SHELL ELECTRIC MFG (HOLDINGS) CO LTD v. LIU CHI KUEN TONY t/a ADA FAN ENTERPRISES

HCA2768/2001
& HCA2821/2001

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NOS.2768 & 2821 OF 2001

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(Consolidated pursuant to the Order of the Hon Waung J
made on 9 November 2001)

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J U D G M E N T

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1. This is a contempt application by the plaintiff against the defendants in this case the plaintiff had decided not to proceed against Mrs Liu and therefore the application is only against the personal defendant, Tony Liu Chi Kuen, and against the corporate defendant, Kingslot Company Limited for contempt in relation to three sets of orders made firstly by Yeung J on 22 June 2001 in the morning, that is named the first order, and then Yeung J's second order in the afternoon of 22 June 2001 and thirdly, my order of 13 November 2001.

2. In relation to the first two orders, it is alleged that the two alleged contemptnors had breached the orders which are prohibitory in nature in that they had in defiance of the orders sold the prohibited goods from China to Nigeria. In relation to the third order, it is alleged that there was both the similar breach of the prohibitory side of the order under paragraph 1 as well as breach of paragraph 2, a discovery order in that the affidavits filed pursuant to that paragraph 2 did not disclose the various sales that had taken place from China to Nigeria.

3. The goods in question, that is the subject of the hot dispute, is a very popular fan that are manufactured and sold by the plaintiff under their trademark and copyright in Hong Kong to the profitable market in Nigeria. The defendants have obviously capitalized on that Nigeria market and have caused similar fans to be made in China which is apparently perfectly legitimate under Chinese Law because the plaintiff enjoys no special right in China in relation to those fans in China, and caused them to be sold to Nigeria. It is not alleged in today's application that there had been any activities carried out in Hong Kong as such by the defendants. The bulk of the evidence tends to show that the activities were carried on by the defendants in China and Nigeria. The extensive evidence filed resulted in the parties being able to argue before me today on two narrow points of construction that are by no means easy and they are quite novel in this type of contempt proceedings. The two points are respectively first, whether on a proper construction of the three prohibitory orders, they can be said to have only local implication, that is, by reference to act in Hong Kong or whether they are not limited to Hong Kong. The second issue in relation to discovery under paragraph 2 of my order is a little bit more complex which I will describe in fuller detail.

4. As to the first issue, the order made by Yeung J in the first order and consists of various prohibitions but in similar terms as can be seen at page 1 of the bundle. I will just read paragraph 1(a), for example :

"1. The Defendant, whether acting by itself, its directors, officers, servants or agents or any of them or otherwise howsoever, be restrained until after the judgment in this Action or further order from :-

(a) manufacturing, marketing, importing, exporting, distributing, selling, supplying, offering for sale and/or supply and/or otherwise howsoever dealing in or with any ceiling fans of the type exhibited as 'LCW-38' to the Affirmation of Leung Chun Wah ('the Leung Affirmation') filed herein on behalf of the Plaintiff; ..."

The similar wording appears in the other two orders.

5. The question before me and that divides the parties is whether on those words, the proper and fair reading of the order is without geographical limitation of the acts prohibited or whether they are limited only to Hong Kong. It is very clear and it is not in dispute that appropriate geographical scope words which (as Mr Yan, SC for the plaintiff admitted) could easily be put into the order would be : after the words "or further order from" "in Hong Kong and/or Nigeria and/or China" and that if these words were there, that would make it very clear as to the acts that are prohibited to be done in those places.

6. The general principle that had been submitted to me by Mr Garland, SC for the defendants, on a proper construction of the order specially in the context of a contempt proceedings, is that the standard of proof is an extremely high one (I think of beyond reasonable doubt as applies in a criminal or quasi-criminal matter because it involves the liberty of the subject) and that the terms of an order attracting penal consequences must be clear and unambiguous (the reference is to Halsbury's Laws of Hong Kong, Volume 7, paragraph 110.066 as well as to the case of R. v. City of London Magistrates Court [1997] 3 All ER 551 at 558). It also follows from that first principle that any ambiguity in the order must be resolved in favour of the defendant. The defendant must be given the benefit of the doubt. That proposition is supported by the case of Haddonstone v. Sharp [1996] FSR 767 at 773 and 775.

