ORIENTAL FOOD INDUSTRIES SDN BHD v. SZE HING LOONG DEVELOPMENT LTD

HCA 2094/2011

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NO 2094 OF 2011

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DECISION
(Variation of Costs Order Nisi)
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Introduction

1.  This court handed down a judgment on 12 February 2015, granting D unconditional leave to defend, upon P’s application for summary judgment against D for trade mark infringement and/or passing off in relation to the SUPER RING product (“Judgment”).

2.  In this decision, I shall adopt the same abbreviations in the Judgment, unless otherwise indicated. 

3.  In the Judgment, I declined to dismiss P’s summons for summary judgement (“O14 Summons”) or to award costs to P under Order 14 rule 7.  Instead, I ordered, on a nisi basis, that costs be in the cause (“Order Nisi”).

4.  By a summons issued on 24 February 2015 (“Variation Summons”), D applied to vary the Order Nisi for the following alternative order:

(i) P to pay D’s costs for the substantive hearing on 22 December 2014 (“ O14 Hearing”) to be taxed, if not agreed, and paid forthwith;

(ii) Costs of and occasioned by this application be paid by P to D to be taxed, if not agreed, and paid forthwith.

Grounds for variation

5.  D did not seek to challenge this court’s decision not to order costs under Order 14 rule 7, and sought only to vary the Order Nisi on a narrower ground, namely for only the costs of the O14 Hearing forthwith, and not the entire application.  D was content with an order that the remainder of the costs of the O14 Summons be costs in the cause.

6.  The main ground that D’s Senior Counsel Ms Tam put forward was that P should have known long before the O14 Hearing that D had raised a substantial defence that would entitle it to unconditional leave to defend, and P should have withdrawn the O14 Summons there and then.

7.  In particular, Ms Tam referred to Cheung’s affirmation filed on 11 March 2014 on behalf of D (“Cheung’s Affirmation”), setting out D’s defence, which was later adopted in D’s amended defence and counterclaim filed on 23 October 2014 (“AD&C”).  Ms Tam submitted that it was unreasonable for D to have continued to prosecute the O14 Summons after considering Cheung’s Affirmation.  Further, P’s failure to withdraw the O14 Summons was even more unjustifiable in light of the substantial, inordinate and unexplained delay in the prosecution of this action.

Discussion

8.  Although there seemed to be a dispute as to whether it was in 2008 or 2009 that P first discovered D’s SUPER RING product (“Product”) introduced into the market, what did not seem to be disputed between the parties was that the first cease and desist letter was sent on behalf of P on 31 July 2009.  As mentioned in the Judgment, quite a lot seemed to be going on at or after that time, including D’s issue of the writ in HCA 1281 of 2009 against P on 24 August 2009 which was later never served and P’s new trade mark applications on 3 September 2009 which led to the Opposition Proceedings. Eventually, it was not until 9 December 2011 that P issued the writ herein, and it was not until another 8 months later that P filed its original statement of claim.

9.  Thereafter, D had filed a request for further and better particulars, and then D did not file its defence within time, which led to P issuing an application for default judgment and D issuing a time summons.  This was followed by D’s summons for security for costs.  Eventually in March 2013, P changed solicitors.

10.  There seemed to be then a gap of some 9 months before P issued the O14 Summons.  Up until then, although I would accept that there was delay in proceeding with the action, the delay was not really in  my view inordinate.

11.  The O14 Hearing took place a year after the issue of the O14 Summons.

12.  At the O14 Hearing, Ms Tam had complained of P’s serious and inordinate delay in proceeding with the O14 Summons and she had submitted that such delay was a good reason for refusing the O14 Summons.

13.  Although I accept that there had been some delay on the part of P in issuing the O14 Summons, I am of the view that P was not solely to be blamed for the delay thereafter.  There had been delay on D’s part in filing Cheung’s Affirmation which had caused P to apply and obtain an UNLESS order against D.  Cheung’s Affirmation eventually filed was some 40 pages in length. In view of the length of Cheung’s Affirmation, it was not unreasonable for P to take another 3 months or so in filing TL Son’s reply affirmation. 

