WONG TO YICK WOOD LOCK OINTMENT LTD v. YUE HWA COSMETIC LTD AND ANOTHER

HCIP 75/2021

[2024] HKCFI 1868

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

INTELLECTUAL PROPERTY PROCEEDINGS NO. 75 OF 2021

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REASONS FOR JUDGMENT

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1.  By way of the Originating Summons filed on 29 November 2021 (“the OS”), the Plaintiff seeks to commit the 1^st Defendant and the 2^nd Defendant, who was at all material times the sole director of the 1^st Defendant, for contempt of court in failing to comply with the order and judgment entered by this court dated 23 January 2020 (“the Order and Judgment”)  which were subsequently amended and re-filed on 7 June 2021 (“the Amended Order and Judgment”). The terms of the Amended Order and Judgment are identical save and except paragraph 8 thereof which are not relevant for the present proceedings.

2.  According to the Plaintiff, the 1^st Defendant is in contempt of court for its failure to file an affirmation pursuant to §§4 and 5 of the Amended Order and Judgment.  Further, the 2^nd Defendant has failed to use his position as sole director of the 1^st Defendant to secure its compliance in respect of §§4 and 5 of the Amended Order and Judgment. The Plaintiff is not pursuing the alleged contempt against the Defendants for non-compliance with the order for delivery up under §3 of the Amended Order and Judgment.

Background leading to the present application

3.  On 7 August 2019, the Plaintiff commenced HCA 1429/2019 against the 1^st Defendant for trademark infringement and passing off for dealing in products with the trademarks and tradenames “黃道盟” and “WONG TO MANK”.

4.  On 23 January 2020, this court ordered that a judgment in default be entered against the 1^st Defendant (i.e. the Order and Judgment).

5.  On 11 June 2020, the Plaintiff served the Order and Judgment on the 1^st Defendant with penal notices by leaving the same at the 1^st Defendant’s registered office (“the Registered Office Address”).

6.  On around 11 June 2020, the Plaintiff made several attempts to effect service of the Order and Judgment on the 1^st Defendant and at its registered office and the 2^nd Defendant at his last known addresses:

(i)  On 11 June 2020, Wu Chun Ting (“Wu”), a clerk of the Plaintiff’s solicitors, attended the Registered Office Address with an attempt to effect service on the Defendants.  It was found that the pharmacy operated by the 1^st Defendant had ceased operation and closed down. Staff of the neighbouring shop and the male security guard of the building had no knowledge of the whereabouts of the 2^nd Defendant and the 1^st Defendant’s company secretary.

(ii)  On the same day, Wu attended one of the 2^nd Defendant’s last known addresses, namely the Belgian Bank Building Address, with an attempt to effect personal service on the 2^nd Defendant.  That address was occupied by an accounting company named Accgirl Limited.  Upon enquiries, the staff present told Wu that her company was the former company secretary of the 1^st Defendant and that she did not know the whereabouts of the 2^nd Defendant nor his contact.

(iii)  On the same day, Wu attended another of the 2^nd Defendant’s last known addresses, namely the Hoi Wen House Address, with an attempt to effect personal service on the 2^nd Defendant.  Wu could not find the 2^nd Defendant, and the security guard of the building did not know the 2^nd Defendant nor any information about him.

(iv)  Wu clerk attended the Registered Office Address, the Belgian Bank Building Address and the Hoi Wen House Address on 14 August 2020 and Max Share Centre Address on 2 September 2022 with an attempt to effect personal service on the 2^nd Defendant.  However, such attempts were unsuccessful.

7.  By order dated 23 September 2020, Master Chow granted an order, amongst other things, for substituted service of the Order and Judgment on the 2^nd Defendant by inserting an advertisement of a Chinese notice of the proceedings in Oriental Daily News.  Substituted service of the said documents was duly effected in accordance with the terms of the said order.

8.  On 24 May 2021, this court ordered, amongst other things, that:

(i)  the Order and Judgment be corrected and amended (i.e. the Amended Order and Amended Judgment);

(ii)  the substituted service of the Order and Judgment as mentioned in the preceding paragraph do stand as good service; and

(iii)  the service of the Amended Order and the Amended Judgment on the Defendants be dispensed with.

9.  On 9 November 2021, as no affidavit was filed before the time expired as required under the Amended Order and Judgment, the Plaintiff applied for leave to commence committal proceedings against the Defendants.  Leave was granted on 19 November 2021.

