WONG TO YICK WOOD LOCK OINTMENT LTD v. SUN ASCENT DEVELOPMENT LTD AND ANOTHER

HCIP 58/2022

[2026] HKCFI 2741

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

INTELLECTUAL PROPERTY PROCEEDINGS NO. 58 OF 2022

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J U D G M E N T

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1.  In this trial, the Plaintiff seeks to hold the Defendants liable for contempt of court in relation to two disclosure orders made by Lok J.

A.  THE FACTUAL BACKGROUND

2.  The facts set out in this section are either taken from the statement of agreed facts, or are undisputed or indisputable. I find them as facts.

A1.  The Various Parties

3.  At all material times, the Plaintiff was incorporated in Hong Kong and carried on business in the manufacturing and marketing of medicated balm or oil under the name “Wong To Yick Wood Lock Medicated Balm 黃道益活絡油”.

4.  The 1^st Defendant (“Sun Ascent”) was incorporated in Hong Kong on 2 October 2002. The 2^nd Defendant, Xu Hualong (“Mr Xu”), was a director and the General Manager (since 2008) of Sun Ascent.

5.  Mr Xu and members of his family, including his cousins, Hui Wa Him Heusen (“Heusen Hui”) and Hui Hiu Kan (“HK Hiu”), have been operating various companies through which their family has been carrying on business in the development and sales of pharmaceutical products. At all material times, HK Hiu was the General Manager of Sun Ascent.

6.  The pharmacies operated by Mr Xu’s family include the following:

(1)  Gold City Pharmacy commenced operations on around 20 October 2006 and ceased business on around 14 December 2009. It was owned by Honour Stage Limited, of which Mr Xu had been a director since around 1 November 2006 until about 19 November 2007.

(2)  HW Pharmacy began operations from the same premises as Gold City Pharmacy since around 15 December 2009. It was owned by Treasure Trend Investment Limited (“Treasure Trend”), of which Mr Xu had been the General Manager since around 15 December 2009 until it ceased business on 17 April 2014.

(3)  Mega Pharmacy was operated by H & Kerrie Investment Ltd, of which Heusen Hui was a shareholder.

(4)  H & B Pharmacy was operated by Champ Key Ltd, of which Heusen Hui was a shareholder.

(5)  C & M Pharmacy was operated by Keen Achieve Ltd, of which Heusen Hui was a shareholder.

(6)  T & D Pharmacy was operated by City Giant Ltd, which, at one point, shared the same shareholders as Sun Ascent.

(7)  Success Pharmacy was operated by Huge View Ltd, of which Mr Xu was a director and sole shareholder.

(8)  Sun Century Holdings Ltd was trading as H.M. Hong (“Sun Century”), of which Mr Xu was a director and shareholder.

A2.  Sun Ascent’s Registration of the Invalidated Trade Mark

7.  On 11 February 2008, Sun Ascent applied to register the trade mark “黃道玉 星加坡宗檀藥業公司 WONG DO YUK SINGAPORE TSUNG TANG MEDICINE CO.” (“the Invalidated Mark”), which was granted on 13 June 2008.

A3.  Manufacturing and Processing of 黃道玉活絡油

8.  On 1 September 2008, a letter of intent of cooperation (“LOI”) between Mega Good Industrial Limited (“Mega Good”) and Sun Ascent took effect. Under the LOI, Mega Good was to assist Sun Ascent to manufacture/process, amongst others, “黃道玉活絡油”.

9.  At all material times, Wong Wai Shing (“Mr Wong”) was at a director of Mega Good. Mr Wong is the husband of Chan Miu Chun (“Ms Chan”), the sole proprietor of “Chan Miu Chun trading as Shun Fat Trading Co” (“Shun Fat”).

A4.  “Product D”

10.  Mega Good was the manufacturer and processor of the product with the mark 黃道玉活絡油 referred to in Annex D of the Plaintiff’s Consolidated Statement of Claim in the Consolidation Action (to be defined below) (“Product D”). Notwithstanding the terms of the LOI, Mega Good received manufacturing/processing orders not from Sun Ascent, but from Gold City Pharmacy and HW Pharmacy “in a manner analogous to that under the LOI”. Mr Wong claimed that he did not know why the pharmacies placed the orders, made purchases, and asked for issuance of invoices and deliveries to them (instead of Sun Ascent). However, Mega Good believed that Sun Ascent and the pharmacies were related entities and regarded them as the same customer.

11.  Shun Fat was the wholesale supplier to Gold City Pharmacy and HW Pharmacy of Product D manufactured/processed by Mega Good.

12.  Between 3 October 2008 and 4 December 2009, Gold City Pharmacy placed orders with Shun Fat for Product D.

13.  Between 29 December 2009 and 26 November 2010, HW Pharmacy placed orders with Shun Fat for Product D.

14.  Ms Chan believed that Gold City Pharmacy and HW Pharmacy were at all material times related to Sun Ascent. She did not know why the pharmacies placed the orders, made purchases, and asked for issuance of invoices and deliveries to them (instead of Sun Ascent). However, Shun Fat believed that Sun Ascent and the pharmacies were related entities and regarded them as the same customer.

