BINARY EVOLUTION COMPUTER LTD v. CAPITAL MORE CO LTD AND OTHERS

IN THE SUPREME COURT OF HONG KONG

HIGH COURT

COMMERCIAL LIST

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JUDGMENT

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1. This is an application by Summons dated 22nd October 1996 on the part of the Defendants to strike out the Re-Amended Points of Claim dated 8th October 1996. The application is made pursuant to O.18 r.19(1)(a), that is, that on its face the Re-Amended Points of Claim discloses no reasonable cause of action. As is usual in such cases under this head, no evidence has been filed: either the pleading is plainly bad, or it is not.

2. This is the second such strike out application in the life of this case, in that on 8th October 1996 Mr. Justice Findlay ordered that the original Points of Claim against the then 2nd, 3rd, and 4th Defendants be struck out, with leave to the Plaintiff to file and serve a fresh pleading within 21 days. Replacement Points of Claim were issued on 29th February 1996, and were followed by Amended Points of Claim on 26th June 1996. Pursuant to a Consent Order made by Waung J. on 2nd October 1996, the present Re-Amended Points of Claim were filed on 8th October 1996, and it is this document which is now under attack, albeit upon a basis different from that which had been the subject of argument before Findlay J.

3. It should also be noted that since the issue of the Writ on 17th October 1995, the parties to the action have also changed, in that two of the original four Defendants had been removed from the action, and the present 3rd Defendant (originally the Plaintiff in a related action, No. CL49 of 95) was added. It is anticipated that the new 3rd Defendant will counterclaim asserting ownership of the copyright in question should the case be permitted to proceed in its current form.

4. This is an action for infringement of copyright. The Plaintiff, Binary Evolution Computer Limited ("BECL") prays for various relief on the basis of the alleged breach of its copyright in connection with certain computer software, which software is an integral part of something known as an Animated Karaoke System ("AKS"). Thankfully, an understanding of the precise details of this software is not required - suffice it to say that copyright in 75 programmes and files, as particularised in the Schedule to the Points of Claim, is said to be owned by the Plaintiff and to have been the subject of infringements by, inter alia, the Defendants.

5. So far, so good. The thrust of the argument put forward by Mr. Coleman, who appeared on this application for the Defendants, was that with regard to the first 59 of the programmes and files as particularised in the Schedule, the Plaintiff had no title to sue, in that the intellectual property rights in "AKS", for which infringement is now claimed, did not rest with the Plaintiff at the date of the issue of the writ. This fact, Mr. Coleman asserted, was evident on the face of the pleading at paragraph 6(h), as the right in question had not been assigned to the Plaintiff until a confirmatory Deed of Assignment dated 19th June 1996, and there was no pleading as to any other form of assignment subsequently confirmed by the Deed. Ergo, said Mr. Coleman, when taken together with the earlier plea, at paragraph 6(1), to the effect that neither the Plaintiff nor its predecessor, BECS, had ever divested itself of its copyright in any way, it was clear that the Plaintiff had no title to sue with regard to these 59 items as at 17th October 1995, the date of the issue of the Writ, and therefore had no cause of action in respect of these rights as at this date. Accordingly, the argument went, new proceedings were required to be issued in relation to items 1 - 59 in Schedule 1 on the basis of the right legally assigned by the June 1996 Assignment, and such new proceedings could then be consolidated with the remaining claim in the present proceedings; alternatively, the whole claim should be struck out, leaving the Plaintiff to pursue new proceedings in relation to the intellectual property rights in "AKS" over which it could now, as at today's date, properly assert ownership.

6. The point is short, and Miss Priscilla Wong, who appeared for the Plaintiff, dealt with it shortly. So far as the pleading was concerned, she stood her ground. Her primary contention was that whilst the re-amended pleading, for which version only she took responsibility, was admittedly not perfect, nevertheless the situation was a very considerable distance away from the "plain and obvious" situations meriting recourse to the summary process of striking out pursuant to O.18 r.19(1)(a). She argued that the Re-Amended Points of Claim, and in particular paragraphs 1(d), 4 and 6(h), clearly showed that in August 1993 the present Plaintiff was incorporated with the specific objective of assuming the business of its sole proprietorship predecessor, namely Binary Evolution Computer Services ("BECS"), and that by 1st April 1994 such takeover of the business had been completed. Further, the June 1996 Deed of Assignment was stated to be confirmatory, supporting her contention as to the prior passage of the relevant intellectual property rights from BECS to the Plaintiff. The Hong Kong Court of Appeal decision in Wah Sang Industrial Co. v. Takmay Industrial Co. Ltd. [1980] F.S.R. 303 was relied on for the proposition that an equitable interest in the work sought to be protected was sufficient for the purpose of bringing suit. She also pointed out that whilst their lordships in Wah Sang had adopted the proposition in Roban Jig & Tool Co. Ltd. [1979] F.S.R. 130 that the combined effect of s.36 of the Copyright Act 1956 and s.53(1)(c) of the Law of Property Act 1925 is that if that assignments of copyright, whether they be of the legal interest or of the equitable interest in such copyrights, must be in writing, the relevance and force of this dictum had been significantly reduced by reason of the repeal of the Hong Kong equivalent of s.53(1)(c), namely s.6(1)(c) of the Law Amendment and Reform (Consolidation) Ordinance, Cap.23. Moreover, she said, she was able at the present time to take advantage of the provisions of s.20 of the Copyright Act 1956, whereby until the matter is put in issue by the Defendant, copyright shall be presumed to subsist in the works to which the action relates. If the Defendant took the view that the ownership position required further clarification, particulars could be requested; for the moments, however, the pleading was sufficient, and indeed, she proffered no amendment or particulars to meet Mr. Coleman's concerns.

