XCHRX LONG FAR HERBAL MEDICINE MANUFACTURING (HONG KONG) LTD. v. LAM KAM FU AND ANOTHER

1999, No. A11337

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

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JUDGMENT

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1. The defendants apply to set aside an order I made at an inter-partes hearing on 30 July 1999.

2. On 14 July, 1999, the plaintiff issued a writ against the defendants. The general endorsement sought -

a) an injunction restraining the defendant from passing off Chinese medical preparations confusingly similar to those of the plaintiff;

b) an injunction restraining the defendants from infringing the plaintiff's copyright in the label of one of the plaintiff's products;

c) an order for delivery of offending articles and materials;

d) discovery relating to these matters;

e) damages and other miscellaneous relief.

3. A letter accompanied the writ asking that the defendants to submit to interlocutory relief, failing which a summons would be issued. This letter of 14 July 1999, which made it plain that, at least, the ancillary order of delivery up would be sought at the hearing of a summons, was, the defendants admitted on 30 July 1999, read and explained to them.

4. On 22 July 1999, a firm of solicitors (the former solicitors) acting for the defendants wrote to the plaintiff's solicitors, and the two sets of solicitors had a meeting.

5. On 27 July 1999, the plaintiff did issue an inter-partes summons in which it sought an interim injunction, an order that the defendants disclose the details of persons with whom it had dealt with the products concerned, and an order for delivery up of the offending items.

6. This summons was supported by an affirmation by an inquiry agent who gave the usual sort of evidence about contacting the defendants and obtaining evidence of the defendants dealing in goods said to be infringing the plaintiff's rights. The plaintiff also filed and served an affirmation by the plaintiff's sales manager. He gave evidence of the infringements of the make-up of the plaintiff's products, the infringement of the copyright and of complaints made by people who had been deceived by the defendants' products. On the face of it, and without any evidence challenging it, this evidence was convincing.

7. The former solicitors of the defendants filed an acknowledgement of service on 3 August 1999, but the defendants' present solicitors filed a notice to act on 4 August 1999.

8. On 12 August 1999, the defendants issued a summons seeking an order setting aside my order of 30 July 1999.

9. When the matter came before me on 30 July 1999, the defendants appeared personally. They had filed no evidence. I questioned them about legal representation, but they said they could not afford this. They conveyed the impression that they had received no legal advice. They did not deny committing the acts complained about; indeed they almost conceded that they had, but said that they were no longer dealing in the offending products.

10. When asked if they accepted that they did what was alleged in the letter of 14 July 1999, they said - "Perhaps that would be right." When asked - "So have you any objections to this order being made?, the answer was - "No objection." That having been said, and in the light of the evidence, I made the order.

11. No evidence was filed with the defendants' summons to set aside. This was not filed until 17 August 1999.

12. This evidence was an affirmation by the defendant Mr Lam Kam Fu, one of the defendants.

13. This affirmation says that the plaintiff failed to make full and frank disclosure. This allegation says, in essence, that the plaintiff failed to present the defendants' case. There was no failure to disclose anything the plaintiff should have disclosed.

14. It goes on to say what the defendants would have argued had they been legally represented at the hearing on 30 July 1999.

15. There is also a complaint about an alleged procedural irregularity. This was not pressed by Mr Tse. There appears to be nothing in it.

16. Mr Lam then explains what happened before the hearing on 30 July 1999. He says the defendants applied for legal aid on 16 July 1999, but withdrew this application. This cannot be so, because the department processed the application and refused aid.

17. Mr Lam says that on 17 July 1999 he consulted the former solicitors, but the defendants could not afford to instruct counsel. On the other hand, Mr Lam says he well understood that the defendants, as wholesalers, could not run the risk of being branded as counterfeiters if an injunction was granted because their business would be seriously affected. Therefore, the defendants took the "commercial decision" to cease dealing in the product concerned. He says that, having made that decision, they "were under the impression that so long as we stopped dealing with the product voluntarily, no injunction would be granted . . ." He does not say on what basis he gained this impression.