A5.  “Product C”

15.  In or since about 2011, Sun Ascent modified the formula and ingredients of 黃道玉活絡油 into a western medicine oil referred to in Annex C of the Plaintiff’s Consolidated Statement of Claim in the Consolidation Action (to be defined below) (“Product C”). Sun Ascent’s newly formulated Product C continued to adopt the Invalidated Mark and substantially the same packaging as Product D, save for (1) different ingredient labels and (2) Sing & Japan International Technology Limited (“Sing & Japan”) (rather than Mega Good) being identified as the manufacturer on the packaging.

16.  Sing & Japan was the manufacturer of Product C. Mr Wong was at all material times the sole director of Sing & Japan.

17.  Sing & Japan engaged 廣州星德商貿有限公司 (“GZ Xingde”) to manufacture/supply the packaging of Product C. In particular, (1) on or around 22 October 2012, GZ Xingde dispatched to Sing & Japan 1,570 packaging boxes of Product C, (2) on or around 22 October 2012, Sing & Japan collected printing fee of 1,570 packaging boxes on GZ Xingde’s behalf, and (3) on or around 2 November 2012, Sing & Japan completed the packaging of 1,368 bottles of Product C.

18.  Between 2012 and 2013, the related pharmacies set out in paragraphs 6(3) to 6(7) above placed orders for a total of 1,368 bottles of Product C from Sing & Japan.

A6.  Position of Sun Ascent and Mr Xu in HCA 562/2014

19.  On 31 March 2014, the Plaintiff commenced HCA 562/2014 against Merika Medicine Factory Ltd and Sun Century for trade mark infringement and passing off. Sun Century was one of the various companies through which Mr Xu’s family carried on business.

20.  In defending against the Plaintiff’s claim, Mr Xu, as a director of Sun Century, contended that the Plaintiff had sued the wrong party. Mr Xu stated in his witness statement of 7 September 2015 that although Sun Ascent’s main business was to hold brand names and trade marks, it was “also sometimes responsible for launching new products”. Mr Xu referred to Sun Ascent’s launch of 黃道玉活絡油 in Hong Kong and stated that his cousin, HK Hiu, would make a witness statement about this.

21.  HK Hui made a witness statement on 7 September 2015 in which she identified herself as General Manager of Sun Ascent. She also contended that the Plaintiff had sued the wrong party, that Sun Century had nothing to do with the infringing黃道玉活絡油 and described the launch of the infringing 黃道玉活絡油 in Hong Kong in late 2008.

A7.  Position of Sun Ascent and Mr Xu in HCMP 1550/2014

22.  On 25 June 2014, the Plaintiff commenced HCMP 1550/2014 to revoke the Invalidated Mark pursuant to ss. 52 and 53 of the Trade Marks Ordinance (Cap 559). As registered proprietor of the Invalidated Mark, Sun Ascent was the Respondent in that action.

23.  In opposition to the Plaintiff’s application to revoke the Invalidated Mark on the grounds of non-use:

(1)  Mr Xu affirmed on 3 October 2014 that “[f]rom the matters set out below, it can be seen that [Sun Ascent] has genuinely made substantial and extensive use, itself and/or via its agent with its consent, of the [Invalidated] Mark in Hong Kong in relation to the Subject Goods”.

(2)  In support of his contention that Sun Ascent had genuinely made substantial and extensive use, itself and/or via its agent with its consent, of the Invalidated Mark in Hong Kong in relation to the Subject Goods, Mr Xu affirmed that (a) Gold City Pharmacy had placed orders with Shun Fat from 3 October 2008 to 4 December 2009, (b) HW Pharmacy had placed orders from 29 December 2009 to 26 November 2010 and (c) the goods ordered by Gold City Pharmacy and HW Pharmacy had been sold to consumers in Hong Kong.

A8.  Position of Sun Ascent and Mr Xu in HCA 2589/2014

24.  On 22 December 2014, the Plaintiff commenced HCA 2589/2014 against, inter alia, Sing & Japan and Sun Ascent for trade mark infringement and passing off in respect of Product C.

25.  The Defence was verified by Mr Xu’s Statement of Truth on 4 June 2015, signed in his capacity as General Manager of Sun Ascent.

A9.  Consolidation of 3 Actions

26.  The 3 actions in HCA 562/2014, HCMP 1550/2014 and HCA 2589/2014 were consolidated on 10 March 2017 (“Consolidated Action”).

27.  On 7 April 2017, the Plaintiff filed and served the Statement of Claim in the Consolidated Action.

28.  On 17 July 2017, the Defence and Counterclaim was filed in the Consolidation Action. It was verified by statement of truth signed by Mr Xu.

29.  On 13 April 2018, HK Hui made a further witness statement in the Consolidated Action on behalf of, amongst others, Sun Ascent, Heusen Hui, Mr Xu and Sun Century, in which she stated, inter alia, that these defendants would be relying on Mr Xu’s affirmation in HCMP 1550/2014, Mr Xu’s witness statement and her own witness statement in HCA 562/2014.

A10.  Consent Judgment and Disclosure Affirmation

30.  On 20 May 2020, a consent judgment (“Consent Judgment”) was entered in the Consolidated Action in favour of the Plaintiff against, amongst others, Sun Ascent and Mr Xu for infringement of trade marks and passing off, which included a consequential order for disclosure of details of the infringing activities of Sun Ascent and Mr Xu.