7. I think if one takes those two propositions together, then it seems to me, and common sense dictates that penal orders must be clear in order to attract any legal penal consequences and that where it does not say anything about geographical limitation or extension if I may put it that way, then it is presumed and must be held to be limited to Hong Kong because that is what a Hong Kong court is supposed to deal with Hong Kong acts. If it is intended that the act prohibited is an act done outside Hong Kong, then an order must say it clearly so that anyone reading it, not just a defendant who was in court on the day of the hearing but a defendant who was absent because he was acting in person or even third parties who may be involved in one way or another with the execution of that order would know what a defendant is entitled or not entitled to do. It seems to me that, therefore, there are clearly powerful reasons for the court to conclude that the three prohibitory orders made have a Hong Kong geographical limitation.

8. It is suggested by Mr Yan in his firm submissions to me that I must have regard to the context in which the orders have been given and the context is the evidence of the plaintiff in support of its case, that the defendants are suspected of carrying on these unlawful activities mostly in China and in Nigeria and that is where they want it stopped. Of course, an order has to be made in the context of the facts but that does not mean an order can be construed by reference to the material used in the court proceedings. I certainly regard it as a dangerous precedent to supply words which are clearly not in the Order into the Order by reference to what had been done in the proceedings itself. An Order should be able to stand on its own feet and be read by anyone and so understood clearly and that is how it should be interpreted and if there is room for ambiguity or doubt then it must be resolved in favour of the defendants.

9. The plaintiff, as I understand it, may well have a serious legitimate complaint against the defendants for its activities to the detriment of the plaintiff. However I must apply the law and the law says clearly that you can only send someone to jail if the order is clear and it seems to me that in this case if the order is not clear (to my mind the order is clear and the order is limited to acts in Hong Kong), then the defendants walk away by the long established principle of the law requiring ambiguities to be resolved in the defendant's favour. So on the first issue, I regret that I am unable to accede to Mr Yan's submissions and I hold in favour of the defendants not being in breach of the prohibitory orders made.

10. I now turn to the second point. This is far more difficult I confess but I will do the best I can.

11. The order made in paragraph 2 of my Order is an order for discovery. I read the relevant part of the order from paragraph 2 :

"2. The Defendants, in the case of the 1st Defendant, by himself and in the case of the 2nd Defendant, by a director, do, within 21 days of the service of this Order, make and file an affidavit/affirmation and serve a copy thereof on the Plaintiff's solicitor's setting forth so far as is known to the Defendants the names and addresses of all persons, firms or companies :-

(a) to whom the Defendants have sold and/or supplied and/or offered to sell and/or supply any items or products of the types referred to in Paragraph 1 hereof;

(b) from whom the Defendants have ordered, bought and/or obtained supplies of any items or products of the types referred to in Paragraph 1 hereof;

(c) who has offered to sell and/or supply to the Defendants any items or products of the types referred to in Paragraph 1 hereof;

(d) who has ordered from the Defendants any items or products of the types referred to in Paragraph 1 hereof;

together with the full details of the respective dates of such acts and the quantities and prices of any items and products involved and do disclose in the said affidavit the exact whereabouts of any person, firm or company known or believed by the Defendants to be in possession of any such products and further do exhibit to such affidavit copies of all documents relevant to the aforesaid acts in the possession, power, custody or control of the Defendants."

Paragraph 3 goes on to give liberty to the plaintiff to use the paragraph 2 affirmations filed by the defendants for the purpose of initiating, prosecuting proceedings in Hong Kong or elsewhere, in other countries.

