GUANGZHOU GREEN-ENHAN BIO-ENGINEERING CO LTD AND ANOTHER v. GREEN POWER HEALTH PRODUCTS INTERNATIONAL CO LTD AND OTHERS

HCA 4651/2002

HCA 2802/2003

HCMP 74/2004

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NO. 4651 OF 2002, 2802 OF 2003 and

MISCELLANEIOUS PROCEEDINGS NO. 74 OF 2004

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(The Consolidated Action)

Dates of Hearing: 9 & 10 September 2004

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R E A S O N S  F O R  R U L I N G

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1.  On 10 September 2004 the Defendants made yet another application by summons for leave to adduce evidence not set out in the witness statements filed before the trial.  By that time, the Plaintiffs had closed their evidence (subject to a reservation about evidence necessitated by a possible amendment pending the decision by this court on leave to amend, the details of which were set out in my Ruling dated 16 September 2004).

2.  The application arose in this way.  On 9 September 2004, the Defendants were leading evidence from their second witness Tong Siu Kun.  In addition to adopting her affirmations already filed before the court as her evidence in chief, Ms Tam took her through some matters by way of clarification or amplification.  In the course of so doing, Ms Tam wished to lead evidence from this witness as to the authenticity of Exhibit LX-28 as a sample of ENHANOID sold by the 1^st Defendant.  In particular, Ms Tam proposed to ask the witness to testify whether the insert and the label on the bottle in LX-28 had ever been used by the 1^st Defendant in ENHANOID sold by it in the market.

3.  Mr Liao SC objected to such evidence being led on the basis that such new evidence took the Plaintiffs by surprise.  He submitted that parties had all along conducted the case on the basis that LX-28 was a sample of ENHANOID sold by the 1^st Defendant and there was nothing in pleadings or witness statements suggesting otherwise.  He took this court through the transcript of this trial in respect of Ms Tam’s cross-examination of PW1 with a view to demonstrate that the defence had changed their position in this regard.

4.  The significance of the contents inside the package of LX-28 came about in the following circumstances.  In the cross-examination of PW1, Ms Tam highlighted some differences between the package box in LX-28 and the Plaintiffs’ package in LX-27.  In particular, she referred to the lack of the two purple stripes at the top and the bottom of the box in LX-28.  As a result, Mr Liao referred the witness to the contents of LX-28 in re-examination.  The insert and the label on the bottle in LX-28 did have two purple stripes similar to the box in LX-27.  At that time, this court indicated to Mr Liao that this court was in as good a position to observe and examine LX-28 and its content as the witness.  Mr Liao therefore did not ask further question in that regard.  That took place on 31 August 2004.

5.  The defence did not indicate at that stage that LX-28 was not a true sample of ENHANOID sold by the 1^st Defendant in Hong Kong. As far as this court is aware, they did not inform the Plaintiffs as to their challenge to the authenticity of LX-28 until Ms Tam attempted to adduce such evidence from DW2 on 9 September 2004.  Had the defence side adopted all along the stance that the insert and bottle in LX-28 were not a true representation of the products sold by them in the market, given their reticence in this regard in their affirmations and witness statements, this court expects them at least to mention this at that stage or shortly thereafter because that this would put everyone on guard that Mr Liao’s reference to such insert and bottle in re-examination was made on a potentially false premise.  Unfortunately, the point was not mentioned until Mr Tam’s attempt to lead evidence from her witness. 

6.  I should mention Ms Tam informed this court that the defence did not intend to suggest that someone in the Plaintiffs had tampered with LX-28 and deliberately produced a misleading sample as exhibit.  She said it could be a genuine mistake.  However, she submitted that justice demanded that the Defendants be given opportunity to challenge LX-28 to counter-balance the effect of reference to LX-28 in re-examination.

7.  Having heard some submissions from the parties in the afternoon of 9 September 2004, I took the view that the intended additional evidence from DW2 were not disclosed in any of her affirmations or witness statement (this is not disputed by Ms Tam) and for the sake of good order and record, the Defendants should make a proper application for additional evidence to be adduced setting out clearly the proposed additional evidence to enable the Plaintiffs to deal with the application.

8.  On 10 September 2004, the Defendants issued a summons seeking leave to file and serve a witness statement of DW2 setting out her evidence as to the challenge to LX-28.  She also proposed to produce what she said to be a sample of ENHANOID sold by the 1^st Defendant at the end of 2001.  The application was supported by a Fourth Affirmation of the solicitor acting for the Defendants.  After hearing submissions on 10 September 2004, I dismissed the application.  I now give reasons for that decision.

