ADNREW RONALD TAYLOR v. CHRISTOPHER WILLIAM JORGENSEN AND OTHERS

HCA 596/2010

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NO. 596 OF 2010

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BETWEEN

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DECISION

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1.  The plaintiff seeks default judgment under Order 19 rule 7 of the Rules of the High Court.

THE PROCEDURAL HISTORY

2.  A short chronology is as follows:

28.04.2010	Writ endorsed with the statement of claim was issued.
03.05.2010	Leave granted to serve a concurrent writ against D1 and D2 out of Hong Kong. Time for them to file the acknowledgement of service was to be 28 days after service.
12.05.2010	D1 served in person.
17.05.2010	D2 served n person.
14.06.2010	D1 filed acknowledgement of service. Not signed. No address provided for service within jurisdiction.
18.06.2010	D2 filed acknowledgement of service. No address provided for service within jurisdiction.
24.06.2010	Plaintiff’s solicitors wrote to D1 inviting him to remedy the acknowledgement of service.
12.07.2010	D1 filed acknowledgement of service. Signed. Still no address provided for service within jurisdiction.
15.07.2010	Summons for default judgment against D1 & D2 taken out by plaintiff (“the 1st Summons”).
23.08.2010	Summons (“the 2nd Summons”) for leave to amend the 1st summons.
30.08.2010	Leave granted to serve the 1st and 2nd summons out of jurisdiction on D1 and D2.
04.11.2010	Hearing of 1st Summons adjourned. Leave granted to the plaintiff to withdraw the 2nd Summons, to issue another summons for leave to amend the 1st Summons and to serve it out of jurisdiction on the 1st and 2nd defendants.
09.12.2010	Summons (“the 3rd Summons”) for leave to amend the 1st Summons. The amended summons seeks judgment against all 3 defendants.

3.  I am satisfied that the 1^st and 2^nd defendants have been properly served with the writ and have not filed any defence to date.  They have also been served with the 1^st and 3^rd Summonses.  I can thus proceed to deal with the application for default judgment.

THE CLAIM

4.  The 1^st defendant was an inventor of a combustion device of which a patent application titled “Method and Device for High Temperature Combustion Applications: International Publication No. WO/2008/095255 ” (defined as “the Combustion Device Patent” in the statement of claim) has been made.

5.  The plaintiff’s claim is based on a cooperation agreement made some time in late July to early August 2009 (“the Cooperation Agreement”) , evidenced partly in writing through documents dated 17 June 2009, 24 June 2009, 25 July 2009 and February 2010, and partly through the conduct of the parties.  By the Cooperation Agreement, it was agreed amongst the plaintiff, the 1^st defendant and one Mr. Vasyli that the parties would use the 3^rd defendant as the vehicle for the commercialization of, amongst others, 3 inventions including the combustion device.  The material terms of the Cooperation Agreement included the following:

(i) The plaintiff and Mr. Vasyli would each obtain 11% of the shareholding of the 3^rd defendant;

(ii) The 1^st defendant’s shareholding in the 3^rd defendant would be reduced from 90% to 68%;

(iii) The plaintiff would contribute initial funds of US$250,000 to the 3^rd defendant;

(iv) The plaintiff and Mr. Vasyli were to be appointed as directors of the 3^rd defendant;

(v) The 1^st defendant would cause the Combustion Device Patent to be assigned by the 1^st and 2^nd defendants to the 3^rd defendant;

(vi) The 1^st defendant would cause all rights and future rights existing or granted in respect of 2 other devices and any patent rights of a load of inventions to be assigned to the 3^rd defendant;

(vii) The parties would each contribute their expertise to the board and management of the 3^rd defendant. The plaintiff and Mr. Vasyli would contribute their skills and experience in business, and the 1^st defendant would contribute his technical knowledge and know-how.

6.  In accordance with the terms of the Cooperation Agreement, the plaintiff and Mr. Vasyli were appointed directors of the 3^rd defendant.  Between June and November 2009, the plaintiff paid US$250,000 by 6 instalments to the 3^rd defendant.  On 29 January 2010, the 1^st defendant caused 11% shareholding in the 3^rd defendant to be transferred to the plaintiff and Mr. Vasyli.  On request of the 1^st defendant for funds to meet the set up expenses of the 3^rd defendant, the plaintiff agreed with the 1^st defendant to lend (“the Loan Agreement”) and did lend funds of US$18,000 to the 3^rd defendant.

