APPLE INC.AND ANOTHER v. PROVIEW INTERNATIONAL HOLDINGS LTD AND OTHERS

HCA 739/2010

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NO. 739 OF 2010

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D E C I S I O N

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1. This is the application of the plaintiffs for the following order:

“The 1^st Defendant be debarred from adducing expert evidence (in particular, the Expert Report of Sun Chang Yong and Yao Zhen Guang dated 8 October 2011 and the Expert Report of Wen-Chieh Wang and Pei-Ling Lin dated 12 October 2011) at trial for non-compliance with paragraph 3 of the Order of Master Ho dated 1 September 2011.”

Background

2. The 1^st plaintiff (“P1”) needs no introduction.  For present purposes, it may be noted that P1 launched its first generation tablet computers called “iPad” in January 2010.  Newer versions called “iPad 2” and “New iPad” were subsequently launched in March 2011 and March 2012 respectively.

3. The 2^nd plaintiff (“P2”) was set up by P1 to acquire trademarks relating to the name and mark “iPad”.

4. The 1^st defendant (“D1”) is the holding company of the Proview Group.  The 2^nd defendant (“D2”), the 3^rd defendant (“D3”) and the 5^th defendant (“D5”) belong to that group and are indirectly owned by D1.

5. The 4^th defendant (“D4”) was the founder of the Proview Group.  He is also one of the two executive directors of D1 and importantly for the purpose of this application:

(a)  the “responsible person” and a director of D2 which is a Taiwanese company; and

(b)  the “legal representative”, Chairman and General Manager of D3 and D5 which are PRC companies.

6. Mr Dawes (the plaintiffs’ counsel) has summarised their claim against the defendants as follows:

(a)  By an agreement made in or about December 2009, it was agreed that D1, D2 and D3 would sell, transfer and assign certain registered iPad trade marks (“iPad Trade Marks”) to P2 for a consideration of £35,000 (“Agreement”).  The amount was duly paid by P2.

(b)  The Agreement was contained in and/or evidenced by: (i) e-mail messages passing between the parties’ representatives; and (ii) a written agreement (“Written Agreement”) and 8 sets of written assignments and related documentation (“Country Assignments”) prepared and executed to give effect to the Agreement.

(c)  In the negotiations leading to the Agreement, representatives of D1, D2 and D3 represented and led P2 to believe, and the parties proceeded on the understanding, that all the iPad Trade Marks, in particular two iPad trade marks registered in mainland China (“China iPad Marks”), were registered in the name of, and owned by, D2.

(d)  Accordingly, in drawing up the Written Agreement and the Country Assignments, only D2 was named as the proprietor, owner and assignor of the iPad Trade Marks and in particular the China iPad Marks.  Representatives of D1, D2 and D3 had approved the drafts of these documents prior to their execution and confirmed that D2 was the owner of all the iPad Trade Marks.

(e)  It was subsequently discovered following the execution of the written documentation that D3, and not D2, was the registered proprietor of the China iPad Marks. After the launch of P1’s products, D1, D2 and D3 have refused and continue to refuse their obligations under the Agreement to ensure full and proper compliance with the Agreement or to effect the assignment of the China iPad Marks to P2.

(f)  In a meeting on 5 March 2010 attended by the President of D3’s Business Display Division (at the instructions of D4) and the legal representative and Chairman of D2, D3 and D5, the situation was described as an “opportunity” and it was suggested that the plaintiffs could purchase the China iPad Marks from D3 for US$10 million.

(g)  On or about 7 May 2010, D3 and D5 jointly applied to the Trade Mark Office to transfer the China iPad Marks to D5 in breach of a written undertaking given by D3’s then solicitors not to dispose of the China iPad Marks.

(h)  On 2 June 2010, the plaintiffs obtained an ex parte injunction from this Court against D1, D3, D4 and D5 seeking to preserve the China iPad Marks.  The injunction has, in substance, been continued until trial.

7. By this action, the plaintiffs claim against the defendants for specific performance of the Agreement, declaration that the China iPad Marks are being held on trust for them, transfer of the China iPad Marks to P2, rectification of the Agreement, injunction to restrain the defendants from disposing of the China iPad Marks, and damages.

8. D2, D3 and D5 have not given any notice of intention to defend.  The plaintiffs’ application to enter judgment against them has been adjourned sine die which, according to Mr Dawes, will be restored for determination at the same time as the trial of this action.

