TWO WAY MEDIA LTD v. PCCW LTD AND OTHERS

HCIP 6/2019

[2022] HKCFI 1103

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

INTELLECTUAL PROPERTY PROCEEDINGS NO. 6 OF 2019

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DECISION

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1.  This is the Plaintiff’s second application for extension of time to comply with the order made by me on 8 December 2021 (“the Order”)  requiring the Plaintiff to provide security in the sum of HK$5,500,000 (“the Amount”)  by either payment into court or by bank guarantee within 56 days from the date of the Order, i.e. by 4 February 2022.

2.  On 13 January 2022, the Plaintiff applied for an extension of time to comply with the Order (“the 1^st Application”). In support of the 1^st Application, the Plaintiff relied on the 3^rd Affirmation of Mr James F Butterworth (“Butterworth’s 3^rd Affirmation”).  The hearing took place on 27 January 2022 (“the January Hearing”).  In the end, I granted an extension up to 3 March 2022 for the Plaintiff to provide the security.

3.  As pointed out by Mr Wong, counsel for the Defendants, I made the following remarks in granting the extension in the January Hearing:

(i)  The financial position of the Plaintiff disclosed in Butterworth’s 3^rd Affirmation was different from the picture the Plaintiff portrayed before the court in the hearing held on 8 December 2021 for the application for security for costs (“the December Hearing”).  The court was to a certain extent misled by the Plaintiff regarding its financial position in the December Hearing.  As a result, the Plaintiff was ordered to pay costs on indemnity basis for the 1^st Application.

(ii)  I also queried the adequacy of the evidence in support of the 1^st Application.  In particular, this court pointed out that there was no evidence on how much Mr Butterworth was worth and how much of his assets was being frozen.

(iii)  Nevertheless, and with reluctance, I granted the extension only on the ground that the refusal of the order would mean that the Plaintiff would not be able to pursue the present action.

(iv)  I specifically warned that any further application for extension of time would be closely scrutinised, and such application has to be supported by full bank statements and financial records.

4.  Despite the warning given at the January Hearing, I agree with Mr Wong that the present application is even worse than the 1^st Application as it is not supported by any supporting affirmation.  In the letter issued by the Plaintiff’s solicitors dated 1 March 2022 (“the Plaintiff’s Letter”), the Plaintiff indicated that it will rely on Butterworth’s 3^rd Affirmation (filed on the last occasion in support of the 1^st Application).  The Plaintiff has also introduced some new matters in the Plaintiff’s Letter, but without being verified on oath, they are no more than bare assertions made by the Plaintiff with a view to get further extension of time to provide security.

Legal principles governing extension of time to provide security

5.  The legal principles governing extension of time to provide security are well established:[1]

(i)  It is the norm for the applicant to provide adequate explanation for making the application for extension of time.  Without evidence explaining why the applicant has not paid the security as ordered, why it needs more time, its financial circumstances, and why no application for extension of time has been made earlier, there is simply no basis for the court to exercise the discretion to grant an extension of time.[2]

(ii)  Litigants should be disabused of the notion that court orders do not mean what they say.  A party seeking an extension of time does not have the luxury of proceedings at a pace that is to its liking.  Rather, it has to proceed with all due dispatch and approach the matter with a sense of urgency.[3]

(iii)  The lack of prejudice to the other party is not itself a ground for granting an extension which is otherwise unjustified.[4]

Lack of explanation on why the Plaintiff cannot comply with the Order

6.  Even up to this stage, there is still no explanation as to why the Plaintiff cannot comply with the order.  As pointed out in the January Hearing, the Order was made against the Plaintiff and not Mr Butterworth, and the duty to provide security lies on the Plaintiff alone.

7.  In §8 of Butterworth’s 3^rd Affirmation, all Mr Butterworth was saying was that the Amount “is in excess of the amount currently in the Plaintiff’s account”.  Yet the Plaintiff had failed to adduce any evidence to show the financial circumstances of the Plaintiff.  No bank statements of the Plaintiff for the past few months had been adduced in support of Mr Butterworth’s bare assertion.  There was also no evidence on whether the Plaintiff owns any other assets to secure any bank guarantee.  In fact, there is no evidence on why the Plaintiff itself cannot secure a bank guarantee.

8.  At the January Hearing, this court specifically pointed out the lack of evidence (including bank statements and financial records of the Plaintiff)  showing the Plaintiff’s alleged inability to comply with the Order, and remarked that any further application for extension of time will be closely scrutinized, and such kind of application should be supported by bank statements and financial records.  Yet in this second application for extension of time, no evidence has been adduced to support the alleged financial difficulty of the Plaintiff in complying with the Order.