7.  The plaintiff alleges that in breach of the Cooperation Agreement and/or the Loan Agreement, the 1^st defendant has failed to cause the 1^st and 2^nd defendants to assign the Combustion Device Patent and evinced an intention not to assign future patent rights of 2 other devices and other inventions to the 3^rd defendant.

8.  The plaintiff seeks specific performance of the Cooperation Agreement against the 1^st and 2^nd defendants, for them to assign the Combustion Device Patent to the 3^rd defendant and damages in lieu of specific performance against the 1^st defendant to be paid to the 3^rd defendant.  The plaintiff also seeks an order for specific performance of the Cooperation Agreement for the 1^st defendant to assign patent rights of the 2 other devices and other inventions as and when they are patented to the 3^rd defendant; and damages in lieu of specific performance.

THE DEFENDANTS’ RESPONSE TO THE CLAIM

9.  The 1^st and 2^nd defendants have on various occasions, including through emails to enquiry@judiciary.gov.hk and the Attorney General of Australia, raised objections to jurisdiction of the Hong Kong court and emphasized that they did not submit to our jurisdiction.  Yet there is no extant application to challenge the jurisdiction of the Hong Kong court in accordance with the Rules of the High Court.  I cannot treat the various unorganized, irrelevant (such as those concerning breach of human rights) and irrational (such as those concerning the terror campaign) assertions of the defendants spread over the emails/faxes as a defence.  Those emails/faxes can, at best, be treated as submissions by the defendants unsupported by evidence.  Very little weight can be given to them.

10.  The 3^rd defendant has faxed in an affidavit of one Mr. Delaney.  The Court does not accept fax images of an affidavit.  This is all the more so when the affidavit said to have been notarized does not appear on its face to be notarized.

APPLICATION UNDER THE 3^RD SUMMONS

11.  There is no reason put forth objecting to the 3^rd Summons. The 1^st summons was of too wide a scope and so the draft amended summons properly scaled it down to not pursuing judgment regarding patent rights under the 2 devices and other inventions.  I give leave to amend under the 3^rd Summons.

APPLICATION UNDER THE AMENDED SUMMONS

12.  Under the amended summons, provided that the plaintiff’s causes of action are properly pleaded in the statement of claim, the Court will give judgment “as the plaintiff appears entitled to on his statement of claim”: Hong Kong Civil Procedure 2011, para 19/7/4.  The Court cannot receive any evidence upon the plaintiff’s application, but must give judgment according to the pleadings alone: Hong Kong Civil Procedure, para 19/7/11.

13.  The amended summons asks for, as against D1 and D2, specific performance of the Cooperation Agreement so that D1 and D2 do assign to the 3^rd defendant all rights, benefits and interest on all patent applications and all patents granted thereon, in any country in the world:

(a) derived from the Combustion Device Patent application entitled “Method and Device for High Temperature Combustion Applications: International Publication No. WO/2008/095255 A1” (‘the International Patent Application”); or

(b) for the invention disclosed in the International Patent Application, including Australian Patent Application no. 2008213910.

14.  With regard to the 2^nd defendant, it was not pleaded that he was a party to the Cooperation Agreement.  The application for default judgment against him cannot be entertained. 

15.  With regard to the application under item (a), the relevant International Patent Application (but without “A1”) was the same as the Combustion Device Patent pleaded in the statement of claim.  I am told that this application has been pending for almost 2 years since February 2008 but it has not yet been granted.  Just when it will be granted is not clear.  As this is an application for default judgment, I act only on the pleaded facts.  In principle, a judgment for the 1^st and 2^nd defendants to assign the patent, if the application for patent is granted, can be given.

16.  What is more problematic is that item (a) asks for “all rights, benefits and interest” in all patent applications and all patents granted thereon, in any country in the world derived from the patent application.  Mr. Hugill for the plaintiff initially suggests that even if the patent application is not granted, there may still be intellectual property rights in the invention, such as copyright, which can be assigned to the plaintiff.  With respect, that has not been pleaded.   At best, the Cooperation Agreement was for the Combustion Device Patent to be assigned by the 1^st and 2^nd defendants to the 3^rd defendant.  The Cooperation Agreement did not cover any other rights if the patent were not granted and I cannot give default judgment in respect of those other rights.

17.  With regard to the application under item (b), I am told by Mr. Hugill that it was an Australian Patent Application number.  Giving judgment under item (a) would have covered (b).  In that case, there is no need for a separate judgment on item (b).