18. On 29 July 1999, Mr Lam says, he found the documents served by the plaintiff. He did not understand these. He consulted the former solicitors again. He says "Relying on [the solicitor's] advice that an injunction would not be granted at the hearing and that it was unnecessary to engage lawyers for that purpose, I did not consider legal representation at the hearing. My understanding was that the most likely result of that hearing would be no injunction being granted given that we had ceased dealing in the product since 16 July 1999. I had no idea at that time an injunction would be granted and that if an injunction was granted [we] would be ordered to pay damages, disclose particulars of dealings with and deliver up all the product."

19. Of course, the defendants were not ordered to pay damages. It is very difficult to understand why any solicitor would advise a client that an injunction would not be granted at an inter-partes hearing convened for this purpose. Mr Lam does not explain on what basis he was given this advice. One might have thought that he would have queried it given that he understood how serious was the matter. He then says that it was his "understanding" that "the most likely result" would be that no injunction would be granted. This is not what he says his solicitor told him, and he does not say where he got this "understanding". Then he changes again, and says that he had "no idea" that an injunction would be granted.

20. This is not the most satisfactory of evidence from someone trying to have an inter-partes order set aside.

21. When Mr Lam describes the events of the hearing of 30 July 1999, he did not have the benefit of having the transcript of the hearing. He does not say that the defendants said that they had no objection to the grant of the order. He says the grant of the injunction was a "shock", and repeats that "we had all along been under the impression that no injunction would be granted."

22. Mr Lam says that the other defendant "would not have admitted or taken to have admitted having passed-off the plaintiff's product if she had received legal proper advice and represented at the hearing on 30 July 1999."

23. The situation can be summarised by saying that the defendant were served properly with the papers relating to the relief sought at the inter-parties hearing, they took legal advice, they must have had the papers explained to them, they must have understood what order the plaintiff was seeking, they decided not to be represented, they conceded, in effect, that they were in the wrong, they said that they were no longer dealing in the offending product, and they submitted to the order. Nothing has changed since that order was made. There is no material change in circumstances, other than that, perhaps, the defendants have realised the consequences of the order. If they were ill-advised, they may have a remedy against their former solicitors. But the fact that they might have been ill-advised is not a reason for setting aside an inter-parties order made, in my view, quite properly.

24. In essence, the defendants can have no complaint about the hearing on 30 July 1999. They are involved in the trade in which the plaintiff is involved. No one, one might have thought, would know better than they whether on not, on the facts, they were passing-off and breaching the plaintiff's copyright. They decided not to challenge the fact that they were. What they say now is - "That was a mistake, founded on bad legal advice, and we did not appreciate the consequences of the order. We want to turn the clock back, and adopt an entirely different attitude to the plaintiff's application." In my view, they have shown no adequate reason why they should be allowed to do that.

25. Mr Tse argues that when the defendants said that they had no objection to the order being made, they were thinking only of the injunction, not the orders to disclose and deliver up. I do not accept this. They had taken legal advice on the papers served on them. It is inconceivable that they did not know that the plaintiff was asking for these orders, which were the usual kind of orders sought in this kind of case. In any event, the defendants themselves do not say that, when they said they had no objection to the order being made, they meant only the injunction and not the ancillary orders. They do not even concede that they said that they had no objection to the order being made.

26. In all these circumstances, there is no reason that I can see that would justify the defendants having a second bite at the cherry.

27. Accordingly, I dismiss the defendants summons. There seems no reason why costs should not follow the event. I make an order nisi that the defendants pay the plaintiff's costs.

28. In this event, Mr Tse asks that I order that there be a stay of execution pending an appeal. There is no summons before me seeking this relief, and no evidence on which such an order could be justified. I decline to make such an order at this stage.