ESQUEL ENTERPRISES LTD AND ANOTHER v. TAL APPAREL LTD AND ANOTHER

CACV 71/2005

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF APPEAL

CIVIL APPEAL NO. 71 OF 2005

(ON APPEAL FROM HCA NO. 809 OF 2004)

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REASONS  FOR   JUDGMENT

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Hon Tang JA (giving the reasons for judgment of the Court):

1.  The plaintiffs’ claim against the defendants is for damages for libel and slander, interference with economic relations and malicious falsehood as well as an injunction to prevent further libel and interference with the plaintiffs’ contractual relations.  The plaintiffs’ claim was “permanently” stayed on the basis of forum non conveniens by Deputy Judge Carlson.  The plaintiffs appealed that order.

2.  The 1^st plaintiff and the 1^st defendant are rivals in the garment trade, having extensive business interests in both the US and Japan.  They are registered in Hong Kong.  The 2^nd plaintiff is a director of the 1^st plaintiff and chairman of the Esquel group of companies, of which the 1^st plaintiff is part.  She is a Hong Kong resident.  The 2^nd defendant is a director of the 1^st defendant, maintaining a residence here although he also resides elsewhere abroad.

3.  For the libel claim, the plaintiffs rely on two letters dated 20 October 2003 and 8 March 2004 written by or on behalf of the 1^st defendant to Mitsui, one of the plaintiffs’ customers at its Tokyo office.  This is pleaded in para. 14 of the statement of claim.  Publication was therefore in Japan.  The gist of the letters was an assertion that the shirts which were sold by the 1^st plaintiff to Mitsui infringed the 1^st defendant’s patents in Japan.  These Japanese patents related to a method of manufacture of shirts that ensured the product to be wrinkle free.

4.  The slander claim is pleaded in para. 15 of the statement of claim.  As explained by Mr Chua, SC, counsel for the plaintiffs, the complaint is that in 2003 and 2004, the defendants, through their staff and agents, had said in the US to various of the plaintiffs’ US customers, that the plaintiffs’ wrinkle free shirt products infringed the 1^st defendant’s US patents and also that the Japanese customers of the plaintiffs had been told in Japan that the plaintiffs’ wrinkle free products infringed the 1^st defendant’s Japanese patents.  The alleged slander therefore took place in the US.

5.  The claims made in respect of interference with economic relations and malicious falsehood are essentially based on the same alleged acts of defamation just identified.  It is unnecessary to deal with these causes of action separately.

6.  It can thus be seen that underlying the plaintiffs’ complaints is the issue of whether the 1^st defendant’s patents in Japan and the US have been infringed.  The statement of claim actually pleads that the 1^st plaintiff’s products do not.  In our view, it is inevitable that the issue of infringement will be at the heart of the litigation between the parties.  The defendants are bound to plead justification as a defence to the defamation claims.  The judge said that the present case “is all about patents – not Hong Kong patents but Japanese and US patents”.  With respect, we agree.

7.  It will be convenient to refer to the libel claim in Japan as the Japanese defamation, and to refer the alleged US slander as the US defamation.

8.  From the foregoing it can be seen that there are two distinct claims for defamation, one claim concerning the US patents, the other claim the Japanese patents.  The Japanese defamation was committed in Japan, the US defamation in the US.

9.  Mr Chua SC submitted:

“… that an appellate court can only interfere in 3 cases on an appeal against a decision whether to allow or refuse a stay of an action:-

(1) Where the judge has misdirected himself with regard to the principles in accordance with which his discretion had to be exercised;

(2) Where the judge in exercising his discretion, has taken into account matters he ought not to have done, or failed to take into account matters he ought to have done; or

(3) Where his decision is plainly wrong.
Louvet v . Louvet [1990] 1 HKLR 670 (C.A.) [tab 5] at 673G-674A”

10.  We saw no ground to interfere with the judge’s exercise of discretion, and, after hearing Mr Chua, dismissed the appeal with costs, with the reasons for judgment to be handed down.  The only amendment required of the order below was that a stay of the action be granted, rather than a permanent stay.  Mr Liao SC for the defendants accepted this.

11.  The test on applications for a stay on the basis of forum non conveniens is well-known.  It is derived from the decision of the House of Lords in Spiliada Maritime Corp v Cansulex Ltd [1987] 1 AC 460 and adopted by this court in The Adhiguna Meranti [1987] HKLR 904.  The judge has correctly identified the applicable legal principles, taking them from the note to O. 11 r. 1 para. 10 of the Hong Kong Civil Procedure, 2006, namely, that:

“… the fundamental principle … is that the court will choose that forum in which the case can be tried more suitably for the interests of all the parties and for the ends of justice.”