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

(i)  On 1 December 2021, Wu attended the Registered Office Address with an attempt to effect personal service of the Committal Papers on the Defendants.  The pharmacy operated by the 1^st Defendant had ceased operation and closed down.  The occupants thereof, the neighbouring shop and the male security guard of the building had no knowledge of the whereabouts of the Defendants.

(ii)  On the same day, Wu attended one of the 2^nd Defendant’s last known addresses, namely the Belgian Bank Building Address, with an attempt to effect personal service of the Committal Papers on him.  That address was occupied by an accounting company named Accgirl Limited.  Upon enquiries, the staff present told the clerk that her company was the former company secretary of the 1^st Defendant and that she did not know the whereabouts of the 2^nd Defendant nor his contact.

(iii)  On the same day, Wu attended another of the 2^nd Defendant’s last known addresses, namely the Hoi Wen House Address, with an attempt to effect personal service of the Committal Papers on him.  The clerk could not find the 2^nd Defendant, and the security guard of the building did not know the 2^nd Defendant nor any information about him.

(iv)  On 6 December 2021, the Plaintiff’s solicitors sent three letters of appointment with copies of the Committal Papers to the 2^nd Defendant at: (i)  the Registered Office Address; (ii)  the Belgian Bank Building Address; and (iii)  the Hoi Wen House Address for the purpose of notifying the 2^nd Defendant that the Plaintiff’s solicitors would effect personal service thereof on 13 December 2021.

(v)  On 13 December 2021, Wu attended the Belgian Bank Building Address again to attempt personal service of the Committal Papers on the 2^nd Defendant.  He was told by the attendant that there was nobody with the name of the 2^nd Defendant inside the office and that she did not know him.  On 12 January 2022, the Plaintiff’s solicitors received the returned mail of its letter of appointment sent to the aforesaid address dated 6 December 2021 through the dead letter post.

(vi)  On the same day, Wu attended the Registered Office Address to attempt personal service of the Committal Papers on the 2^nd Defendant.  The occupants of the Registered Office Address, the neighbouring shops and the male security guard of the building had no knowledge of the whereabouts of the 2^nd Defendant.  On 24 December 2021, the Plaintiff’s solicitors received the returned mail of its letter of appointment sent to the aforesaid address dated 6 December 2021 through the dead letter post.

(vii)  On the same day, Wu attended the Hoi Wen House Address to attempt personal service of the Committal Papers on the 2^nd Defendant and was greeted by an elderly man who spoke foul language and said he did not know the whereabouts of the 2^nd Defendant.  Further enquiry with the security guard of the building yielded the same result.

(viii)  On 6 January 2022, Wu attended another of the 2^nd Defendant’s last known address, namely the Max Share Centre Address, to attempt personal service of the Committal Papers on the 2^nd Defendant.  That address was occupied by Accgirl Limited.  Upon enquiries, the staff present told clerk that the 2^nd Defendant ceased using their service since 2019 and that she did not know his whereabouts nor his contact.

(ix)  On 7 January 2022, the Plaintiff’s solicitors sent a letter of appointment with copies of the Committal Papers to the 2^nd Defendant at the Max Share Centre Address for the purpose of notifying him that the Plaintiff’s solicitors would effect personal service thereof on 12 January 2022.

(x)  On 12 January 2022, Wu attended the Max Share Centre Address to attempt personal service of the Committal Papers on the 2^nd Defendant.  Wu was told that there was nobody with the name of the 2^nd Defendant inside the premises and that they could not contact him.  Further enquiries with neighbouring shops and a security guard yielded no fruitful results.

11.  On 21 January 2022, upon the Plaintiff’s application, this court ordered, amongst other things, substituted service of the Committal Papers on the 2^nd Defendant by: (i)  prepaid ordinary post of the same to the Hoi Wen House Address; and (ii)  inserting an advertisement of a Chinese notice of the proceedings in Oriental Daily News.  Substituted service of the Committal Papers was duly effected in accordance with the terms of the said order.

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

12.  A director or officer of a body corporate can be liable for contempt committed by a body corporate under O 45 r 5(1)(b)(iii)  of the RHC.  This liability is not absolute but requires an element of personal culpability on the part of the director.  Hence, a director would be guilty of contempt if:

(i)  the director is fully aware of the terms of the order with which the company must comply;

(ii)  the director must have that knowledge at a time when he or she can use his or her position as an officer to secure compliance; and

(iii)  the director is aware that, if he or she does not so use his or her position, steps may be taken against him or her personally to enforce compliance.

