WING TAI PLASTIC & METAL FACTORY LTD v. KA LUEN TOYS MANUFACTORY LTD

HCA 386/2006

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NO. 386 OF 2006

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R U L I N G

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Introduction

1.  I am afraid that this case is in danger of getting into something of a muddle in a way that nobody involved in it, including the court, had expected or wished for.  I have before me an application by the Plaintiff made under the slip rule and/or the court’s inherent jurisdiction to re-consider the terms of my order of 4 July 2006.  Before I refer to the terms of the order and the changes which the Plaintiff now wishes me to make I need to re-trace the history of litigation. 

2.  Both parties are plastic toy manufacturers.  The Plaintiff is also a designer of such toys who, having manufactured its designs, then sells them to customer overseas.  The Defendant also trades in such products.

3.  The action concerns three of the Plaintiff’s products which are toy weapons called a “Skull Trident” a “Gargoyle Axe” and a “Gargoyle Spear”.  It has produced these from original artistic works of which it is the copyright owner. It complains that the Defendant has infringed its copyright by offering for sale toys that are “visually identical” or “closely similar” to its toy weapons.  The prayer to the amended-Statement of Claim seeks an injunction, in common form in this type of case, to restrain the Defendant:

“From infringing or authorising the infringement of the Plaintiff’s copyright in original artistic works, or counselling or procuring others to commit the aforesaid act …”

Secondly, it seeks damages or an enquiry as to damages or, at its option, an account of profits in relation to act of copyright infringement and lastly, discovery on oath in relation to these matters.

4.  In relation to how this application now comes before me it is important, I think, to bear clearly in mind the relief sought.

Previous Interlocutory Proceedings

5.  Having issued its writ the Plaintiff applied for an interim injunction from Chu J on 24 February 2006.  At this hearing the Defendant gave an undertaking in terms of the injunction being asked for and the matter was then adjourned for a fuller hearing before the summons judge on 17 March 2006.  Prior to that hearing the parties came to an agreement which meant that there was no need for a substantive hearing before the summons judge.  The order which reflects that agreement is one by Poon DJ dated 9 March 2006.  Given its comprehensive nature and having regard to what took place before me on 4 July, to which I will come in a moment, I propose to set out this order in full:

“BY CONSENT IT IS ORDERED that:

1.    the Defendant is restrained whether acting by itself, its directors, officers, servants or agents or otherwise howsoever from the date hereof from doing the following acts or any of them, that is to say:

(a)   Manufacturing, importing, exporting, selling, offering or exposing for sale, possessing for the purpose of, in the course of, or in connection with any trade or business, distributing or otherwise dealing in or with toy weapons identical or substantially similar to the toy weapons exhibited as ‘LCW-5A, 5B and 5C’ to the Affirmation of Lai Chun Wah filed herein and dated the 21^st of February 2006, including but not limited to the 2 toy weapons shown in the photograph exhibited thereto and marked ‘LCW-13’; and/or

(b)   Counselling, procuring or authorizing others to do any of the foregoing acts;

2.    the Defendant do deliver up of all goods, samples, articles, packing materials, catalogues, leaflets, photographs, price lists and items in the possession, custody, power or control of the Defendant, the continued retention or use of which by the Defendant would offend the foregoing injunctions or any of them;

3.      the Defendant do by a director within 14 days from the date hereof make and file an affidavit or affirmation disclosing the identity of al parties:

(1)   from whom the Defendant has obtained or have contracted to obtain supply of; and

(2)   to whom the Defendant has supplied or offered to supply;

       any items the dealings in or with which would offend the injunctions in paragraph 1 hereof, together with the dates and quantities thereof, and exhibiting thereto true copies of all aforementioned documentation relating thereto.

4.      the Summons hearing scheduled for 17^th March 2006 returnable before the Summons Judge be vacated; and

5.      costs of this application and of the Plaintiff’s Summons including costs of the hearing before the Honourable Madam Justice Chu on 24^th February 2006 be to the Plaintiff to be taxed if not agreed.”