12.  The judge adopted the three-stage approach commended by Hunter JA in The Adhiguna Meranti at page 907F-908B, and abbreviated by Nazareth J (as he then was) in the Lanka Muditha [1991] 1 HKLR 741 at page 744:

“(I)    Is it shown that Hong Kong is not only not the natural and appropriate forum for the trial, but that there is another available forum which is clearly or distinctly more appropriate than Hong Kong ...

(II)    If the answer to (I) is yes, will a trial at this other forum deprive the plaintiff of any “legitimate personal or juridical advantages”? The evidential burden here lies upon the plaintiff.

(III)   If the answer to (II) is yes, a court has to balance the advantages of (I) against the disadvantages of (II) ... Deprivation of one or more personal or juridical advantages will not necessarily be fatal to the applicant provided that the court is satisfied that notwithstanding such loss “substantial justice will be done in the available appropriate forum” ... Proof of this ... rests upon the applicant for the stay.”

13.  At stage I, the judge followed the decision of the English Court of Appeal in The Albaforth [1984] 2 Lloyd’s Rep. 91 which held:

“… that the jurisdiction in which a tort has been committed is prima facie the natural forum for the determination of the dispute.”

14.  Since the Japanese defamation was committed in Japan and the US defamation committed in the US, the courts of Japan and the US are prima facie the natural fora for the determination of the Japanese and US defamations respectively.

15.  Mr Chua has submitted that the place of commission of the tort is only a starting point and not determinative.

16.  However, the judge never said that the place where the tort was committed was determinative.  Insofar as Mr Chua relied on para. 37 of the judgment as a contrary indication, Mr Chua has misunderstood the learned judge.

17.  This is what Mr Chua said in para. 5.8 of his submission:

“However, after finding that the torts complained of were committed abroad, the deputy judge went on to say (at judgment para. 37 (D/24)) that:

‘this alone will have been sufficient for the defendants to have succeeded at this stage of the enquiry’ (emphasis added).”

18.  But in para. 37 of the judgment, the judge was dealing with the plaintiffs’ claim based on an alleged interference with the 1^st plaintiff’s contractual relations.  This is what the judge said:

“… And so where the libel/malicious falsehood action so clearly falls under the purview of the courts of Japan, should the plaintiffs seek their assistance, so does the allegation concerning interference with the plaintiffs’ contractual relations.  This alone would have been sufficient for the defendants to have succeeded at this stage of the enquiry.”

19.  The judge was not saying that the place of the commission of the tort was determinative, but that since the claim based on the alleged interference with contractual relations was part and parcel of the libel action, as the libel/malicious falsehood action should be tried in Japan so should the claim for interference with the plaintiffs’ contractual relations.

20.  Mr Chua also referred us to the decision of the House of Lords in Berezovsky v Michaels and Anor [2000] 1 WLR 1004.  That decision involved the 30 December 1996 issue of the Forbes magazine where the plaintiff and one Glouchkov (whose appeal was dealt with at the same time) were described as “criminals on an outrageous scale”.

21.  “Forbes” had an international circulation and the sale of that particular issue was 785,000 in the US and Canada, 1,900 in England and Wales and 13 in Russia.

22.  Mr Berezovsky and Mr Glouchkov sought leave to serve a writ out of the jurisdiction in respect of the English circulation, in other words, for the libel allegedly committed in England.

23.  The High Court set aside the leave that had been granted by a master and stayed the proceedings.  The Court of Appeal reversed the judge.  The House of Lords by 3 to 2 affirmed the decision of the Court of Appeal.

24.  The House of Lords affirmed the correctness of the decision in The Albaforth, Lord Steyn saying at p. 1014E-F, that the principles from that case were “established, tried and tested, and unobjectionable in principle”.

25.  In Berezovsky, the plaintiff was libelled in England as well as in the United States, Canada and Russia, and presumably in other countries or territories where that particular issue of the magazine was available.  It was concerned with the question whether, notwithstanding that the plaintiffs had been defamed in England, they should be allowed to sue the defendants by serving them out of the jurisdiction.