9. D1 and D4 used to be represented by the same firm of solicitors.  Their solicitors ceased to act for them after the filing of their common Defence.  D4 has since been adjudicated bankrupt and has taken no further part in these proceedings.  D1 is the only defendant actively defending the action.

This Application

10. The plaintiffs have specifically pleaded in paragraph 12(b) of the Statement of Claim that:

(a)  The Written Agreement and the Country Assignments were executed by one Ray Mai Shih Hung (“Mr Mai”), the Legal General Counsel of the Proview Group, for and on behalf of D2; and

(b)  Mr Mai was authorized to execute the Written Agreement and the Country Assignments by a letter of authorization signed by D4 (“Authorization Letter”).

11. Although D1 has admitted Mr Mai’s signature on the Agreement (which is called “Proview Taiwanese Agreement” in the Defence) and the Country Assignments, and that D4 has signed the Authorisation Letter (see paragraph 17.1 of the Defence), it alleges inter alia that:

“24. … at all material times prior to the purported execution of [the Agreement] and [the Country Assignments] by Mr Mai, the respective managements of the 1^st to 3^rd Defendants were not informed of, nor had any of them purported to authorise:-

24.1 any negotiations between Mr Timothy Lo, Mr Mai and/or Mr Yuan on one part, and the 2^nd Plaintiff on the other part;

24.2  the execution of [the Agreement] or [the Country Assignments] by Mr Mai.”

and that:

“26. In the circumstances, neither Mr Huy Yuan nor Mr Mai ever has any authority, whether actual or apparent, to bind any of the Defendants in relation to any matter pertaining to any of the [iPad Trade Marks including the China iPad Marks], [the Agreement] or [the Country Assignments].”

12. In reply, the plaintiffs have pleaded in paragraph 53(5) of the Reply that:

“ (a) As a matter of Taiwanese law and practice, a “responsible person” or “representative” (代表人) of a company:

(i) has the power to bind that company with his signature alone; and

(ii) has full authority to act on behalf of the company and bind the company.

(b) As a matter of PRC law:

(i) A legal representative of a company has the power to act on behalf of the company and bind that company, for example, a document affixed with his signature alone can bind that company.

(ii) It is presumed that a legal representative’s acts are binding on the company. No such presumption is available with respects to the acts of other directors of the company.

(iii) If a legal representative of a company acts outside the scope of his/her powers, such acts still bind that company unless the opposite party knew or ought to have known that the legal representative was acting outside the scope of his/her powers.

(c) In the premises, the 4^th Defendant had the authority to bind the 2^nd and 3^rd Defendants by his signature.

(d)  Mr Mai executed the Agreement and the Country Assignments under the Authorisation Letter executed by the 4^th Defendant.”

13. It is apparent from the above that expert evidence on Taiwanese law and PRC law is required to assist the trial judge to decide whether the plaintiffs’ assertions concerning foreign law should be accepted.

14. On 16 February 2011, Master Levy granted leave to the plaintiffs to adduce expert evidence at trial:

(a)  on PRC company law in relation to the issue raised in paragraph 53(5)(b) of the Reply; and

(b)  on Taiwanese company law in relation to the issue raised in paragraph 53(5)(a) of the Reply,

and directed the plaintiffs to disclose to the defendants such evidence in the form of written reports within 120 days.

15. In compliance of Master Levy’s order, the plaintiffs served the following reports on the defendants:

(a)  the expert report of William Shaojie Lu on PRC law; and

(b)  the expert report of Wang Wen-Yeu on Taiwanese law.

16. Subsequently, Master Ho made the following order against D1 on 1 September 2011:

“Unless by 4 pm on 13 October 2011, the 1^st Defendant do serve the expert reports in response and limited to the issues set out in the two expert reports prepared by Wang Wen-Yeu and William Shaojie Lu for the Plaintiffs, failing which the 1^st Defendant shall be debarred from adducing expert evidence at the trial.”

17. On 13 October 2011, D1 served the 2 expert reports which form the subject matter of this application on the plaintiffs.

18. Mr Dawes now complains that instead of responding to the plaintiffs’ expert evidence and limiting the discussion to the issues set out in the plaintiffs’ reports, D1’s experts have somehow went off on a tangent and dealt with entirely different issues and matters in their reports.  By failing to comply with the unless order of Master Ho, so he argues, D1 should be debarred from adducing such expert evidence at trial.

19. Further, Mr Dawes submits that D1 (whilst it was still legally represented) had been put on notice of its failure as early as in October 2011.  Yet, D1 has not sought relief from sanction under Order 2, rule 4. Accordingly, the sanction specified in the unless order has taken effect and D1 should be debarred from adducing any expert evidence at trial.

