CANON KABUSHIKI KAISHA v. GREEN CARTRIDGE CO. (HONG KONG) LTD. AND ANOTHER

1993, No.A7844

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

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J U D G M E N T

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1. I have before me a summons dated 14th October 1997 issued by the Plaintiff herein for an Order that the principal and interest standing in The Hongkong and Shanghai Banking Corporation Hong Kong dollar Savings Account Nos.002-6-346536 and 002-8-367175 be paid forthwith to the Plaintiff's solicitors for the account of the Plaintiff in partial satisfaction of the Plaintiff's costs in Privy Council Appeal No.75 of 1996.

2. This is very much a procedural sideshow resulting from this long running litigation, which was a patent and copyright infringement action, the subject matter of which involved disposable process cartridges used in laser printers and photocopiers.

3. The history of the action can be broadly, and shortly, stated. The Plaintiff issued a writ in July 1993, and on 15th September 1993, the Plaintiff issued a summons for an interlocutory injunction seeking to restrain the 1st Defendant from committing acts of patent infringement. This application was dealt with by Consent Order made by Rogers, J. on 7th February 1994. As Mr Shieh, for the Plaintiff, put it, the result of this was that the 1st Defendant could continue with the manufacturing and sale of its "copy" process cartridges until trial, provided that the 1st Defendant paid US$1 per cartridge sold into a joint bank account held by the parties' solicitors, such money to be held "to the order of the Court".

4. Pursuant to that Order, money was paid into The Hongkong Bank account from March 1994 until, I understand, the conclusion of the proceedings in the Court of Appeal, and the sum presently stands at a figure of in or around HK$1.3 million. The present application, therefore, involves the payment out of these very monies.

5. But to return to the history of the action. Trial before Rogers, J. took place in late 1994, and judgment was handed down in the action on 31st March 1995. Paragraph 9 of that judgment reads :-

"The amount or amounts certified to be due to the Plaintiff upon making the said accounts and enquiries at paragraphs 6, 7 and 8 hereof be paid to the Plaintiff from the account held by the parties' solicitors pursuant to paragraph 2 of the order of Mr Justice Rogers dated 7 February 1994 and the balance (if any) be paid by the Defendants to the Plaintiff within such time as is ordered upon such accounts or enquiry."

6. The Defendants appealed against the findings of the trial judge, and the Plaintiff cross appealed. The Court of Appeal allowed both the appeal and the cross appeal, holding, inter alia, that the Plaintiff's copyright was not infringed. However, the Court of Appeal held that two of the Plaintiff's patents held invalid below were valid and infringed, and paragraph 7 of the Court of Appeal Order read as follows :-

"The amount or amounts certified to be due to the Plaintiff upon making the said accounts or enquiry at paragraphs 5 and 6 hereof be paid to the Plaintiff from the monies held in the accounts held by the parties' solicitors pursuant to paragraph 2 of the Order of Mr. Justice Rogers dated 7th February 1994 and to paragraph 1 of the Undertakings given to the Honourable Mr. Justice Liu and embodied in the Order dated 30th August 1995 and any deficiency be paid by the 1st Defendant to the Plaintiff within such time as is ordered upon such accounts or enquiry and any surplus after such payment be released to the 1st Defendant within such time as is ordered upon such accounts or enquiry."

7. Thereafter the matter went to the Privy Council on the issue of copyright infringement only, the Privy Council allowing that appeal with costs to the Plaintiff by Order dated 20th May 1997. That Order was formally made an Order of the High Court by the Order of Master Jennings dated 20th June 1997, paragraph 3 of which reads :-

"(3) that the Defendant to pay to the Plaintiff its costs of the appeal to Her Majesty in Council incurred in the said Court of Appeal and the sum of (177,485.38 for its costs thereof incurred in England."