26.  Mr Chua also referred us to the case of King v Lewis [2005] E.M.L.R. 4 (page 45).  That involved an article which was posted on a website based in the California which could be downloaded.  The article was downloaded in England.  It was accepted that subject to any defences on the merits, the defendant had been libelled in England.  This, like Berezovsky, was concerned with what Lord Steyn called “trans-national” libels.  At page 57 the Court of Appeal said:

“… Where there is publication, say in two jurisdictions only, it remains relatively confined, and the Albaforth starting-point may remain very meaningful. But in relation to Internet libel, bearing in mind the rule in Duke of Brunswick v Harmer that each publication constitutes a separate tort, a defendant who publishes on the Web may at least in theory find himself vulnerable to multiple actions in different jurisdictions.  The place where the tort is committed ceases to be a potent limiting factor.”

27.  Relying on King v Lewis, Mr Chua submitted that the judge has placed undue weight on the places of publication.

28.  But we are not here concerned with trans-national libels at all where publication takes place in a number of different jurisdictions.  We are only concerned with two groups of libel, one committed in the US and the other in Japan.  More importantly, we are concerned with a case where no defamation was committed in Hong Kong.  It has not been alleged that there has been any publication in Hong Kong.  So we see nothing wrong with the judge regarding the place of commission, namely the places where publication took place, as prima facie the natural fora for the determination of the claim.

29.  In para. 35 of the judgment, the judge said:

“This is one of those cases where there is much that can be, and has been, said on both side.  Ultimately, I am persuaded that Mr Liao must be right when he said that the natural forum for this action is Japan and the US rather than here.  What has persuaded me is that the alleged libels, and for person purposes, the claim based on malicious falsehood goes with it, were published abroad and not in Hong Kong.  In such circumstances the cases to which I have already referred in this regard are clearly applicable … ”

30.  As already noted we are concerned with an exercise of discretion by the judge.  We remind ourselves of the words of Lord Templeman in Spiliada, at page 465:

“In the result, it seems to me that the solution of disputes about the relative merits of trial in England and trial abroad is pre-eminently a matter for the trial judge.  Commercial court judges are very experienced in these matters.  In nearly every case evidence is on affidavit by witnesses of acknowledged probity.  I hope that in future the judge will be allowed to study the evidence and refresh his memory of the speech of my noble and learned friend Lord Goff of Chieveley in this case in the quiet of his room without expense to the parties; that he will not be referred to other decisions on other facts; and that submissions will be measured in hours and not days.  An appeal should be rare and the appellate court should be slow to interfere.  I agree with my noble and learned friend Lord Goff of Chieveley that there were no grounds for interference in the present case and that the appeal should be allowed.”

31.  Mr Chua SC stressed the close connection which the plaintiffs and the defendants have with Hong Kong.  These factors were acknowledged in the judgment.  The judge was entitled to give such weight to the connection as he considered appropriate.  We agree with the judge that though at least three of the parties are Hong Kong based, in reality this was not a weighty factor to suggest that Hong Kong was the natural forum.  All the parties are very much international in profile and in the way their business is carried out.

32.  The judge then went on to refer to another argument of Mr Liao, SC, counsel for the defendants, which he said carried weight.  That argument was based on the so-called Moçambique Rule (from British South Africa Company v The Companhia de Moçambique [1893] AC 602).  Mr Chua argued that the so-called Moçambique Rule had no application as the plaintiffs were prepared to accept for the purpose of these claims that the Japanese and US patents were valid.

33.  He referred us to the decision of the English Court of Appeal in Pearce v Ove Arup Partnership Ltd and Anor [2000] Ch 403 and R Griggs Group Ltd v Evans [2005] Ch 153 where a distinction was made between cases where the validity of the patents was challenged and cases solely concerned with infringement of patents (see R Griggs at para. 138(2)).  But the judge has not said that the Moçambique Rule as such was applicable.  Indeed, it is obvious that he did not regard it as directly applicable, since had it been strictly applicable, it would have been decisive (rather than just carried weight) of the application before him.  Further, as pointed out in Pearce v Ove Arup, the Moçambique Rule went to jurisdiction and justiciability, and that, under that rule, the English court has no jurisdiction “to entertain an action for trespass to foreign land”,  at 425G, and at page 431:

“It is, we think, clear from analysis of the judgments in the Moçambique case [1893] A.C. 602 that the House of Lords treated the question whether the English courts should entertain an action for trespass to foreign land as one of justiciability.  The English courts should not claim jurisdiction to adjudicate upon matters which, under generally accepted principles of private international law, were within the peculiar province and competence of another state.  We think it significant that both Lord Herschell L.C. and Lord Halsbury placed emphasis on the same passage in Vattel’s Law of Nations, written one hundred years earlier:

‘as property of this kind is to be held according to the laws of the country where it is situated, and as the right of granting it is vested in the ruler of the country, controversies relating to such property can only be decided in the state in which it depends.’”

