LEUNG YEE AND ANOTHER v. NG YIU MING AND ANOTHER

HCA 7462/1998
HCMP 1730/1999

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NO. 7462 OF 1998

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D E C I S I O N

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NATURE OF SUMMONS

1. By Summons the Plaintiffs in this matter sought either an extension of time in which to carry out a certain undertaking embodied in a Consent Order or, failing that, to have a trademark presently in the name of both Plaintiffs and both Defendants re-registered in the name of the first Plaintiff only, and the two actions HCA 7462/98 and HCMP 1730/99, in respect of which the Consent Order was made, restored for hearing.

BACKGROUND

2. The Plaintiffs and the Defendants were involved in a familial/commercial dispute that resulted in 2 actions being consolidated and tried before Mr Recorder Kwok in June 1999. One action, HCMP1730/99, concerned the rectification of the Trade Mark Register and the other, HCA7462/98, a partnership dispute. The Plaintiffs claimed to be partners with the Defendants in running a chain of shops selling tortoise jelly, a claim the Defendants disputed. In the trademark action the 1st Defendant sought rectification of a trademark, then in the 1st Plaintiff's sole name, so that he would be substituted as holder.

3. The trial proceeded for 2 days and on 11 June 1999 the consolidated action was compromised and a Consent Order, embodying terms agreed between the parties in full and final settlement of the claims, was made.

4. One undertaking required the Plaintiffs, within one month of the date of the order, to alter the signs on certain shop premises, by adding qualifying characters to ensure that purchasers of the tortoise jelly sold in those shops realised they were purchasing a product peculiarly the Plaintiff's own and not one which might be considered to be passed off as being the Defendants' product.

5. A Schedule incorporated in the order gave details inter alia of which characters were to be added and specified their sizes relative to the characters they qualified. The Consent Order provided that when the Plaintiffs had complied with that undertaking the Defendants would pay the sum of $6.5 million for the Plaintiffs' shares in a land investment company.

6. The Plaintiffs arranged to have the signs altered, paying some $95,000.00 to do so. They sought legal advice as to whether they had complied with the order properly and their then solicitor informed them that they had. The solicitor, who inspected one of the shops to check the alterations, gave the Plaintiffs this advice after being assured that the other shop signs had been altered in similar fashion.

7. In further compliance with the order the Plaintiffs arranged to have the trademark altered by adding the names of the 2nd Plaintiff and both Defendants. Despite this the Defendants refused to pay the money for the Plaintiffs' shares claiming there had been failure to comply with the undertaking to alter the shop signs.

8. The Plaintiffs sought a Declaration that they had complied with the undertaking and were entitled to have the $6.5 million paid over. Deputy Judge Wong, on 8 November 1999, ruled there had not been proper compliance as the characters did not accord with the size and description specified. The Plaintiffs did not appeal that ruling and instead filed a summons to have the two actions reinstated for hearing. Subsequently the Plaintiffs filed the present summons amending the earlier one by seeking an extension of time.

PLAINTIFFS' CASE

9. The Plaintiffs acknowledge that what they seek is an indulgence from the court of 1 month's extension in which to complete compliance with their undertaking. They argue that they did their best to comply with the undertaking, expended a large sum of money to effect the alterations and took legal advice which assured them that they had complied. They point out that they attended, as required, to the alteration of the Trade Mark Register, an action against the interest of the 1st Plaintiff.

10. The Plaintiffs submit that the Defendants would not suffer any prejudice, if an extension of time was granted, which could not be compensated for by costs. They contend that to allow the Defendants to benefit from being added as trade mark holders, without having to pay for the Plaintiffs' interest in the property company, would be to unjustly enrich them.

11. If the court cannot be persuaded to grant an extension the Plaintiffs submit that the hearing of the consolidated actions should be restored and that, pending the outcome of those proceedings, the Trademark Register should be rectified by re-registration of the trademark in the 1st Plaintiff's sole name.

DEFENDANTS' CASE

12. The Defendants oppose both the application for extension of time and the alternative restoration of action proposed, as being misconceived. They argue that the court has no jurisdiction to vary the terms of a consent order which was stated to be in full and final settlement, because it is a contract and where such contract exists the court will not vary the terms by giving the party in breach extra time to perform the terms.

13. As it was no part of the parties' bargain that the Plaintiffs might seek an extension of time, to allow them to do so would be to substitute a different type of performance from that which the parties agreed. The "Liberty to apply" granted in the Consent Order does not give the court power to vary the terms consented to, but simply provides a means for enforcing and working out the terms.

