HKK v. N

HCCT 45/2012

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

CONSTRUCTION AND ARBITRATION PROCEEDINGS

NO. 45 OF 2012

____________

____________

_____________

D E C I S I O N

_____________

1.  There are two applications. One is for amending my order made on 7 November 2013 under Order 20 rule 11 of the Rules of the High Court and the inherent jurisdiction of the court. The other is for varying the cost order nisi I made in that judgment.

2.  I refer to my judgment given on 7 November.  The defendant handles the licensing issues for the N group of karaokes and the plaintiff is the copyright licensing body for K-server licences representing a number of record companies.

3.  The defendant has applied as the originator to the Copyright Tribunal against the plaintiff under CT 2/2010, seeking reliefs under Section 156(3) of the Copyright Ordinance, because it regarded the licensing scheme operated by the plaintiff unreasonable.

4.  Whilst CT 2/2010 was pending, the plaintiff applied to this court for interim payment or, alternatively, payment into court or, in the further alternative, performance by the defendant of the terms of the plaintiff’s licensing scheme.

5.  In my judgment I allowed the application for payment into court as security for payment pursuant to the decision that may be made by the Copyright Tribunal in CT 2/2010, but dismissed the rest of the applications.

6.  I ordered that the defendant do pay into court within two weeks from the judgment a sum of HK$20 million for the back catalogue KMVs (which are not new release, nor concert videos, nor excluded titles, and are confirmed by the plaintiff to be covered by the licence) for four scheme years from 1 July 2010 to 30 June 2014.

7.  I also ordered the defendant to pay into court within two weeks another sum of HK$10 million in respect of new KMVs (which are KMVs first published commercially at any time during the scheme years for karaoke entertainment usage in Hong Kong as may be confirmed by the plaintiff in writing but does not include any concert title) to be furnished from 1 November 2013 to 30 November 2014.

8.  I also ordered the defendant to pay a sum of HK$20 million into court no later than 14 July of each of the years to come, commencing from 2014, unless CT 2/2010 should be decided on or before 1 July of that year.

9.  I also made a costs order nisi that the defendant do pay the plaintiff the costs of the proceedings, with certificate for two counsel.

10.  The defendant now seeks amendments to the order and variation of the costs order nisi.

11.  The defendant, in the application to amend, asks for two amendments.  The first one is to insert into the order requirements for the plaintiff to deliver to the defendant watermarked copies of the back catalogue within 14 days after the defendant has paid the security money into court.  This is just to require the plaintiff to perform its obligation under the licensing scheme. 

12.  I had made it plain during the hearing that if I should order the defendant to pay security, the plaintiff should likewise perform its obligations under the scheme unconditionally.  I did not so provide in the judgment because I just focused my attention on the formulation of the payment order and overlooked the uncontroversial obligation of the plaintiff.

13.  The plaintiff’s opposition to this amendment is only that the plaintiff has already performed this obligation up to now and the previous delay was because of the fault of the defendant.

14.  I will not consider who was at fault for the previous delay and I do not think it is a material consideration.  I simply think that as a matter of fairness, the concurrent obligations of a party should be spelled out in the order.  Since I have not done so because the plaintiff’s obligations have slipped my mind, I will do so now.

15.  I therefore allow the amendment sought by the defendant in terms of paragraphs 1 and 3(a) of its summons dated 27 November 2013 in order to spell out the plaintiff’s obligations to deliver the watermarked copies of the back catalogue KMVs and further back catalogue KMVs.

16.  For the second part of the amendment summons, the defendant asks that the obligation to pay the HK$10 million for the new KMVs from 1 November 2013 to 30 June 2014 and the HK$15 million per year also for new KMVs from 1 July 2014 onwards be subject to an option for the defendant to obtain a licence under the licensing scheme for the new KMVs.  My existing order does not provide for this option to the defendant, but requires the defendant to pay for the new KMVs for as long as CT 2/2010 may be pending. 

17.  In seeking this amendment, the defendant submits that the scheme to be considered by the Copyright Tribunal for which I ordered security does have this option.  In fact, initially when the scheme was offered by the plaintiff to the defendant, there appeared to be no such option (page 905) and that was one of the reasons that prompted the making of CT 2/2010 by the defendant (page 846).