34.  In Coin Controls Ltd v Suzo International (UK) Ltd [1999] Ch 33, the Moçambique Rule was applied to a case where the validity of foreign patents was in issue.

35.  Coin Controls Ltd v Suzo International (UK) Ltd [1999] Ch 33 was referred to in argument in Pearce v Ove Arup [2000] Ch 403, but not in the judgment.  This is what Laddie J said in Coin Controls Ltd at page 51E:

“… Secondly, whether there is infringement is dependent on the wording of the claims.”

36.  Furthermore, in Plastus Kreativ AB v Minnesota Mining and Manufacturing Co & Anor [1995] RPC 438, Aldous J (as he then was), said, at page 447 line 42:

“I also believe that it would not normally be right for the courts of this country to decide a dispute on infringement of a foreign patent in respect of acts done outside this country provided there is an adequate remedy in the relevant country.”

37.  Whether or not a patent has been infringed depends not only on the validity of the patent but also its width and scope, which would in turn depend on the meaning of the wording of the claim.

38.  Moreover, although Pearce v Ove Arup Partnership Ltd and Anor and R Griggs Group Ltd v Evans can be taken as authorities for the proposition that:

“… the Moçambique Rule does not require the English court to refuse to entertain a claim in respect of the alleged infringement of Dutch copyright …”

(Pearce v Ove Arup Partnership Ltd and Anor at page 445A) and that the same approach might be taken with regard to foreign patents, they certainly do not support any argument to the effect that where the case involves the infringement of a foreign patent that this somehow cannot be a weighty factor to hold that the foreign jurisdiction involved is the most appropriate forum.  In fact, in our view, this must clearly be a weighty factor.

39.  This is what the judge said:

“… Nevertheless, I am concerned that our court may proceed on an erroneous view of foreign patent law and either award or refuse damages and the other relief asked for based on such a bad finding quite apart from the other misgivings expressed by Laddie and Aldous J.J.’s to which I have previously referred.

39.  In saying this, I am cogniscent that these patent cases were purely patent cases but the sentiments and principles upon which they were decided have sufficient application here (if not identically so) that I should have regard to them.  This part of Mr Liao’s submission therefore must also and does weigh in my decision.”

With respect, we can detect no error of approach.  He rightly held that such considerations added weight to the fact that prima facie the natural forum for the determination of the dispute was where the defamation was committed and where the relevant patents were located.

40.  Mr Chua also made the point that insofar as the Judge was of the view that the Japanese defamation should be tried in Japan and that the US defamation should be tried in the US, the Spiliada test was not satisfied.  There could not be a stay in favour of more than one jurisdiction.  The cases referred to an alternative forum, not alternative fora.  He referred to us what Lord Goff said in Spiliada at page 476:

“        (a)   The basic principle is that a stay will only be granted on the ground of forum non conveniens where the court is satisfied that there is some other available forum, having competent jurisdiction, which is the appropriate forum for the trial of the action, i.e. in which the case may be tried more suitably for the interests of all the parties and the ends of justice.”

Mr Chua paraphrased this:

“At stage 1, the defendant must satisfy the court that there is another forum abroad which is the appropriate forum for the trial of the action.”

41.  Mr Chua submitted since the trial of this action will involve the trial in the USA as well as in Japan, this is not a case where it could be said that there is only one appropriate forum for the trial of the action.

42.  But as Lord Steyn explained in Berezovsky v Michaels at page 1014C:

“In Spiliada, the House examined the relevant questions at a high legal of generality. The leading judgment of Lord Goff of Chieveley is an essay in synthesis: he explored and explained the coherence of legal principles and provided guidance. Lord Goff of Chieveley did not attempt to examine exhaustively the classes of cases which may arise in practice, notably he did not consider the practical problems associated with libels which cross national borders. On the other hand, the line of authority of which The Albaforth is an example was concerned with practical problems at a much lower level of generality.”

