KONINKLIJKE PHILIPS ELECTRONICS N.V. v. B. MARLBOROS INTERNATIONAL (HK) LTD

HCA 2463/2005

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NO. 2463 OF 2005

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J U D G M E N T

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Background:

1.  On 6 December 2005, Deputy Judge Mayo, on an ex parte application, made an interim injunction in favour of Philips, against Marlboros, restraining Marlboros from infringing certain registered designs in relation to triple-headed electric shavers.  The injunction also required Marlboros to deliver up to Philips any offending items.

2.  The injunction was in the usual terms, specifying Friday 16 December 2005, as the return date, and containing notification to Marlboros of their right to apply on notice to discharge the order.  In the usual way, by its terms, the injunction restrained Marlboros only until the determination of the summons on the return day.  On that day, unless the injunction was continued, it would lapse and cease to have any consequence at all for Marlboros.

3.  Marlboros were due to take possession of a consignment of offending goods in Hong Kong on about 7 December 2005.  Following service of the order, agreement was reached between the parties to deliver the offending goods to Philips, and that has now been done.

4.  The matter came before me on 16 December 2005, the return day in relation to the ex parte injunction.  For reasons which will subsequently appear it may well be that Marlboros have no further interest in the matter.  For Philips, Mr Shipp acknowledged that, the offending goods having been recovered, and there being no further real issue between the parties, there was no need to continue the injunction.  He did not seek continuation of the injunction and was content that it should lapse according to its terms.  He did not seek any costs against Marlboros.

5.  In all of those circumstances one might have thought that this litigation would be sensibly resolved between the parties with the filing of a discontinuance and no further steps being taken in the proceedings.  It might have been argued that there could be a payment by Philips to Marlboros of a sum of costs, consequent upon the discontinuance, but any such costs would be very modest for Marlboros had simply been required to ensure that Philips took possession of the goods on their arrival in Hong Kong.

6.  Instead, Marlboros instructed solicitors and counsel to attend court on the return day and to apply to discharge the injunction.  In addition Marlboros, somewhat surprisingly having regard to the plain worth of Philips and of the state of the proceedings, sought security for costs.  Very sensibly, Mr Shipp did not oppose that application and I made an order that Philips give security for costs by way of bank guarantee in the sum of $150,000, security to be given in 21 days.  Costs on that summons were fixed as costs in the cause.

7.  At the hearing I raised the question as to whether there was still any real issue between the parties.  Notwithstanding the fact that there appeared to be no further real issue between the parties, and that it was not sought that the injunction should continue, counsel for Marlboros was instructed to proceed with the argument to discharge the injunction.  Apparently the purpose of the application was to place Marlboros in a situation where a demand could be made for a substantial sum of costs.  It was accordingly necessary for me to conduct a hearing on the merits of that application.  After reading the papers and hearing the parties I dismissed that application with reasons to follow.  These I now give.

Factual circumstances leading to the injunction:

8.  Philips is an internationally known electronics company holding many patents.  Its triple headed electric razor is well known.  The razor is the subject of two Hong Kong Registered Designs.  In November 2003, it came to the attention of Philips through its investigators that a manufacturer in the PRC, Shanghai Zhen Bao Electrical Limited, was manufacturing and dealing with a shaver that was substantially similar in shape and configuration to Philips’ shaver.

9.  In June 2005, offending shavers made by Zhen Bao were found in South Africa, imported by a firm called Glomail.  There was correspondence between the lawyers for Philips and Glomail, as a result of which, on 14 June 2005, Glomail gave a written undertaking not to use or dispose of any offending products in South Africa, and to return all those products it had in its possession or control to the manufacturer.  To the knowledge of Philips, the products were stored in a warehouse in South Africa.

10.  Notwithstanding the undertaking given by Glomail, four months went past without any evidence being supplied to Philips that the products had been returned to the manufacturer.  On 18 October 2005, Philips’ lawyers wrote to Glomail’s lawyers demanding that the undertaking be honoured and goods returned to the manufacturer.  By e-mail response, Philips was informed that details of shipping arrangements would be supplied.  On or shortly after 13 November 2005, Philips received a copy of a bill of lading in relation to the products.  This bill of lading described the consignor as Glomail and the consignee as Marlboros.  It was plain from the bill of lading that it would be necessary to tranship the goods between vessels in Singapore.

