LEHMANBROWN LTD v. UNION TRADE HOLDINGS INC AND OTHERS

HCMP 977/2015

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF APPEAL

MISCELLANEOUS PROCEEDINGS NO. 977 OF 2015

(ON AN INTENDED APPEAL FROM HCMP NO. 775 OF 2012)

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J U D G M E N T

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Hon Lam VP (giving the Judgment of the Court):

1.  In this application, the defendants in HCMP 775 of 2012 seek leave to appeal against the decision of L Chan J on 18 February 2015 made pursuant to a summons taken out by those defendants under Order 12 Rule 8. The substantive parts of the order of 18 February 2015 are as follows:

“ 1. Insofar as it relates to the two registered Hong Kong Marks, the Originating Summons herein has been duly served upon the 1^st Defendant and upon the 2^nd Defendant.

2. Insofar as it relates to the Mainland Marks, the Originating Summons herein has not been duly served upon the 1^st Defendant or upon the 2^nd Defendant.

3. In respect of the Plaintiff’s claims herein relating to the Mainland Marks, it has no jurisdiction over the 1^st Defendant or the 2^nd Defendant.

4. It has jurisdiction over the Plaintiff’s claims herein against the 3^rd Defendant and the 4^th Defendant.

5. The Defendants’ application for stay on the ground of forum conveniens is dismissed.”

2.  The defendants sought leave to appeal before the learned judge.  The judge refused leave on 9 April 2015.  The judge gave full reasons for refusing leave in his written decision of 9 April 2015.

3.  The defendants now come to this court to seek leave.  In the draft Notice of Appeal attached to the summons of 23 April 2015, they sought the following orders:

“ (i) D1, D2, the 3^rd Defendant (“D3”) and the 4^th Defendant (“D4”) have not been served with the O.S.; and (ii) save for the Plaintiff’s O.S. claims made against D2 (only) which are described in para 2(1) and (2) below, the Court lacks jurisdiction in respect of the Plaintiff’s O.S. claims AND FOR AN ORDER that, otherwise, but save for the orders described in para (1) above, the Judgment be set aside with costs to the Appellant Defendants, here and below.”

4.  As appeared from the draft Notice of Appeal and the grounds advanced in it, the defendants do not challenge the judge’s conclusion on forum non conveniens.  The intended appeal concentrates on the challenge to jurisdiction.

5.  The test for granting leave in respect of interlocutory matters is well settled and there is no disagreement between the parties.  By way of threshold, the defendants have to show reasonable prospect of success, viz. the prospect of success must be more than fanciful though without having to be probable. Further, this is only a threshold. This court has a discretion to refuse leave even if such threshold is met, see Ho Yuen Ki Winnie v Ho Hung Sun Stanley HCMP 1009/2009, 24 Aug 2009, para 16.  

6.  Having considered the submissions of the parties (both written and oral), we come to the conclusion that we should not grant leave.

7.  Most of the grounds canvassed by the defendants have been satisfactorily dealt with by the judge in his judgment of 18 February 2015 and his decision of 9 April 2015.  We take this opportunity to remind practitioners of what had been said on previous occasions that parties should reconsider the arguability of an intended appeal in light of the decision of the primary judge in refusing leave, see for example Singh Arjun v Secretary for Justice [2014] 2 HKLRD 678 at paragraph 10. 

8.  Further, for reasons canvassed in that judgment as well as Jenho Development Ltd v Pensonic Technology (HK) Ltd HCMP 277 of 2013, 25 March 2013, this court will treat grounds advanced for the first time in a renewed application before this court cautiously. 