Discussion

20. In my view, the starting point of the discussion is Order 38, rule 36(1).  It provides that:

“Except with the leave of the Court or where all parties agree, no expert evidence may be adduced at the trial or hearing of any cause or matter unless the party seeking to adduce the evidence has applied to the Court to determine whether a direction should be given … and has complied with any direction given on that application.”

21. So, except where all parties agree or with leave of the court, a party may only adduce expert evidence at trial if he has complied with the expert direction given by the court.

22. The plaintiffs have complied with the expert direction of Master Levy and may therefore adduce their 2 expert reports at trial.

23. Whether D1 may adduce its 2 reports will depend on whether it has complied with expert direction in terms of the unless order of Master Ho.

24. Master Ho has confined the scope of the expert evidence to be adduced by D1 to a response to the plaintiffs’ evidence and limited it to the issues set out in the plaintiffs’ reports.

25. William Shaojie Lu, the plaintiffs’ expert on PRC law, identified and dealt with the following issues in his report (adopting the numbering used in his report):

(a)  What is the role of a legal representative of a company, and what are the powers and/or authority of a legal representative of a company?

(b)  Is there any difference between the powers and/or authority of a legal representative of a company as compared to those of a director of a company?

(c)  Is there any presumption that the acts of a legal representative of a company are binding on that company?

(d)  Do the acts of the legal representative alone bind the company?  In particular, can the legal representative bind the company:

•   by only the affixing of his signature on a document?
•   by only the affixing of his personal chop on a document?

(e)  What is the legal effect of the affixing of the personal chop of the legal representative of a company on a document in place of his signature?  In particular, is the affixing of the personal chop of the legal representative on a document equivalent to the signature by the legal representative of that document?

(f)  If a legal representative of a company acts outside the scope of his/her authority and/or power, are there any circumstances where such acts would still bind the company?  If so, in what circumstances would such acts still bind the company?

(g)  In light of the facts set out in section 1 of the Instruction Letter (which is annexed to the report), does D4 have the authority to bind D3 by his signature and/or personal chop?

26. D1 puts forward Sun Chang Yong and Yao Zhen Guang as its PRC law experts.  They discussed the following issues in their report (adopting their numbering):

(1)  “麥世宏於2009年12月23日在台北與IP公司簽署的《AGREEMENT》在授權和簽署的手續上是否合法、有效？”  

(2)  “該《授權書》的主體是否明確？授權人是公司法人，還是楊榮山個人？”  

(3)  “楊榮山先生當時是以甚麼身份授權麥世宏？是以台灣唯冠電子股份有限公司負責人的身份，還是香港唯冠國際控股有限公司的負責人，或者是以唯冠科技（深圳）有限公司負責人的身份進行授權？”

(4)  “這個授權書是否只能使麥世宏代表台灣唯冠電子股份有限公司簽約而不能代表香港唯冠國際控股有限公司和唯冠科技（深圳）有限公司？即使楊榮山是這三個公司的負責人，是否也不可以使麥世宏有這個代表權？”

27. The plaintiffs have engaged Wang Wen-Yeu to give an opinion on Taiwanese law.  The expert set out and dealt with the following issues in his report (adopting his numbering):

(a)  What is the role of a Responsible Person/Representative (代表人) of a company, and what are the powers and/or authority of a Responsible Person/Representative of a company?

(b)  Is there any difference between the powers and/or authority of a Responsible Person/Representative of a company compared to those of a director of a company?

(c)  Does the Responsible Person/Representative of a company have full authority and/or power to act on behalf of that company and bind that company?

(d)  Do the acts of the Responsible Person/Representative of a company alone bind the company?  In particular, can the Responsible Person/Representative of a company bind the company:

•   by only the affixing of his signature on a document?
•   by only the affixing of his personal chop on a document?

(e)  What is the legal effect of the affixing of the personal chop of the Responsible Person/Representative on a document in place of his signature?  In particular, is the affixing of the personal chop of the Responsible Person/Representative on a document equivalent to the signature by the Responsible Person/Representative of that document?

(f)  As one of the 3 directors of D2 and its Chairman and Responsible Person/Representative, does D4 have the authority to bind D2 by his signature and/or personal chop?

