AQUA-LEISURE INDUSTRIES, INC AND ANOTHER v. BESTWAY INFLATABLES & MATERIAL CORPORATION

HCA 43/2003

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NO. 43 OF 2003

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J U D G M E N T

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1. The defendant applies ex parte on notice to discharge the injunction I granted in the evening of 6 January 2003. That was an injunction granted ex parte on notice and I was told that notice had been given by fax to the defendant in Shanghai at its Shanghai offices. The injunction I granted restrained the defendant from importing, exporting, ordering, advertising, promoting, displaying, exhibiting, offering for sale, selling, supplying, disposing of or otherwise dealing in or with plastic inflatable pools of the design exhibited as "SH2" to the affirmation of Sebastian Hughes made on 6 January 2003 or any pool of a substantially similar design.

2. The reason for the urgency for the ex parte order was that I was informed that the defendant intended to exhibit its pool at the Toy Fair which was commencing on 7 January 2003.

3. Mr. Yan, counsel for the defendant, has drawn my attention to certain matters which are highly material in my view and which were not disclosed at the ex parte stage.

4. The first point is that the 1st plaintiff and related companies of the defendant have been engaged in on-going litigation in the United States of America since September 2002 over the subject pool. By that I mean the pool with dimensions 8' x 26" made with translucent material.

5. It is clear from the complaint filed in the United States District Court, District of Massachusetts that the 1st plaintiff herein brought proceedings against related companies of the defendant in respect of a number of causes of action including breach of contract. It is pleaded that there was an agreement entered into between the 1st plaintiff and the representative of the defendant companies, Mr. William Zhu, that there was an agreement not to sell a self-rising aboveground translucent swimming pool for the 2003 season. There was no claim for infringement of copyright in the US proceedings. There was an answer filed to the complaint which hotly denied the various claims of the 1st plaintiff.

6. Of particular importance is that there was correspondence between the United States attorneys and I have been referred to a letter from Mr. William Grimm of Hinckley, Allen & Snyder LLP, attorneys for the defendants in the American proceedings. That letter touches upon the allegations made in these proceedings. I quote from part of that letter as follows :

“ Third, it is clear that Aqua-Leisure has no proprietary interest in a self-rising aboveground translucent swimming pool. Fast set pools have been a staple of the pool market for a number of years now and are offered by many companies competing in this marketplace. The concept is clearly in the public domain. The addition of a translucent material or top piece is hardly significant or proprietary"

7. Mr. Grimm goes on to refer to the fact that translucent pools had been offered for sale by Oriental Recreation Products Shanghai Co. Ltd. as well as another competitor, Intex. It is significant that in the catalogue of Oriental Recreation Products Shanghai Co. Ltd. a pool, which is described as a see-through pool of dimensions of 8' x 24", was clearly included in this catalogue which, as Mr. Yan has drawn my attention to, was published in the year 2001 and the price list shows that such items were available for sale in the year 2001. It seems to me that this is highly material matter for the court to know since the plaintiffs' allegation in these proceedings is that it was only in early 2002 that the plaintiffs' designer developed the original concept for a 8' x 26" self-rising translucent swimming pool. Not only did the attorneys in the US proceedings make the point that the concept was clearly in the public domain they produced some evidence to support that point. I consider this to be a very material fact for the court to know since it goes directly to the question of whether or not interlocutory relief should be granted to the 1st plaintiff.

8. Mr. Yan also makes the point that although the 1st plaintiff in the proceedings in the United States prayed for a preliminary injunction in its complaint, it never applied for any preliminary injunction. That would also have, in my view, been a material fact for the court to know.

9. Mr. Grimm has also made the point in his letter that at best the faxes sent by Mr. Zhu could amount to an assertion by him that in consideration of a substantial order from the 1st plaintiff, Bestway would act as exclusive supplier for the translucent fast set pools during 2002. He also makes the point as is apparent from the fax that Mr. Zhu never promised the 1st plaintiff that his company would refrain from offering the product in 2003.

10. Exhibit "SH4" to the affirmation of Mr. Hughes is the fax dated 19 May 2002 from Mr. Zhu to the 2nd plaintiff. In that fax Mr. Zhu states :

“ AFTER THE MEETING, I ALREADY MAKE THE DECISION THAT : 1―BESTWAY WILL NOT SELL 8" (sic) X 26" FAST SET POOL THIS YEAR. FOR THE NEXT YEAR, WE CAN DISCUSS WITH YOU AND DECIDE HOW TO DO."

Apparently, Mr. Grimm was referring to this fax when he said in his letter dated 4 October 2002 and exhibited as "ZQ-3":

“ It is apparent that Mr. Zhu never promised Aqua-Leisure that his company would refrain from offering the product in 2003."

11. It is patently obvious that this is a material fact for the court to have known and I am satisfied that there has been very serious non-disclosure of material facts.

12. Mr. Wheare has submitted that his firm did not know of these facts and the letter from the attorneys were sent to the 1st plaintiff's attorneys in the US proceedings. But the 1st plaintiff must have known of these facts.

13. I have no hesitation in discharging the ex parte order in view of the failure to make disclosure of the material facts and I discharge the injunction granted on 6 January 2003.