9.  In the present case, a number of points taken by Mr Barlow SC on behalf of the defendants had not been canvassed at the substantive hearing.  For that reason, the judge refused to entertain them in the application for leave to appeal.   Those grounds were identified by the judge at paragraphs 11-13, 16-19, 25 and 28 in his Decision of 9 April 2015.  In the course of his oral arguments, Mr Barlow tried to contend that these were not new points. However, the defendants did not place before us the necessary materials to demonstrate that the points had been taken at the substantive hearing below. The judge gave detailed written reasons for refusing leave in which he identified these new points. The defendants had ample opportunity to place before us materials such as skeleton submissions put before the judge or a transcript of the substantive hearing in the court below to demonstrate that these were not new points. They did not do so. Nor did Mr Barlow seek to assert that they were not new points in his written submissions. In these circumstances, this court must proceed on the basis that the judge was correct in identifying them as new points.

10.  Whilst the Court of Appeal obviously has power to entertain new points in an appeal, it is also clearly and firmly established that new points which are fact sensitive or otherwise affect the course of evidence or conduct of the case at the hearing below should not be allowed. Though this principle is usually applied in situations where the new points necessitate further evidence to be adduced, it is not confined to such scenarios. Very often, the raising of new point by one party may lead to the other party raising counter arguments and the consideration of such counter arguments may involve factual assessment in a different light from that undertaken by the court below. Sometimes, it may involve a different weighing of factors in the exercise of discretion. Alternatively, the other party may embark on a different course of forensic conduct if the new point were taken earlier. The appellate court, in considering whether the new point would be entertained, is entitled to take these matters into account in order to avoid unfairness to the other party.

11.  Bearing in mind the broad discretion under section 14AA of the High Court Ordinance, this court should apply the same approach when leave to appeal is sought on the basis of some new points which had not been canvassed at the substantive hearing below. There is no point in granting leave on a new ground which the Court of Appeal would not entertain on the hearing of the appeal proper. 

12.  In the context of an application under Order 12 Rule 8, a defendant challenging jurisdiction should advance all the grounds for so doing in his original application. According to the Court of Final Appeal’s decision in The Resource 1 (2000) 3 HKCFAR 187, the avenue provided by this rule is the exclusive code for challenging jurisdiction. In respect of a challenge to service, even if a defendant succeeds in persuading the court that the original service was bad, in many cases it might be possible for a plaintiff to remedy the situation by effecting service again. There could be situations where the court may find a waiver of irregularity or it may deem a certain mode of service to be good service if the process had actually come to the knowledge of the defendant. In light of these possibilities, permitting a defendant to run a different argument to contest service at the appellate level after his failed attempt on another argument without proper explanation can lead to undue and unfair delay in the processing of the claims. Further, a plaintiff might suffer prejudice in terms of losing the opportunity to take steps to rectify the defect by an alternative mode of service at an earlier opportunity. Hence, if a particular line of challenge is not adopted at the court below, in line with the spirit of Order 1A Rule 1, this court should be slow to allow it to be raised for the first time on appeal in the absence of explanation for not taking the point below.

13.  We do not accept the submissions of Mr Barlow that the court must, irrespective of the position of the parties, have regard to these points as they go to jurisdiction. Unlike the situation in In re Lehman Brown Ltd CACV 272 of 2011, 13 March 2013, we are not dealing with a situation where the court does not have the power to grant a certain kind of relief (and in that sense a point of jurisdiction arises). We are dealing with a case where prima facie these defendants had been served in Hong Kong and they came to court challenge the effectiveness of such service. The burden is on them to raise proper grounds for challenging such service.

14.  The background facts of the case were adequately summarised by the judge in his judgment of 18 February 2015 at paragraphs 42 to 50 and we shall not repeat the same. It should be noted that as far as the 1^st, 2^nd and 4^th Defendants are concerned, service on them was effected in Hong Kong and the question which we should concentrate in this application is whether the respective service on them was good service. In respect of their cases, Order 11 is not engaged.

15.  In respect of the 1^st and 2^nd Defendants, in light of what was said above as to the effect of a failure to advance an argument to challenge jurisdiction at first instance, we agree with the judge that they should not be allowed to withdraw from the concession made by Mr Barlow that their Hong Kong addresses were good for service in respect of the causes of action against the 1^st and 2^nd Defendants concerning the Hong Kong Marks (see paragraph 12 of the Decision of 9 April 2015).  We also agree with the judge that the unregistered mark point, not having been raised below, could not be entertained at the appellate stage for the purpose of challenging service.