28. D1’s chosen experts on Taiwanese law are Wen-Chieh Wang and Pei-Ling Lin.  They dealt with the following issues in their report:

(a)  “麥世宏於2009年12月23日在台北與第二原告IP APPLICATION DEVELOPMENT LIMITED（下稱IP公司）簽署的「AGREEMENT」（下稱協議書）在授權及簽署的手續上是否合法、有效？”  

(b)  “楊榮山作為台灣唯冠電子股份有限公司（下稱台灣唯冠公司）的法定代理人即董事長是否有權代表台灣唯冠公司授權麥世宏簽署上述協議書？”

(c)  “授權書的主體是否明確？授權主體是個人還是公司？若是公司，授權主體是台灣唯冠公司，還是唯冠科技（深圳）有限公司（下稱深圳唯冠公司），還是唯冠國際控股有限公司（下稱香港唯冠公司），或者是三個公司共同為授權主體？”

(d)  “授權書在授權人公司主體明確的情況下加蓋法定代理人即董事長的個人印章是否表示該授權為法定代理人即董事長負責人的個人授權而非公司授權？”

(e)  “根據該授權書的授權，被授權人麥世宏能否代表深圳唯冠公司簽署上述協議書？是否會產生該授權書亦對深圳唯冠公司發生法律效力?”

29. It is quite obvious that D1’s experts (in both respects) did not adopt the issues set out in the plaintiffs’ reports in their discussion.  Instead, they reframed the issues and rendered an opinion from a different perspective.

30. Ms Sun has submitted at the hearing that D1’s evidence nonetheless correspond in substance to the plaintiffs’ evidence as follows:

  On PRC law

(a)  issue (1) in D1’s report corresponds to issue (d) in the plaintiffs’ report;

(b)  issue (2) in D1’s report corresponds to issues (d) and (e) in the plaintiffs’ report;

(c)  issue (3) in D1’s report corresponds to issue (a) in the plaintiffs’ report; and

(d)  issue (4) in D1’s report corresponds to issues (c), (f) and (g) in the plaintiffs’ report.

  On Taiwanese law

(e)  issue (a) in D1’s report corresponds to issues (c) and (d) in the plaintiffs’ report;

(f)  issue (b) in D1’s report corresponds to issues (b), (c), (d) and (e) in the plaintiffs’ report;

(g)  issues (c) and (d) in D1’s report correspond to issue (f) in the plaintiffs’ report; and

(h)  issue (e) in D1’s report corresponds to issue (f) in the plaintiffs’ report.

31. Mr Dawes has cautioned against a general comparison of the reports.  He draws a distinction between the present application which is concerned with non-compliance with a court order and an application for leave to adduce expert evidence which is concerned with the relevancy of the evidence proposed to be adduced.  He observes that D1 has blatantly breached the unless order of Master Ho and the court should allow the sanction specified in the order to take effect.  For otherwise, he submits, the court will be rewarding the defaulting party with unearned leave to adduce unauthorised expert evidence at trial through the back door.

32. I think Mr Dawes is right.  In a judgment handed down by the Court of Appeal on the same date as the hearing of this application[1], Fok JA confirmed the following principle in relation sanction for failure to comply with a rule or court order:

“47. Mr Wong submitted, in reliance on Marcan Shipping (London) Limited v Kefalas & Anor [2007] EWCA Civ 463, unrep., 17.5.07 at §§28 to 36, that, under the new procedural regime, it is not for the party seeking to take advantage of a default to apply to the court in order to render a sanction for that default effective. Instead, the sanction takes effect immediately and it is for the party in default to apply for relief from the sanction. Only if there is an application for relief from the sanction is the court required to consider whether, in all the circumstances, it is just to make an order granting relief from the consequences that would otherwise follow.

48.  We would accept those submissions as an accurate summary of the effect of O.2 r.4 and O.2 r.5.”

33. As I have observed above, it is quite obvious that D1’s experts’ have failed to pay heed to the unless order of Master Ho by responding to the plaintiffs’ evidence and limiting their discussion to the issues set out in the plaintiffs’ reports.  Notwithstanding promptings from the plaintiffs, D1 has still not applied for relief.

34. In deference to Ms Sun’s submission, I have considered the reports in detail.  I do not think it can fairly be said that the discussion in D1’s reports generally correspond to the issues discussed by the plaintiffs’ experts.

35. D1’s experts (in both respects) started off by discussing the validity of the Agreement.  But there is no issue on the validity of the Agreement. Nowhere in the Defence has D1 challenged the validity of the Agreement.  Far from that, D1 is relying on the terms of the Agreement in its defence (see paragraph 14(4) of the Defence).  Thus, no expert evidence on the validity of the Agreement should be allowed (as there is no dispute). 

