court that justice - the balancing of justice between the parties - so required, having regard to the concurrent criminal proceedings, and taking into account the principle, which applies in the criminal proceedings itself, of what is sometimes referred to as the ‘right of silence’ and the reason why that right, under the law as it stands, is a right of a defendant in criminal proceedings.” [Megaw LJ in First Jefferson Ltd. v. Bhetcha [1979] 1 WLR 898, at 904 ff.].

25.  The authorities are adamant that there is:-

“no principle of law that a plaintiff in a civil action is to be debarred from pursuing that action in accordance with the normal rules for the conduct of civil actions merely because so to do would, or might, result in the defendant, if he wished to defend the action, having to disclose, by an affidavit under Order 14, or in the pleading of his defence, or by way of discovery or otherwise, what his defence is or may be, in whole or in part, with the result that he might be giving an indication of what his defence was likely to be in the contemporaneous criminal proceedings. The protection which is at present given to one facing a criminal charge - the so-called ‘right of silence’ - does not extend to give the defendant as a matter of right the same protection in contemporaneous civil proceedings.” [Megaw LJ in First Jefferson, at 904 ff.]

26.  The burden is on a defendant to show that it is “just and convenient that the plaintiff’s ordinary rights of having his claim processed and heard and decided should be interfered with”.  See Petroliam Nasional Berhad v. Tan Soon Gin [1990] 1 HKLR 4 (CA), at 8, citing First Jefferson with approval.

27.  Helpful examples (marked as Examples A, B and C in the passage below) of when a Court might grant a stay were provided by Megaw LJ in First Jefferson (at 905):-

“Of course, one factor to be taken into account and it may well be a very important factor, is whether there is a real danger of the causing of injustice in the criminal proceedings. There may be cases - no doubt there are - where that discretion should be exercised. In my view it would be wrong and undesirable to attempt to define in the abstract what are relevant factors. By way of example, a relevant factor telling in favour of a defendant might well be the fact [Example A] that the civil action, or some step in it, would be likely to obtain such publicity as might sensibly be expected to reach, and to influence, persons who would or might be jurors in criminal proceedings. It may be [Example B] that, if the criminal proceedings were likely to be heard in a very short time ... it would be fair and sensible to postpone the hearing of the civil action. It might be [Example C] that it could be shown, or inferred, that there was some real - not merely notional - danger that the disclosure of the defence in the civil action would or might, lead to a potential miscarriage of justice in the criminal proceedings, by, for example, enabling prosecution witnesses to prepare a fabrication of evidence or by leading to interference with witnesses or in some other way.”

9.  When considering the authorities, I bear in mind that each case has its own special circumstances. 

(i)  In China Sciences Conservational Power Limited v. Chat Tat Chee, progress of the trial has been beset by protracted adjournments.  It has run from April 2008 for a year by the time the application for stay was made in 2009.  By then the prosecution has closed its case.  It was intended that evidence was to be taken in the Mainland so the trial was bound to run for much longer before reaching a conclusion. The trial could not be described as occurring over a short time. Stay of the civil proceedings was refused.

(ii)  In Wharf Ltd & others v. Lau Yuen How & others, HCA 1535/2008, both the civil and criminal proceedings were at a very early stage.  Notwithstanding the existence of a Mareva injunction against the defendants, Poon J refused to stay the civil action. 

APPLICATION OF THE LAW TO THE FACTS

10.  Considering example A in First Jefferson, the criminal trial of D3 will be heard in the District Court without a jury and is unlikely to attract great publicity.

11.  As to example B, both the civil and criminal proceedings are at a very early stage.  There is as yet no trial date fixed for the criminal proceedings and so no conclusion is in sight.  Length of the trial depends on the number of prosecution witnesses.  D1 in the present action has just issued an originating summons to challenge the registration of one of the trade marks of the plaintiffs.  Mr Maurelett points out that the 22 defendants in the criminal proceedings may well challenge the validity of any trade mark and ask for stay of the criminal proceedings pending resolution of this issue in D1’s originating summons but I do not wish to speculate.  On the other hand, if I were to grant any stay until the estimated conclusion of the criminal trial, this will mean a delay of about 1 year for the plaintiff who has served the writ in November 2009.  Some of the underlying claims in this action took place in 2005/2006.  Civil claims should be prosecuted with dispatch and should not be warehoused for an indefinite period for no good reason: China Sciences Conservational Power Limited v. Chat Tat Chee.  Delay will result in delayed resolution and hence enforcement of judgment.  In this case, the plaintiffs are not protected by any injunction against disposal of assets.

12.  As to example C, it has not been shown that there is any real danger that the disclosure of the defence in this action would lead to a potential miscarriage of justice in the criminal proceedings.  One of the fear of D2 and D3, namely, that after disclosing his defence in the civil proceedings, members of staff of the plaintiffs may give witness statements in addition to but different from their intended/original ones in anticipation of his defence.  This concern can now be removed as only one Mr Jim (Intellectual Property Director) of the plaintiffs is likely to be a prosecution witness.  His evidence is going to be technical, i.e. to distinguish between real and counterfeit Burberry products. He had completed the examination of the seized goods on 16 September 2010 and confirmed that the seized goods were not manufactured by the plaintiffs.

13.  Having considered all the circumstances, I decline to grant a stay of the present proceedings.

EXTENSION OF TIME TO FILE DEFENCE

14.  On the alternative application, I grant an extension of time for D2 and D3 to file and serve their defence.  The amended statement of claim has been filed for some months.  If serious consideration has been given to the defence before making this application for stay, granting 21 days should be sufficient for them to putting in a proper substantive defence supported by a statement of truth.  An unless order at this stage in inappropriate.

CONCLUSION

15.  I dismiss the plaintiffs’ application for entry of default judgment.  I also dismiss D2 and D3’s application for stay of proceedings.  I grant leave for D2 and D3 to file and serve their defence out of time within 21 days from today.

16.  As for costs, the application for judgment was prompted by the failure of D2 and D3 to file and serve their defence.  It was properly taken out in the first place.  The defendants’ application for stay has been dismissed.  Accordingly, costs for both summonses (including all costs reserved thereunder) should be to the plaintiffs to be borne by D2 and D3 and I make an order nisi accordingly.

17.  There shall be summary assessment of costs on the papers on 30 May 2011 at 9:30 am.  No attendance is required. The plaintiffs shall file and serve its statement of costs by 20 May 2011.  The defendant shall file and serve its grounds in opposition by 27 May.

18.  I thank counsel for their able assistance.