31.  By an affirmation dated 28 September 2020 filed on behalf of Sun Ascent, Treasure Trend, Sun Century and himself (“Disclosure Affirmation”), Mr Xu stated, amongst other things, that:

(1)  Sun Ascent and he were not in possession, power, custody or control of any of the articles and materials as defined in paragraph 4 of the Consent Judgment (“Offending Articles”);

(2)  before signing the Disclosure Affirmation, none of the defendants in the Consolidated Action (including Sun Ascent and Mr Xu) (a) have sold or supplied and/or offered to sell or supply to anyone the 黃道玉活絡油 as identified in Annexes B, C and D of the Plaintiff’s Consolidated Statement of Claim in the Consolidation Action (including Product C and Product D) or other get-ups similar thereto (“Infringing Goods”), (b) have ordered, bought and/or obtained from anyone the Infringing Goods, and (c) have received order from anyone in respect of the Infringing Goods;

(3)  before signing the Disclosure Affirmation, Sun Ascent and Mr Xu have not manufactured or caused to be manufactured or distributed or sold any of the Infringing Goods; and

(4)  the costs incurred and the sums received or receivables from the manufacturing of and dealing with the Infringing Goods were nil.

A11.  Present Proceedings

32.  Pursuant to the leave granted by Lok J on 19 July 2022, the Plaintiff commenced the present contempt proceedings against Sun Ascent and Mr Xu on 1 August 2022.

33.  On 26 September 2023, leave was given to the Plaintiff to set down the Originating Summons for trial.

34.  On 26 August 2024, Sun Ascent and Mr Xu applied to set aside the leave granted to the Plaintiff to institute the present proceedings. On 3 September 2024, Lok J vacated the trial of the Originating Summons herein which was originally fixed on 25 to 27 September 2024. The setting aside application was dismissed by Lok J on 25 September 2024.

B.  THE PARTIES’ RESPECTIVE CASE

35.  The Plaintiff’s case is that Mr Xu’s statement in the Disclosure Affirmation that Sun Ascent had (1) never sold, supplied or offered to sell or supply to anyone, (2) never ordered, bought and/or obtained from anyone, and (3) never received order from anyone the infringing products, is untruthful. The Plaintiff contends that Sun Ascent and Mr Xu have adopted a position diametrically opposite to what they admitted in the pleadings filed in the earlier proceedings, and have therefore failed to comply with the disclosure orders in the Consent Judgment. The Plaintiff acknowledged during the trial that it is not part of its case to contend that the Defendants were obliged to disclose dealings made by their agents under the Consent Judgment.

36.  The Defendants’ case is that Sun Ascent did not manufacture, sell or supply in the infringing products. They submit that no relevant admissions were previously made. Accordingly, the Defendants contend that they are not in contempt of court in relation to their disclosure obligations.

C.  THE ISSUES AND LEGAL PRINCIPLES

37.  The parties have agreed the following 6 issues that require the court’s determination:

(1)  Prior to the Consent Judgment, had Sun Ascent sold, supplied, offered to sell or supply, ordered, bought and/or obtained or received orders for any Infringing Goods?

(2)  Has Sun Ascent failed to make the disclosure of its dealings with the Infringing Goods which it was ordered to make pursuant to paragraphs 5 and 6 of the Consent Judgment?

(3)  Prior to the Consent Judgment, had Sun Ascent ordered, sold or supplied any packaging materials of the Infringing Goods?

(4)  Has Sun Ascent failed to make the disclosure of its dealings with the Offending Articles which it was ordered to make pursuant to paragraphs 5 and 6 of the Consent Judgment?

(5)  Is Mr Xu liable to be committed to prison by reason of Sun Ascent’s breaches of the Consent Judgment?

(6)  Has Mr Xu failed to exercise his position and powers as the director of Sun Ascent to cause, procure and/or arrange for Sun Ascent to make disclosure of its dealings with Infringing Goods and Offending Articles as required under paragraphs 5 and 6 of the Consent Judgment?

38.  Each of the 6 issues is dealt with below.

39.  I bear in mind the following principles derived from Sir Gerard Brennan NPJ’s judgment in Kao, Lee & Yip v Koo Hoi Yan (2009) 12 HKCFAR 830 in assessing whether the defendants are liable for contempt.

(1)  In proceedings for civil contempt, an allegation must be proved strictly and strict proof of guilt is required. Proof must be beyond reasonable doubt.[1] 

(2)  When the alleged contempt is based on the defendant’s failure to comply with court orders, the proper approach is:

(a)  first to construe the court order in question so as to ascertain its meaning and operation;

(b)  then to determine whether the defendant has in fact complied with the orders as so construed; and

(c)  finally to consider whether any failure to comply was accompanied by the state of mind necessary to establish punishable contempt.[2]

D.  ISSUE 1

40.  The question in Issue 1 is whether prior to the Consent Judgment, Sun Ascent had sold, supplied, offered to sell or supply, ordered, bought and/or obtained or received orders for any Infringing Goods.

41.  In its Statement filed pursuant to RHC O.52 r.2 and the Originating Summons, the Plaintiff put forward two main bases to contend that Sun Ascent had made admissions that it sold the Infringing Goods.

42.  First, the Plaintiff alleged that Sun Ascent had made admissions in its pleading that it (Sun Ascent) had sold Infringing Goods manufactured by Sing & Japan from October 2008 until around December 2010 in Hong Kong. Specifically, the Plaintiff relied on paragraphs 7(a) and 9(d) of Sun Ascent’s Defence in HCA 2589/2014 (“Original Defence”)[3] as the factual elements for such alleged admissions.