14.  P then applied for leave to amend its statement of claim and the O14 Summons.  The O14 Hearing was directed to be fixed for one day hearing on 10 January 2014, and eventually it was only on 14 August 2014 that P and/or D attended before the Registry for fixing the date for the O14 Hearing.  Having regard to the above, in my view, the delay after the issue of the O14 Summons was due to a number of reasons, and as I had said earlier, P was not solely to be blamed.

15.  For the purposes of the O14 Summons, D only focused on its defence on whether P owned/owns the SUPER RING Goodwill exclusively.

16.  As mentioned earlier, the main ground put forward by Ms Tam that the Order Nisi should be varied was that P should have known after Cheung’s Affirmation that D had raised a substantial defence that would entitle it unconditional leave to defend, and that P should have withdrawn the O14 Summons earlier. 

17.  Mr Pun had complained that what D was trying to argue was to re-open and re-argue issues before this court at the time of the O14 Hearing.  He had referred to Ralotte Investments Ltd v Bauhinia Ltd HCMP 3388/2013, unreported, Decision dated 4.12.14.  Queeny Au-Yeung J had said[1]:

“The fact that the decision on costs was expressed as an order nisi is really just to cater for the fact that, in many situations where there had been no oral hearing, parties may have loose ends to tie up (for example, Calderbank offers or sanctioned offers) before an order is sealed.”

18.  Ms Tam did not accept that she was re-arguing issues, and had reminded the court by producing a copy of her skeleton submissions for the O14 Hearing.  At that time, Ms Tam was arguing that P’s application should be dismissed with costs under Order 14 rule 7, on the basis that P knew D relied on a contention which entitled it to unconditional leave to defend[2], and alternatively, that there be unconditional leave to defend with costs to D[3].

19.  Ms Tam had concluded in her then skeleton submissions by submitting that P’s application was “demonstrably not suitable for adjudication by summary judgment application even before extensive amendments to the pleadings were undertaken.  For the reasons stated above, the application ought not to have been commenced or proceeded with[4]”.

20.  I accept that Ms Tam’s then submissions were mainly directed towards the substantive issue as to whether P’s application should be dismissed under Order 14 rule 7, rather than towards the issue of costs, and in particular she did not refer to Order 62 rule 5.  However, the points she made at the O14 Hearing were more or less the same points she was making in relation to the Variation Summons, namely serious delay on P’s part, Cheung’s Affirmation had revealed D’s defence and P should be aware of a triable issue being raised, the O14 Summons was only a tactical procedural manoeuvring and P’s O14 Summons in respect of the Product was only a small part of P’s claim.

21.  In the Judgment, this court had declined to dismiss the O14 Summons and to award costs to D under Order 14 rule 7.  As set out in paragraphs 91-93, the court found that it was not unreasonable for P to proceed with the O14 Summons.   

22.  Ms Tam had referred the court to what was said by Godfrey JA in Skink Ltd (in liquidation) vComtowell [1994] 2 HKC 286, in particular that “a plaintiff who starts Order 14 proceedings believing that the defendant has no defence to the action should be advised, as soon as a credible defence is shown, to give up trying to obtain summary judgment; to do otherwise is simply to waste time and money[5]”.

