WONG TO YICK WOOD LOCK OINTMENT LTD v. KIN LAM MEDICINE CO LTD AND OTHERS

CACV 82/2017

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF APPEAL

CIVIL APPEAL NO 82 OF 2017

(ON APPEAL FROM HCMP NO 2472 OF 2016)

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J U D G M E N T

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Hon Kwan JA (giving the judgment of the Court):

1.  This is an application brought by the 1^st to 4^th respondents for leave to adduce new evidence in their appeal against the judgment of Chow J on 23 March 2017, in which he found them guilty of contempt of court. Their summons was issued on 22 May 2017.

2.  We exercise our power under Order 59 rule 14A to deal with this application on paper, despite the letter of the applicant’s solicitors dated 29 May 2017 requesting an oral hearing so that the court is “taken through and fully informed of the state of the evidence at the committal proceedings which [the respondents] had chosen not to appear thereby demonstrating that this whole exercise of applying to admit the so-called new evidence is an exercise in futility.”

3.  We have taken into account the above views.  This is not a complex matter, and we have been adequately assisted by written submissions on both sides.  Bearing in mind the underlying objectives in Order 1A rule 1 of the Rules of the High Court, in particular to increase the cost-effectiveness of the procedure and to promote a sense of reasonable proportion and procedural economy in the conduct of proceedings, we think it appropriate to dispose of this application without an oral hearing and that this application ought to be determined before the hearing of the appeal.

4.  The background matters may first be related as follows.

The judgments in HCA 2585/2014

5.  The respondents were sued by the applicant in HCA 2585/2014 for trademark infringement and passing off by the use of “黃道活絡油”, “Wong Do Lo Ye” and deceptive packaging on medicated balm.

6.  On 16 September 2015, default judgment was entered by Chow J against the 1^st to 3^rd respondents in that action by which each of these companies was restrained from infringing the applicant’s trademark and committing acts of passing off (“the 1^st Judgment”).  On the same day, a default judgment was entered by the judge against the 4^th respondent (who was at all material times and is a director of each of the 1^st to 3^rd respondents) by which he was likewise restrained from infringing the applicant’s trademark and committing acts of passing off (“the 2^nd Judgment”).

7.  On 25 September 2015, the 1^st Judgment endorsed with a penal notice was served on the 1^st to 3^rd respondents at their registered office.

8.  On 15 March 2016, the 1^st and 2^nd Judgments each endorsed with a penal notice was served on the 4^th respondent personally.

The proceedings to commit for contempt

9.  On 15 September 2016, the applicant issued an originating summons in HCMP 2472/2016 seeking to commit the 1^st to 4^th respondents for contempt of court in failing, refusing or neglecting to comply with the 1^st and 2^nd Judgments.  The originating summons was amended on 23 January 2017.

10.  The 1^st to 3^rd respondents were served with the committal papers on 19 September 2016 at their registered office.  Attempts to serve the papers on the 4^th respondent personally were not successful.  On 20 January 2017, Chow J granted leave to the applicant to effect service of the committal papers on the 4^th respondent by substituted service.  On 24 January 2017, the papers were duly served on all the respondents.  In the case of the 4^th respondent, the documents were served by leaving the same at the registered office of the 1^st to 3^rd respondents and by inserting the same into the mail box of his residential address, pursuant to the order for substituted service.

The judgment for contempt

11.  The contempt proceedings took place before Chow J on 17 March 2017.  The respondents did not appear. Judgment was given on 23 March 2017 (“the Contempt Judgment”).

12.  Chow J found on the evidence that:

“(1) On 11 May 2016, a medicated balm in a packaging which (i) bore the name of the 3^rd respondent, (ii) bore the words “黃道活絡油” and “Wong Do Lo Ye”, and (iii) was confusingly similar to the packaging at Annex B of the Statement of Claim was being offered for sale and sold in a retail shop in Hong Kong.

(2) On 11 November 2016, the 1^st respondent exhibited for sale on its website a medicated balm in a packaging which (i) bore the name of the 3^rd respondent, (ii) bore the words “Wong Do Lo Ye”, and (iii) was confusingly similar to the packaging at Annex B of the Statement of Claim.

(3) On 16 November 2016, the 2^nd respondent, through its managing director (the 4^th respondent), offered for sale or supply a medicated balm which (i) bore the name of the 3^rd respondent, (ii) bore the words “Wong Do Lo Ye”, and (iii) was confusingly similar to the packaging at Annex B of the Statement of Claim.”