43.  Before dealing with paragraphs 7(a) and 9(d) of the Original Defence, it is important to highlight the agreed fact that it was Sing & Japan who manufactured Product C (see paragraph 16 above).

44.  In paragraph 7(a) of the Original Defence, Sun Ascent “admitted that [Sing & Japan] had been the manufacturer of the product bearing the Subject Mark (“[Sun Ascent’s] product”) … for [Sun Ascent] to sell in Hong Kong and that [Sun Ascent] is the registered owner of the Subject Mark since 2008”. The Plaintiff accepted in its written closing submissions that paragraph 7(a) was concerned with Product C. In my view, on a proper reading of paragraph 7(a) of the Original Defence, the admission was that Product C was manufactured by Sing & Japan for Sun Ascent to sell in Hong Kong. Similarly, at paragraph 23(5) of its Consolidated Statement of Claim, the Plaintiff itself also considered the admission in paragraph 7(a) of the Original Defence was that “[Sing & Japan] was the manufacturer of [Product C] for [Sun Ascent] to sell in Hong Kong”. I do not think paragraph 7(a) is sufficiently clear to constitute an admission that Sun Ascent had sold Product C in Hong Kong.

45.  The Plaintiff submitted that paragraphs 7(a) and 9(h) of the Original Defence “must be read together” so that they constitute Sun Ascent’s admissions that it had sold Product C in Hong Kong. I have already explained above why I do not think paragraph 7(a) constitutes an admission on the part of Sun Ascent that it had sold Product C in Hong Kong. For the reasons given below, I also do not think paragraph 9(h) amounts to such an admission. There is nothing on the face of the pleading to suggest that paragraphs 7(a) and 9(h) were intended to be read together. In any event, I do not agree that reading the two paragraphs together has the effect of constituting the admissions as contended for by the Plaintiff.

46.  Accordingly, I do not think it has been proved beyond reasonable doubt that Sun Ascent had admitted under paragraph 7(a) that it had sold Product C in Hong Kong.

47.  In paragraph 9(d) of the Original Defence, Sun Ascent pleaded that it “started to market and sell [Sun Ascent’s] Products from about October 2008 but cease to sell the same in or about December 2010 in Hong Kong …”.

48.  It is first necessary to ascertain the subject matter of the alleged admission in paragraph 9(d) of the Original Defence.

(1)  As agreed between the parties, HCA 2589/2014 was commenced by the Plaintiff to claim against Sing & Japan and Sun Ascent for trade mark infringement and passing off in respect of Product C (see paragraph 24 above). Further, the Plaintiff submitted in paragraph 6(b) of its written closing submissions that HCA 2589/2014 “was only about Product C”. It is therefore readily understandable why the Plaintiff accepts that the term “the product bearing the Subject Mark [defined in the pleading as “the 5^th Defendant’s product[4]”]” in paragraph 7(a) of the Original Defence should be understood as a reference to Product C (see above).

(2)  However, the term used in paragraph 9(d) of the Original Defence is “[Sun Ascent’s] Products” in plural, and such a term was not defined in the pleading. Nor was the term “Product” or “Products” defined anywhere else in the pleading. On its face, it is unclear as to what products the term “[Sun Ascent’s] Products” was intended to include.

(3)  It seems clear that the term cannot refer to Product C because (a) Product C was manufactured by Sing & Japan, as admitted in paragraph 7(a) of the Original Defence, (b) Sing & Japan was only incorporated in 2012 and (c) Product C therefore could not have been marketed and sold by Sun Ascent between 2008 and 2010.

(4)  In paragraph 6(a) of its written closing submissions, the Plaintiff submitted that “Sun Ascent had admitted [in paragraph 9(d) of the Original Defence] that it had marketed and sold Product D in Hong Kong from about October 2008 to December 2010”.[5] Given that HCA 2589/2014 was only concerned with Product C, it is not altogether clear that paragraph 9(d) was intended by Sun Ascent to refer to Product D or other products bearing the Invalidated Mark.

(5)  In any event, there was admissible evidence[6] in these proceedings to suggest that Product D was ordered by and delivered to Gold City Pharmacy and HW Pharmacy from October 2008 to November 2010, and was then sold by the two pharmacies to consumers in Hong Kong.

49.  The Plaintiff referred to certain statements made in Mr Xu’s affirmation previously filed in HCMP 1550/2014 and the witness statements filed in HCA 562/2014 to seek to support its case. I do not agree that such statements are sufficient for the Plaintiff to prove beyond reasonable doubt that Sun Ascent had marketed and sold Product D in Hong Kong.

(1)  At paragraph 7 of his affirmation filed in HCMP 1550/2014, Mr Xu stated:

“It was alleged by the [Plaintiff] … that [Sun Ascent] has never put the Subject Mark to any use in Hong Kong. This is not the case. From the matters set out below, it can be seen that [Sun Ascent] has genuinely made substantial and extensive use, itself and/or via its agent with its consent, of the Subject Mark in Hong Kong in relation to the Subject Goods.”

(2)  As can be seen from the first two sentences of paragraph 7, one of the main purposes of preparing this affirmation was for Mr Xu to give evidence of the use of the trade mark by the owner or with his consent. Paragraph 7 of Mr Xu’s affirmation was not concerned about marketing and sale of any products.

