HONG KONG KARAOKE LICENSING ALLIANCE LTD v. NEWAY MUSIC LTD

CAMP 131/2020 & CACV 328/2020

[2020] HKCA 736

CAMP 131/2020

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF APPEAL

MISCELLANEOUS PROCEEDINGS NO 131 OF 2020

(ON AN INTENDED APPEAL FROM HCCT NO 45 OF 2012)

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BETWEEN

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AND

CACV 328/2020

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF APPEAL

CIVIL APPEAL NO 328 OF 2020

(ON APPEAL FROM HCCT NO 45 OF 2012)

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BETWEEN

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(Heard Together)

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REASONS FOR JUDGMENT

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Hon Kwan VP (giving the Reasons for Judgment of the Court):

1.  On 3 August 2020, M Chan J handed down a decision ordering payment out to the plaintiff of two sums paid into court totalling $25 million with all interests accrued pursuant to Order 22A rule 1(1) of the Rules of the High Court (“the Decision”). On 6 August, the defendant filed a notice of appeal against the Decision and sought an urgent hearing of the appeal (CACV 328/2020). On 12 August, the defendant filed a summons seeking leave to appeal in the event that leave is required and a rolled-up hearing for the leave application and the appeal proper (CAMP 131/2020). The defendant’s challenge is premised solely on the absence of jurisdiction to order payment out under Order 22A rule 1(1).

2.  At the commencement of the rolled-up hearing on 27 August, the defendant’s counsel conceded that leave to appeal is required.  After the hearing, we dismissed the application for leave to appeal and the notice of appeal filed without leave.  We ordered the defendant to pay the plaintiff’s costs in CAMP 131/2020 and CACV 328/2020, to be taxed if not agreed, and declined to grant a certificate for three counsel to the plaintiff.  These are the reasons for judgment of the court.

Background

3.  The plaintiff, Hong Kong Karaoke Licensing Alliance Limited, was the copyright licensing body for karaoke server licences for the reproduction of karaoke music videos (“KMVs”) under a scheme operated by the plaintiff (“the Scheme”).  The Scheme commenced operation on 1 July 2010 and ceased on 30 June 2015.

4.  The defendant, Neway Music Limited, is engaged in operating the Neway Group of karaoke outlets.  In June 2010, the defendant applied to the plaintiff for a KMV server licence under the Scheme.  However, when the licence was offered, the defendant contended that the terms were unreasonable and on 9 August 2010 applied as the originator to the Copyright Tribunal for relief under section 156 of the Copyright Ordinance, Cap 528 (CT 2/2010).  The Tribunal has power under section 156(3) to consider the matter in dispute and make such order, either confirming or varying the scheme so far as it relates to cases of the description to which the reference relates, as the Tribunal may determine to be reasonable in the circumstances.

5.  It was only on 23 December 2019 that the Tribunal handed down its decision in CT 2/2010 (“CT Decision”), after hearings were held on various dates from August 2017 to March 2019.  The only issue the Tribunal was required to determine is whether the plaintiff’s tariff of licence fees under the Scheme in respect of the repertoire of “back catalogue” and the terms upon which the licences for such repertoire were being offered and granted were unreasonable^[1]. The Tribunal found and confirmed that the structure and the rates of the back catalogue repertoire are reasonable and did not consider it necessary to make any variation to the Scheme^[2]. It ordered the defendant to pay the plaintiff licence fees for the plaintiff’s back catalogue from 1 July 2010 to 30 June 2015, and directed the parties to provide their calculations^[3].

6.  There being no agreement on the amount of licence fees payable on the basis determined by the Tribunal, directions were given by the Tribunal on 8 April 2020 for evidence and submissions to be filed for a hearing in August 2020 to determine the amount^[4].

7.  On 6 November 2012, when proceedings in CT 2/2010 were pending, the plaintiff issued an originating summons in the High Court (HCCT 45/2012) for interim payment by the defendant of licence fees at $94,410,000 or such sums as the court may think just on account of the reproduction and use by the defendant of the plaintiff’s KMV repertoire since 1 July 2010.  The plaintiff also sought an alternative remedy of payment of the said sum into court or a further alternative that the defendant should comply with the terms of the Scheme, pending the determination of CT 2/2010.  The originating summons was issued under rule 22 of the former Copyright Tribunal Rules, Cap 528C^[5], section 45(2) of the Arbitration Ordinance, Cap 609^[6] and Order 73 rule 1^[7].

