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

MISCELLANEOUS PROCEEDINGS NO. 74 OF 2004

____________

____________

(The Consolidated Action)

_____________________________

REASONS FOR RULING

_____________________________

1. On 22 July 2004, I disposed of several applications made by the Defendants in the course of the trial as follows,

(a) I dismissed the application for leave to re-re-amend the Defence by adding new paragraphs putting forward positive pleas to challenge the originality of some of the works of the Plaintiffs;

(b) I dismissed the application for leave to adduce evidence in this trial as set out in the third supplemental witness statement of Dr Chung Chee Keung, the 2nd Defendant and the witness statement of Tong Siu Kan, both dated 16 July 2004;

(c) I dismissed the application for leave to adduce evidence in this trial the evidence relating to a Japanese magazine set out in Paragraphs 7 to 10 of the third affirmation of Tong Siu Kan of 19 July 2004;

(d) I granted leave to the Defendants to adduce evidence from Chan Chin Hung and Wong Yan Yan in respect of the drawings exhibited as "TSK-2" and "TSK-3" respectively on condition that such evidence shall be set out in supplemental witness statements from these witnesses to be filed and served within 7 days.

I now give reasons for these rulings.

2. Mr Liao SC described these applications came at the 13th hour. They came about in the following circumstances. On 19 July 2004, the trial has proceeded to its 11th day. PW1, the key witness for the Plaintiffs, was in the middle of being cross-examined. Ms Tam informed the court on that morning that the Defendants proposed to put in some new evidence. She said the new witness statements had been faxed to solicitors for the Plaintiffs on Friday, 16 July 2004. That was the day when the court had to adjourned early due to typhoon signal No.8 being hoisted around 11:45am. That signal was not lowered until the close of business hours on Friday. Hence, it is not reasonable to expect the fax would come to the attention of those acting for the Plaintiffs earlier than Saturday. Apart from the new witness statements, a bundle of new documents were also sent.

3. Understandably, Mr Liao took objection to the new evidence at such late stage. However, when Ms Tam made the application concerning the new witness statements, there was no affirmation to account for such late application. Mr Liao submitted that the application should not be entertained in the absence of proper explanation by way of affirmation given the substantive nature of the new material, the serious impact they might have on the trial and the lack of explanation for the delay. In the wake of that objection, Ms Tam asked for the case to be stood down to the afternoon of 19 July 2004 to have the affirmations in support of the applications in place.

4. The affirmation evidence was ready at about 3:30 pm on 19 July 2004. They included the sixth affirmation of Dr Chung, third affirmation of Tong Siu Kan and third affirmation of Lam Sek Kong. Mr Liao needed time to digest these affirmations and he was also considering the possibility of cross-examining these deponents. The case was therefore adjourned to 20 July 2004.

5. On 20 July 2004, Mr Liao informed the court that he would not apply for cross-examination of these deponents. Submissions were made by the parties in respect of the admission of the new witness statements and documents as evidence in this trial. In the course of his submission in the afternoon of 20 July 2004 (Ms Tam took up the whole morning for her submission), Mr Liao commented on several defects in the evidence of Dr Chung accounting for the delay.

6. In the morning of 21 July 2004, Ms Tam attempted to put in a 7th Affirmation of Dr Chung to deal with those defects. For reasons already given orally, I refused leave to Defendants to rely on the 7th Affirmation. Ms Tam continued with her submissions in reply and in the afternoon, she decided to apply for leave to re-re-amend the Defence to add the following pleas,

"64B Further or alternatively, the First Defendant's designer created the depiction of the cracked spore referred to above [V162, 221, E 731] by reference to the photograph referred to in Paragraph 65BA below.

65BA Further or alternatively, the depiction of a cracked spore appearing or contained in the alleged artistic works referred to in paragraphs 51(b)(i) [Q12-15], (iii) [Q19] and (iv) [Q20] is not original in that it was derived or substantially derived from the photograph of a complete lingzhi spore appearing in a Japanese magazine entitled "靈芝健康読本 1" published in January 1997.

65BB Further or alternatively, the artwork referred to in paragraph 51(b)(vii) [Q21(t), 21(u)] is not original in that it was derived or substantially derived from a packaging for "ENHANVOL" spore powder capsules designed by or on behalf of Gunze Sangyo Inc. for the Japanese market in late 2000."