(3)  The Plaintiff further relied on paragraph 32 of the same affirmation, in which Mr Xu said:

“By reason of the aforesaid matters, [Sun Ascent’s] Goods have been exposed to consumers in the Hong Kong market. They had been sold in Hong Kong at the premises of Gold City Pharmacy and HW Pharmacy directly and through outside sales/agents which were independent of the said pharmacies. …”

(4)  As far as the sales “through outside sales/agents which were independent of the said pharmacies” are concerned, there was some suggestion in the evidence that “Gold City Pharmacy and/or HW Pharmacy might have in turn supplied Product D to other retailer(s)”. This suggestion appeared in a letter written by the solicitors for Mega Good and Shun Fat dated 18 October 2016, which was included in the evidence by the Plaintiff in these proceedings.

(5)  I do not read paragraph 7 and other statements referred to by the Plaintiff in Mr Xu’s affirmation filed in HCMP 1550/2014 as admissions that Sun Ascent had marketed and sold Product D in Hong Kong.

(6)  In HCA 562/2014, Mr Xu and HK Hui each filed a witness statement to contend that the Plaintiff had sued the wrong party. Although both of them did refer to Sun Ascent in other parts of their respective statement, I do not believe that such statements are sufficiently clear to constitute an admission that Sun Ascent had marketed and sold Product D in Hong Kong.

50.  The Plaintiff has not adduced any other independent evidence to suggest that Sun Ascent had been selling Product D, or any other products bearing the Invalidated Mark, between 2008 and 2010.

51.  In these circumstances, I do not accept that the Plaintiff has proved beyond reasonable doubt that Sun Ascent had made an admission, whether in paragraph 9(d) of the Original Defence or the previous affirmation or witness statements filed, that it marketed and sold Product D, or other products bearing the Invalidated Mark, in Hong Kong from about October 2008 until about December 2010.

52.  As mentioned above, the Plaintiff alleged that Sun Ascent had made admissions in paragraphs 7(a) and 9(d) of the Original Defence that it (Sun Ascent) had sold Infringing Goods manufactured by Sing & Japan from October 2008 until around December 2010 in Hong Kong. It is right to record that the Plaintiff conceded in its written closing submissions that there is a mistake in paragraph 11 of the Plaintiff’s Statement and paragraph 10 of the Originating Summons. For the reasons given earlier, paragraphs 7(a) and 9(d) of the Original Defence cannot be relied upon to demonstrate that Sun Ascent had admitted that it had sold Product C from October 2008 until around December 2010 in Hong Kong. A statement filed under O.52 r.2(2) is to be treated in a similar manner as an indictment in criminal proceedings, and should state all the factual elements: Cosimo Borrelli v Allan Tak Yuen Chan [2018] 2 HKLRD 496 at [31] (Kwan JA). The Plaintiff accepted that paragraph 11 of the Plaintiff’s Statement (1) was part of the factual elements for its case on contempt against the Defendants, and (2) contains an error. Nonetheless, no application has been made to amend it. In my view, the Plaintiff should have made it clearer as to the precise factual basis upon which the Defendants are said to be liable for contempt. This is something that the court has taken into account in determining the present application.

53.  For the above reasons, I do not consider that paragraphs 7(a) and 9(d) of the Original Defence can be regarded as admissions on the part of Sun Ascent that it (Sun Ascent) had sold Infringing Goods manufactured by Sing & Japan from October 2008 until around December 2010 in Hong Kong.

54.  I now turn to the Plaintiff’s second basis to contend that Sun Ascent had made admissions that it sold the Infringing Goods. The Plaintiff alleged that Sun Ascent had admitted that it sold the Infringing Goods with modified formula and ingredients from around 2011 until 2013 when it returned the unsold Infringing Goods to Sing & Japan. Specifically, the Plaintiff relied on paragraphs 9(g) and 9(h) of the Original Defence[7] for such alleged admissions.

55.  Paragraphs 9(g) and 9(h) of the Original Defence pleaded as follows.

“(g) In or since about 2011 and until 2013, [Sun Ascent] modified the formula and ingredients of [Sun Ascent’s] Product into western medicine oil which requires no registration. [Sun Ascent’s] newly formulated product continued to adopt the Subject Mark and the packing except with (i) different ingredient labels and (ii) [Sing & Japan] being the Manufacturer marked on the packaging. Such new product could then be continued to be manufactured and sold even if outcome of the Medicine Application was still pending.

(h) [Sun Ascent’s] Product in the form of western medicine oil had been sold in Hong Kong till about 2013 when all such unsold goods were returned to [Sing & Japan] owing to unsatisfactory sales.”

56.  It is common ground that the subject matter in question in these pleas was Product C.

57.  Although paragraph 9(g) refers to Product C being continued to be sold, and paragraph 9(h) refers to the selling of Product C in Hong Kong, there is no plea about the identity of the seller. Accordingly, on the face of these two sub-paragraphs, it does not appear to me that Sun Ascent had made any admission that it sold Product C from 2011 until 2013.

58.  In any event, there are agreed facts in these proceedings to the effect that between 2012 to 2013, the various pharmacies set out in paragraphs 6(3) to 6(7) above placed orders for a total of 1,368 bottles of Product C from Sing & Japan (see paragraph 18 above). These agreed facts plainly do not support the Plaintiff’s allegation that Sun Ascent had sold Product C from 2011 until 2013. In any event, the Plaintiff has not adduced any other independent evidence to suggest that Sun Ascent had been selling Product C, or any other products bearing the Invalidated Mark, from 2011 to 2013.