8. Hence the present application.

9. In a nutshell, Mr Shieh submits that a liability to pay costs is as much a liability in the action as a liability to pay damages. The court, he says, undoubtedly has jurisdiction to order payment out of the monies in the joint account, and that as a matter of discretion, all the practical considerations point to one conclusion only, namely that the money should be paid out to the Plaintiff, given that the order of costs made against the 1st Defendant in the Privy Council appeal is a precise and liquidated sum, that there is also an undoubted and indisputable liability, and that it makes no sense for the money to remain in the joint account. He amplifies this argument in his elegant skeleton but that, at least, was a thrust of his submission.

10. To the contrary, Mr Chow, for the 1st Defendant, opposes as "a matter of principle". Essentially, Mr Chow's submission is that the monies in the joint bank account have always been notionally earmarked for the payment of damages, which was precisely the factual matrix at the date of the Order before Rogers, J., as to the consensual nature of which Order he also lays considerable stress. Moreover, the judgment of Rogers, J. dated 25th June 1995 (at paragraph 9) and the judgment of the Court of Appeal (at paragraph 7 thereof, which paragraph was, I note, not altered by the Privy Council decision) make the point that the amounts consequent upon the accounts and inquiries are to be paid from the joint account. He further submits that this Court has no jurisdiction to vary the Court of Appeal Order and that, if such variation is to be done, it should be done by the Court of Appeal. Lastly, he submits that there is no current certainty, as opposed to unproved speculation, that the monies in the joint account would be insufficient for the damages accruing to the Plaintiff.

11. I think that in the circumstances this latter point is stretching credulity. Admittedly there has as yet been no inquiry as to damages, but on the affidavit evidence before the Court, Mr Shieh is confident that the damages liability is in excess of at least HK$20 million. In fact, from a financial viewpoint, the 1st Defendant's position looks distinctly bleak. Not only must the 1st Defendant pay the Privy Council costs, now crystallised at some £177,000, but it must also pay the costs (yet to be taxed) of the First Instance and Court of Appeal proceedings, plus all the damages in due cause to be proved. So, in terms of the Plaintiff and the 1st Defendant, the monetary equation is overwhelmingly one way. The Plaintiff can be under no liability vis-a-vis the 1st Defendant, and the 1st Defendant can have no legitimate residual claim to any of the monies in the joint account. Indeed, the latter sum of HK$1.3 million appears to be but a drop in the financial ocean, so to speak, and all that the Plaintiff wishes now to achieve is to obtain the payment of these monies to defray the now-quantified Privy Council costs.

12. In my judgment, the merits of this application are overwhelmingly with Mr Shieh's clients, and the only point which has given me pause for reflection in the present debate is Mr Chow's submission that to accede to the present application would, in effect, be to vary an Order of the Court of Appeal.

13. Mr Shieh's response to this is to say that there is nothing to prevent a First Instance judge from construing an Order of a Superior Court - he says that the mere exercise of the power to construe such an Order does not logically lead to the conclusion that such can only be conducted by a Court of Appeal judge - although he does, I think, accept that if the Order in question is construed as mandatory in effect, it can only be varied by the Court pronouncing it, that is, by the Court of Appeal. The option in this situation would, therefore, be to revert to Rogers, JA (as he now is) for such an application to take place; however, in Mr Shieh's submission, such an exercise in the circumstances would be a manifest waste of time and money.

14. After some hesitation, I agree with Mr Shieh. I think that paragraph 7 of the Order of the Court of Appeal dated 9th May 1996 is permissive only, and not mandatory in its effect. In my view, the monies in the joint account are not to be regarded as an exclusive mandatory source for the payment of damages, at least until any formal variation of the Court of Appeal's Order. Rather, at the time of making the Orders in question, the Court, at the Court of Appeal level and at First Instance, was merely reflecting the existence of the funds in the joint account as the first source of the payment of such damages as may be subsequently ascertained; accordingly, in my judgment, the Court was not saying that such funds can or could never be used for any other purpose. Ergo, paragraph 7 permits but does not preclude. And if this be correct, this Court is, in my judgment, in the position to direct the orderly and fair disposal of the monies in the joint account according to the situation as it has now developed some two years later. To suggest that such monies in the joint account should remain effectively inviolate pending the ascertainment of the damages, whilst interest continues to accrue upon the unpaid crystallised costs, is a suggestion that holds no intrinsic attraction.