23.  What was said by Godfrey J had survived the CJR.  DHCJ Louis Chan, as he then was, had referred to what was said by Godfrey J in Alviero Martini v Bubble Retail (unrep, HCA 1937/2008, 2.10.2009) and had summarised:

“If the defendant’s affidavit in opposition should reveal an entitlement to unconditional leave to defend, but the plaintiff still pursues the application for summary judgment without good reason, then the plaintiff should be ordered to bear all costs incurred from the time when the defendants’ case has been properly revealed. Such costs would normally include the costs of the hearing[6].” (emphasis added)

24.  Further, in Top Point v K&L Gates, (unrep, HCA 1088/2011, 30.1.2010), unconditional leave to defend was given after argument.  The defendant made an application to vary an order nisi for costs in the case, to which the plaintiff objected on the ground that the court did not dismiss the application under Order 14 rule 7(1).  L Chan J rejected the plaintiff’s argument and varied the costs order, ruling that the defendant was only seeking costs after a certain date on the basis that it was unreasonable for the plaintiff to have pushed on with the application after seeing the defendant’s affidavit evidence.

25.  What was said by Godfrey J was also followed by DHCJ Marlene Ng[7]in Bold Shine v Zheng Deli, unreported, HCA 1676/2011, 17.10.2013.

26.  As set out in paragraph 91 of the Judgment, Mr Pun had pointed out at the O14 Hearing that D’s defence as originally filed on 6 December 2012 consisted of a bare denial that the SUPER RING Goodwill was owned or solely owned by P, with no particulars as to who owned the SUPER RING Goodwill and that particulars were only given in Cheung’s Affirmation.  Mr Pun had also submitted that D’s above allegation was not mentioned in the Opposition Proceedings, and that D’s AD&C was only filed on 23 October 2014.

27.  Mr Pun had submitted at the O14 Hearing that D’s argument that the SUPER RING Goodwill belonged to SHK/D was not genuine since such argument was totally inconsistent with the past conduct of SHK and/or D. The court had referred to Mr Pun’s then submissions in paragraph 77 of the Judgment.

28.  Again in his submissions in relation to the Variation Summons, Mr Pun re-iterated that D’s line of defence that it had acquired or shared the SUPER RING Goodwill was wholly inconsistent with the past conduct of D, which included, among other things, SHL not raising  any objection to P’s decisions to make changes in 1996 and 2005 to the packaging of P’s SUPER RING products on the basis that it owned the SUPER RING Goodwill, nor did SHL raise any objection to P’s decisions in 2004 to remove the SHL’s House Mark from the packaging of P’s SUPER RING Product on the basis that it owned the SUPER RING Goodwill. 

29.  Costs are in the discretion of the court, and the court, if appropriate, may take into account any of those matters set out in Order 62 rule 5 of RHC, which include the conduct of all the parties under sub-paragraph (e) and whether a party has succeeded on part of his case, even if he has not been wholly successful under sub-paragraph (f).

30.  Further, Order 62 rule 5(2) sets out:

“(2) For the purpose of paragraph (1)(e), the conduct of the parties includes-

(a) whether it was reasonable for a party to raise, pursue or contest a particular allegation or issue;

(b) the manner in which a party has pursued or defended his case or a particular allegation or issue;

(c) whether a claimant who has succeeded in his claim, in whole or in part, exaggerated his claim; and

(d) conduct before, as well as during, the proceedings.”

31.  As set out in the Judgment, notwithstanding all those points made by Ms Tam at the time of the O14 Hearing, I had formed the view that it was not unreasonable for P to proceed with the O14 Summons in light of all the circumstances of the case including the alleged inconsistent past conduct of D.  D did not succeed in having the O14 Summons dismissed with costs under Order 14 rule 7, which formed the main part of Ms Tam’s skeleton submissions for the O14 Hearing.

32.  Having considered Ms Tam’s and Mr Pun’s submissions in relation to the Variation Summons, I am unable to say that P had pursued the O14 Summons in relation to the Product without good reason.  I am of the view that it was not unreasonable for P to “push on” with its application, after Cheung’s Affirmation, in light of the circumstances of the case, in particular the alleged inconsistent past conduct of D.

33.  Having regard to the above, I maintain my view that costs of the O14 Summons should be costs in the cause, and decline to vary the Order Nisi.  I will accordingly dismiss the Variation Summons, with costs to P, to be taxed if not agreed.