59.  For all the above reasons, the Plaintiff has not proved beyond reasonable doubt that Sun Ascent had sold, supplied, offered to sell or supply, ordered, bought and/or obtained or received orders for any Infringing Goods prior to the Consent Judgment. Issue 1 is answered in the negative.

E.  ISSUE 2

60.  The question in Issue 2 is whether Sun Ascent had failed to make the disclosure of its dealings with the Infringing Goods which it was ordered to make pursuant to paragraphs 5 and 6 of the Consent Judgment.

61.  Paragraphs 5 and 6 of the Consent Judgment provide:

“5. The Defendants do, within 28 days from the date of this Judgment, in the case of the 5^th, 6^th and 10^th Defendants, make and file and serve an affidavit or affirmation by a duly authorized director, and in the case of the 7^th and 8^th Defendants, make and file and serve an affidavit or affirmation, verifying compliance with paragraph 4 above and setting forth so far as is known to the Defendants the names and the addresses of all persons, firms or companies:

(a) to whom the Defendants or each of them have sold or supplied and/or offered to sell or supply;

(b) from whom the Defendants or each of them have ordered, bought and/or obtained; and

(c) from whom the Defendants or each of them have received orders for;

the Offending Articles together with full details of the dates, consideration and quantities of each such sale, supply, offer for sale or supply, order and/or purchase, and exhibit thereto copies of all relevant documents relating thereto in the possession, custody, power or control of the Defendants or any of them.

6. The Defendants do, within 28 days from the date of this Judgment, in the case of the 5^th, 6^th and 10^th Defendants, make and file and serve an affidavit or affirmation by a duly authorized director, and in the case of the 7^th and 8^th Defendants, make and file and serve an affidavit or affirmation, setting forth the following information:

(a) the number of the Infringing Goods and oils, medicated oils, balms, medicated balms bearing or under or by reference to the Invalidated Mark manufactured or caused to be manufactured by the Defendants or any of them;

(b) the number of the Infringing Goods and oils, medicated oils, balms, medicated balms bearing or under or by reference to the Invalidated Mark distributed or sold by the Defendants or any of them;

(c) the number of the Infringing Goods and oils, medicated oils, balms, medicated balms bearing or under or by reference to the Invalidated Mark that are in the possession of the Defendants or any of them in the course of trade;

(d) the sums received or receivable by the Defendants in respect of the number of the Infringing Goods and oils, medicated oils, balms, medicated balms bearing the Invalidated Mark sold by the Defendants or any of them; and

(e) the costs incurred by the Defendants in respect of the manufacture of the Infringing Goods and oils, medicated oils, balms, medicated balms bearing the Invalidated Mark;

and exhibit to such affidavit or affirmation all documents relating to the aforesaid information, including but not limited to all relevant contracts, invoices, orders, payment receipts and other documents or copies thereof.”

62.  Under paragraphs 5 and 6 of the Consent Judgment, Sun Ascent was required to set out, amongst other things,

(1)  the identity and address of persons (a) to whom Sun Ascent has sold or supplied and/or offered to sell or supply, (b) from whom Sun Ascent has ordered, bought and/or obtained, and (c) from whom Sun Ascent has received orders for, the Offending Articles;

(2)  the number of the Infringing Goods and products bearing the Invalidated Mark (a) manufactured or caused to be manufactured by Sun Ascent, (b) distributed or sold by Sun Ascent and (c) that were in the possession of Sun Ascent in the course of trade;

(3)  the sums received or receivable by Sun Ascent in respect of the number of the Infringing Goods and products bearing the Invalidated Mark sold by Sun Ascent; and

(4)  the costs incurred by Sun Ascent in respect of the manufacture of the Infringing Goods and products bearing the Invalidated Mark.

63.  As to the matters required to be set out as referred to in paragraph 62(1) above, in view of my earlier conclusion on Issue 1, Sun Ascent was not obliged to set out any information in the Disclosure Affirmation under paragraph 5 of the Consent Judgment.

64.  As to the matters required to be set out as referred to in paragraph 62(2) above:

(1)  The agreed facts suggest that (a) Product D was manufactured by Mega Good and was caused to be manufactured by Gold City Pharmacy and HW Pharmacy (see paragraphs 10, 12 and 13 above), and (b) Product C was manufactured by Sing & Japan and caused to be manufactured by the various pharmacies set out in paragraphs 6(3) to 6(7) above (see paragraphs 16 and 18 above). The Plaintiff has not adduced sufficient evidence to suggest that Products C and D, or other products bearing the Invalidating Mark, were manufactured or caused to be manufactured by Sun Ascent.

(2)  The agreed facts suggest that Product D was distributed by Shun Fat (see paragraph 11 above). The Plaintiff has not adduced sufficient evidence to suggest that Products C and D, or other products bearing the Invalidating Mark, were distributed or sold by Sun Ascent.

(3)  The Plaintiff has not adduced sufficient evidence to suggest that Products C and D, or other products bearing the Invalidating Mark, were in the possession of Sun Ascent in the course of trade.

(4)  In these circumstances, Sun Ascent was not obliged to set out any information involving itself in the Disclosure Affirmation under paragraphs 6(a), 6(b) and 6(c) of the Consent Judgment.

