Treasure Area Ltd. v. Chow Chung Kit Maurice and Another

HCA005112/1997

HCA 5112/97

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NO. 5112 OF 1997

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Coram: The Hon. Mr. Justice Ribeiro in Chambers

Date of Hearing: 28 September 1999

Date of Judgment: 28 September 1999

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J U D G M E N T

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1. I have before me the 2nd Defendant's appeal against the refusal of Master Cheung to strike out the Points of Claim. The application before the learned Master was made on the basis that the Action was frivolous, vexatious and an abuse of process.

2. The dispute in the present Action, and also in two related Actions, concerns the ownership and alleged infringement of copyright in certain computer software which drives a commercially operated karaoke system.

3. According to the Points of Claim, in about September 1993, the Plaintiff entered into a contract either with the 1st Defendant trading as Binary Evolution Computer Services ("BECS") or with Binary Evolution Computer Limited ("BECL") for the latter to develop and install in its premises such karaoke software for a total consideration of $180,000.

4. BECL was incorporated on 24 August 1993 and subsequently took over the business of BECS. BECL's only shareholders and directors are the two Defendants, who are husband and wife.

5. It is alleged by the Plaintiff that the agreement for all property rights, including copyright, in all works produced by BECS or BECL at the Plaintiff's requests or for the Plaintiff's purposes relating to the computer system were to be owned by the Plaintiff.

6. Pursuant to the agreement, the system, known as the AKS Computer System ("the AKS system") was duly installed at a karaoke establishment commercially operated by the Plaintiff in about April 1994.

7. It is alleged however that the two Defendants have "authorised, directed and procured" BECL to infringe the Plaintiff's rights in various ways. The Plaintiff complains, for instance, of the bringing of the abovementioned related Actions to assert ownership of copyright in the AKS system. It also complains that BECS and/or BECL have installed the AKS system in other, competing, karaoke establishments without the Plaintiff's authorization.

8. In their Defence, the Defendants deny that the agreement vested copyright or any other rights in the Plaintiff. In their respective Affidavits filed in support of the 2nd Defendant's application, they both depose to the 2nd Defendant having no involvement in the affairs of BECL at all and that her status as a director and shareholder is due solely to the statutory requirement that there be at least two directors and shareholders for a limited company. Additionally, with a view to bolstering that negative proposition, the 1st Defendant has deposed to the fact that his wife is not an authorised signatory on BECL's bank account, that BECS did not employ any staff with effect from 1 April 1994, and that his wife has never been employed by BECL, that she has never been paid any director's fees by BECL, that no board meetings were held and that the 1st Defendant alone has been responsible for all decisions relating to the operation of both BECS and BECL.

9. Both of the related Actions mentioned were brought by BECL. In HCCL 39/1995, BECL obtained certain permanent injunctions against its former employees. In HCA 8663/1997, BECL sues the present Plaintiff together with two other parties and Mr. Justice Stone has ordered that the present Action be tried immediately after the trial of that Action.

10. At the core of the 2nd Defendant's application to strike out for abuse of process is the argument that the Plaintiff is unable to specify any overt conduct on her part capable of founding personal liability against her for infringement, even assuming that copyright vested in the Plaintiff.

11. The 2nd Defendant accepts that if a director personally orders or procures the commission of an infringing act, then such conduct may properly found personal liability on his or her part: Copinger & Skone James on Copyright, Vol. 1, 14th Ed., §22-22, Evans & Sons Ltd. v Spritebrand Limited [1985] F.S.R. 267 and A. P. Besson Ltd. v Fulleon Ltd. [1986] F.S.R. 319.

12. However, the 2nd Defendant contends, an analysis of the pleadings, affidavits and witness statements (filed in the present as well as in the related Actions) discloses that the Plaintiff has no basis whatsoever for alleging that she (as opposed to her husband, the 1st Defendant) did any acts personally upon which the allegation that she "authorised, directed and procured" infringements may be based. In my view, this contention is made good. I was taken by Mr. Jeevan Hingorani who, with Miss Monica Chow, appears for the 2nd Defendant, through the relevant references in the papers and it is clear that the 1st Defendant is the person who features throughout, both in the allegations of the Plaintiff and of the 1st Defendant himself. There is hardly any mention of the 2nd Defendant as a participant in the affairs of either BECS or BECL.