9.  In the said Fourth Affirmation, the solicitor explained that at an inspection of exhibits that took place on 10 January 2004, he noted that the insert and the label over the bottle in LX-28 were different from the package box.  He said however the focus at that time was the design of the box and the trade marks.  It further appeared to him that the bottle and the insert were clearly and obviously inserted by mistake.  However, nothing was done by the defence side about that.  It was only when reference was made to the insert and the bottle in LX-28 in re-examination of PW1 on 31 August 2004 (wrongly stated in the affirmation to be 1 September 2004) that the solicitor sought instructions from the Defendants to see if they could get an intact sample of ENHANOID sold by the 1^st Defendant at the relevant time.  Only one sample (“TSK-1”) was located and it was sent to the solicitor on 2 September 2004.  No explanation was offered as to why nothing was said about this until 9 September 2004.

10.  There is no indication in the Fourth Affirmation as to whether the Defendants were aware of the alleged discrepancies between the contents of LX-28 and the actual product sold prior to 31 August 2004.  Mr Yan SC (who addressed this court on behalf of the Plaintiffs to oppose the application on 10 September 2004) submitted by reference to a chronology that there had been several inspections of exhibits including an inspection on 29 September 2003 by DW2 herself with the solicitor and photocopies of the contents of LX-28 including the insert were supplied on 8 October 2003 to the Defendants’ solicitors at their request.  The inspection on 10 January 2004 was also attended by counsel together with DW2.  Counsel submitted that it could not have escaped the Defendants’ attention that the contents of LX-28 included the insert and bottle with labels similar to those in LX-27.  

11.  PW1 produced LX-28 in his first affirmation of 23 August 2003 by saying the following,

“In Hong Kong, the said product was repackaged by the Plaintiffs’ distributor (namely, the 1^st Defendant) in another pink box, which also bore the trade marks and/or legends “ENHANOID” … With the approval of the Plaintiffs, the Defendants applied a hologram bearing the words “Green Power 天維健康產品”.  There is now produced and shown to me marked “LX-28” a sample of the Plaintiffs’ re-packaged lingzhi lipid in a pink packaging.  At the request of the Defendants, it was stated on the said re-packaging that the said product was jointly produced by the 1^st Plaintiff and Green Power Sweden…”

This was adopted by PW1 as his evidence-in-chief.

12.  There is a dispute between the parties as to whether such evidence tantamount to an assertion that LX-28 was a sample of the product sold by the Defendants in Hong Kong.  Ms Tam contended that the evidence did not have such effect whilst Mr Yan contended otherwise.  On this point, I accepted the contention of Mr Yan.  That paragraph in the Affirmation of PW1 was part of Paragraph 49 which started by saying the following,

“The Plaintiffs first launched lingzhi products incorporating the Inventions in Mainland China and subsequently in Hong Kong.  The Plaintiffs’ lingzhi products have been marketed in packaging and under and by reference to trade marks and/or legends as follows:-

[amongst other products] (c) The Plaintiff’s lingzhi or ganoderma spore lipids in capsules …”

The evidence quoted in the paragraph above is part and partial of this sub-paragraph (c).  Therefore, quite plainly, the witness was describing the product sold in the market and LX-28 was said to be a repackaged version sold by the Defendant in the Hong Kong market.    

13.  That affirmation was filed, in support of an application for interlocutory injunction.  There was no challenge to the authenticity of LX-28 as a sample of ENHANOID sold by the Defendants in the evidence filed in opposition.  In fact, nothing had been said in the defence affirmations concerning the design of LX-28.  Ms Tam accounted for that by reference to the scope of the interlocutory injunction application.  She said the application at that stage did not touch on the copyright aspects.

14.  However, the outcome of the application for interlocutory injunction was directions for speedy trial given by this court.  The trial, as reflected in the pleadings, included trial of copyright claims.  Pursuant to those directions, parties were given leave to file witness statements supplemental to the affirmation evidence already filed.  There was still no challenge to the authenticity of LX-28 in the supplemental statements filed on behalf of the Defendants.

15.  Ms Tam ultimately accepted that it was an oversight on the part of the lawyers but she said the Defendants should not be penalized about that.  She submitted that only minimal prejudice would be caused to the Plaintiffs if such evidence were admitted and the Plaintiffs could recall their witnesses if necessary.  She emphasized that the insert clearly referred to the Plaintiffs’ product sold in mainland instead of those sold by the 1^st Defendant in Hong Kong since it was an insert for 學者牌靈芝孢子脂質精華膠丸 and that brand name and description of product were not used by the 1^st Defendant in Hong Kong.  The picture of the product in the insert was that of LX-27 instead of LX-28.  Further, the advertisement at Trial Bundle D335 placed by the 1^st Defendant used a bottle different from that in LX-28.  There was no reference to the 1^st Defendant in the insert in LX-28. Counsel said these discrepancies cried out for explanation and it would be unjust if the Defendants were not allowed to adduce evidence to challenge LX-28.    

16.  Although DW2 gave some evidence about the hologram not supposed to be attached to that version of the product sold by the Defendants, Ms Tam conceded that the defence would not rely on that in view of the Plaintiffs’ submissions in opposition on 9 September 2004 and the specific reference to the hologram in the affirmation of PW1 as quoted in Paragraph 11 above.