16.  Whether the Plaintiff has locus standi to sue for infringement is not a question of jurisdiction and it is not a point that can be canvassed in an Order 12 Rule 8 application.  Further, since it is not an application for service outside jurisdiction, whether the Plaintiff has any sustainable claim against the 1^st defendant does not fall within the scope of this application.  The same observation can be made on Mr Barlow’s contention that the matter should proceed by writ as opposed to originating summons and the criticism against the claims in respect of infringement. 

17.  The position of the 3^rd Defendant is slightly different. Though the service was effected by sending the document to the solicitor for the 3^rd Defendant in Hong Kong, it was pursuant to the agreement between the solicitors in a letter of 14 May 2012. Under that agreement, the 3^rd Defendant reserved the right to challenge jurisdiction. Thus, the 3^rd Defendant can challenge jurisdiction by arguing that the claims of the Plaintiff do not fall within Order 11.

18.  We agree with the judge that the correct characterization of the claims regarding the mainland marks is breach of contract. Though the claims were worded in the Originating Summons in terms of misappropriation of Mainland Marks, if one read the supporting affidavits and the judgment of Harris J in HCCW 377 of 2010 (referred to in the Originating Summons), these were obviously claims based on breach of agreement. As such, the courts in Hong Kong do have jurisdiction to hear the Plaintiff’s claims against him in that respect.

19.  Mr Barlow’s complaint about non-existent Order 11 application is misconceived for the reasons given by the judge at paragraph 21 of his Decision of 9 April 2015 by reference to the letter of 14 March 2012. We do not see any scope for arguing that New Link Consultants Ltd v Air China [2005] 2 HKC 260 para 39 was wrongly decided. The way in which the judge in the instant case approached the matter at paras 37 to 41 of his judgment of 18 February 2015 was perfectly in line with established authorities: e.g. Sphere Drake Insurance v Gunes Sigoria Anonim Sirketi [1988] 1 Ll Rep 139.  The effect of the agreement between the solicitors was that the 3^rd Defendant reserved the right to contest jurisdiction (e.g. by arguing that the claims does not fall within Order 11). However, subject to such contest as to jurisdiction, he could not subsequently argue that his solicitors did not accept service on his behalf. As provided in the reservation, he could also challenge the form or content of the Originating Summons. But these are not grounds pertaining to a challenge to jurisdiction under Order 12 Rule 8. The whole point of an agreement of that nature was, as observed by Neill LJ in Sphere Drake Insurance v Gunes Sigoria Anonim Sirketi, supra, at p.143 to save the costs and time involved in a full Order 11 procedure. It would be self-defeating if, as contended by Mr Barlow, the 3^rd Defendant could mount a challenge in respect of the service on the solicitors on the basis that no formal Order 11 application had been made. We have no hesitation in rejecting this contention. As explained in Sphere Drake Insurance, the correct analysis is that the service was effected in Hong Kong pursuant to the agreement between the parties.

20.  In respect of the 4^th Defendant, she did not raise the point about mode of service at the substantive hearing. It is now too late for her to try to canvass the same for the purpose of the intended appeal. As she was served in Hong Kong and Order 11 is not relevant in her case, whether there is any valid claim against her is not something we should be concerned at this stage.

21.  As will be apparent from this judgment, we do not deem it appropriate for us to deal with arguments of Mr Barlow which have no bearing in the context of this application as they do not arise in the context of a challenge on jurisdiction under Order 12 Rule 8. Thus, this judgment would not pre-empt the Defendants from making whatever applications as they deem fit to challenge the claims of the Plaintiff on grounds other than jurisdiction.  

22.  In our view, the intended appeal is without merit.  We therefore refuse to grant leave and order the Defendants to pay the costs of the Plaintiff in this application.  Based on the costs statement submitted, we fix such costs at $104,000.