6.  Notwithstanding having submitted to so much, the Defendant then filed its defence on 25 April 2006.  It put the Plaintiff to proof of its ownership of copyright and of its subsistence.  The whole tenor of the defence was to set up, if it were to come to trial, a fully fledged contest of the Plaintiff’s claim.  It also pleaded the fact that it had consented to the order made by Poon DJ on 9 March and averred that it had complied with the order by delivering up the moulds and samples and filed an affirmation setting out all the information required of it by the order.  It concluded with the plea that by virtue of these matters the Plaintiff had suffered no loss or damage and that it was not entitled to the relief sought.

7.  This appears to have left the Plaintiff completely unimpressed because on 21 June it took out an Order 14 summons in the following terms: [I set these out in full for ease of reference when I come to subsequent events.]

“1. the Defendant be restrained and a permanent injunction is hereby granted restraining them, whether acting by itself, its directors, officers, servants or agents or otherwise howsoever from the date hereof from doing the following acts or any of them, that is to say:

(a)   infringing the copyright subsisting in original artistic works in relation to the Plaintiff’s items 950A “Skull Trident”, 950B “Gargoyle Axe and 950C “Gargoyle Spear”; and/or

(b)   Counselling, procuring or authorizing others to do any of the foregoing acts;

2. the Defendant do delvier up of all goods, samples, articles, packing materials, catalogues, leaflets, photographs, price lists and items in the possession, custody, power or control of the Defendant, the continued retention or use of which by the Defendant would offend the foregoing injunctions or any of them;

3. damages, or an enquiry as to damages, or at the Plaintiff’s option an account of profits in relation to all acts and/or joint acts of copyright infringements;

4. discovery upon oath in relation to the foregoing;

5. interest pursuant to section 48 of the High Court Ordinance;

6. there be liberty to apply; and

7. the costs of this action including the costs of the Order 14 summons be to the Plaintiff, to be taxed if not agreed.”

8.  It becomes immediately apparent that this summons sought to cover, in effectively identical terms, what the Defendant had already submitted to under Poon DJ’s order.

The Hearing of the Order 14 Summons Before me on 4 July

9.  I have so far set out how the matter lay by the time it came before me.  I should observe that on 4 July only 15 minutes had been allocated and, perfectly understandably, the Plaintiff’s solicitors had anticipated a hearing which was not going to be dispositive of their summons, with the court only giving directions in preparation for a contested summons.  The Plaintiff appeared by solicitors, it had previously instructed counsel, Miss Tam, before Chu J in February and had expected to do so again on the substantive hearing of the Order 14 summons.  The Defendant was represented by counsel, Miss Lam, who had settled its defence and who was therefore thoroughly familiar with the matter, which is not to say that Mr Wong, the Plaintiff’s solicitor was not.  Plainly he was, having regard to the way that he was able to engage the argument that developed before me.  There is a transcript which I ordered and from this it is possible to follow precisely what occurred on 4 July.

10.  Mr Wong invited me to give directions for the filing of evidence and to adjourn for full argument of his summons when he intended to brief Miss Tam (by now Senior Counsel) to appear.  Miss Lam submitted that this was completely unnecessary having regard to the terms of the consent order of 9 March.  She submitted that such a course would amount to an unnecessary waste of costs and that any outstanding matters could be addressed by me in the way that I gave further directions, essentially in respect of the outstanding enquiry as to damages which would, as is usual in such matters, be heard by a Master.

11.  One of Mr Wong’s particular concerns was that Poon DJ’s order comprised an interim injunction and that by its summons the Plaintiff was seeking a permanent injunction.  That was of course a correct stance to take, which was addressed by the order made on 4 July which gave the Plaintiff the permanent injunction that it sought.  This having been obtained by Mr Wong the court had to address the remaining ancillary, but crucially important, orders that were sought by the Plaintiff.  It seemed to me, on a proper analysis, that the inevitable enquiry before the Master would have to address a number of matters in order to arrive at an accurate assessment of the damage suffered by the Plaintiff, if any, which would involve an investigation into whether full disclosure had been made by the Defendant as well as complete delivery up of “goods, samples …”, and so forth as required under paragraph 2 of Poon DJ’s order.  The order I made, it seems to me, caters for those issues to be canvassed before the Master.  The Defendant has filed its affidavit in purported compliance with paragraph 3 of Poon DJ’s order and it will be open to the Plaintiff to require the deponent of the affidavit to be cross-examined before the Master.  That application will need to be made to the Master himself.