17.  But the hologram could, in my view, be important if the Defendants wished to challenge the authenticity of LX-28.  It is at least indicative that LX-28 was repacked by the 1^st Defendant in the absence of any evidence or suggestion of tampering.

18.  Mr Yan submitted that the Plaintiffs would suffer massive prejudice if the Defendants were allowed to adduce the additional evidence at this late stage.  He said the prejudice could not be remedied by giving leave to the Plaintiffs to recall PW1.  He stressed that it is the Plaintiffs’ case that LX-28, including its contents, was a sample of the product sold by the Defendants in Hong Kong albeit only for a brief period of time.  The Defendants had been changing their packaging of the lipid products for several times.  If the Defendants were given leave to adduce the additional evidence, Mr Yan contended justice demanded that the Plaintiffs be given a reasonable opportunity to trace the chain of exhibit LX-28.  Mr Yan told this court PW1 would not be the only witness who is involved.  He submitted it would be easier for that to be done way back in August 2003 when the affirmation was filed.  In addition, the Plaintiffs would also like to procure evidence from other sources to prove the Defendants did at one time sell lipid product in the same manner as LX-28.  That would take considerable time and again it would have been easier way back in August 2003.

19.  Further, although this case would go part-heard in any event, it was possible to have the trial resume for another 15 days in November.  If the additional evidence were introduced, that 15 days time slot would not be sufficient and the trial would again be further delayed.  Given the rationale behind the directions for speedy trial, Mr Yan submitted that this would cause prejudice to the Plaintiffs that cannot be compensated by costs.

20.  As regards the additional evidence, the sample TSK-1 proposed to be produced by DW2 was, according to the witness statement of DW2 placed before me on 10 September 2004, manufactured around 6 May 2002.  It was not around the same date where lipid products were first introduced into the Hong Kong market by the Defendants.  On their own case, the products were introduced in the end of 2001.  Mr Yan also quite rightly observed that there was difference in the colouring between the boxes in LX-28 and TSK-1 indicating that they were not from the same batch of goods. Given the changes in packaging from time to time, I am of the view that TSK-1 could not offer much assistance in the resolution of the dispute as to how the lipid product marketed by the Defendant in the end of 2001 looks like.

21.  In paragraph 2 of the witness statement, DW2 asserted that the label on the bottle and the leaflet did not come from the 1^st Defendant.  It is not clear whether she was asserting that the label and leaflet had never been used by the 1^st Defendant.  Based on what Ms Tam told me in the afternoon of 9 September 2004, I take it that the purpose of this paragraph and paragraph 3 was to challenge the label and leaflet in LX-28 as a true representation of the product that had been sold by the 1^st Defendant.

22.  Whilst it is correct, as highlighted by Ms Tam in Paragraph 15 above, that there are some matters already in evidence that the defence might be able to rely upon to comment on LX-28, I think it is not the same as saying that by reason thereof, the Defendants should be given a licence to call whatever additional evidence as they wish to deal with the same point irrespective of their omission to file witness statement on the topic.

23.  It may well be that the Plaintiffs are quite content with dealing with such comments on the existing state of evidence.  However, if additional evidence is adduced from DW2 specifically on the same subject, the evidential position would be rather different and the points raised by Mr Yan as to prejudice become pertinent.

24.  From what had been said earlier, it is apparent that I am not happy with the explanation of the Defendants as to their omission to file positive evidence to challenge LX-28 in accordance with my directions for speedy trial.  Whether it is due to lawyers’ fault or that of the clients, it does not matter in the present context.  I accept Mr Yan’s submission on prejudice.  I do not need to recite what I have said, perhaps more than once, in previous rulings delivered in this case as to the serious prejudice that would cause to the Plaintiffs if the trial were delayed by a violation of the integrity of my directions for speedy trial.  

25.  In my judgment, the defence could still make the points mentioned by Ms Tam in Paragraph 15 above in their closing submissions.  However, it would not be right for this court to allow them to put in additional evidence to bolster their challenge to LX-28 when they had chosen not to do so earlier without adequate and satisfactory explanation bearing in mind the prejudice that might cause to the Plaintiffs if this court were to hold otherwise.

26.  For these reasons, I dismissed the application.

27.  By way of postscript, after I announced my decision in the morning of 10 September 2004, Ms Tam did ask some questions which were apparently inconsistent with this ruling when she resumed with her examination in chief of DW2.  I do not think she did so deliberately as I did not give reasons for my ruling there and then.  However, I think I should hear parties on whether any evidence should be expunged from the record after this Reasons for Ruling has been handed down.  For that purpose, I direct that written submissions be filed by both parties by 30 September and submissions in reply be filed by 7 October.  Unless parties wish to have a hearing, I will deal with the matter on paper prior to the resumption of the trial on 8 November 2004.