7. For reasons set out below, several aspects of these applications, if allowed, will bring in new dimensions to the action which the Plaintiffs had not been given any opportunity to deal with so far. The applications were made at a very late stage, so late such that the length and progress of the trial will be seriously prolonged and disrupted. I have set out the approach that the court should adopt in dealing with late applications of similar nature in Hong Lok School Ltd v Chow Sai Yiu HCA 17139 of 1999, 7 July 2003 and Man Fong Hang v Man Ping Nam HCA 7935 of 1998, 21 July 2003. Ultimately, it is a balancing exercise.

8. Given my directions for speedy trial which were accepted by the Plaintiffs as an alternative for continuing with their application for interlocutory injunction, they would suffer prejudice if the trial had to be adjourned for a lengthy period before it could be resumed. It has to be borne in mind that one of the claims of the Plaintiffs was based on a non-competition clause in the agreements allegedly made between the 2nd Plaintiff and the 1st Defendant and that clause expired in a few months' time. Although by 21 July it is quite apparent that the trial could not be completed by 23 July 2004 (the last day allocated for this case) and an adjournment is inevitable, I am of the view that without the new material, it would be possible to fix an early date for the resumption of the trial readily. The situation would be quite different if the Plaintiffs have to deal with the new dimensions as well. The final resolution of the dispute would certainly be further delayed. It therefore requires very strong and powerful factors to balance against the prejudice likely to be suffered by the Plaintiffs.

9. The reason why Ms Tam made the application for leave to amend is that on the existing state of pleadings, although the Defence denied the originality of the Plaintiffs' works (Paragraph 65(2) of the Re-amended Defence), the only positive case pleaded in that regard is Paragraph 65B alleging that the Plaintiffs' works were derived from those of the Defendants' designers pleaded in Paragraph 64A. The net effect of the proposed amendments were: (i) to add an additional challenge to originality of the Plaintiffs' works by referring to other original sources, viz. the Japanese magazine pleaded in Paragraph 65BA and the Japanese packaging pleaded in Paragraph 65BB; (ii) to add a new original source for the Defendants' creation to account for some of the similarities with the Plaintiffs' works.

10. In my judgment, those amendments were necessary before the Defendants could be allowed to put in the evidence relating to the Japanese magazine and the Japanese packaging. In my view, the adducing of such evidence goes beyond passively challenging the Plaintiffs' case on originality. They amount to a positive case put forward by the Defendants. Even though the Defendants were not in a position to establish each and every element regarding the copyrights of the Japanese magazine and the Japanese packaging, at least one of the purposes of the Defendants in putting forward these documents were to invite this court to draw an inference from the alleged similarities between them and the Plaintiffs' works and the proof of access of the Plaintiffs to the Japanese material that the Plaintiffs' designers copied from them. The establishment of a case by inference is no less a positive case than the proof of a case by direct evidence.

11. In principle, there are sound reasons why these matters should be pleaded. They are material elements in the defence and in the absence of pleadings, the attention of the Plaintiffs would not be directed towards such lines of attack to their originality. Once these are pleaded, the Plaintiffs would have to consider the preparation of evidence necessary to meet the challenge including a detail comparison between the Japanese works and the Plaintiffs' works, examining the evidence as to the dates of creation of the Japanese works, the evidence as to access and if necessary, evidence pertaining to a case of originality stemming from material alteration or modification of another work. These are just examples of steps that those advising the Plaintiffs could take. But they could not do so unless their attention was drawn to such issues in the pleadings.

12. I do not think authorities are needed for this analysis. Mr Liao referred to Copinger & Skone James on Copyright 14th Edn., Para.22-106 and Laddie, Prescott & Vitoria The Modern Law of Copyright and Designs, 3rd Edn. Para.39.76 and drew an analogy with the need to plead particulars of prior art in the defence to claims based on design right. I also derive some support from the precedent in Para.66-Q10 of Bullen & Leake & Jacob's Precedents of Pleadings.

13. It follows that without such pleas, the issues were not properly raised and the court should not allow them to be canvassed, see Poon Hau Kei v Hsin Chong Construction Co Ltd [2004] 2 HKLRD 442.

