ANEX ELECTRICAL CO LTD v. KINGSLAND INTERNATIONAL LTD AND ANOTHER

1997, No. A 3727

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

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J U D G M E N T

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1. This is an appeal by the Defendants from the order of Master Kwan made pursuant to Order 24 of the Rules of the High Court on 19th December 1997 granting to the Plaintiff leave to use, produce and rely on copies of all documents discovered now or in the future in this action, in case No. C97-0206 in the United States District Court for the Central District of California and in any other court in the United States to which that case may be transferred. The Defendants seek an order dismissing the Plaintiff's original application with costs of this appeal and the application below to be awarded to the Defendants. The action involves a claim by the Plaintiff that it has copyright in the drawings of a battery charging device and that the Defendants have infringed that copyright.

2. The Plaintiff is a Hong Kong Company whose principal business is manufacturing and distributing consumer products. In 1984 the Plaintiff procured the design of a car battery charger by a Mr. Wan. The Plaintiff alleges that it is the owner of the copyright in the design of the car charger. The Plaintiff claims that the 1st Defendant in breach of the Plaintiff's copyright has sold and/or offered for sale in Hong Kong and/or imported into Hong Kong and/or dealt in for profit copies of the car charger. The Plaintiff claims in the alternative that this was done on behalf of, or with the assistance of, the 2nd Defendant.

3. The Plaintiff further alleges, as it is necessary in a claim for breach of copyright, that the 1st and/or 2nd Defendant knew from about the autumn of 1996, if not before, that the imitations infringed the Plaintiff's copyright in the car charger's design. The Plaintiff further alleges that the acts of infringement have allowed the 1st and/or 2nd Defendants to usurp the market position of the car charger and gain the 1st and/or 2nd Defendants an unfair competitive advantage. The Plaintiff claims damages for breach of copyright including an award of additional damages under Section 17(3) of the Copyright Act 1956. The writ of summons was issued in Hong Kong on 11th April 1997 and the Statement of Claim was filed on 30th April 1997.

4. Prior to the issuance of the writ in Hong Kong, the Plaintiff had commenced parallel proceedings against Sun-Mate Corporation, an American company which has common shareholders and directors with the 2nd Defendants, in the United States District Court, in the northern district of California. This U.S. action was commenced in the United States on 17th January 1997 about three months before the issuance of the writ in Hong Kong.

5. The complaint in the Plaintiff's claim in the U.S. action is much wider than the claim in the Hong Kong action and in particular includes complaints of (a) unfair competition, (b) trade dress infringement, (c) attempted monopolization, (d) common law unfair competition, (e) false advertising, (f) intentional interference with contractual relations, (g) defamation and (h) trade libel and product disparagement.

6. In the Hong Kong action, some documents were produced by the Defendants to the Plaintiff as part of discovery and these documents have been forwarded by the Plaintiff's solicitors to the Plaintiff's U.S. Attorney as the Defendants did not seek a stay of Master Kwan's order. However since then, a further order has been made relating to specific discovery of a number of other documents and accordingly this appeal relates to any such documents that are subsequently to be produced in this action.

7. I am told that these further documents will be disclosed soon in an affidavit to be filed by the Defendants. At the hearing of the appeal, at the outset, Mr. Parker of Messrs Robertson Double & Lee objected to the affidavit of Jonathan Nicholas Green sworn on 13th December 1997 to be placed before me on the ground that the filing of the affidavit was out of time and that some of the contents of the affidavit represented new evidence which had not been placed before Master Kwan. Mr. Jonathan Harris, appearing for the Plaintiff, submitted that the affidavit was relevant to the hearing of this appeal and that if I were to have the affidavit before me, it could pose no prejudice to the Defendants. I granted leave to Mr. Harris to rely on the affidavit.

8. Mr. Parker submitted that the U.S. action was broadly similar to the Hong Kong action but the causes of action in the U.S. action were many more than that in the Hong Kong action and therefore he submitted that the two actions were different. He submitted, as is the law, that the court can relax the implied undertaking by a solicitor not to use any documents disclosed on discovery for any collateral ulterior purpose and that the use in the United States of the documents discovered in Hong Kong would be for a collateral and ulterior purpose. He submitted that it would not be fair that the documents disclosed should be used for other purposes and that if the Plaintiff was relying on the fact that the Defendants in the U.S. action were in default of their discovery obligations, there were remedies in the U.S. action which the Plaintiff could pursue. He relied upon the Hong Kong Case of Bentley & anor. v. Parry & anor. [1993] 1 Hong Kong Cases p298 to submit that Kaplan J. had set down certain criteria which should be met before a party should be granted leave to use documents for reasons other than the litigation itself. He submitted that these criteria by Kaplan J. were approved by the Court of Appeal. He submitted that: -

"Such an order acts as a disincentive for parties to give full and frank disclosure. If parties are of the view that all documents disclosed can be used against them in other jurisdictions they may hesitate to give full disclosure to avoid disclosing documents to be used against them in other proceedings, where the law may be significantly different.

No special circumstances have been introduced as evidence to allow the Court to exercise its discretion to grant leave. The Plaintiff has failed to show any special circumstances and failed to show why it needs the assistance of this court. The Plaintiff has argued that Sun-Mate is in breach of orders for the discovery of documents in the US action. This has been denied, but regardless of this point this court must assume that the Plaintiff in California has the same rights as a Plaintiff in Hong Kong and can exercise the same rights there if the Defendants fail to disclose documents in that action. Therefore it is submitted the Plaintiff has failed to discharge the onus on it to obtain such an Order.