8.  The originating summons was heard by L Chan J who gave judgment on 7 November 2013 (“L Chan J Judgment”).  There is no express provision for a power to order interim payment in a reference to the Tribunal under section 156(3).  L Chan J reasoned that references under section 156 are of the terms of a scheme already in operation and the tariff in the scheme is payable pending the determination of the reference by virtue of section 156(2)^[8]. Hence, there is no need for a provision for interim payment similar to section 164(1), which applies to section 162 (reference to the Tribunal of the terms on which a licensing body proposes to grant a licence) or section 163 (reference to the Tribunal of a licence due to expire) where licence fees are not yet payable pending the determination of the reference.  He held that neither the Tribunal nor the court would have jurisdiction to order interim payment for a reference under section 156^[9].

9.  Notwithstanding the holding that the tariff in the scheme is payable pending the determination of the reference by virtue of section 156(2), L Chan J held that he still cannot order the defendant to pay the plaintiff the full royalties per the tariff table of the Scheme from 1 July 2010 in light of the reliefs sought in the originating summons and the evidence before the court.  He noted that the originating summons was for interim payment, not for a declaration of the meaning and effect of section 156(2) and an order for payment of the royalty according to the applicable tariff^[10].

10.  L Chan J further held that the court has no jurisdiction to order interim payment under section 45(2) of the Arbitration Ordinance^[11] because “interim measure” referred to in Article 17 of the UNCITRAL Model Law does not include orders for interim payment.

11.  There was no controversy that the court does have jurisdiction under Article 17 of the UNCITRAL Model Law to order payment into court^[12]. L Chan J considered it appropriate the defendant should make payment of a reasonable sum into court “to secure what it will have to pay the plaintiff per the licensing scheme as may be ordered by the Copyright Tribunal in CT 2/2010.”^[13]  He considered $5 million per annum should be paid for the back catalogue^[14].  Pursuant thereto, the defendant paid into court $20 million on 21 November 2013 and $5 million on 10 July 2014.

12.  On 6 January 2017, L Chan J ordered that the total sum of $25 million already paid into court shall continue to be held in court “pending the determination of CT 2/2010 or until further Order from the Court”.

13.  After the CT Decision was handed down and on 20 March 2020, the plaintiff issued a summons under Order 22A rule 1(1)^[15] and the inherent jurisdiction of the court for payment out to it of the $25 million with all accrued interest.  By the Decision, M Chan J made the order as sought.

Whether leave to appeal is required

14.  At the hearing, Mr Joseph Wong, who appeared for the defendant, abandoned his contention that leave to appeal against the Decision is not required.  We are satisfied leave is required in this instance.

15.  When the originating summons was heard by L Chan J in November 2013, the former Copyright Tribunal Rules, Cap 528C were in force, rule 22 of which provided that section 45(2) of the Arbitration Ordinance applied with the necessary modifications to proceedings before the Copyright Tribunal as it applied to arbitral proceedings and hence Order 73 rule 1 applied to an application under section 45(2). The former Rules were repealed and replaced by a completely new set of Copyright Tribunal Rules, Cap 528D, which came into effect on 1 May 2017.  Rule 22 of the former rules did not survive the repeal.  Under the current Rules, which are self-contained, all direct links and cross-references to the Arbitration Ordinance have been removed^[16].  The plaintiff’s summons issued on 20 March 2020 was not made under section 45(2) of the Arbitration Ordinance and Order 73 rule 1, which have ceased to be relevant.  The order made on this summons is not an order under Order 73 and does not come within Order 59 rule 21(1)(i).  As this is an interlocutory order and is not excepted from the application of section 14AA(1) of the High Court Ordinance, Cap 4 by any provision in Order 59 rule 21, leave to appeal against the Decision is required.

16.  Under section 14AA(4), leave to appeal shall not be granted unless the court hearing the application is satisfied that the appeal has a reasonable prospect of success, or there is some other reason in the interests of justice why the appeal should be heard.  It is incumbent on the defendant to show that the prospect of success of the intended appeal is more than fanciful or more than just arguable, without having to be probable.

The defendant’s arguments

17.  Mr Wong argued that the court has no jurisdiction to make the order for payment out because the order is in substance and effect an interim payment to the plaintiff, albeit under the guise of Order 22A rule 1(1).  He contended that the legal position remains completely unchanged since the L Chan J Judgment in that the Tribunal has yet to decide on the licence fees payable (if any) and no order for payment of licence fees has been made.  The defendant’s latest position is that no licence fees are payable for the back catalogue because the licence to the defendant had not commenced at all.  Hence, the order for payment out under Order 22A rule 1(1) is in effect and substance an order for interim payment.

