XCHRX CHAN KIN TIM, LESLIE AND ANOTHER v. AMUSE HONG KONG LIMITED

1993, No. A10123

IN THE SUPREME COURT OF HONG KONG

HIGH COURT

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J U D G M E N T

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1. The Plaintiffs are in the pop music business. By a series of agreements in writing they managed a group of musicians called "Beyond" (the Group). By various assignments in writing and signed by the parties, the Plaintiffs also own the copyright in a substantial number of songs written or performed by the Group or its members. In a manner which is becoming familiar in the world of pop entertainment, for example, the Beatles or more recently George Michael, the Group has become disenchanted with the Plaintiffs. On 8th April 1993, the Group issued a writ against the Plaintiffs (the Group's action) in which, principally, they seek a declaration that the agreements and assignments were void or voidable as being in restraint of trade, procured by undue influence or inequality of bargaining power, for misrepresentation or breach of fiduciary duty. Appropriate consequential relief is also sought.

2. The Group is now managed by a Japanese company which I shall call K K Amuse. The Defendant in this action is a subsidiary of K K Amuse. On 16th September 1993, the Defendant wrote to various well-known publishers in the music business, to the effect that the Plaintiffs did not own the copyright in the Group's songs. The Plaintiffs, however, took objection to the terms in which the letter was couched. Consequently, on 8th November, they commenced this action which is principally for damages for slander of title and unlawful interference. The endorsement on the writ also seeks an injunction to restrain the Defendant from publishing a denial that the Plaintiffs are the owners of copyright in certain compositions. By summons dated 9th November, the Plaintiffs seek an interlocutory injunction that the Defendant withdraws its letter of 16th September unconditionally, and until after trial of the action or further order refrains from publishing a denial that the Plaintiffs are owners of copyright. It is with this summons that I am concerned.

3. The 1st Plaintiff is a director of the 2nd Plaintiff (KML). The two are effectively indistinguishable. The 1st Plaintiff spotted the Group in 1985 and thought them to have promise. There were then 5 members of the Group. One left in 1988; another, Wong Ka Kui, sadly died earlier this year after the Group's action had been commenced. After discussion, in December 1985 the 1st Plaintiff and the Group entered a simple Chinese agreement by which the 1st Plaintiff effectively became their manager and obtained the right to process any copyright. In June 1986, that agreement was replaced by a formal agreement with each individual member of the Group. Those agreements were renewed from time to time, most recently for a period of 2 years from 1st January 1992 to 31st December 1993. Between 1986 and 1992, members of the Group assigned to the Plaintiffs copyright in any musical and literary works written or performed by the Group.

4. Because of the Group's success, in 1991 the Plaintiffs entered negotiations with K K Amuse to enable the Group to be promoted more widely. In 1992, management responsibilities were transferred to K K Amuse. What was not transferred was copyright in the Group's work which remained vested in the Plaintiffs. In 1992, however, the Plaintiffs entered a co-publishing agreement with K K Amuse by which half of the copyright in an album released by the Group in 1992 was assigned to K K Amuse. The Plaintiffs' copyright interest was recognised on the cover of this album. K K Amuse has rendered half yearly statements to the Plaintiffs in accordance with the co-publishing agreement. The question of copyright ownership, however, arose at the end of 1992, when the Defendant discussed with Warner Music the possibility of Warner releasing certain songs written by the Group. The 1st Plaintiff, on learning of this from Warner, contacted the Defendant and pointed out that these songs were not in the album released in 1992, and not the subject of the co-publishing agreement. On 7th January 1993, the Defendant apologised for the error in a letter to the Plaintiffs. In April, of course, the Group's action commenced.

5. In June 1993, the Group released a further album through Warner. There was no acknowledgement of the Plaintiffs' copyright. When the 1st Plaintiff enquired about this, he was informed by Warner that the Defendant had advised Warner that there was a dispute over the question of ownership of copyright, and that no credit should be given to the Plaintiffs on the album's cover. Nonetheless, the Plaintiffs were able to continue marketing the Group's songs in various formats.