11.  Philips were suspicious of the transaction.  There had been evidence made available to them from the South African authorities that modifications were being undertaken to the products in South Africa to overcome safety problems raised by those authorities.  Acts of modification would have been entirely inconsistent with Glomail’s undertaking to return the products to the manufacturer.  There is no suggestion that anyone in South Africa other than Glomail were dealing with the products and the inference plainly arose from that evidence as to modification and the delay in honouring the undertaking to return, that Glomail were undertaking the modifications.  Philips were concerned that the goods might be dissipated from the shipment in Singapore where they were due to be transhipped, or, if the consignee knew of Philips’ concern, that the goods would be diverted on arrival in Hong Kong.

12.  Despite the undertaking to return the goods to the Shanghai manufacturer there was no explanation as to the involvement of Marlboros nor as to the delivery of the goods to Hong Kong rather than Shanghai.

13.  In all of those circumstances Philips sought and were granted an ex parte injunction against Marlboros.

Marlboros’ case:

14.  For Marlboros it is contended that the ex parte injunction ought not to have been granted in the first place, and that it ought to be now discharged ab initio on the grounds that there was neither urgency nor secrecy about the matter, and accordingly there was no proper basis to grant the injunction ex parte.  Ms Tam argued that from such discharge Philips would have to meet Marlboros’ costs.

15.  In an affidavit filed for Marlboros, it is said that the company was asked by Glomail to assist them to return goods to a factory in China.  It was asserted, but without any evidential basis, that:

“it is very difficult if not impossible for anybody to return goods to a manufacturer in China directly from (overseas)”.

Marlboros did not inquire into the reason why the goods were to be returned but agreed:

“to help forward the goods to the factory in China”,

and:

“for this purpose (Marlboros) was named consignee on the bill of lading by Glomail even though (Marlboros) were not the owners”.

16.  The affidavit asserts that, after Marlboros were served with the ex parte order:

“Glomail (was) informed that (Marlboros) were not prepared to be shown as the consignee since (Marlboros) were never the owner of the goods.  Accordingly Glomail changed the bill of lading to a shipper’s bill of lading before the ship’s arrival”.

This was effected by the issue of a new bill of lading, in which the in which the goods are:

“Consigned to the order of: To order of shipper”.

Marlboros are given as the “Notify address”.  This bill of lading, described by Ms Tam as a “replacement” bill of lading was exhibited.  Apparently shortly thereafter, using that bill of lading, the goods were uplifted and secured by Philips’ solicitors.

The discharge of ex parte interim injunctions:

17.  As to the circumstances in which an ex parte application may be made, Ms Tam relied upon, and Mr Shipp took no exception to, the following statement of principle from Rogers J., (as he then was), in Seapower Resources International Ltd & Ors v Lau Pak Shing & Ors, (unreported, A10715/1993), in the following terms:

“The basis on which ex parte applications should be made are, of course, well known.  They have been expounded again in the Court of Appeal in England last July in TRP v Thorley.  I do not intend to repeat what I said there, or indeed what Godfrey J. said in the case of Jademan Holdings Ltd v Francis Leung Pak-to & Ors [1989] 2 HKLR 151.  Ex parte applications should only be made were either the delay would cause the applicant injustice or the defendant would take action which would nullify the effect of the injunction.  An ex parte injunction goes against the normal way litigation is conducted.  It is an infringement of the rights of natural justice of each party to be heard.  Those making such applications have a duty to bear that in mind and I cannot pass their responsibility to the Court when they do so.”

18.  It is contended for Marlboros that there was neither any matter of urgency demanding an ex parte injunction, nor was there any matter of secrecy which would demand an ex parte injunction.  Both are plainly bases upon which the court will grant interim relief in the absence of the defendant.  Mr Tam says further that Philips ought to have contacted Marlboros before seeking the injunction and sought their agreement to the delivery up of the offending goods.

19.  An application to discharge an injunction takes the form of a complete rehearing of the matter, with each party being at liberty to put in evidence: see Commercial Injunctions, 5^th Ed, Stephen Gee QC, para 23.021.  Thus, the defendant may seek to persuade the court that on all the evidence, the grant of the injunction was unjustified.  The evidence that may be considered includes evidence of matters which have occurred since the ex parte application.

20.  The case put for Marlboros was that they were, in effect, acting as a good Samaritan, that that was demonstrated by the replacement bill of lading, and that had an approach been made to them before the goods arrived in Hong Kong, the whole matter could have been resolved by agreement, without the need to proceed to Court.

Discussion:

21.  I am satisfied that this was a proper case for both urgency and secrecy, and that it was accordingly a proper case for the issue of an ex parte injunction.