13.  By reason of the above matters, the judge held that the 1^st to 3^rd respondents each acted in breach of the 1^st Judgment, the 4^th respondent acted in breach of the 2^nd Judgment, and the 4^th respondent was further liable under Order 45 rule 5(1)(b)(iii) for failing to ensure that the 1^st to 3^rd respondents complied with the 1^st Judgment.

14.  The judge was satisfied beyond reasonable doubt that each of the 1^st to 3^rd respondents had proper notice of the 1^st Judgment but wilfully failed to comply with the judgment with knowledge of its contents.  He was also satisfied beyond reasonable doubt that the 4^th respondent had proper notice of the 1^st and 2^nd Judgments but wilfully failed to take reasonable steps to ensure that the 1^st to 3^rd respondents complied with the 1^st Judgment, and comply with the 2^nd Judgment, with knowledge of their contents.  He noted that none of the respondents had offered any explanation for the failure to comply with the 1^st and/or 2^nd Judgments, or any facts or matters in mitigation.  He found each of them in contempt of court.

15.  The judge ordered each of the 1^st to 3^rd respondents be fined $80,000 and the 4^th respondent be committed to prison for four months.  The respondents were ordered to pay the applicant’s costs on an indemnity basis.

The notice of appeal

16.  The four respondents filed a notice of appeal against the Contempt Judgment on 5 April 2017, seeking to set aside the judgment and that the application for committal against the respondents “be remitted to the Honourable Mr Justice Chow for determination of the proper penalty against the Respondents”.  It would appear from the order sought on appeal that the appeal is directed against penalty only, not liability.

17.  Two grounds of appeal were advanced.

18.  The first is that the judge erred in law in not issuing a warrant for arrest of the directors of the 1^st to 3^rd respondents and of the 4^th respondent to bring them before the court so that they could be heard in mitigation before he imposed any penalty against each of them.

19.  The second is that the penalty imposed against each of the respondents is disproportionate or manifestly excessive, because the judge failed to take into account there was insufficient evidence as to “the actual state of mind” of any of the respondents, in particular, there was no or insufficient evidence to prove that the respondents’ contempt was “deliberate” or “contemptuous”.

The new evidence and the present summons

20.  On 5 April 2017, the respondents filed in the appeal proceedings an affirmation of Liu Wang Fung[2] (“Liu’s 1^st affirmation”).  She is the wife of the 4^th respondent and a director of each of the 1^st to 3^rd respondents.  On 12 April 2017, the respondents filed a second affirmation of Liu Wang Fung (“Liu’s 2^nd affirmation”).  These affirmations were filed without leave.

21.  On 22 May 2017, the respondents issued the present summons seeking leave to adduce in this appeal and rely on Liu’s two affirmations.  A third affirmation of Liu was filed on the same day in support of the summons (“Liu’s 3^rd affirmation”).

22.  Liu’s 1^st affirmation consisted of five paragraphs.  The only paragraph which may be of any relevance is paragraph 4, in which she deposed that she learned about “the Judgment[3] and committal orders” on 24 March 2017 as it was reported in some local Chinese newspapers.  She further said since then, on the 4^th respondent’s instructions, she dug up all unopened envelopes kept at the office of the 1^st to 3^rd respondents and their residential home to retrieve as many documents “pertinent to the present proceedings” as possible, and in the course of that exercise, she found “some unopened letters” either without the name of the sender, or marked with the name of the applicant’s solicitors Messrs William W L Fan & Co.

23.  Liu’s 2^nd affirmation consisted of five paragraphs.  Only paragraphs 4 and 5 may be of any relevance to this appeal.  In paragraph 4, she repeated paragraph 4 of her 1^st affirmation and went on to say that she caused the unopened letters she considered might be related to these proceedings to be passed on to the respondents’ solicitors, Messrs H M Tsang & Co, on 29 March 2017.  In paragraph 5, she stated that a clerk of the respondents’ solicitors counted the number of unopened letters in her presence in the solicitors’ office on 29 March 2017, that there were 38 unopened envelopes in total, and that the clerk numbered each for identification and took photographs of them.

The applicable principles

24.  It was asserted in Liu’s 3^rd affirmation that the matters deposed to in her first two affirmations could not have been laid before Chow J at the hearing on 17 March 2017 and hence were not matters that could have been obtained with reasonable diligence.  She further asserted that the new evidence would have a very important effect on the mind of the Court of Appeal and not of a sort which is inherently improbable.  These statements would seem to track the wording of the requirements in Ladd v Marshall [1954] 1 WLR 1489 at 1491.