14. The next question is whether amendments should be allowed. Whilst generally the court could allow an amendment to enable the real issue in dispute to be canvassed no matter how late it is applied for, the modern approach is that lateness and explanation for the delay in making the application are relevant factors to be taken into account in the exercise of discretion by the court. Other factors include the importance of the amendments to the party applying for leave and the prejudice the amendments would cause to the other side and whether that could be remedied by costs or adjournment. There could be other relevant factors depending on the facts of the case. It is a balancing exercise and the ultimate consideration is fairness (procedural as well as substantive) to the parties in all the circumstances. In the present context, what was said by Lord Griffiths in Ketteman v. Hansel Properties [1987] 1 AC 189, 220 is pertinent,

".... There is a clear difference between allowing amendments to clarify the issues in dispute and those that permit a distinct defence to be raised for the first time.

Whether an amendment should be granted is a matter for the discretion of the trial judge and he should be guided in the exercise of the discretion by his assessment of where justice lies. Many and diverse factors will bear upon the exercise of this discretion. I do not think it possible to enumerate them all or wise to attempt to do so. But justice cannot always be measured in terms of money and in my view a judge is entitled to weigh in the balance the strain the litigation imposes on litigants, particularly if they are personal litigants rather than business corporations, the anxieties occasioned by facing new issues, the raising of false hopes, and the legitimate expectation that the trial will determine the issues one way or the other. Furthermore to allow an amendment before a trial begins is quite different from allowing it at the end of the trial to give an apparently unsuccessful defendant an opportunity to renew the fight on an entirely different defence.

Another factor that a judge must weigh in the balance is the pressure on the courts caused by the great increase in litigation and the consequent necessity that, in the interests of the whole community, legal business should be conducted efficiently. We can no longer afford to show the same indulgence towards the negligent conduct of litigation as was perhaps possible in a more leisured age. There will be cases in which justice will be better served by allowing the consequences of the negligence of the lawyers to fall upon their own heads rather than by allowing an amendment at a very late stage of the proceedings."

15. This is not a case where the need for amendments is technical in the sense that the evidence concerning the new points was already raised in the witness statements or documents disclosed well in advance before trial. As mentioned, the new points were first brought up in the form of new witness statements and documents sent to the solicitors for the Plaintiffs on 16 July 2004. By that stage, the trial had already lasted for 10 days with the key Plaintiffs' witness having been cross-examined by Ms Tam for several days.

16. Explanations for the lateness of the applications were unsatisfactory. As regards the Japanese packaging, Dr Chung said he had given that to his solicitors near the end of 2003. This was confirmed by the solicitor in his Third Affirmation. Although Dr Chung said in Paragraph 2 of his sixth affirmation that the packaging was furnished in the context of the application for interlocutory injunction that had nothing to do with the copyright claims, one cannot lose sight of the fact that by that stage, the copyright action had been commenced. As demonstrated by Mr Liao, the packaging for ENHANOID had always been one of the subject matters in the copyright claims. It was pleaded in the original Statement of Claim in High Court Action No.4651 of 2002 filed on 25 February 2003.

17. Ms Tam said the focus of the Defendants and their lawyers had been placed on the spore device used in the packaging for ENHANOID and thus they did not address their minds to the packaging generally. The Japanese packaging was only relevant to the latter but not the former. Hence its significance escaped their attention. She said it was only after Mr Liao had identified the copyright works relied upon by the Plaintiffs clearly in his opening the defence lawyers appreciated that the general layout of the ENHANOID packaging also formed part of the Plaintiffs' claims. It was also suggested that the memory of Dr Chung regarding the Japanese packaging was jogged by PW1's reference to pearly white colour packing in his evidence.

18. Having considered the pleadings and the evidence filed by the Plaintiffs by way of witness statements, I do not see any justification for the alleged assumption on the part of the defendants and those advising them that the Plaintiffs' copyright claim on ENHANOID packaging was confined to the spore device. The witness statements filed on behalf of the Plaintiffs in April 2004 and documents exhibited thereto clearly referred to the whole packaging.

19. Further, if the Defendants' solicitors thought that the Japanese packaging was not relevant to any issue in the action, why did they keep it instead of returning the same to the Defendants? In my view, there is no satisfactory explanation before me as to the purpose for which Dr Chung produced that Japanese packaging to his solicitors and the retention of that by the solicitors afterwards. As Ms Tam said, that packaging had no relevance in the context of the interlocutory injunction application.