9.  The absence of such evidence is particularly important because in resisting the Defendants’ security application, the Plaintiff had always maintained that it “has sufficient resources to meet the likely amount of any reasonable costs order that may eventually be made against it”[5], “the Plaintiff has to date paid more than US$30 million in legal fees for these and various other global proceedings relating to the Patent and its family members”[6], “the proceedings in the US, Canada, and Germany were resolved with substantial confidential payments having been made to the Plaintiff”[7], and “there should not be any difficulty or great expense enforcing in Colorado any Hong Kong judgment that orders the Plaintiff to pay the Defendants’ costs”[8]. In other words, it has never been the Plaintiff’s position that its financial position is so bad that it has to rely on others to provide the security or to secure the bank guarantee.

10.  For these reasons, I agree with Mr Wong that there is simply inadequate evidence before the court showing why the Plaintiff has been unable to comply with the Order.  There is not even an attempt to provide such evidence.

The Plaintiff’s inability to comply with the Order even if extension is granted

11.  Further, even according to the Plaintiff’s Letter, the Plaintiff will not be able to comply with the Order even if another extension of time is granted.  In the present application, the Plaintiff seeks an extension of 54 days up to 26 April 2022.  The Plaintiff is not suggesting that it can definitely provide the security by that time.  Instead, in the Plaintiff’s Letter, the Plaintiff contends that “by which time it will be in a better position to inform the Court as to when it can provide the Security and the form it will take”.  The Plaintiff’s Letter still refers to §§11 and 12 of Butterworth’s 3^rd Affirmation, in which an extension up to 6 July 2022 was sought.  Hence, it is most likely that there will be yet another application for extension of time even after granting the 54-day extension sought in the present application.

12.  In any event, I agree with Mr Wong that the Plaintiff has plainly provided no justification for the extension of time sought.  The Plaintiff’s sole argument is based on the alleged divorce proceedings of Mr Butterworth.  However, Mr Butterworth is not subject to the Order, and he has no obligation to provide the Amount or to secure any bank guarantee for the Plaintiff.  Though such matter was raised in the January Hearing, Mr Butterworth still has not provided any undertaking to the court that he will provide the security for the Plaintiff.

13.  Even assuming Mr Butterworth is prepared to provide such undertaking (as the Plaintiff’s solicitors now contend in their reply submissions), there is no evidence on his financial worth.  This matter was raised by the court in the January Hearing.  All Mr Butterworth had disclosed in Butterworth’s 3^rd Affirmation is that there were currently divorce proceedings pending against him, and all his assets were “frozen” by way of an automatic temporary injunction.  Yet there is no evidence on how many assets Mr Butterworth owns and how much they are worth.  There is also no evidence on the amount that is being claimed against Mr Butterworth in the divorce proceedings, what other existing liabilities or debts he may have, and whether he will still be in a position to secure the bank guarantee for the Plaintiff after the conclusion of the divorce proceedings.  There is equally no evidence as to the time frame for the progress of the divorce proceedings, which may affect the time as to when Mr Butterworth can provide the security. I agree with Mr Wong that the Plaintiff has completely failed to address these issues in the Plaintiff’s Letter let alone on oath.

14.  Whilst Mr Butterworth claimed that his wife had refused to provide consent, he had failed to exhibit the relevant correspondence in support.  At the January Hearing, the Defendants pointed out that Mr Butterworth could apply to the court to transfer the necessary funds to the Plaintiff or to modify the temporary injunction to enable him to secure the bank guarantee.  In response, the Plaintiff now claims in the Plaintiff’s Letter that there was a hearing in the divorce proceedings on 21 January 2022 in which Mr Butterworth was informed (not sure by whom)  that there was absolutely no way the Colorado court would allow the release of any funds until the final order in the divorce proceedings.  The Plaintiff claims that there was another hearing on 2 February 2022 in which the Colorado court specifically denied Mr Butterworth’s request to use martial funds for the security until the making of the final order.  The Plaintiff contends that the ruling was oral and there is no official record from the Colorado court.

15.  There are several points that can be made about these latest assertions:

(i)  None of the above assertions has been confirmed on oath by Mr Butterworth.  The alleged hearings took place more than a month ago and there is no reason why Mr Butterworth or his lawyer in the divorce proceedings could not have made an affirmation and disclosed in detail how such an application was made and how and on what grounds the application was refused by the Colorado court.

(ii)  Whilst the Plaintiff claims that the Colorado court’s ruling was made orally, it is inconceivable that the application itself was made without any documentation or notice.  Even if it was a telephonic hearing, there must have been some records (emails or other electronic messages)  to show that such hearing did take place as alleged.  The Plaintiff has not produced a shred of evidence showing that Mr Butterworth has indeed made such application.