25.  If it was envisaged by the respondents that the applicable legal principles for an application to adduce new evidence in an appeal against a judgment for civil contempt are the same as those for the admission of new evidence in civil appeals, namely, the requirements laid down in Ladd v Marshall, this is wrong.  It was held by the Court of Final Appeal in Kao, Lee & Yip v Koo Hoi Yan (2009) 12 HKCFAR 830 at §§6 and 20 that in this kind of situation, the criminal rules relating to the admission of fresh evidence in section 83V of the Criminal Procedure Ordinance, Cap 221 should be applied instead.

26.  The relevant provisions of section 83V are as follows:

“83V. Evidence

(1) For the purposes of this Part, the Court of Appeal may, if it thinks it necessary or expedient in the interests of justice —

(a) order the production of any document, exhibit or other thing connected with the proceedings, the production of which appears to it necessary for the determination of the case;

(b) order any witness who would have been a compellable witness in the proceedings from which the appeal lies to attend for examination and be examined before the Court of Appeal whether or not he was called in those proceedings; and

(c) subject to subsection (3), receive the evidence, if tendered, of any witness.

(2) Without prejudice to subsection (1), where evidence is tendered to the Court of Appeal thereunder the Court of Appeal shall, unless it is satisfied that the evidence, if received, would not afford any ground for allowing the appeal, exercise its powers of receiving it if —

(a) it appears to it that the evidence is likely to be credible and would have been admissible in the proceedings from which the appeal lies on an issue which is the subject of the appeal; and

(b)  it is satisfied that it was not adduced in those proceedings but there is a reasonable explanation for the failure to adduce it.”

27.  In Mahabobur Rahman v HKSAR (2010) 13 HKCFAR 20, Chan PJ, giving the judgment of the Court of Final Appeal, stated in §13 that the conditions to be satisfied before receiving evidence under section 83V(1) are as provided in subsection (2) and they are as follows: (1) the fresh evidence is likely to be credible; (2) it would have been admissible in the court below; (3) it is relevant to an issue in the appeal; (4) there is a reasonable explanation for the failure to adduce it in the court below; and (5) the court is satisfied that it would afford a ground of appeal.

28.  Thus, the conditions as stated, which are cumulative, should be applied in this instance.

Discussion

29.  The respondents contended that the present situation is not within the Ladd v Marshall territory because the new evidence in the 1^st and 2^nd affirmations of Liu are “matters which have occurred after the date of the hearing”.  She had deposed it was only after the Contempt Judgment that she learned about it and she then took certain action.  It was submitted that in respect of matters which have occurred after the hearing, the court should apply the principles laid down by the English Court of Appeal in Hughes v Singh, The Times, 21 April 1989, namely, that the appeal court has a wide discretion in admitting such fresh evidence though it should be exercised sparingly with due regard to the need for finality in litigation; that the court takes into account all the circumstances before, during and after the trial; and that the evidence should be admitted where it would be an affront to one’s sense of fairness not to admit it.

30.  The above submission must be rejected for two reasons.  First, as we have mentioned earlier, the applicable principles are not the requirements in Ladd v Marshall but the rules relating to the admission of fresh evidence in section 83V.  Whether the present situation is within the Ladd v Marshall territory is irrelevant.  Second, in any event the matters deposed to in the 1^st and 2^nd affirmations of Liu are not “matters which have occurred after the date of the trial or hearing”.  These words do not cover evidence coming to light after the trial, as to matters which occurred before trial (Hong Kong Civil Procedure 2018, vol 1, §59/10/13 p 1170).  As rightly submitted by the applicant, the respondents have conflated the occurrence of a matter with the discovery of the occurrence of a matter.

31.  We turn to consider whether the respondents have satisfied the conditions for receiving fresh evidence under section 83V.

32.  We will first consider together the conditions that the evidence is relevant to an issue in the appeal and that the court is satisfied it would afford a ground of appeal.

33.  The respondents submitted the new evidence has crucially established that as many as 38 letters apparently served by the applicant on the respondents were left unopened until Liu became aware of the Contempt Judgment and committal orders on 24 March 2017.  This would cast doubt on (1) whether the judge was right to hold that he was satisfied beyond reasonable doubt that each of the respondents had proper notice and knowledge of the 1^st and 2^nd Judgments; and (2) whether the respondents were aware of the need to attend the hearing of the proceedings to commit them for contempt on 17 March 2017.