6. Meanwhile, on 15th July the Plaintiffs' solicitors wrote to the solicitors for the Group and the Defendant asking for a copyright notice in favour of the Plaintiffs to be put on the 1993 album. This request was refused. In order to ensure that the public was aware that the Group's songs in the 1993 album were in the Plaintiffs' copyright, the 1st Plaintiff published a notice to that effect in daily newspapers in Hong Kong on 3rd and 4th September. The notice was a straightforward statement that the copyright in the 1993 album was owned by the Plaintiffs, and that there was a dispute between the Plaintiffs and the Group and K K Amuse. This had been preceded by a letter dated 19th August to various music publishers and record companies.

7. On 22nd September, the 1st Plaintiff learned of the Defendant's letter of 16th September. That letter referred to recent communications from the Plaintiff on the subject of copyright and continued :-

"On behalf of Amuse and Beyond we would wish to respond as follows :-

1. The compositions contained on the latest Album (the Compositions) are registered with the Composers and Authors Society of Hong Kong Ltd naming Amuse as publisher and members of Beyond as the owners of the copyright in the Compositions. The said registrations are countersigned by members of Beyond, the composers of the Compositions. Copies of the relevant Publishing Agreements between Beyond and Amuse covering the compositions can be provided at your request.

2. The contention by Kinn's Music Ltd that they own the copyright in the Compositions is spurious and without foundation. In addition to claiming rights in the Compositions, we understand that Kinn's Music Ltd also claim to own copyright in a number of other compositions written by the members of Beyond as scheduled in a circular letter from Kinn's Music Ltd to all record companies/Karaoke producers/music publishers of 19th August, 1993 ("the Back Catalogue") - we enclose a copy of the schedule of these compositions for your ease of reference. Beyond categorically refute any claims of Kinn's Music Ltd to copyright in the Compositions or the Back Catalogue and have filed proceedings in the High Court (High Court Action No. A2950 of 1993) asserting their title in the Compositions and the Back Catalogue and seeking a declaration from the High Court in this regard. If you wish a copy of the Writ of Summons can be forwarded to you.

C.A.S.H./have been put on notice of the aforementioned High Court Action and of Beyond's request that Amuse be the publisher of records of all of the Compositions, past, present and future. All publishing rights should, therefore, be negotiated through our offices."

8. The sentence emphasised in the 2nd paragraph contains the sting to which the Plaintiffs take exception. Absent that sentence, Mr. Garland for the Plaintiffs conceded that the Plaintiffs would probably have had no cause for complaint. He did point out, however, that the reference to the Group's action is misleading because it does not disclose the true nature of the case and the attack upon the Plaintiffs.

9. Mr. Faulkner for the Defendant complained that both in the 1st Plaintiff's affidavit in support of this application and in the summons itself, the whole of the Defendant's letter is under attack. In the course of this hearing, however, the focus was upon the words emphasised. That, he said, was not the case which he had come to meet. I am quite satisfied, however, that the offending words colour and infect the whole letter and that there can have been no doubt as to the Plaintiffs' attitude to this letter.

10. In my view, the Plaintiffs make their position clear in paragraph 36 of the 1st Plaintiff's affidavit, where he said :-

"it cannot possibly be said now, in the light of the contents of this affidavit, that KML's longstanding claim to copyright is "spurious and without foundation" or that all publishing rights should be (or even could be) negotiated through Amuse. The damage being caused to my reputation as the controlling arm of KML, and the financial damage being caused to KML itself by the letter sent by Amuse (HK) is enormous and, if the letter is not withdrawn, irreparable. I cannot see any harm that would be caused to Amuse if the letter were to be withdrawn since, at this stage, none of relevant royalty payments are actually due to Amuse and so the letter serves only to harm me and KML without conferring any legitimate benefit on Amuse. If Beyond and its management company (Amuse) are permitted to publish statements in Hong Kong to the effect that neither I nor KML owns copyright in the Beyond Songs, and that all rights must be negotiated through Amuse, the trade is bound to believe them or at the very least withhold payments and dealings with me and KML. If the letter that caused the damage is not unconditionally withdrawn, I have no means of rectifying the position and avoiding the inevitable damage to myself and KML. I also need to ensure that no similar correspondence is sent out again in order to preserve the status of myself and KML in Hong Kong as the parties properly entitled (unless and until the Court rules otherwise) to deal with copyright in Beyond Songs."

