TSIT WING (HONG KONG) CO LTD AND OTHERS v. TWG TEA COMPANY PTE LTD AND ANOTHER

HCA 2210/2011

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NO. 2210 OF 2011

_____________

__________________________

REASONS FOR DECISION

__________________________

1.  This case has been fixed for trial to commence on 19 June 2013 with 14 days reserved.

2.  In the hearing on 30 April 2013, I made an order to adjourn sine die with liberty to restore the defendants’ summons dated 25 September 2012 for the following order:

(i) the plaintiffs be made subject to an express cross-undertaking as to damages in respect of the defendants’ undertaking given to the Court of Appeal by order dated 16 February 2012 (“the Undertaking”); alternatively,

(ii) the plaintiffs’ implied cross-undertaking as to damages in respect of the Undertaking be confirmed.

3.  I now give my reasons for such decision.

4.  The plaintiffs’ claims are for passing off and trade marks infringement.  The plaintiffs commenced the action on 23 December 2011.  By the order of Yam J dated 30 January 2012, the plaintiffs obtained an interlocutory injunction to restrain the defendants from, inter alia, carrying on business with respect to tea products in Hong Kong under the “TW” or “TWG” brand name.

5.  The defendants appealed against the order of Yam J.  The Court of Appeal heard the appeal on an expedited basis on 16 February 2012. According to the appellate court, Yam J erred in the exercise of his discretion in relation to the issue of balance of convenience.  Upon the undertaking by the defendants that they would, pending the judgment of the court in this case, confine their business in Hong Kong to the existing operation of their business in their tea salon in the IFC Mall, the Court of Appeal discharged the injunction order of Yam J.

6.  After the decision of the Court of Appeal, the defendants applied for an order for speedy trial which was granted by me on 3 May 2012.  The case was then fixed for trial to commence on 19 June 2013 with 14 days reserved.

7.  The order of the Court of Appeal does not contain reference to an express cross-undertaking as to damages binding the plaintiffs in respect of the restraint imposed by virtue of the Undertaking.  Apparently, such issue was not raised before the Court of Appeal by either side.

8.  The defendants therefore took out the present application with a view to obtain or to confirm the cross-undertaking as to damages.

9.  So far as I understand it, the defendants’ arguments are two-fold:

(i)     as a matter of law, a cross-undertaking as to damages will be implied if the court grants an injunction or accepts an undertaking in lieu thereof; and

(ii)    the circumstances of the present case justify the imposition of a cross-undertaking as to damages in respect of the Undertaking given by the defendants.

10.  I have 2 problems in hearing the application now.

11.  Firstly, the Undertaking was given before the Court of Appeal, and it was also upon such Undertaking that the Court of Appeal discharged the injunction granted by Yam J.  Unless the Court of Appeal is functus officio and cannot deal with the issue about the cross-undertaking as to damages, the most appropriate forum to hear the application is the Court of Appeal itself.  It seems that the arguments presented by both parties have not addressed the issue of functus officio, and so it would not be appropriate for this court to deal with the application at this stage.

12.  Further, I can foresee some problems if this court were to impose a cross-undertaking as to damages today.  In the English decision of Smithkline Beecham Plc v Apotex Europe Ltd (No 3) [2005] FSR 930 at 943, 945 & 946, Lewison J held that the court has no power to compel the giving of a cross-undertaking as to damages.  Its only choice, if no cross-undertaking is given, is to withhold the injunction.  Since cross-undertaking is a voluntary undertaking and cannot be imposed upon a party, it follows a fortiori that it cannot be imposed retrospectively.

13.  If this court were to proceed with the application and to take the view that cross-undertaking should be imposed, what should this court do if the plaintiffs were to refuse to offer the cross-undertaking as to damages?  Should the defendants be released from the Undertaking?  Does this court have the jurisdiction to release the defendants from the Undertaking given to the Court of Appeal?  With all these uncertainties, the issue about cross-undertaking as to damages should be dealt with by the Court of Appeal.

14.  Secondly and more importantly, I take the view that the court should not deal with the application before the adjudication of the claim by the trial judge or at such a late stage of the proceedings.  If the trial judge decides the claim in favour of the plaintiffs, the defendants have no basis to enforce the cross-undertaking as to damages even if there is one.  In such case, the issue about cross-undertaking as to damages is wholly academic.

15.  According to Mr Pao, it would be in the interest of the parties to know their legal position as soon as possible.  However, the trial will take place only next month and so the advantage of having an early determination on such issue is quite minimal.  Quite on the contrary, the hearing of such application will impose unnecessary burden on the parties to deal with the application in the limited time before the trial, and any possible appeal resulting from such early determination will only complicate the proceedings or even jeopardise the trial date.  Hence, I refused to hear the application and adjourned it sine die with liberty to restore.

16.  As the court refused to entertain the defendants’ application, the plaintiffs should get the costs of the hearing on 30 April 2013.  The plaintiffs should also obtain certificate for 2 counsel as the application involves some complicated issues of law and the conduct of this case has been handled by 2 counsel most of the time.  I so ordered in the hearing.