22.  In the first place Philips had every reason to doubt the integrity of any assertion made by Glomail.  Glomail had undertaken to return the goods to the manufacturer in Shanghai.  Four months had elapsed and the goods had not been returned but were still retained in the warehouse in South Africa.  It is right that Philips were aware that the warehouse was resisting the release of the goods but that is information which must be seen in the light of the evidence that steps were being taken to modify the goods to meet South African safety standards.  Ms Tam contended that there was no evidence that Glomail were undertaking the modification.  For the reasons given above I am satisfied that there is sufficient evidence to say that Philips’ suspicions were justified.

23.  Marlboros were described in the bill of lading as the consignee.  Mr Shipp drew my attention to para 1.07 of Modern Bills of Lading 2^nd Ed, Paul Todd, where the author records:

“Typically, the seller (or original seller in a chain) will also be the shipper.  With manufactured goods re-sales at sea are rare, in which case the buyer may be named in the bill of lading as consignee.  In that case the shipper will also be consigner.”

There is no suggestion that Glomail ever explained to Philips the involvement of Marlboros.  When regard is had to the fact that the manufacturer was apparently in the Shanghai area, there ought to have been some explanation from Glomail or Marlboros to why the goods were being shipped to Hong Kong.  Philips were perfectly justified in finding the bill of lading supplied to them suspicious, and not raising those suspicions with the parties involved, but instead taking steps to protect its position.

24.  There is no suggestion at all that either Glomail or Marlboros took any step at all to inform Philips what arrangements have been made to send the goods from Hong Kong to the manufacturer.  All Philips received was a pillar of lading indicating that the goods were consigned to Marlboros in Hong Kong.

25.  Had Philips not pursued the matter in secret it would have been a simple step, were either Glomail or Marlboros aware that injunctive relief was being sought, to divert the shipment during transhipment in Singapore, or on arrival in Hong Kong.  Philips were in my view entitled to wait until the last minute before the goods arrived in Hong Kong to seek injunctive relief.  Making inquiry or moving earlier, particularly prior to transhipment in Singapore, would only be to warn the other side of Philips’ intention, thereby giving opportunity to divert the shipment.

26.  Ms Tam describes the second bill of lading as a “replacement” bill of lading.  The integrity of this document is in serious doubt.  In the first place it was issued in Hong Kong after 7 December 2005.  Yet it is dated 13 November 2005.  The date is demonstrably false.  Instead of being a house bill of lading, (HBL), it is a Fiata bill of lading, (FBL).  Instead of there being three originals in the set, as is usual and was indicated on the original copy, it states that there are no original documents.  There is no evidence as to any involvement by Glomail in the issue of the document, not even an e-mail.  The maker of the affidavit exhibiting the document and asserting that Glomail changed the bill of lading, a plainly hearsay statement, does not condescend to particulars to support the belief that the change was made by Glomail.  As it presently stands this statement is a mere assertion.  The second bill of lading asserts that the goods are consigned to the order of the shipper, (Glomail).  There is no evidence whatsoever as to whom Glomail intended to consign the goods upon their arrival in Hong Kong.  The question of the future of the goods is left entirely open.

27.  In my view there is nothing in this document which improves the position of Marlboros.  It is plainly arguable, on the evidence is it presently stands, that this is a false document that has been prepared without the involvement of Glomail, and at the request of Marlboros.

28.  It was asserted by Marlboros, but without evidence, that it is difficult if not impossible to return goods to a manufacturer in the PRC.  In the absence of evidence supporting that assertion there appears to be no reason at all why the consignee on the bill of lading ought not to have been Shanghai Zhen Bao.  No assertion at all is made by Marlboros as to what steps they had in place prior to the receipt of the interim injunction to ship the goods on to Shanghai Zhen Bao.  I would have thought that if they were the good Samaritan they say they were, such arrangements would have been in place and would have been disclosed to the court in these proceedings.

29.  In the circumstances the application for security for costs, and the manner in which Marlboros have approached the proceedings, are more consistent with the acts of a party that has an interest in the goods, and not one who is merely acting as a conduit for goods to another party in the PRC.

30.  For foregoing reasons I am satisfied that the original issue of the injunction on an ex parte basis was entirely justified and that it ought not to be discharged, with costs consequences in favour of Marlboros, but, as Mr Shipp sought, to be allowed simply to lapse.

31.  This was an entirely unnecessary application which has failed.  There will be an order nisi to be made absolute in 14 days that Marlboros must pay Philips costs of and incidental to the hearing on 16 December 2005.  Sensibly, Mr Shipp did not seek costs in respect of the original grant of the interim injunction.