13.  The director has a personal duty: (a)  to find out exactly what have to be done by the company to comply with the order; and (b)  to see that such things are done properly and in accordance with the time set out in the order.[1]

14.  Where proper notice by way of substituted service of the contempt application has been given to the defendant, the court can infer and can be satisfied, in the absence of any evidence to the contrary, that the defendant is aware of the present application and that he or she deliberately chooses not to appear before the court and has no intention of opposing the present application.  Under the circumstances of the present case, leave should be granted to the Plaintiff to proceed with the application in the Defendants’ absence.  Moreover,  personal defendant who is absent at the hearing can be found guilty of contempt for breach of orders notwithstanding that the orders, the originating summons and the notice of appointment were all served by way of substituted service.[2]

15.  Likewise, where the court has exercised its discretion under O 45 r 7(7)  dispensing with service of the order and where there is an absence of any evidence from the director that he or she was unaware of the order, the court can conclude that the director knew of the terms of the order before the time expired when it had to be complied with and that the director knew that the plaintiff required him or her to exercise the powers as a director to ensure the company complied with the order.[3]

16.  It is trite that the burden is on the applicant to prove the contempt beyond reasonable doubt.  In hearing a committal for civil contempt, the court adopts a 3-stage test to: (1)  construe the relevant court order or undertaking to ascertain its meaning and operation; (2)  determine whether the respondent has in fact complied with the order or undertaking as so construed; and (3) consider whether any failure to comply was accompanied by a state of mind necessary to establish punishable contempt.  With regard to the state of mind, it is not necessary to prove that the alleged contemnor's conduct was contumacious, ie that he or she deliberately intended to disobey the order.  It is sufficient to prove that the act constituting breach was done intentionally, not casually or accidentally, and the defendant knew of the facts which rendered it a breach of the relevant order or undertaking.[4]

17.  It is beyond doubt that the Defendants are in contempt of court.  Under §§4 and 5 of the Amended Order and Amended Judgment, the 1^st Defendant was required to file, and the 2^nd Defendant was required to secure compliance of the 1^st Defendant to file, within 21 days from date of service thereof (i.e. by 6 November 2020 the latest)[5] an affirmation: (i)  verifying compliance with order for deliver up; and (ii)  providing Norwich Pharmacal and Island Records disclosure.  They had not done so and such affirmation remains outstanding.

18.  Given that proper notice of the Amended Order and Judgment had been given to the Defendants, it is beyond reasonable doubt that the 1^st Defendant had wilfully failed to comply with the same and is therefore in contempt of court.  It is also beyond reasonable doubt that the 2^nd Defendant was fully aware of the terms of the Amended Order and Judgment with which the 1^st Defendant must comply, that he knew at the time when he could use his position as the sole director to ensure compliance, and that he was aware if he did not so use his position, steps may be taken against him personally to enforce the judgment.  Therefore, the 2^nd Defendant is also in contempt of court.

Sentencing

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

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

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

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

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

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

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

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

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

(v)  whether the contemnor has cooperated.

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

23.  Having considered authorities such as Wong To Yick Wood Lock Ointment Ltd v Kin lam Medicine Co Ltd[11] (4 months’ imprisonment), La Dolce Vita Fine Dining Co Ltd v Zhang Lan[12] (12 months’ imprisonment for failure to provide disclosure under a Mareva injunction)  and Wong To Yick Wood Lock Ointment Ltd v Brooklye Ltd & Anor[13] (6 months’ imprisonment for failure to comply with various disclosure orders), I decided to impose a sentence of 3 months’ imprisonment in the case of the 2^nd Defendant.

24.  In a similar case heard by this court at the same time (i.e. HCIP 13/2022), I imposed a sentence of 4 months’ imprisonment on a person who was in contempt both in his personal capacity and as the sole director of a limited company.  Since the 2^nd Defendant in the present case is held liable for contempt only in the capacity of director, I decided to impose a lower sentence of 3 months’ imprisonment.

25.  I also granted leave to the Plaintiff to issue Writ of Sequestration against the 1^st Defendant.

26.  For costs, I awarded costs in favour of the Plaintiff to be taxed on an indemnity basis.