12.  These orders having been made it seemed to me that the Plaintiff would have obtained all the relief that it sought and indeed was entitled to given the fact that the Defendant was willing to submit to a permanent injunction, being the principal relief sought in the prayer to the amended-Statement of Claim.  The other relief sought was amply covered by the remaining orders made by me which will enable the Master to investigate whether full disclosure and delivery up has been made under the terms of Poon DJ’s order which is what is also asked for in the prayer to the amended-Statement of Claim.  Once those orders were made by me there remained nothing further to litigate about.  I was therefore pleased to have been able to make such an order on this occasion thereby putting an end to the action save for the hearing before the Master.

What is Now Asked for

13.  Miss Tam has asked me to substantially re-visit my order.  My jurisdiction to do so is circumscribed by the terms of O.20 r.11.  It seems to me that, save for one matter which I will come to shortly, that what she asks for is beyond the scope of what I can legitimately do under the rule.  One of the complaints appears to be that I have not entered judgment on liability as asked for under the Order 14 summons.  The short answer to that is that I have done so by granting the permanent injunction which disposed of the major part of the relief sought.

14.  What has concerned me is that I have not sufficiently addressed the issue of costs in the action itself, as opposed to the costs of the directions given on 4 July which I have covered by the order of “costs in the inquiry”.  There was argument in respect of this aspect at the time and I dealt with the matter by the order that I have just referred to.  Nevertheless, it seems to me that this type of order does not sufficiently address this very important element to the action.  The Plaintiff has already obtained costs of the interlocutory proceedings before Chu J and Poon DJ but this must have left over the other costs of the action which need to be addressed and which should not be left to the Master.  It strikes me that this amounts to a lacuna in the judgment which needs to be addressed.  I am content to say that this can legitimately be characterised as an “accidental … omission” which this salutary jurisdiction allows me to address, rather than obliging one or other of the parties to have to go to the Court of Appeal to put right.  It seems to me that where the Defendant has conceded that the permanent injunction should be ordered that costs must follow that event in the Plaintiff’s favour.  It will therefore have its costs on a party and party basis up to the hearing of 4 July.  As to that hearing most of the argument was taken up with the form of the order.  Almost immediately Miss Lam had conceded the issue of liability [page 1I of the transcript].  Once that was conceded the rest of the hearing dealt with directions and the form of the order.  I propose to say that 10% of the costs of 4 July should form part of the costs of the action which will be to the Plaintiff as I have already ordered; the majority of the costs of 4 July [90%] will remain as costs in the inquiry.  To this extent I am prepared to exercise my powers under O.20 r.11.  As to the balance of what Miss Tam is asking for I am of the view that these are matters outside the scope of the rule and the comments I made in Chao v Don [2002] 3 HKLRD J4 in how this jurisdiction needs to be addressed prevent me from going further.  In this regard the decisions of Neuberger J (as he then was) and Rix LJ referred to by me in Chao v Don are particularly pertinent and of assistance.

Conclusion

15.  This amendment of the costs order will now be made to reflect the changes that I am prepared to make.  Everything else asked for can only be dealt with on appeal, if that is the course that the Plaintiff wishes to embark on.

16.  As to the costs of this hearing, I propose to make an order nisi.  The Plaintiff has succeeded to a limited but important extent.  It was an amendment that needed to be made and it was one that was opposed.  On the other hand, the Defendant has largely succeeded where I have declined to go any further.  This would also need to be addressed in the order for costs.  The broad justice of the matter is fairly disposed of in my view by an order that there should be no order for costs.  If either party wishes me to re-consider this order for costs, I direct that it file a written submission within 14 days of today and that any response be filed within 14 days thereafter.