18.  By the L Chan J Judgment, it was determined against the plaintiff that the court would have no jurisdiction to make the interim payment sought, from the perspective of the Copyright Ordinance, and from the perspective of the Arbitration Ordinance.  Mr Wong submitted this is a situation of res judicata, as the plaintiff is in effect asking for interim payment when L Chan J had already determined there is no jurisdiction to make such order under rule 22 of the former Copyright Tribunal Rules and section 45(2) of the Arbitration Ordinance. What the plaintiff has sought to do is to bypass section 45(2) by asking for interim payment in two stages: first seeking an order of payment into court under section 45(2), and then asking for payment out under Order 22A rule 1(1).

19.  Although Order 22A rule 1(1) gives the court wide powers, they must be exercised judiciously and money should be released for the purpose of which it was paid in.  Here, the sums paid into court were for the purpose of securing what may be ordered to be payable by the Tribunal in CT 2/2010.  That being the case, Mr Wong submitted there is no jurisdiction to order payment out unless and until there is an actual order for payment of licence fees by the Tribunal.

20.  He further contended that M Chan J was in error in stating that L Chan J was considering the question of jurisdiction in the context of section 45(2) of the Arbitration Ordinance and the grant of interim measures by the court in aid of arbitration^[17]. The correct way of putting this is that L Chan J was considering the same question in the same set of proceedings between the same parties and he ruled against the plaintiff.  So this is a case of res judicata.  He also criticised the judge for stating that the court has an unfettered discretion over the money paid into court^[18]. If the discretion was unfettered, L Chan J would not be required to distinguish between the interim payment and the alternative relief of payment into court and rejected the former whilst allowing the latter.

21.  We do not accept the defendant’s arguments.

22.  It is wrong to characterise the order of payment out in this instance as in substance and effect an order for interim payment.  For one thing, the court was dealing with the release of monies sitting in court, and is empowered under Order 22A rule 1(1) to order payment out of any money paid into court at any time before, at or after the trial or hearing of the action.  Nor is it correct to say there is no change in the legal position since the L Chan J Judgment, as plainly there is.  The Tribunal had determined that the structure and the rates of the plaintiff’s back catalogue of the Scheme are reasonable and ordered the defendant to pay the licence fees from 1 July 2010 to 30 June 2015.  The fact that the quantum of the licence fees has yet to be determined goes merely to the discretion whether to release the monies remaining in court and if so how much should be paid out.

23.  We reject the defendant’s latest position that licence fees are not payable. As mentioned earlier, the defendant had raised a reference to the Tribunal under section 156 and it was pointed out in the L Chan J Judgment that references under section 156 are of the terms of a scheme already in operation and the tariff in the scheme is payable pending the determination of the reference by virtue of section 156(2).  Mr Rimsky Yuen, SC for the plaintiff^[19] also referred to the decision of L Chan J on 6 January 2017 in which the judge confirmed that a reference to the Tribunal under section 156 is of a scheme “in operation”, not a scheme “proposed to be operated”, which is governed by section 155^[20]. The defendant’s latest position appears to be a new point which had not been raised previously.

24.  There is clearly no question of res judicata. The issue that was determined in the L Chan J Judgment was whether interim payment alternatively payment into court should be ordered, whereas M Chan J was concerned with a different issue, namely, whether the monies paid into court should be released to the plaintiff.

25.  Further, although this is not material to our decision, section 45(2) of the Arbitration Ordinance ceased to be relevant when the former Rules were repealed, doing away with the old rule 22 and all direct links and cross-references to the Arbitration Ordinance. With the repeal of the old rule 22, and as there is no provision in the new Rules dealing with the release of money paid into court, Order 22A rule 1(1) should apply, conferring power on the court to deal with any money paid into court in an action.  There is no question of bypassing section 45(2).

26.  The rulings in the L Chan J Judgment concerning the lack of jurisdiction to order interim payment, whether from the perspective of the Copyright Ordinance and/or the Arbitration Ordinance, have no bearing to the present situation relating to the jurisdiction to order payment out under Order 22A rule 1(1).  The monies paid into court by the defendant are clearly covered by the expression “any money paid into court in an action (whether or not in accordance with Order 22)” in that provision.  And the court has power to order payment out “at any time before, at or after the trial or hearing of the action”.  This must have been envisaged by L Chan J when he ordered on 6 January 2017 that the monies paid into court shall continue to be held in court “pending the determination of CT 2/2010 or until further Order from the Court”.

27.  The defendant’s contention that the order for payment out was made without jurisdiction is not reasonably arguable.  Nor do we think there is any reason in the interests of justice why the intended appeal should be heard.  We therefore refused to grant leave to appeal from the Decision.