20. As regards the Japanese magazine, the explanation of the defence was that it was discovered by chance on 9 July 2004, a few days after the trial began. That was a magazine published in January 1997 and the Defendants had kept a photocopy thereof. It was alleged by Tong Siu Kan in her Third Affirmation that this photocopy was made by her in January or February 1999 when the original magazine was given to her by Professor Liu for reference. She said she had shown the magazine to the design consultant engaged by the Defendants for the creation of the packaging of the ENVANOL spore powder marketed in Hong Kong. She also said she had forgotten about it prior to the recent chanced discovery of the document.

21. Even though there had not been any cross-examination of Tong on her Third Affirmation, I do not find her assertion that this document was recently discovered by chance to be credible. The Defendants had not condescended upon particulars as to how the chance discovery came about. They did not provide this court with any information as to how the document had been kept and why it was not noticed by the defendants when list of documents were prepared despite due diligence. They did not explain why all of a sudden, Dr Chung "discovered" it on 9 July 2004. I do not need to speculate the reasons why this document was not disclosed before 16 July 2004. It is however clear to me that this document in the form of photocopy was in the Defendants' possession all along and if the Defendants wished to rely on it in this trial, there was no good reason why they had not disclosed the same much earlier.

22. Having compared the Japanese packaging and the pictures in the Japanese magazine with the copyright works relied on by the Plaintiffs and the alleged infringed items of the Defendants, I am of the view that the relevance of these pleas in this action are marginal. As regards the packaging, the Japanese packaging was alleged by the Defendants to bear some resemblance to the Plaintiffs' packaging exhibited as LX-26. However, based on the alleged infringement pleaded by the Plaintiffs, the more relevant layout should be that of LX-27 (compared with the Defendants' packaging). Ms Tam argued that these packaging were a series of works and LX-27 was derived from LX-26. In the overall scheme of the designs, having compared all these packaging, I am of the view that Ms Tam had placed undue weight on the significance of LX-26.

23. As regards the pictures of the spore in the Japanese magazine, whilst there are similarities in the image and shape of the spore between the pictures and the Plaintiffs' graphic representation of a cracked spore, these are by no means conclusive as to the subsistence of copyrights in the Plaintiffs' works. The cracks in the Plaintiffs' works were not found in the picture.

24. On the whole, it is at best speculative whether these new pleas and new evidence would afford a good defence to the Defendants to the copyright claims. Of course, at the stage of amendments, the Defendants only need to satisfy the court that amendments were arguable and I am prepared to assume that they are arguable. However, the strength of the amended case can be taken into account in the balancing exercise when the amendments came so late that it would cause prejudice to the other side that cannot be compensated by costs.

25. This is not a case where the defence would crumple without the amendments. The defence raised other grounds to resist the Plaintiffs' copyrights claims and they could (and I believe they would) still pursue those contentions in the trial. The effect of the refusal of leave to amend and to adduce new material in evidence is merely to bar the Defendants from running one aspect of their case which they failed to fairly forewarn the Plaintiffs that they intended to run in accordance with the rules of pleadings and the directions for speedy trial.

26. On balance, I take the view that it would be unfair to the Plaintiffs to allow the Defendants to raise these new points and put in the new evidence at this late stage and I ruled accordingly.

27. I turn to the witness statement of Tong Siu Kan dated 16 July 2004. The purpose of that statement was to give evidence in relation to,

(a) the Japanese packaging;

(b) two newspaper advertisements in October 2001;

(c) other counterfeit products on the market in 2003.

28. I have dealt with the evidence relating to the Japanese packaging. In the course of her submissions, Ms Tam abandoned the application in relation to other counterfeit products. The remaining part is the new evidence relating to the two newspaper advertisements. The first newspaper advertisement was the one dated 9 October 2001. It was produced by the Plaintiffs as part of exhibit LX-36 as evidence of acknowledgment by the Defendants that the 2nd Plaintiff was the inventor of the technology essential to the production of ENHANOID. A packaging of the products sold in mainland China bearing the name 盈康力 also appeared in that advertisement. There is no dispute that the advertisement was placed by the 1st Defendant. The witness statements and affirmations filed by the defence prior to this latest application did not deal with this advertisement at all.