11. As a result of the letter, Warner Music and other distributors are withholding payment of royalties to the Plaintiffs. The Plaintiffs fear that other distributors may follow suit. At least one licencing arrangement for the Group's songs has been aborted at the point when a contract was about to be signed. Consequently, the Plaintiffs' income is decreasing, they will not have the-funds available to be able to continue to exploit the group's works and may be unable to continue in business. It is further suggested that KML, at least, may be unable to continue to defend this action.

12. Three propositions of law about which, I think, there was no real disagreement, fall to be considered by me in deciding this application. First, the tort of slander of title requires proof by a plaintiff that the words used were false and made maliciously. Second, an interlocutory injunction in an action based on libel is granted sparingly and only in the clearest case, particularly where a defendant pleads justification. Third, the jurisdiction to grant a mandatory interlocutory injunction.

13. As regards the first proposition, the position was summarised by Stable J. in Wilts United Dairies Ltd. v. Thomas Robinson Sons & Co. Ltd. (1957) RPC 220 at p.237 :-

" As I understand the law it is this, that if you publish a defamatory statement about a man's goods which is injurious to him, honestly believing that it is true, your object being your own advantage and no detriment to him, you obviously are not liable. If you publish a statement which turns out to be false but which you honestly believe to be true, but you publish that statement, not for the purpose of protecting your own interests and achieving some advantage to yourself, but for the purpose of doing him harm, and it transpires, contrary to your belief, that the statement that you believed to be true has turned out to be false, notwithstanding the bona fides of your belief because the object you had in mind was to injure him and not to advantage yourself, you would be liable for an injurious falsehood."

"The third proposition which I derive from the cases is this, that if you publish an injurious falsehood which you know to be false, albeit that your only object is your own advantage and with no intention or desire to injure the person in relation to whose goods the falsehood is published, then provided that it is clear from the nature of the falsehood that it is intrinsically injurious - I say 'intrinsically,' meaning not deliberately aimed with intent to injure but as being inherent in the statement itself, the defendant is responsible, the malice consisting in the fact that what he published he knew to be false.""

14. The final words relating to malice in that passage are echoed by Glidewell L.J. in his judgment in Kaye v. Robertson And Another (1991) Fleet Street Reports 62, which is authority for the 2nd proposition with which I am concerned. In that case, the plaintiff asserted 4 causes of action including libel and malicious falsehood. At p.67 Glidewell L.J. said :-

" Mr. Milmo for the defendants submits that, assuming that the article was capable of having the meaning alleged, this would not be a sufficient basis for interlocutory relief. In William Coulson & Sons v. James Coulson & Co. [1887] 3 T.L.R. 46, this court held that, though the High Court has jurisdiction to grant an interim injunction before the trial of a libel action, it is a jurisdiction to be exercised only sparingly. In his judgment the Master of the Rolls said:

"Therefore to justify the court granting an interim injunction it must come to a decision upon the question of libel or no libel, before the jury decided whether it was a libel or not. Therefore the jurisdiction was of a delicate nature. It ought only to be exercised in the clearest cases, where any jury would say that the matter complained of was libellous and where if the jury did not so find the court would set aside the verdict as unreasonable."

This is still the rule in actions for defamation, despite the decision of the House of Lords in American Cyanamid Co. v. Ethicon Ltd. [1975] A.C. 396 in relation to interim injunctions generally. This court so decided in Herbage v. Times Newspaper Limited and Others, unreported but decided on 30 April 1981.