18.  However, when the plaintiff responded to the defendant’s case in CT 2/2010 the plaintiff made it plain that there were options in licensing scheme for the licensee to opt for just a back catalogue of KMVs or just the new KMVs or both (pages 854, 867, 1900, and 1921 to 1923).

19.  Mr Liao, leading counsel for the plaintiff, opposed this application on the ground that when the defendant initiated CT 2/2010 the options had not been made available in the scheme.  The fact that the options were present in the scheme documents (pages 401 to 403) was because they were provided for subsequently.

20.  Be that as it may, the fact remains that there are these options present in the scheme that is before the Copyright Tribunal.

21.  My order for security is to secure the payment to be ordered under the scheme by the Tribunal.  The amount to be paid by way of security should also contain the same options so that the defendant can consider how to exercise it as and when the time comes for such exercise.

22.  However, even with the amendments proposed by the defendant, there is still no option for the defendant to choose just to have the new KMVs and no back catalogue KMVs.  But there was no discussion in the written or oral submissions for amendment to cater for such an option.  I would therefore not implement the same on my own initiative.

23.  Mr Liao, in opposing this amendment, also referred to the transcript of the hearing and submitted that the hearing was conducted on the sole basis that the defendant was to subscribe for a scheme that provides both the back catalogue and new KMVs.  I, however, consider that even if that were the case, that would still not place the defendant in the prejudicial position of not having the option to pay security when the scheme before the Tribunal has the options.

24.  I did not provide for the options in my judgment because I overlooked it, though it had been drawn to my attention at pages 401 to 403 of the hearing bundle.  I therefore allow the amendments sought in paragraphs 2 and 3(b) of the defendant’s amendment summons.

25.  I also make a costs order nisi that the plaintiff do pay the defendant the costs of this summons with certificate for two counsel.

26.  The defendant in the summons for variation of the costs order nisi seeks an order that there be no order as to costs of the application, save and except the costs of the hearing and that the plaintiff do pay the defendant 80% of the costs of the hearing with certificate for two counsel.

27.  The ground of the application is that the plaintiff spent hardly any time to advance its case on payment into court.  Mr Yan, leading counsel for the defendant submitted that the plaintiff spent all its efforts in the written and oral submissions on the claim for interim payment and argued strenuously for interim payment to be ordered as an interim measure under Section 45(2) of the Arbitration Ordinance.  A lot of time was also spent on arguing the applicability of the case of Performing Right Society v Working Men’s Club & Institute Union Limited [1988] FSR 586, a decision by Mr Andrew Park QC.  However, the plaintiff lost in all these submissions.

28.  The issue of interim payment, though stated as an alternative relief in the originating summons, was hardly mentioned.  It was only raised by me on the second day of the hearing and Mr Yan then conceded on the jurisdiction regarding such payment.  But I note that Mr Yan still opposed such payment on the merits, despite his concession on the jurisdiction.

29.  Mr Yan also pointed out in his reply this morning that the plaintiff sought payment into court in the originating summons at over HK$94 million, but obtained a much smaller sum.

30.  Mr Liao argued against this summons strenuously and referred extensively to the transcript of the hearing.  However, the fact remains that the plaintiff had advanced a lot of arguments not on payment into court, but on interim payment and also for interim payment to be ordered as an interim measure.  Time was also spent on the Working Men’s Club case.  But Mr Liao did point out correctly that there were a lot of overlapping areas in the preparation of the application for the various alternative reliefs.

31.  I think that Mr Yan is right that the plaintiff has lost all the arguments it made during the two-day hearing.  I agree that it is fair and just that the plaintiff should pay the defendant 80% of the costs of the hearing, with certificate for two counsel - the remaining 20% not awarded is to reflect Mr Yan’s argument against payment into court, despite his concession on jurisdiction - and I so order.

32.  Regarding the costs of the application, save that of the hearing, I think it is too harsh to make no order as to costs in the light of the overlapping areas of preparation for the different reliefs.  I think it is fair to order that the defendant do pay the plaintiff 40% of the costs of the application and I so order. 

33.  Since the defendant has succeeded substantially on this summons for variation of the cost order nisi, I also make a costs order nisi on this summons that the plaintiff do pay the defendant 65% of its costs with certificate for two counsel.