15. So that once I have arrived at this conclusion, I have little difficulty in permitting what is in effect execution of the crystallised Order for the Privy Council costs against the sum presently standing in the joint account. In the circumstances, I cannot see anything to be gained by referring the matter to Rogers, JA, or indeed to one of his colleagues in the higher Court, and accordingly, rightly or wrongly, I think that this Court should grasp this particular nettle and decide the point here and now; indeed I note, for reasons which are not altogether clear, that this particular application has been outstanding since October 1997, and I think it is high time that a decision was reached thereon. It follows, therefore, that notwithstanding the valiant efforts of Mr Chow in arguing a difficult brief, I grant the Plaintiff's application, and I am prepared to do so in terms of the summons before me unless Mr Chow has any argument on costs that he wishes to place before me.

[Submissions from Counsel]

16. I now have received submissions on costs. Mr Chow, for and on behalf of the 1st Defendant, quite properly draws my attention to the fact that this is actually the third effort in getting this application off the ground in terms of argument. Mr Shieh helpfully tells me that the first hearing of the summons was returnable was on 31st October 1997 for 15 minutes. It was then adjourned for a date to be fixed, not unsurprisingly. The matter was then refixed for hearing before Yam, J. on 8th January 1997 for a morning, but I understand that at that time approaches were made between the parties to the effect that the matter be further discussed with a view to a consensual resolution of the whole issue, and that accordingly such argument did not take place on that day. Today, of course, the matter has been argued to its conclusion, and I have now rendered my judgment. Against this background, therefore, Mr Chow suggests that the costs of and occasioned by the hearing on 31st October 1997 and 8th January 1998, which were reserved, should be on the basis of no Order as to the costs of those days. To the contrary, Mr Shieh suggests that he should have the costs of both of those days since the ultimate hearing has now taken place, and he has won.

17. In my judgment, the appropriate Order is as follows : the Plaintiff is to have the costs of and incidental to this application, to be taxed if not agreed, save and except for the costs of and occasioned by the hearing on 8th January 1998; as to those costs, I consider that no order as to costs is the appropriate order. I further add, for the direction of the taxing master in light of the Order I have made, that Mr Shieh's brief fee is to be permitted for the hearing today; in other words, the effect of this is that on taxation his clients will be denied a refresher.

18. That takes care of the costs. However, Mr Shieh has drawn my attention to minor matters on the face of the summons. First, instead of the word "forthwith", my order is that the principal and interest in the joint account be paid to the Plaintiff's solicitors within 14 days of the date hereof. It may be, also, that Mr Chow is in the position to offer me an undertaking in that regard, in which case there is no need to refer in the formal Order to the Defendant's solicitors doing all that is necessary to effect such payment.

19. A further matter arose after dealing with these other issues. Mr Chow, on behalf of the 1st Defendant, asked for a short adjournment. I granted it, and on my return, he indicated that he had instructions to appeal, and that he wanted a stay of execution pending that appeal. Mr Shieh, for his part, has drawn my attention to the relevant text regarding a stay of execution as is digested in the White Book, and suggests that he should not be deprived of the fruits of this particular success in this Court.

20. I have considered the matter fully, and rightly or wrongly, I have come now to the particular conclusion as reflected in this judgment. However, this is a somewhat unusual situation; it is not quite the normal type of litigation wherein a litigant has obtained an order for payment of a sum of money, and immediately (and naturally) wants the fruits of that judgment. I bear in mind that this is a long-standing piece of litigation, and that the money in question has been in the joint account for some three to four years. Accordingly, after looking at the situation in the round, I think that in the circumstances prevailing the correct order is as follows :

21. There be a stay of execution to the 1st Defendant for a period of 21 days to permit the 1st Defendant to make application to a single Judge of the Court of Appeal for a stay of execution of this Order. It follows therefore from what I have said that if a single Judge of the Court of Appeal has not granted any such stay of execution within 21 days from today, then the present interim stay of execution expires, and the result of this application will stand in the normal course.

22. I thank both Counsel for their assistance.