Such an Order encourages fishing expeditions from parties with view to obtaining documents for foreign proceedings. This is particularly so in cases where the two actions are significantly different such as in this case."

9. Mr. Harris for the Plaintiff admitted that the U.S. case was not identical to the Hong Kong Case and that the cause of action in the Hong Kong Case was based on the breach of copyright but that in the U.S. case, there were the other claims but the core claim was also a breach of copyright. He submitted that jurisdictional problems may make it difficult to join the U.S. Defendant into the Hong Kong case because the Defendant in the U.S. was an American company which had no offices in Hong Kong, and that the acts complained of in the U.S. case were acts committed in the United States. He said that the main claims in the U.S. case arose out of the same factual matrix and that the legal claims were very similar. He submitted that the Defendant in the United States action had not disclosed the documents which were disclosed in the Hong Kong action and which are deemed by the Plaintiff's U.S. Attorneys to be relevant to the U.S. case.

10. Not all the documents which were disclosed in Hong Kong and subsequently dispatched to the United States were disclosed in the United States. Mr. Harris accepted that the use of these documents in the United States would be for a collateral purpose for which the leave of the court would be required. He submitted that there were special circumstances in this case which would justify the court granting leave for these documents to be used in other proceedings. He further submitted that if leave were granted no injustice would be caused to the Defendants. He quoted to me passages from the book "Discovery" by Paul Matthews and H. Malek commencing at p252 and in particular he relied upon the case of Sybron Corporation v. Barclays Bank [1985] 1 Ch. p299 for the proposition that where the causes of action in the two different actions were the same, the Plaintiffs ought to have leave to use the documents disclosed in one action for the purpose of the other action.

11. He also relied upon the case of Crest Homes v. Marks [1987] AC p829 to submit that where persuasive and cogent reasons for modification or release of the undertaking are shown to the satisfaction of the court, leave should be granted to permit collateral use of disclosed documents which had been subject to the undertaking.

12. Further reliance was placed on the case of "Halcon International Inc. v. Shell Transport & Trading Company" 1979 RPC 97 where a plaintiff in patent proceedings was refused leave to use documents disclosed by the defendant for the purpose of Dutch proceedings in the patent office between the same parties. Leave was refused by the Court of Appeal primarily on the ground that it considered that such use would be unfair to the defendant in that: (a) in the Netherlands the use of the documents would result in them being put upon a public file; (b) it might well be necessary for the defendant to disclose further many more confidential documents in the light of the plaintiff's use of the documents, and (c) the facts in the two proceedings were sufficiently different for there to be a lack of mutuality.

13. In "Sybron" supra, Scott J. granted leave in view of the fact that the causes of action in both proceedings were the same, particularly as where there was joinder instead of a new action. In Dory v. Wolf GmbH [1990] FSR226 leave was granted to permit the plaintiff to use documents disclosed by the defendant in parallel United States proceedings between the same parties. There was no conflict with the rationale of the undertaking as the United States Court had already ordered discovery which encompassed the documents disclosed in the English action and the effect of leave was substantially to save the costs of preparing bundles for the United States proceedings, as bundles had already been prepared in the English action ("Discovery" by Paul Matthews pages 263 and 264).

14. Relying upon Dory, Mr. Harris submitted that the approach by the court to give leave should not involve technical considerations such as relaxing the undertaking being a disincentive to the parties to make full disclosure and that there should be no technical or juridical reason for withholding leave if there are good reasons for doing so. Mr. Harris also relied upon the case of Apple Corps Limited v. Apple Computer Inc. Fleet Street Reports [1992] p389 where leave was granted to permit the plaintiffs to disclose to the European Commission documents disclosed by the defendant in parallel English proceedings between the same parties which also involved the same issue as to whether a particular agreement infringed Article 85 of the Treaty of Rome. In that case it was clearly desirable that the European Court had the same material before it as the High Court ("Discovery" page 264).

15. Where there is only a collateral connection between the discovery and the intended action, the court may also find that is a special reason for granting leave (p264 "Discovery" by Paul Matthews), citing as the authority the case of Sony Corp. v. Time Electronics [1981] 1 WLR1293.

16. In my judgment, the two actions arise from the same cause of action, even though the claims in the U.S action are more varied than the claims in the Hong Kong action. The documents discovered in the Hong Kong action are clearly relevant to the U.S. action. I do not accept that if there should be default in disclosing documents in the U.S. action, the Plaintiff should be compelled to pursue his remedies in the U.S. action and should not be able to use the documents discovered in Hong Kong. It may well be that some documents which are relevant to the U.S. action were never in the custody or possession of the Defendant in the U.S. action and therefore that Defendant would have no obligation to disclose any such documents which could well be very relevant to the U.S. claim.

17. I also do not accept the point made by Mr. Parker that if the Defendant in the U.S. action has breached Hong Kong copyright belonging to the Plaintiff, then that company should be named as a Defendant in the Hong Kong action, for different reasons such as jurisdiction of the Hong Kong Court over the U.S. company and whether any judgment obtained in Hong Kong might be enforceable in the U.S.A. against the American company.

18. I find that in this matter, persuasive and cogent reasons have been shown to my satisfaction which therefore give rise to special circumstances to enable the court to grant leave to permit collateral use of documents to be disclosed in the Hong Kong action. The appeal by the Defendants is therefore dismissed with costs to the Plaintiff.