THE WALT DISNEY COMPANY v. DISNEY PROPERTY AGENCY

1992, No.A7289

IN THE SUPREME COURT OF HONG KONG

HIGH COURT

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[Where the relevant factors are equally balanced, the court will order a foreign plaintiff to give security for costs]

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J U D G M E N T

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1. This is an appeal from Master Jennings who on 25th February 1993 refused to order the plaintiff to give security to the defendant for the costs of the action.

2. The action is a passing-off action. The plaintiff is the Walt Disney Company, a company incorporated under the laws of the State of California. The defendant is Goldwise Ltd, a Hong Kong company which has chosen to trade under the name "Disney Property Agency".

3. The principles upon which security for costs will be ordered are well-settled. The most recent restatement is set out in the judgment of Lord Donaldson of Lymington, M.R. in The "Alpha" [1991] 2 LI LR 52 where he says this at p.54:-

"The basic principle underlying R.S.C., O.23, r.1(1) (a) is that it is prima facie un just that a foreign plaintiff, who by virtue of his foreign residence is more or less immune to the consequences of an order for costs against him, should be allowed to proceed without making funds available within the jurisdiction against which such an order can be executed. As Sir Nicolas Browne-Wilkinson put it in a passage in his judgment in Porzelack K.G. v. Porzelack (U.K.) Ltd. [1987] 1 W.L.R. 420 at p.422 which was cited by Lord Justice Bingham with approval in Slazengers case:-

'The purpose of ordering security for costs against a plaintiff ordinarily resident outside the jurisdiction is to ensure that a successful defendant will have a fund available within the jurisdiction of this Court against which it can enforce the judgment for costs.'"

4. The Porzelack case referred to by Lord Donaldson of Lymington in The "Alpha" was itself a passing-off case. In the course of his judgment in that case, Sir Nicolas Browne-Wilkinson, the Vice-Chancellor, said this:-

"... a defendant who is trading deceptively can be deprived of his costs, even if successful in the action. However, counsel submits that such an order cannot be made in a passing-off action and that the court in this action will be bound to order the defendant, if successful, to get its costs.... The essence of the matter is that the defendant's conduct, leading as it does to confusion in the mind of the public, is such as to disentitle it to an order for costs in its favour."

5. Bearing all this in mind I turn to the facts of the present case to see how I should balance in the scale the factors which are material to my decision whether or not to make the order for which the defendant asks.

6. The plaintiff is a foreign corporation and so prima facie liable to be ordered to give security for costs. On the one hand, the plaintiff suggests that the strength of the case against the defendant is considerable. On the other hand, the defendant contends that it is nothing of the kind. Now it is true that, so far as the evidence goes, no explanation has been given by the defendant as to why the name "Disney" was chosen by the defendant as a trading name. That might suggest to some, and indeed to the trial judge, a deliberate intent on the part of the defendant to cash in on the goodwill attaching to the plaintiff's name. Against that, the fields in which the plaintiff and the defendant respectively trade are very far apart; and that might suggest to some, and indeed to the trial judge, that there really is no likelihood of confusion between the plaintiff and the defendant. The fact that the plaintiff and the defendant trade in different fields is not in itself sufficient to defeat the passing-off action. But I come to the conclusion, at the end of all this, that the court ought not at this stage to get involved in assessing the competing considerations between the plaintiff and the defendant as to the strength of their respective cases. Much can be, and no doubt will be, said on each side. I do not, therefore, think this factor can be a decisive or even important factor either for or against granting security for costs.

7. The plaintiff is a large and substantial company and that the defendant is a small Hong Kong property agency. It may appear to some, and it may appear to the trial judge, that this is an oppressive action. The plaintiff is no doubt extremely aggrieved by the numerous counterfeiters who trade on its name and its characters for their own gain; for example by making without licence articles featuring the well-known cartoon characters for which the plaintiff is famous. But that is a far cry from this case where, so far as the evidence goes, there is not the slightest suggestion that the defendant is using these characters in any way to promote its own business. But I am not impressed with the suggestion made by the defendant that this action is necessarily oppressive. That too is a matter which must be left to the trial judge to decide.

8. The plaintiff points rightly to its considerable commercial success and to the high reputation for commercial integrity which it enjoys. It protests that there is really no significant likelihood of its being unable or unwilling to pay the costs if it loses this action. It is in receipt of a stream of royalties payable to it by a subsidiary company in Hong Kong which, as it points out, could be garnished in the event of any refusal by the plaintiff to meet any order for costs awarded against it. There really are no grounds, it says, for fearing that the defendant will not get its costs in those circumstances.

9. I have to balance all these factors in considering how to exercise in the interests of justice the discretion conferred on me.

10. My starting point is of course that the plaintiff is a foreign corporation. In these circumstances, as Sir Nicolas Browne-Wilkinson pointed out in the Porzelack case at p.1077:-

"It seems to me that I have an entirely general discretion either to award or refuse security, having regard to all the circumstances of the case. However, it is clear on the authorities that, if other matters are equal, it is normally just to exercise that discretion by ordering security against a non-resident plaintiff."

I think matters are equal here; and I have come to the conclusion that the just course is to protect this defendant by ordering the plaintiff to give security for costs. It is a substantial corporation and the defendant is comparatively small fry. I think the balance of justice comes down in the defendant's favour.

11. As matters at present stand, the plaintiff is riding high commercially. But one never knows whether, in the course of an action the circumstances of the parties may change, due perhaps to commercial failure, or to a takeover by newcomers whose standards of commercial integrity fall short of those of the former owners. I see no reason why the defendant ought to be exposed to this sort of risk, remote though it may seem to be, and I propose to follow the rule that, where the justice of the case requires it, an order for security for costs ought to be made. I shall make such an order accordingly, referring it to the master to determine the amount of the security (if not agreed); in the circumstances, I allow this appeal.