12. The argument by the parties, respectfully is that : by Mr Garland to the effect that there has been no breach of paragraph 2 because although the defendants in their discovery affirmation did not refer to the various sales, the sales were not Hong Kong sales but all relates to acts done outside Hong Kong, whereas the argument of Mr Yan is that unlike paragraph 1 which might have a geographical limitation if I should rule against him which I have done, paragraph 2 is a Norwich Pharmacal order and such order has no geographical limitation.

13. I think the first approach I have to a construction of paragraph 2 is to say this : the words where the verbs of the various acts of the defendants appear, ought to carry the same meaning both in paragraph 1 and paragraph 2 because they appear in the same document. By my ruling I have indicated earlier, I hold that the verbs such as manufacturing, marketing, importing, exporting, distributing, selling, supplying, offering so on and so forth in paragraph 1 carry the normal limitation of Hong Kong acts and do not extend to foreign acts. Now it is a standard rule of construction that when the same words appeared in a different part of the same order, then they must carry the same meaning, namely with the same limitation to Hong Kong and does not extend to foreign parts so that where the words under paragraph 2(a) appear "to whom the Defendants have sold", one would say (in Hong Kong), "and/or supplied" again (in Hong Kong) and/or "offered to sell" (in Hong Kong) "and/or supplied" (in Hong Kong), so on and so forth. The same goes for paragraph (b), etc. So I will therefore read paragraph 2 with the same geographical Hong Kong limitation, which is the normal way a Hong Kong order operates. When one seeks to extend the usual Hong Kong limitation, one has to spell it out clearly in the order and that obviously has not been done. So my first approach is to say that paragraphs 1 and 2 carries the same meaning. I have held in paragraph 1 that they have the Hong Kong geographical limitation for the acts and paragraph 2 must go the same way.

14. It is argued by Mr Yan that I should not do this and he says there are two reasons why I should not do this. First, it is because paragraph 3 clearly refers to a possibility and in fact the court has given the liberty as well as having addressed the question of foreign proceedings. But it seems to me in relation to that contention that construing paragraph 2 in the usual way with Hong Kong limitation does not in any way destroy the validity or the effectiveness, of paragraph 3, it still works paragraph 3. It is only if on my construction of paragraph 2 in the way of geographical limitation that paragraph 3 would be destroyed or inconsistent with paragraph 2, then the court must pause to say that construction probably is not correct. So I do not think the existence of paragraph 3 in any way detracts from the strength of what I say in relation to paragraph 2, namely with geographical limitation to Hong Kong acts.

15. It is secondly said by Mr Yan that my approach to paragraph 2 with geographical limitation is contrary to a Norwich Pharmacal order and he refers to the standard format in the Hong Kong White Book. He refers me to also cases such as Jade Engineering (Coventry) Limited v. Antiference Window Systems Limited & Ors [1993] FSR 461 and Smith Kline & French Laboratories Ltd v. Global Pharmaceutics Ltd [1986] RPC 394, but I do not think these cases really advance the matter very much as they are not concerned with construction of geographical scope of the discovery order. It is certainly true that when the plaintiff sought paragraph 2, it was on the basis that there was a breach of the Hong Kong right of the plaintiff and that there were acts done in Hong Kong as requiring the protection of the Hong Kong court for the issue of the Norwich order. The narrow question here is whether having regard to the matters that had been submitted to the court, the court is entitled to read into, and I emphasize the words "read into", paragraph 2 of the order, a further extension of without geographical limitation so that the scope of the order is extended to worldwide acts because ultimately this is what it come down to as Mr Yan has agreed that if he is right then paragraph 2 has worldwide scope applying to worldwide acts of the defendants. Again, if I may rely on the principles I have identified earlier of the approach to the construction of order of the court, that it has to be clear, it has to be unambiguous and, if in doubt it has to be construed against the plaintiff in favour of the possible contemptnor.

16. With some difficulty, I have eventually reached the conclusion that on the second issue the defendants are also correct and that paragraph 2 should be given a narrow meaning and that therefore the defendants are not in breach of paragraph 2 of my order.

17. The parties have agreed that if I hold both issues in favour of the defendants, then the motion must be dismissed. I therefore order that the motion be dismissed with costs to the defendants.