43.  We agree with Mr Chua to this extent: where the party seeking a stay cannot point to one forum for the trial of the relevant cause of action but only to a number of possible fora, he will not be able to demonstrate a forum “clearly or distinctly” more appropriate than Hong Kong.  However, we believe that, where as here, an action involves two distinct causes of action and that, in relation to each, there is an appropriate foreign forum but different to one another, a stay may nevertheless be granted.  Mr Chua seemed to have accepted this proposition in principle, because in the course of his submissions he accepted that a plaintiff who suffered, say, personal injuries caused by the same defendant but on different occasions in Japan as well as in the US, could have his action in Hong Kong stayed to be determined by the courts of those two countries.

44.  However, he argued, relying on cases such as King v Lewis dealing with what he called multiple torts, that a stay should not be granted simply because a tort was committed in more than one country.  As explained above, King v Lewis was concerned with “trans-national” libels, and therefore has little relevance.  In the end, the court must decide each case on its own merits and not apply dicta from cases such as Spiliada too rigidly as though they were a preset formula or a statute.  Sometimes, there may be a perfectly sensible justification for even parallel (a fortiori separate) proceedings:  see for example The Kapitan Shvetsov [1997] HKLRD 374.

45.  Mr Chua also argued under the stage II test that a trial in the US or Japan would deprive the plaintiffs of legitimate personal or juridical advantages, these being, for example, the availability of assets in Hong Kong to satisfy any judgment which the plaintiffs may obtain against the defendants.  He also referred to the possibility that the defence of qualified privilege may be of more limited in scope in Hong Kong than in the US.  However, as explained in Adhiguna Meranti at page 922:

“The decision in de Dampierre has resolved our doubts.  This makes it clear that it is the first view which is correct: that the test is now not injustice to the plaintiff but justice to both parties; and that our jurisdictional doubts were ill-founded.  We must consider, per Lord Templeman, whether it is “just” that the plaintiffs “should be allowed to exploit their Hong Kong advantage” and we should “only refuse a stay if it would be unjust to confine the plaintiffs” to their remedies in Indonesia.  We must consider, per Lord Goff, “the balance of fairness between the parties”.”

46.  The stage II inquiry was properly considered by the judge in his judgment: see paras. 42 to 44.  There is no basis on which we could interfere with his exercise of discretion.  Indeed, on the material before us, we would have exercised the discretion the same way.

47.  The availability of enforcement procedures in Hong Kong of foreign judgments (such as any judgment from the courts of Japan or the US) are not so difficult or cumbersome that it can really be said that the plaintiffs will somehow be deprived of a legitimate personal or judicial advantage by litigating in those countries.

48.  Nor are we persuaded by Mr Chua’s submission based on any supposed difference in the law of qualified privilege between Hong Kong and the US.  Even if such a difference existed and it mattered to a significant degree in the claims made by the plaintiffs, we fail to see what injustice there could be in letting the courts of the US determine, according to their domestic law, a defamation that occurred there.

49.  Subsequent to the writ in the present case, several proceedings were instituted in the US.  They concern US patents.  So far, no proceedings have been commenced in Japan.  Since the judgment appealed from was delivered, the position regarding the US proceedings have become clearer.  However, Mr Chua has submitted that all the Japanese patents have their “equivalents” in the US patents.  To summarise the position, it seems that the 1^st defendant and an associated company (Taltech) have restricted their patent infringement claim to only 2 US patents, namely, “779” and “615” and that in relation to 6 other US patents, (“343”, “292”, “394”, “191”, “554” and “542”), the 1^st defendant and Taltech have undertaken not to sue the 1^st plaintiff or its affiliates for patent infringement.

50.  In the relation to the Japanese patents, the plaintiffs’ case is that “2859137”, “3093708” and “3205725” correspond to US patents “615”, “292” and “394”.  Thus, Mr Chua submitted that:

“(3)   In the light of TAL’s recent undertaking, it is unlikely that it maintains any allegation of patent infringement in relation to Japanese patents “3093708” and “3205725”.  TAL has maintained on Affirmation that its US and Japanese patens are “in substance the same”, so that the U.S.A. proceedings “are likely to be in practice determinative of Taltech’s or the 1st Defendant’s patent rights in Japan”: H. Lee 1st §30 [B/13].”

51.  Nevertheless, whether there has been any infringement (of whatever patent) remains crucially a live issue.  We agree with the judge that the appropriate fora for the determination of such questions must be the courts in the US and Japan.  These are the countries where the relevant patents are located and as far as the defamation claims are concerned, where they took place and where the relevant reputations of the plaintiffs are to be considered.