34.  We agree with the applicant that the above submission distorted the evidence in the 1^st and 2^nd affirmations of Liu and also involved a quantum leap.

35.  Liu merely deposed that she herself did not know about the Contempt Judgment and committal orders until she learned about this from reports in newspapers on 24 March 2017.  There is no evidence of her role as a director in the 1^st to 3^rd respondents, whether she was actively involved in the affairs of these companies.  She did not purport to speak for the 4^th respondent, who was and is a director of the 1^st to 3^rd respondents, and was held by the judge to be liable under Order 45 rule 5(1)(b)(iii) for failing to ensure that the 1^st to 3^rd respondents complied with the 1^st Judgment.  So even on the assertion of the absence of knowledge of the Contempt Judgment and committal orders, what is asserted by Liu can hardly be regarded as lack of such knowledge on the part of the 1^st to 4^th respondents.

36.  Further, Liu’s absence of knowledge of the Contempt Judgment and committal orders until 24 March 2017 and that 38 unopened envelopes were subsequently found, some of which were from the applicant’s solicitors, cannot properly be treated as evidence of lack of knowledge of the respondents of the 1^st and 2^nd Judgments, or of the court documents in the proceedings for contempt.  There is nothing to refute the evidence of service of the 1^st and 2^nd Judgments and the committal papers on each of the respondents.  There is no evidence as to the contents of what was contained in each of the 38 unopened envelopes.  Crucially, Liu did not depose in her affirmations that she had no knowledge of the 1^st and 2^nd Judgments, or of the committal papers.  This was raised only in the submissions of the respondents’ counsel.  Nor did she give any explanation why there were 38 envelopes at the registered office of the 1^st to 3^rd respondents and her residence that were unopened.

37.  The new evidence cannot possibly be relevant to the first ground of appeal, which is a complaint that the judge had erred in law in not issuing a warrant of arrest against the directors of the 1^st to 3^rd respondents and against the 4^th respondent to bring them before the court before he imposed a sanction on each of them.  As for the contention in the second ground there was insufficient evidence to prove that the respondents’ contempt was deliberate or contemptuous, we do not think the new evidence is relevant in establishing this contention on the analysis we have made of what Liu had deposed.  It follows that we cannot be satisfied that the new evidence would afford a ground of appeal in respect of either ground advanced in the notice of appeal.

38.  It is not strictly necessary to consider the other conditions for admission of new evidence.  We would only mention this.  We have reservations if the fresh evidence is likely to be credible (assuming to the contrary it may establish that the respondents’ contempt was deliberate or contemptuous).  The applicant has filed evidence in opposition of this application of an originating summons in HCMP 2566/2016 (“the invalidation proceedings”) issued by the applicant against the 1^st respondent on 22 December 2016 for invalidation of the latter’s trademarks.  This originating summons was served on the 1^st respondent at the registered office at the same time when the summons to amend the originating summons to commit the 1^st to 4^th respondents for contempt (in HCMP 2472/2016) and to seek leave to serve the committal papers on the 4^th respondent by substituted service was served on these respondents at the same address.  The 1^st respondent was aware of the invalidation proceedings as it had written to the Trade Marks Registry on 3 February 2017 asking for a translation of the correspondence from the latter in relation to the invalidation proceedings.  There is force in the applicant’s submission it beggars belief the respondents were so highly selective in choosing to open what kind of envelopes and leaving others unopened.  The absence of explanation in Liu’s affirmations why 38 envelopes were unopened does not give credence to establishing the contention that the respondents’ contempt was not deliberate or contemptuous.

Orders

39.  For the above reasons, we dismiss the respondents’ application to adduce new evidence in this appeal.

40.  There is no reason why costs should not follow the event.  We order the 1^st to 4^th respondents to pay the applicant’s costs of this summons.

41.  The applicant submitted a statement of costs for summary assessment of $138,872.  We would allow $117,922 as reasonable costs.

42.  The costs order and gross sum assessment are orders nisi.  Any party seeking to vary the orders nisi shall lodge a written submission within seven days hereof, failing which the orders shall become absolute.

[1] The date of the applicant’s submission was 19 March 2017 and is erroneous, it was received by the court on 20 July 2017

[2] In the annual returns of the companies, her name was stated as “Liu Wan Fung” and in Chinese 廖蘊鋒

[3] This is clearly a reference to the Contempt Judgment, see §2 of Liu’s 1^st affirmation