36. D1’s experts then dealt with the Authorised Letter.  They generally discussed, from their respective perspective, the identity of the authoriser, the capacity in which D4 authorized Mr Mai and whether other defendants might be bound by D4’s authorisation.  They construed the Authorisation Letter based on their respective expertise and concluded that D2 was the authoriser.  They further opined that D1 and D3 could not be bound by D4’s authorisation.

37. But why should Hong Kong court apply either PRC law or Taiwanese law to the Authorisation Letter?  Neither the plaintiffs nor D1 have pleaded that the letter should be subject to foreign law and the trial judge would simply apply Hong Kong law in construing it.  As such, the trial judge would not be assisted by an opinion based on PRC law or Taiwanese law.

38. D1’s Taiwanese law experts have even gone beyond their expertise by applying PRC law in discussing why D3 (a PRC company) should be bound by D4’s authorization (see the discussion under issue (e)). 

39. In my view, D1’s experts have generally usurped their function as experts by trying to decide the case for the trial judge.

40. What has caused me some concern is that D1’s reports nonetheless contain relevant evidence.  For example, D1’s PRC law experts have discussed in issue (4) in their report inter alia whether D3 should be bound by D4’s authorization.  D1’s Taiwanese law experts have also, in issues (b) and (d) in their report, touched upon issues (c), (d), (e) and (f) in the plaintiffs’ report relating to D2.  I therefore explored with the parties at the hearing whether I should adopt the approach in Wong Hoi Fung v American International Assurance Co (Bermuda) Ltd  [2002] 3 HKLRD 507 and allow so much of D1’s evidence to go to trial which is clearly relevant or where I cannot form a clear view on its relevance.

41. In the end, I am convinced by Mr Dawes to adopt a robust approach. 

(a)  This is after all not an application for leave to adduce expert evidence.  Instead of considering the relevancy of D1’s evidence (which has already been decided in terms of the expert directions given), I should be focusing on whether D1 has complied with the unless order.

(b)  Given that D1 has clearly failed to comply with the unless order, I should (in accordance with the approach approved by the Court of Appeal) allow the sanction to take effect leaving it to D1 to invoke Order 2, rule 4 to apply for relief.  I should not think for D1 (even though D1 may be acting in person) and consider whether relief should be granted when there is no such application.  This is all the more so as D1 had been warned of the consequence whilst it was still legally represented.

(c)  More fundamentally, I consider it impractical to allow part of D1’s expert evidence to go to trial.  First, D1’s reports will have to be redacted if I were to allow only part of it to go to trial.  This is not an easy exercise as D1 is currently unrepresented.  It may also be difficult for the trial judge to appreciate D1’s evidence properly without a full context.  Secondly, D1’s experts have not adopted the issues framed by the plaintiffs’ experts in their discussion.  The trial judge may have difficulty comparing the evidence from both sides when the experts have adopted a completely different approach. Thirdly, it is unrealistic to expect the plaintiffs to agree on D1’s evidence and the calling of D1’s experts at trial is inevitable.  This will tantamount to giving D1’s experts a free ticket to respond to the plaintiffs’ evidence at trial. This would be unfair to the plaintiffs as they would not know beforehand what D1’s experts would say and prepare for it.  That was precisely the scenario which the unless order had set out to avoid in the first place.

42. In my view, D1 has clearly failed to comply with the unless order of Master Ho and the sanction specified in the order should take effect.  Since D1 has not complied with the expert direction given by the court, it should not be allowed to adduce any expert evidence at trial. 

Conclusion

43. For the aforesaid reasons, the plaintiffs’ application is granted.

44. Costs normally follow the event.  I make an order nisi that D1 shall pay the plaintiffs’ costs of this application forthwith with certificate for counsel, to be summarily assessed if not agreed.  Unless an application has been made within 21 days from the date of this decision to vary the order nisi, the order shall become absolute.

45. As D1 is acting through a director who has elected to speak Mandarin at the hearing, I direct Ms Sun to make an appointment with a court interpreter through my clerk if necessary within 7 days from the date of this decision for the decision to be interpreted to her.

46. For the purpose of the summary assessment:

(a)  The plaintiffsare directed to lodge in court and serve on D1 a statement of costs in the usual form within 28 days from the order nisi becoming absolute.  Longer than usual time is allowed here to cater for negotiation on costs.

(b)  D1 is directed to lodge in court and serve on the plaintiffsa succinct list of its objections within 14 days thereafter.

(c)  The summary assessment will be conducted by me without an oral hearing unless otherwise directed, and the parties will be notified of the result in writing in due course.