18.  The next issue is whether or not an order for specific performance should be granted, bearing in mind the principle that the Court will not require that to be done which cannot be done.  The application for patent registration has not yet been granted.  It is also uncertain whether or not the 1^st and 2^nd defendants will assign the patent rights to the plaintiff.  The giving of a default judgment by this Court will not be an end to the litigation as it is anticipated that enforcement has to be done in Australia where the 1^st and 2^nd defendants are resident. 

19.  To allay the Court’s concerns, the plaintiff has obtained a legal opinion from an Australian lawyer, Mr. Kearney, on 2 issues:

(i) Whether the Australian Courts will give effect to a judgment of the Hong Kong Court ordering by way of specific performance that the 1^st and 2^nd defendants do transfer rights in an Australian patent application to the 3^rd defendant (“the Hong Kong judgment”); and

(ii) If so, whether the Hong Kong judgment (or a resealed judgment in Australia) would be sufficient to compel the Australia patent registry into action to register a transfer of rights in the patent application.

20.  Mr. Kearney is of the view that since the Hong Kong judgment is not a monetary judgment or fixed debt, it is not enforceable in Australia under the Foreign Judgments Act 1991 (Cth) or at common law.  He holds the view, however, that an Australian court of equity may do so, although he is not able to identify a case in which that court has done so in the past.  The Australian courts will be likely to recognize the jurisdiction of the Hong Kong Court in the action even though it involves an Australian patent application, since it arises out of a contract or a personal equity between the parties.  Mr. Kearney is unable to find any direct authorities.  He merely drew analogy with those cases where an order of a foreign court appointing receivers was recognized and enforced in Australia. The Australian Patents Office will not, however, register an assignment on the basis of an order of an Australian court for specific performance based on the Hong Kong  judgment unless the defendants have executed the required assignment documents pursuant to the Hong Kong judgment. If the defendants do not execute the requisite assignment documents, then an officer of the court, such as the Registrar, can be authorized to do.  If such an order were made and the officer of the court then executed the assignment documents this would be sufficient for the Australian Patents Office to register the assignment.  Alternatively, an application could be made to the Commissioner of Patents under the Patents Act 1990 (Cth) which provides that where, before a patent is granted, a person would, if  the patent were then granted, be entitled under an assignment or agreement or by operation of law to the patent, the Commissioner of Patents may on request by the person in accordance with the regulations, direct that the application proceed in the name of the person. Such an application could be based on the order of the Australian court authorizing transfer of title, which would in Mr. Kearney’s view, be a sufficient basis for the Commissioner to make the required directions.

21.  It is unfortunate that this legal opinion was not disclosed to the learned Master when the application for service of the writ out of jurisdiction was made, as it might have an impact on whether or not Hong Kong was the proper forum for this case.  It is unfortunate that even after this intended default judgment there might still be litigation, potentially in the Australian equity court. Be that as it may, I remind myself that this is an application for default judgment and I act only on the pleaded case. I should not assume that the defendants will not comply with the intended judgment, or second guess what the Australian equity court will do in terms of recognition of this intended judgment.  Given that there may be means of recognition of this intended judgment in Australia and means to execute an assignment of the patent to the 3^rd defendant should the 1^st defendant fail to do so, I give judgment in favour of the plaintiff on the materials before me.

CONCLUSION

22.  I give judgment to the plaintiff only against D1 for specific performance of the Cooperation Agreement so that D1 do assign to the 3^rd defendant any patent (when the application for patent is granted) under the Combustion Device Patent application entitled “Method and Device for High Temperature Combustion Applications: International Publication No. WO/2008/095255”.

COSTS

23.  With regard to costs reserved on 13.8.2010, 15.9.2010, 4.11.2010, I make no order as to costs as the plaintiff had to amend the 1^st summons and was not in a position to proceed.  It was on the basis of the 3^rd summons that I gave this default judgment.  Subject to the aforesaid, there will be costs to the plaintiff for this action including the costs of this application. 

24.  I have considered the costs statement prepared by the plaintiff.  A broad brush approach will be adopted when considering costs and the Court will not embark on a mini-taxation of each item of costs. I reduce costs for the following reasons:

(i) The hourly rate of $3,000 charged by Mr. Hugill is excessive bearing in mind that he qualified in Hong Kong only in 2009 and was acting under a supervising partner. A rate of $2,000 is more appropriate. There will be adjustment to the amount claimed accordingly.

(ii) The costs for attendances on the first 3 occasions will be disallowed whilst the costs for 16.12.2010 and today will be allowed.

(iii) Counsel’s brief for attendance is not allowed as the plaintiff was simply not ready to proceed on the day counsel appeared.

25..  I summarily assess costs at HK$180,000 to be paid by the 1^st defendant to the plaintiff.