Mr. Milmo submits that on the evidence we cannot be confident that any jury would inevitably decide that the implication that Mr. Kaye had consented to give his first interview to Sunday Sport was libellous. Accordingly, we ought not to grant interlocutory relief on this ground.

It is in my view certainly arguable that the intended article would be libellous, on the authority of Tolley v. Fry. I think that a jury would probably find that Mr. Kaye had been libelled, but I cannot say that such a conclusion is inevitable. It follows that I agree with Mr. Milmo's submission and in this respect I disagree with the learned judge; I therefore would not base an injunction on a right of action for libel.

2. Malicious Falsehood

The essentials of this tort are that the defendant has published about the plaintiff words which are false, that they were published maliciously, and that special damage has followed as the direct and natural result of their publication. As to special damage, the effect of section 3(1) of the Defamation Act 1952 is that it is sufficient if the words published in writing are calculated to cause pecuniary damage to the plaintiff. Malice will be inferred if it be proved that the words were calculated to produce damage and that the defendant knew when he published the words that they were false or was reckless as to whether they were false or not.

The test in Coulson v. Coulson (supra) applies to interlocutory injunctions in actions for malicious falsehood as it does in actions for defamation. However, in relation to this action, the test applies only to the requirement that the plaintiff must show that the words were false. In the present case I have no doubt that any jury which did not find that the clear implication from the words contained in the defendants' draft article were false would be making a totally unreasonable finding. Thus the test is satisfied in relation to this cause of action.

As to malice I equally have no doubt from the evidence, including the transcript of the tape-recording of the "interview" with Mr. Kaye in his hospital room which we have read, that it was quite apparent to the reporter and photographer from Sunday Sport that Mr. Kaye was in no condition to give any informed consent to their interviewing or photographing him. Moreover, even if the journalists had been in any doubt about Mr. Kaye's fitness to give his consent, Mr. Robertson could not have entertained any such doubt after he read the affidavit sworn on behalf of Mr. Kaye in these proceedings. Any subsequent publication of the falsehood would therefore inevitably be malicious."

15. Mr. Faulkner submitted that there is no evidence of malice. He said that there is no express assertion by the Plaintiffs of malice on the part of the Defendant. He said the letter is nothing more than an assertion by the Defendant of its rights and a denial of the rights of the Plaintiffs. He said that the letter is simply an emphatic response to the Plaintiffs' newspaper advertisement. He said that there is not even an arguable case of slander of title, let alone a case of the strength required by the authorities.

16. Mr. Faulkner went further. He said that even if malice had been asserted the background to the letter, particularly the institution of the Group's action, is sufficient to remove any suspicion of malice. He referred to Redwood Music Ltd. v. Francis Day & Hunter Ltd. and Others (1978) RPC 429. In that case, Robert Goff J. (as he then was) said at p.467 :-

" The alleged slander of title by Redwood is contained in the letter dated 5th March 1973 written on their behalf by their solicitors, Messrs. Denton, Hall & Burgin, to a number of record companies. I have already quoted the text of that letter in full, and I need not repeat it here. I have no doubt that the publishers took a good deal of offence at the fact that this opening salvo by Redwood was addressed not to them but to the record companies; though I have little doubt that Redwood's purpose in so doing was to bring home to the publishers the seriousness of their claim, having regard in particular to the fact that the claim, when previously advanced by Miss Stern direct to the publishers, had met with so negative a response. Be that as it may, Mr. Stable's contention was that Redwood wrote that letter either knowing that their assertion of title to the reversionary rights was false, or being reckless as to whether it was true or false. I do not consider that there is any substance in this contention. To start with, it is prima facie most unlikely to be correct. Redwood have invested a considerable sum of money in advancing their claim. By the time the letter of 5th November 1973 was written, they had already been involved in prolonged consultation with their legal advisers, and had gone to the expense of preparing documents and taking assignments of the reversionary interests of a large number of estates. Since that date, they have of course embarked upon some very expensive litigation, with a view to establishing their rights; but it is clear that, at the date of the letter, they had already resolved so to proceed. In such circumstances, it is almost inconceivable that they knew their claim to be ill- founded, or were reckless whether it was well-founded or not."