13. It is noteworthy that by a summons issued on 26 February 1999, the Plaintiff sought specific discovery of documents such as the audited accounts of BECS and BECL, their bank mandates, the Inland Revenue returns for their employees, BECL's board minutes and the 2nd Defendant's Inland Revenue returns, employment contracts and monthly pay slips. In support of that application, Mr. Steven James Birt, an assistant solicitor acting for the Plaintiff, swore an Affidavit stating that such documents were required to "verify whether there is any basis for the 2nd Defendant's (striking out) Summons" and that such documents were "essential to enable the Plaintiff to defend" that Summons. The 2nd Defendant points out that all the requested documents except for board minutes have been provided (there being no board minutes) but that the Plaintiff has thereafter sought to file no evidence in support of its case against the 2nd Defendant.

14. The Plaintiff argues that a sufficient case exists against the 2nd Defendant personally to justify the Action proceeding to trial to test her denial of involvement. The Plaintiff points to the fact that the 2nd Defendant is a computer systems engineer by profession and had actively participated in the business of BECS by co-authoring part of the AKS system software. While she has provided evidence that she took no part in BECL's business at any material time and that she was instead in full time employment elsewhere, the Plaintiff suggests that since BECS's business was not taken over immediately upon BECL's incorporation in 1993, but only on 1 April 1995, the 2nd Defendant may have continued to work for BECS in the meantime. The Plaintiff argues that on this basis, it may be reasonable to infer that she personally participated in some way in the infringing acts which allegedly took place during such period. Miss Winnie Tam, who appears for the Plaintiff, fairly stated that the Plaintiff is unable to put its case any higher.

15. In my judgment, the Plaintiff's case against the 2nd Defendant boils down to no more than the allegation (i) that she is a director of BECL, (ii) that she is the 1st Defendant's wife; (iii) that she is herself a computer systems engineer and (iv) that she once took part in writing some of the software forming part of the AKS system. None of these matters is either in itself wrongful or capable of constituting a personal procurement of any of the infringing acts complained of. The fact that she took part in writing computer code used for the AKS system does not constitute any infringement as the relevant complaints have to do with the allegedly unauthorized use of the system after it was written. There is no complaint relating to the authoring of the same.

16. In my view, the note at 18/19/20 in the White Book is apposite in the present case. It states that "The issue of a Writ making a claim which is groundless and unfounded in the sense that the Plaintiff does not know of any facts to support it is an abuse of the process of the Court and will be struck out." In my view, it is unacceptable for a Plaintiff to bring such an action in the hope that something will turn up or that some point will be flushed out in cross-examination at the trial. The 2nd Defendant is entitled to know clearly what specific conduct she is accused of so as to make her personally liable. She is not to be exposed to a fishing expedition by the Plaintiff in cross-examination in the Plaintiff's hope of finding some case against her.

17. I have therefore come firmly to the conclusion that the appeal must be allowed and that the Action against the 2nd Defendant should be struck out as a groundless claim in the sense I have mentioned and I so order. I will hear counsel as to costs.

18. Having heard counsel as to the terms of the Order and as to costs, I now make the following Orders, namely, that :-

1. The Points of Claim be struck out and the Action be dismissed as against the 2nd Defendant.

2. The 2nd Defendant is to have the costs of the application here and before the Master and the costs of the Action.

3. The 2nd Defendant is to be at liberty to tax her costs of this application and of the application before the Master forthwith unless such costs are agreed.

4. Taxation of the 2nd Defendant's costs of the Action be deferred until determination of the Action or further order.

Representation:

Miss Winnie Tam instructed by Richards Butler for the Plaintiff.

Mr. Jeevan Hingorani and Miss Monica Chow instructed by Messrs. Barlow Lyde & Gilbert for the 2nd Defendant.