65.  As to the matters required to be set out as referred to in paragraph 62(3) above, given that there was no cogent evidence to suggest that Products C and D, or other products bearing the Invalidating Mark, were sold by Sun Ascent, Sun Ascent was not obliged to set out any information involving itself in the Disclosure Affirmation under paragraph 6(d) of the Consent Judgment.

66.  As to the matters required to be set out as referred to in paragraph 62(4) above, given that there was no cogent evidence to suggest that Products C and D, or other products bearing the Invalidating Mark, were manufactured by Sun Ascent, Sun Ascent was not obliged to set out any information involving itself in the Disclosure Affirmation under paragraph 6(e) of the Consent Judgment.

67.  It is further noted that the relevant dealings with Products C and D by Treasure Trend were disclosed in the Disclosure Affirmation in compliance of paragraphs 5 and 6 of the Consent Judgment.

68.  For all the reasons above, I find that there was no failure on the part of Sun Ascent to make the disclosure of its dealings with the Infringing Goods which it was ordered to make pursuant to paragraphs 5 and 6 of the Consent Judgment. Issue 2 is also answered in the negative.

F.  ISSUE 3

69.  The question in Issue 3 is whether prior to the Consent Judgment, Sun Ascent had ordered any packaging materials of the Infringing Goods.[8]

70.  In its Statement filed pursuant to RHC O.52 r.2 and the Originating Summons, the Plaintiff contended that Sun Ascent must have ordered the infringing packaging materials from GZ Xingde and must have sold and/or supplied such materials to other third parties.[9] In particular, the Plaintiff relied on Mr Wong’s statutory declaration made in HCA 2589/2014 (“Mr Wong’s SD”) to seek to establish that Sun Ascent had engaged GZ Xingde to print the packaging materials of the Infringing Goods.

71.  It is common ground that Mr Wong was at the material times the sole director of Sing & Japan which manufactured Product C.

72.  In paragraph 7 of Mr Wong’s SD, the following was said:

“I further understand from [Sing & Japan’s] past business dealings that, in general, [Sing & Japan’s] customers would pay GZ Xingde the printing fees directly ... Alternatively, [Sing & Japan] would collect printing fees on behalf of GZ Xingde and pay GZ Xingde afterwards; this was the case for [Sun Ascent] in relation to the Infringing “2589 Medicated Balm”.”

73.  In his SD, Mr Wong further exhibited a record in Chinese (“Chinese Record”) of Sing & Japan collecting payment of printing fees on behalf of GZ Xingde with an entry dated 22 October 2012 for “黃道玉活絡油” for “旭昇”.

74.  Mr Wong did not file any affidavit in these contempt proceedings and was not called as a witness at the trial. Mr Wong’s SD was put into evidence in these proceedings through one of affirmations filed on behalf of the Plaintiff.

75.  It is important to note that the statements from Mr Wong’s SD are hearsay evidence and the veracity of such evidence could not be tested in cross-examination in this trial.

76.  In Citybase Property Management Ltd v Kam Kyun Tak (No 1) [2003] 2 HKC 98, Ma J at [17(1)] made the following observations in relation to the use of hearsay statements in affidavit evidence in contempt proceedings:

“... where contempt proceedings are involved, although affidavit evidence is both admissible and normal, it is important that as much first hand evidence of the actual contempt is adduced or if not, an explanation given as to why such evidence is unavailable. This is not to fetter a court’s consideration of hearsay evidence where appropriate, but no court would wish to make a finding of contempt unless the evidence to support such a finding was good. It is to be borne in mind that in contempt proceedings, there is no burden on the respondent to prove his innocence: see Concorde Construction Co Ltd v Colgan Co Ltd (No 2) [1984] HKC 253 at 257.”

77.  This passage was cited with approval by Poon JA in Numeric City Ltd v Lau Chi Wing [2016] 4 HKLRD 812 at [23]. At [29], his Lordship referred to the right under Article 11(2)(e)[10] of the Hong Kong Bill of Rights (s.8 of the Hong Kong Bill of Rights Ordinance (Cap 383)) (“HKBOR”), and said that such a right “materially impacts on the use of hearsay evidence in contempt proceedings in that the court must ensure that the admission of the hearsay evidence is compatible with the putative contemnor’s right to cross-examine the witnesses against him as guaranteed in the particular circumstances of the case”.

78.  Importantly, Poon JA at [30] to [32] held that the principles propounded by the European Court of Human Rights are applicable in considering compatibility of admission of hearsay evidence in contempt proceedings with Article 11(2)(e) of the HKBOR. The following principles extracted from Horncastle v United Kingdom (2015) 60 EHRR 31 were cited:

(1)  “The Court’s task is to ascertain whether the proceedings as a whole, including the way in which evidence was taken, were fair.”

(2)  “Article 6(3)(d) [of the European Convention on Human Rights, which is substantially similar to Article 11(2)(e) of the HKBOR] enshrines the principle that, before an accused can be convicted, all evidence against him must normally be produced in his presence at a public hearing with a view to adversarial argument. Exceptions to this principle are possible but must not infringe the rights of the defence, which, as a rule, require that the accused be given an adequate and proper opportunity to challenge and question a witness against him, either when that witness makes his statement or at a later stage of proceedings.”