17. It is trite law that if a defendant says that he is going to justify, no interlocutory injunction will be granted unless the court is satisfied that the defendant will not be able to justify. See Gatley on Libel and Slander 8th ed. para. 1574, and Bonnard v. Perryman (1891) 2 Ch. 269. That case shows just how strongly the courts lean against granting interlocutory relief in proceedings based on libel. The libel complained of, was as serious as perhaps a libel could be in that :-

"The article so published, and which the Defendant intends to repeat, calls the person denounced a city thief, a vulture, speaks of his swindles and his nefarious practices, and says, amongst other choice phrases, that there is no phase of the criminal law that has not been scoffed at by him, and that fraud, conspiracy, burglary, and felony have been used to aid his schemes to despoil and hoodwink the public."

18. By way of justification, that defendant said that he would prove the truth of the allegations by calling witnesses, by cross-examination of the plaintiffs and by other evidence which he could or should not produce on an interlocutory application. Pretty thin stuff, if I may respectfully say so, but it appears to have impressed the Court of Appeal.

19. I have to say that I am not impressed. I am not aware of any assertion of justification on affidavit by anyone on behalf of the Defendant. Indeed, I think it would be difficult for the Defendant to make such an assertion. Mr. Faulkner's argument was that the Defendant can rely upon the Group's action which, if successful, may have the effect of making some or all of the agreements and assignments between the Plaintiffs and the Group void. If that is the result of the Group's action, then the Plaintiffs' claims to copyright will have been without foundation and necessarily spurious. In my judgment, that argument is, if I may respectfully say so, equally spurious. The judge or jury trying this action will have to look at the circumstances as they prevailed at the time the Defendant's letter was written and published. At that time, the Defendant was indisputably aware of the background, because the Group's action (upon which Mr. Faulkner equally relies to dispel any suggestion of malice) is designed to avoid the agreements and assignments between the Plaintiffs and the Group. Those documents go back many years during which time the Plaintiffs' title has not been challenged and the Plaintiffs have arranged publication or licensing of the Group's material, and received royalties therefor. How, in those circumstances, anyone could describe the Plaintiffs' claim to copyright as "spurious and without foundation" is wholly beyond my comprehension. Those words suggest that the Plaintiffs, in order to take advantage of a successful group of musicians, have very lately come forward with some cock and bull story about an agreement or arrangement with the Group, in relation to copyright, which had not previously seen the light of day. In my judgment, the words complained of were false and plainly known to be false on the part of the Defendant. A successful outcome (for the Group) of the Group's action will not, in my judgment, have any effect upon this action. I fail to see how the Defendant can hope to justify the offending words.

20. In the circumstances, malice is to be inferred notwithstanding the absence of any express allegation by the Plaintiffs. In any event, it is difficult to conceive what other purpose the Defendant could have had in sending the letter in the terms in which it did, other than to make life as difficult as possible for the Plaintiffs. I do not regard the letter simply as an emphatic denial of the Plaintiffs' title.

21. The question of damage then arises. There is no evidence that the Defendant is likely to suffer any direct financial loss or damage. Mr. Faulkner suggested that there might be damage to the Defendant's reputation if the letter is withdrawn, because that would be more harmful than a simple assertion of contrary claims. I do not think there is anything in that. Mr Faulkner also said that there might be problems if the Plaintiffs licence, assign or otherwise deal with copyright before the outcome of the Group's action. There is nothing in this that cannot be cured by an appropriate provision in any injunction that I might grant.

22. As far as the Plaintiffs are concerned, the loss of royalties, even if on a temporary basis (and temporary in these circumstances might be many months if not years) will plainly affect the Plaintiffs' ability to do business. That will equally plainly be aggravated by the damaging allegation which has been made against them. Whilst I reject the suggestion that KML, at least, may have difficulty in funding the litigation in which it is now involved, I am satisfied that damage has been shown.