14. The Defendants also oppose the application because the Plaintiffs have failed to comply with their undertaking, even now, more than 6 months since they were held to be in breach. This according to the Defendants reveals their application as wholly without merit and shows their "wilful disregard" of a court order.

15. As for the alternative course of restoring the original actions, the Defendants say that this can be done only by setting aside the original compromise. They say that the Plaintiffs cannot be released from their original bargain; that they were in breach of that bargain and as it was a condition precedent for the purchase the Defendants need not purchase the shares.

RULING

16. This is clearly a heated family dispute over a commercial enterprise. A compromise was reached however and the Plaintiffs acted promptly and at some expense to effect the agreed changes to the signs and to add names to the Trade Mark Register. Unfortunately those signs, for whatever reason, accorded with the changed text, but did not accord exactly with the sizes of the lettering agreed. Even more unfortunately the Defendants decided to take advantage of what must be seen in the light of common sense and on any objective view as a technical breach.

17. It is clear from the judgment of Deputy Judge Wong that he considered that this matter could have been dealt with by negotiation without it ever being necessary for the Plaintiffs to seek a Declaration. The tenor of this litigation and the court time spent on a matter which could have been cured by a simple consent application to amend the original order is an indication of the parties' residual ill-feeling.

18. From the available evidence it is not correct to say, as the Defendants do, that the Plaintiffs are seeking in some way to be relieved from their bargain. They were prompt in carrying out their part of the bargain, albeit erroneously, and the signs were changed, and have remained changed since that time thus ensuring that devotees of tortoise jelly know that at specified outlets, under a recognised trade mark, it is prepared according to big sister's supervision. It is highly unlikely (and was not suggested) that there has been any loss of custom since the signs were altered because the size of the lettering does not accord exactly with the Schedule. The Plaintiffs are prepared to correct the letter sizes and recognize their liability for costs.

19. If the court grants the Plaintiffs' request it would be ensuring that the parties' bargain, achieved after two days trial time had been expended, does not lapse because of what can be regarded as a technicality. In a case of this nature the principle de minimis non curat lex has specific application. The Plaintiffs' failure to comply effectively with the Consent Order is acknowledged, but the Defendants' swift refusal to purchase the Plaintiffs' interest gives the impression that they may not have been serious about the original compromise.

20. Since the qualifying words were added to the signs the Defendants' interests have been protected, viv-a-vis their customers, even if the character sizes are incorrect. Further the Defendants have been placed on the Trade Mark Register in respect of a trade mark which is of special and, no doubt, commercially valuable significance to their business. It would be unconscionable to allow the Defendants to stand on the letter (or in this case the characters) of their bargain and retain the undoubted benefits of being registered as holders of the trade mark without concomitant purchase of the Plaintiffs' shares of the property company, when a simple extension of time will enable proper force and effect to be given to the contract evidenced by the Consent Order.

21. It is also to be hoped that by giving effect to the Consent Order that the parties will be able to cease from acrimonious, time-consuming and expensive litigation on a matter that they have settled between them already.

22. I accept the Defendants' argument that the "Liberty to Apply" provision does not allow the court to re-open the Consent Order or exercise a jurisdiction it does not possess. It is arguable however that it does enable the court to work out the terms of the Consent Order and to enforce it and I regard the application for the extension as a means of working out the terms of the order. This is not a case where the Plaintiffs set out to avoid the terms of the order, or where they acted mala fide. If it was such a case the court could have no legitimate interest in granting the request.

23. Having considered all the facts of the case, the intention of the parties and the need to have litigation of this nature disposed of swiftly and finally I grant the request of the Plaintiffs for an extension of time.

COSTS

24. Counsel for the Defendants sought the costs of this application on an indemnity basis, a claim that was resisted by counsel for the Plaintiffs. Having considered the principles that underly a grant of costs on an indemnity basis (Refer: Overseas Trust Bank And Coopers & Lybrand (a firm) and Peat Marwick, Mitchell & Co(a firm) and Another [1991]1 HKLR 177 and Sung Foo Kee Ltd v Pak Lik Co(A Firm) [1996] 3 HKC 570) I cannot see that costs on such basis can be justified for this matter. The Plaintiffs may be guilty of delay in bringing this matter before the court, but they cannot be considered as being in contempt of court; or having shown wilful disregard of a court order; or being guilty of an affront to the court such as would justify a grant of indemnity costs.

ORDER

25. I order that the time for compliance with the Further Undertaking by the 1st and 2nd Plaintiff in HCA 7462 of 1998 and the Respondent in HCMP 1730 of 1999 be extended to one month from the date of this order.

26. Costs of the application will be to the Defendants, to be taxed if not agreed.

27. Certificate for two counsel granted.