(3)  “The Grand Chamber set out two requirements which flow from the general principle identified. First, it has to be established that there was a good reason for the non‑attendance of the witness. Secondly, even where there was a good reason, where a conviction is based solely or to a decisive extent on statements made by a person whom the accused has had no opportunity to examine, the rights of the defence might be restricted to an extent incompatible with the guarantees of art.6. Accordingly, when the evidence of an absent witness is the sole or decisive basis for a conviction, sufficient counterbalancing factors are required, including the existence of strong procedural safeguards, which permit a fair and proper assessment of the reliability of that evidence to take place.”

79.  In this case, the Plaintiff relied on Mr Wong’s SD as the basis for seeking to hold the Defendants liable for contempt in relation to the packaging materials of the Infringing Goods. The Plaintiff has not provided any explanation as to why Mr Wong has not prepared an affidavit in these contempt proceedings, or why he has not been called by the Plaintiff as a witness to give evidence in this trial. Given that the Plaintiff carries the burden of proof to establish guilt beyond reasonable doubt, I disagree with the Plaintiff’s submission that the Defendants should have applied under RHC O.38 r.21 to cross-examine Mr Wong. After all, as referred to by Ma J in the passage quoted above, there is no burden on the respondent in contempt proceedings to prove his innocence. I recognise that there is no absolute prohibition against the use of hearsay evidence to support a charge of contempt. Nonetheless, following the principles set out in Numeric City, it seems to me that the court must be satisfied of the reliability of the hearsay evidence before it can be used as the sole or decisive basis for a conviction in contempt proceedings.

80.  A reading of paragraph 7 Mr Wong’s SD and the Chinese Record together may suggest that Sing & Japan had collected printing fees from Sun Ascent on behalf of GZ Xingde in relation to Product C on or about 22 October 2012. However, even on that reading, it does not necessarily follow that Sun Ascent must have ordered the printing materials in question itself from GZ Xingde. Mr Wong stated at paragraph 4 that the purpose of his SD was to set out the background and reasons as to why the packaging of the infringing products were all manufactured and/or supplied by GZ Xingde. In other words, the purpose of the SD was not to provide information about Sun Ascent’s role in relation to the packaging materials. Indeed, Sun Ascent was only referred to in Mr Wong’s SD in the context of the printing materials on one occasion (that is in paragraph 7).

81.  In these circumstances, and given that Mr Wong’s hearsay evidence has not been tested in cross-examination, I consider that the Plaintiff has not proved beyond reasonable doubt that Sun Ascent had ordered any packaging materials of Product C at the material times.

82.  In the two affirmations filed to oppose the present contempt application, Mr Xu stated that (1) Sun Ascent had always been a non‑trading company and had never incurred any “printing fee”, whether payable to Sing & Japan or not, and (2) Sun Ascent was never asked to pay printing fees or never paid them. On 30 August 2022, it was ordered that the defendants’ affirmation evidence “shall be admitted only upon [the defendants’] election to do so at the substantive hearing”. Mr Xu elected not to give oral testimony at the trial, and the Defendants fairly accepted that they could not rely on Mr Xu’s affirmations in this trial. I have placed no weight on the contents of Mr Xu’s affirmations in coming to my conclusions. For the avoidance of doubt, no adverse inference has been drawn against the Defendants in relation to Mr Xu’s election not to give oral testimony in these contempt proceedings: China Metal Recycling (Holdings) Ltd v Chun Hei Man [2018] 1 HKLRD 455 at [36] (Lam V-P).

83.  For all the reasons given above, the Plaintiff has not proved beyond reasonable doubt that Sun Ascent had ordered any packaging materials of the Infringing Goods prior to the Consent Judgment. Issue 3 is answered in the negative.

G.  ISSUE 4

84.  The question in Issue 4 is whether Sun Ascent had failed to make the disclosure of its dealings with the Offending Articles which it was ordered to make pursuant to paragraphs 5 and 6 of the Consent Judgment.

85.  I repeat what I said under Issue 2 in relation to the matters that were required to be disclosed under paragraphs 5 and 6 of the Consent Judgment. In view of the conclusion made under Issue 3, Sun Ascent was not obliged to set out any information involving itself in the Disclosure Affirmation under paragraphs 5 and 6 of the Consent Judgment.

86.  Accordingly, I find that there was no failure on the part of Sun Ascent to make the disclosure of its dealings with the Offending Articles which it was ordered to make pursuant to paragraphs 5 and 6 of the Consent Judgment. Issue 4 is also answered in the negative.

H.  ISSUE 5

87.  The question in Issue 5 is whether Mr Xu is liable to be committed to prison by reason of Sun Ascent’s breaches of the Consent Judgment. Given my earlier conclusions that Sun Ascent has not breached the Consent Judgment, Mr Xu is not liable for contempt. Issue 5 is answered in the negative.

I.  ISSUE 6

88.  The question in Issue 6 is whether Mr Xu failed to exercise his position and powers as the director of Sun Ascent to cause, procure and/or arrange for Sun Ascent to make disclosure of its dealings with Infringing Goods and Offending Articles as required under paragraphs 5 and 6 of the Consent Judgment. Again, given that Sun Ascent did not fail in complying with its disclosure obligations, there was no failure on the part of Mr Xu to exercise his power as a director of Sun Ascent. Issue 6 is also answered in the negative.

J.  DISPOSITION

89.  For all the above reasons, the Originating Summons is dismissed.

90.  I make an order nisi that the costs of these proceedings (including all reserved costs) are to be paid by the Plaintiff to the Defendants, to be taxed if not agreed.