23. The Plaintiffs having overcome the initial hurdles, should I exercise my discretion in their favour and grant a mandatory injunction. The principles were set out by Hoffmann J. in Films Rover International Ltd. and Others v. Cannon Film Sales Ltd. (1987) I WLR 670. At p.680, the judge said :-

"The principal dilemma about the grant of interlocutory injunctions, whether prohibitory or mandatory, is that there is by definition a risk that the court may make the wrong decision, in the sense of granting an injunction to a party who fails to establish his right at the trial (or would fail if there was a trial) or alternatively, in failing to grant an injunction to a party who succeeds (or would succeed) at trial. A fundamental principle is therefore that the court should take whichever course appears to carry the lower risk of injustice if it should turn out to have been wrong in the sense I have described. The guidelines for the grant of both kinds of interlocutory injunctions are derived from this principle.

The passage quoted from Megarry J. in Shepherd Homes Ltd. v. Sandham [1971] Ch. 340, 351, qualified as it was by the words "in a normal case," was plainly intended as a guideline rather than an independent principle. It is another way of saying that the features which justify describing an injunction as "mandatory" will usually also have the consequence of creating a greater risk of injustice if it is granted rather than withheld at the interlocutory stage unless the court feels a "high degree of assurance" that the plaintiff would be able to establish his right at a trial. I have taken the liberty of reformulating the proposition in this way in order to bring out two points. The first is to show that semantic arguments over whether the injunction as formulated can properly be classified as mandatory or prohibitory are barren. The question of substance is whether the granting of the injunction would carry that higher risk of injustice which is normally associated with the grant of a mandatory injunction. The second point is that in cases in which there can be no dispute about the use of the term "mandatory" to describe the injunction, the same question of substance will determine whether the case is "normal" and therefore within the guideline of "exceptional" and therefore requiring special treatment. If it appears to the court that, exceptionally, the case is one in which withholding a mandatory interlocutory injunction would in fact carry a greater risk of injustice than granting it even though the court does not feel a "high degree of assurance" about the plaintiff's chances of establishing his right, there cannot be any rational basis for withholding the injunction."

24. I have no hesitation in finding that the Plaintiffs ought to get the mandatory relief which they seek. That relief, the withdrawal of the offending letter, will not as in so many cases involving mandatory injunctions, have the effect of deciding the action. Further, like Hoffmann J., I find no difficulty about formulating the order in an enforceable form. It is also difficult to see how that withdrawal could cause loss, let alone uncompensatable loss, to the Defendant. On the other hand, if the letter is not withdrawn there will be loss to the Plaintiffs, a loss which will be difficult to quantify. Finally, if the letter is withdrawn, the status quo will be restored, the status quo being the Plaintiffs' undisputed holding of agreements and assignments vesting copyright in them, and the collection of royalties therefor, subject only to the Group's action in which those documents are sought to be avoided.

25. In the circumstances, it is not necessary for me to deal with the Plaintiffs' other cause of action, unlawful interference. Suffice it to say that that tort depends upon the letter and the tort of slander of title. I agree with Mr. Faulkner that the same considerations would apply. I reject Mr. Garland's unsupported submission that it would fall to be considered in accordance with ordinary American Cyanamid principles. If Mr. Garland's submission is correct, he would be able to get in by the back door what he could not get in the front.

26. In principle, therefore, I am prepared to grant the relief sought by the Plaintiffs. I will grant an order in terms of paragraph 1 of their summons, so that the offending letter is withdrawn without comment and unconditionally. I am concerned that paragraph 2 is drawn in terms which are perhaps too wide because it would prevent the Defendant from legitimately answering questions about the Group's action. I will hear counsel as to how this might be more suitably worded. I will also hear counsel on the question of the proper protection of the copyright pending resolution of the Group's action, and of course, on the question of costs.