7. After some reflection, I am not minded to grant this application, although I am bound to say, after considering the respective positions, that I do not think that Mr. Coleman's objections can be consigned quite as easily to the mere "whistles and bells" category as Miss Wong sought to do.

8. There is in my judgment sufficient on the face of the present pleading to withstand frontal assault at this stage, notwithstanding Mr. Coleman's primary contention that there was insufficient to set up the existence of an equitable interest in the Plaintiff prior to the confirmatory Deed of June 1996. I bear in mind in particular the pleaded factual matrix, with the Plaintiff succeeding the sole proprietorship of Mr. Chow, the consequent asset transfer, and with Mr. Chow and his wife becoming shareholders of the Plaintiff, taken together with the statutory presumption within s.20 of the 1956 Copyright Act, the provisions of which apply to Hong Kong. Nor am I greatly impressed with the invocation of paragraph 6(f) in support of the argument, in that it seems to me that the particular factual context readily supports the reasonable construction that the copyright in question had not been divested to third parties unconnected either with the Plaintiff or its sole proprietorship predecessor.

9. For the moment, therefore, I am prepared to find, in Mr. Coleman's attractive phrase, that there is indeed within this pleading "a whisper loud enough to be heard," and to infer from that which is already pleaded a pre-existing interest resting in the Plaintiff prior to the June 1996 confirmatory assignment, and certainly, as Miss Wong would have it, the possibility of such. I note in passing at this stage that I do not accept Mr. Coleman's contention that the mere issuance of his summons to strike out is sufficient for the Defendant to "put in issue the question whether copyright subsists therein", to use the language of s.20. This point was not fully developed in argument, but it seems to me that matters are only properly put "in issue", in the accepted sense, upon the basis of pleaded averments, and that until a Defence is filed whereby such issue is constituted the Plaintiff continues to be entitled to the benefit of this particular statutory presumption. In expressing this view, I am reinforced by the fact that in Roban Jig, op. cit., in which s.20 was invoked, the defendants in that case had by their defence specifically challenged the Plaintiffs title to the copyright in question.

10. A further, albeit subsidiary, factor is that I am not attracted to the argument that I should now strike out this pleading when the same document had been filed pursuant to a Consent Order dated 2nd October 1996. It seems to me odd that a party can consent to the filing of a pleading on the one hand, presumably after giving it full consideration, and on the other thereafter seek to remove that very document by means of a striking out application. This was not a point which was specifically taken by counsel, and I mention it for the sake of completeness as a matter of which I have been aware and which I have taken into account in the exercise of my discretion.

11. Looking at the matter in the round, therefore, in my judgment this attack by the Defendants has been a little too quick off the mark. It may well turn out that there are storm clouds ahead for the Plaintiff, and certainly more than Miss Wong was presently prepared to countenance; I bear in mind here the observation of Stamp L J in Roban Jig, op. cit., at p.142, that one may commence suit by relying on the equitable title to property and get in the legal title afterwards, but that that does not mean that you can sue on no title at all and acquire such title thereafter. In my view, however, the case should be permitted to proceed at the moment without further interruption. The pleadings should be constituted, particulars can and perhaps will be requested, and thereafter the issue of ownership and the Plaintiff's locus with regard to items 1 - 59 can no doubt be revisited should such be appropriate. In short, it is possible that Mr. Coleman may turn out to be correct in his criticisms of the Plaintiff's case, but he is going to have to wait to find out.

12. Accordingly, as earlier indicated, in the exercise of my discretion and in the light of all the material before me, I decline to order the summary relief which is sought, and I dismiss the Defendants' application. In this connection I make also an order nisi whereby the Plaintiff is to have the costs of and occasioned by this application in any event.

13. Following upon this decision, I consider it appropriate to make the following limited consequential directions: namely, that the Defendants are to have 21 days to file and serve their Defence and Counterclaim (if any), and that the Plaintiff is to have 14 days to file and serve a Reply and or Defence to Counterclaim (if any).

14. It may well be that there will be further interlocutory applications in this case, and in the circumstances and in light of this judgment I think it desirable also to order that all such interlocutory matters are listed for hearing before me. Since this is a Commercial List case this should not cause undue difficulty.

15. Lastly, I would like to express my appreciation to Counsel for their crisp and helpful submissions.