(iii)  The Plaintiff has not disclosed on what grounds the Colorado court denied Mr Butterworth’s request.  As correctly pointed out by Mr Wong, if the reason for such alleged denial was because of Mr Butterworth’s lack of sufficient assets, this is highly relevant for this court to determine whether the Plaintiff will be able to comply with the Order if further extension is granted.  The new evidence introduced in the Plaintiff’s Letter has in fact raised more questions about the financial resources of Mr Butterworth than providing answers.

(iv)  Despite the allegation about the hearing of the Colorado court on 2 February 2022, the Plaintiff waited for a whole month before making the present application.  There is not even an attempt to explain such inordinate delay, or what else the Plaintiff or Mr Butterworth had done during the one-month period to try to secure funding, in the Plaintiff’s Letter let alone on oath.  One can say that an attempt was made to explain the delay in the reply submissions when the Plaintiff’s solicitors claim that Mr Butterworth and his legal team had been heavily engaged in the divorce proceedings.  Yet this is a bare assertion as the same has been verified on oath or supported by appropriate documentary evidence.  Further, the Plaintiff should have known that providing security is a serious matter in this litigation, and so it should have approached the matter with a sense of urgency.

16.  In my judgment, the absence of sworn evidence and explanations on these queries is particularly important by reason of the following:

(i)  The Plaintiff has given the court a different picture about the its financial position in the December Hearing.  If the Plaintiff is not prepared to confirm its allegations on oath, the court has great reservation about the truthfulness of these latest allegations and the genuineness of the explanations.

(ii)  After the January Hearing, the Plaintiff knew full well as to what was required if it sought to make further application for extension of time, and yet the Plaintiff has not produced any credible sworn evidence to support its application.

17.  Hence, there is hardly any justification for the court to grant further extension of time for the provision of security.

Prejudice

18.  In so far as the Plaintiff suggests that there is no prejudice suffered by the Defendants by reason of the extension, it is well established that the lack of prejudice to the other party is not in itself a ground for granting an extension which is otherwise unjustified.  In any event, I agree with Mr Wong that the Defendants will continue to suffer prejudice if the present claim is allowed to continue to hang over their heads, and that the Defendants may be forced to incur substantial costs in dealing with the Plaintiff’s multiple time extension applications with no real prospect of recouping without security being provided.

19.  In so far as the Plaintiff contends that the action will be dismissed if the extension is not granted, the Plaintiff has only itself to be blamed for deliberately withholding information from the court at the December Hearing and the January Hearing, and for ignoring the warning given by the court for the need in disclosing full documents regarding the financial positions of the Plaintiff and Mr Butterworth in support of further time application.  Hence, one cannot complain that the Defendants are taking a tactical advantage of the Plaintiff’s temporary inability to comply with the time limit, as there is a serious risk that the Defendants are unable to recover their costs if they succeed in defending the claim.  In particular, the Plaintiff was giving the court a different picture about its financial position in the December Hearing.  Hence, I agree with Mr Wong that the position which the Plaintiff finds itself in is entirely self-induced.

20.  Neither can the Plaintiff rely on the previous concessions it had given to the Defendants for extensions of time to justify the extension sought in the present application.  The merits of each of such applications depend on the particular circumstances, and one cannot use such excuse to justify what would otherwise be an unmeritorious application.

21.  The Plaintiff also claims that it has paid the sum of $950,000 to the Defendants pursuant to a previous costs order.  But as the evidence now shows, the financial position of the Plaintiff may not be that healthy as previously portrayed, and so the Plaintiff’s ability to pay pursuant to a previous costs order cannot assist its case in this application.

Final order and costs

22.  For these reasons, despite that the court has a wide discretion in considering any application for extension of time to provide security for costs, this is not an appropriate case for the court to grant such extension.  I therefore dismiss the Plaintiff’s summons.

23.  I agree with Mr Wong that the costs of this application should be borne by the Plaintiff on an indemnity basis.

24.  The present application is “defective” in the sense that it is not even supported by proper supporting affirmation, not to mention the absence of external evidence and records which could have been easily provided.  This is particularly important given the court’s warning given in the January Hearing that any further application must be supported by bank statements and financial records of the Plaintiff and Mr Butterworth.  The Plaintiff has chosen to ignore the warning and support the application simply by way of a letter the contents of which the Plaintiff does not even bother to verify on oath.  This way of conducting litigation warrants an indemnity costs order against the Plaintiff.

25.  Further, there has also been unexplained and substantial delay in making the present application for extension of time. Even assuming that Mr Butterworth did apply to the Colorado court for a variation of the injunction and the Colorado court did refuse such application as alleged in the Plaintiff’s Letter, all these happened on 2 February 2022 and there is no reason why the Plaintiff only took out an application for extension of time on 1 March 2022 which was only 2 days before the deadline.

26.  For these reasons, the costs of this summons would be paid by Plaintiff on an indemnity basis.