29. Ms Tam suggested in cross-examination of Professor Liu that it was an advertisement placed by the 1st Defendant at his request for the promotion of the 2nd Plaintiff at a trade fair in Shenzhen. Professor Liu denied that. Part of the new evidence of Tong was to substantiate that allegation put by Ms Tam to Professor Liu.

30. The second advertisement was an advertisement dated 12 October 2001. According to Ms Tam, the purpose of adducing the second advertisement as additional evidence was to demonstrate that the Defendants did not intend to market ENHANOID in Hong Kong with the same packaging as that in mainland China and they did not like the name 盈康力. Ms Tam further submitted that the second advertisement could discredit the evidence of Professor Liu that 盈康力 had been sold in Hong Kong.

31. Tong's explanation for not putting in the evidence relating to these advertisements earlier was that it had not occurred to the Defendants that they were relevant prior to Liu's answers given in cross-examination.

32. I find it difficult to accept such explanation. The Defendants must have given instructions to Ms Tam about the circumstances leading to the first advertisement prior to the cross-examination of Professor Liu. Otherwise counsel could not put forward such a case to the witness. Hence, the significance of these matters should have been known to the defence well before the answers given by the witness in cross-examination.

33. As regards the second advertisement, it has always been the Plaintiffs' case that the product sold in Hong Kong was repackaged and it was named 盈康孢子油 instead of 盈康力. Mr Liao also confirmed to this court that the Plaintiffs are not relying on the first advertisement to assert that products in mainland China packaging had been sold in Hong Kong. Regarding the evidence of Liu, Mr Liao contended that his evidence should be understood as referring to planned sale of the same products in Hong Kong with repackaging.

34. Since the cross-examination of Professor Liu has not been completed and Mr Liao has yet to re-examine him, it is undesirable for the court to express a view on his evidence at this stage if it is not necessary to do so. I would only say that there is a certain element of ambiguity when he testified about the sale of 盈康力 in Hong Kong.

35. In general, an answer given by a witness to a question put to him in cross-examination concerning collateral matters must be treated as final. Evidence to contradict such answer cannot be led (see Cross & Tapper on Evidence, 9th Edn., p.297-9; Phipson on Evidence, 15th Edn., Paras.11-37 and 11-38). In my judgment, the additional evidence regarding the two advertisements relates only to collateral matters. I do not find such evidence to be of direct relevance to the issues between the parties. In this context, the main issue is who owned the goodwill pertaining to the names ENHANOID and盈康孢子油. The Plaintiffs did not suggest that by the first advertisement the Defendants accepted the Plaintiffs to be the owners of that goodwill. It seems to me to be a matter of little moment whether the first advertisement was placed at the request of Professor Liu for promotion at the trade fair. Likewise, whether the Defendants had any objection to the use of the name盈康力 in Hong Kong had no direct bearing on that main issue. Whilst the question as to who had the final say on the product name to be used in Hong Kong may be relevant to the main issue, I do not find the new evidence relating to the advertisements to be of much assistance in the resolution of that question. The advertisements did not show that the Defendants had final say on the choice of product name in Hong Kong.

36. Permitting the Defendants to adduce such new evidence on collateral issues would, in my view, unjustifiably confuse the matters that the court must decide in this trial. Further, if such evidence were admitted, the Plaintiffs would need to deal with it and this would prolong the trial unnecessarily.

37. For these reasons, I think this court should exercise its discretion in refusing leave to allow the new evidence relating to the advertisements to be adduced.

38. The drawings exhibited as "TSK-2" and "TSK-3" are different. They are directly relevant to the copyright claims. The makers, Chan Chin Hung and Wong Yan Yan, have already filed witness statements and they would be subject to cross-examination. These drawings were stored in computers and it appears that they were printed out at the suggestion of counsel in early July 2004. The production of these drawings was to complete the picture in respect of evidence already set out in the existing witness statements. The material does not raise a new dimension to the trial. Although the drawings should have been disclosed earlier, I do not think the Defendants would suffer serious prejudice if leave were granted for such evidence to be adduced. I have therefore ruled accordingly.