Re Interlego Ag

Case No.HCMP 709/1995

Court

High Court CFI

Date—

Judge—

Case Document

100%Judiciary

HCMP000709/1995

M.P. 709/95

IN THE SUPREME COURT OF HONG KONG

HIGH COURT

MISCELLANEOUS PROCEEDINGS

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	IN THE MATTER OF High Court Action No. A4172 of 1994 between INTERLEGO A.G. (Plaintiff) and LEGO NEW ENTERPRISES LIMITED (Defendant)
	and
	IN THE MATTER OF an application by INTERLEGO A.G. for Orders of Committal against LEE KAM WAH and LEUNG CHEUNG TONG both directors of LEGO NEW ENTERPRISES LIMITED and for Orders for leave to issue Writs of Sequestration against LEGO NEW ENTERPRISES LIMITED and its directors LEE KAM WAH and LEUNG CHEUNG TONG

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Coram: The Hon. Mr. Justice Waung in Court

Date of Hearing: 30th May and 21st June 1995

Date of Handing Down of Judgment: 11th July 1995

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JUDGMENT

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1. By its Originating Motion dated 20th April 1995, the Applicant herein, INTERLEGO A.G. ("the Applicant") moved the Court:-

(1)	to commit the 1st Respondent, Lee Kam Wah ("Lee") as director of the company, Lego New Enterprises Ltd. ("the Defendant Company"), to prison for his contempt in failing and/or refusing to comply with the Judgment dated 12th October 1994 ("Judgment") in High Court Action 4172 of 1994 ("Action") by:-

	(a)	continuing to pass off, causing, enabling or assisting others to pass off his business as and for that of the Applicant by the use in connection with the name of "LEGO" as part of his company name;
	(b)	failing to deliver up to the Applicant the articles bearing LEGO name;
	(c)	failing to disclose on oath the names and addresses of persons from whom and to whom the offending articles under (b) had been supplied.

(2)	to commit the 2nd Respondent. Leung Cheung Tong ("Leung") as director of the Defendant Company to prison for his contempt in failing and/or refusing to comply with the Judgment in the Action by:-

	(a)	continuing to pass off causing, enabling or assisting others to pass off his business as and for that of the Applicant by the use in connection therewith the name "LEGO" as part of the Defendant Company's name;
	(b)	failing to deliver up to the Applicant the articles bearing LEGO name;
	(c)	failing to disclose on oath the names and addresses of persons from whom and to whom the offending articles under (b) had been supplied.

(3)	to issue Writ of Sequestration against the 3rd Respondent the Defendant Company and against Lee and Leung as directors of the Defendant Company for their several contempts in failing and/or refusing to comply with the Judgment in Action by:-

	(a)	continuing to pass off causing, enabling or assisting others to pass off his business as and for that of the Applicant by the use in connection with the name of "LEGO" as part of their company name;
	(b)	failing to deliver up to the Applicant the articles bearing LEGO name;
	(c)	failing to disclose on oath the names and addresses of persons from whom and to whom the offending articles under (b) had been supplied.

2. Although Counsel for the Applicant presented this case initially as one where there had been clear contempts by each and every one of the 3 Respondents and that these were major and serious contempts by these three Respondents, I cannot come to that same conclusion. The matter arises this way.

3. The Applicant as the internationally well-known manufacturer of plastic toys, is a Swiss company with ownership of goodwill in the business and name and trade mark "LEGO". The Defendant Company is a very small company and was incorporated in Hong Kong and its business was intended to be in publishing entertainment and football magazines mainly for the China market. Lee and Leung are two directors and shareholders of the Defendant Company. As I understand it there is really no question that the Defendant Company was in any sort of direct competing business against the Applicant. Unfortunately, the Defendant Company had chosen to use a name with the word LEGO in it and thereby brought upon itself the full weight of the international giant the Applicant. There was no evidence that the Defendant Company knowingly used the word LEGO in its company name with the intention of misleading any one that the business of the Defendant Company was that of the Plaintiff and there was no evidence that anyone had ever been so misled. Indeed the Chinese name of the Defendant Company was very different from that of the Plaintiff and the logo of the Defendant Company was also as I understand it very different from that of the Plaintiff.

4. By Default Judgment dated 12th October 1994 of Deputy Judge Bokhary, Judgment was entered against the Defendant Company whereby:-

	(a)	The Defendant Company was restrained from carrying on business under or by reference to the name LEGO or from otherwise passing off any business as the business of or connected with the Plaintiff;
	(b)	The Defendant Company do within 7 days of service of the Judgment deliver to the Plaintiffs solicitors all items in possession of the Defendant Company the use or sale of which would offend against the Injunction under (a) above;
	(c)	The Defendant Company do within 7 days of service of the Judgement do by a director make and file an affidavit setting forth particulars of all persons and companies to whom the Defendant Company had supplied from whom the Defendant Company had ordered and obtained supplies of and who were known to be in possession of the offending items.

On the 14th October 1994, this Judgment was served on the Defendant Company and a copy was also served personally on Lee a director of the Defendant Company. The other director of the Defendant company, Leung was personally served a copy of the Judgment on the 19th of November 1994. Nothing was done by the Defendant Company in relation to the Judgment and there was no change of name by the Defendant Company.

5. By its Notice of Motion, the Applicant sought to commit the three Respondents for contempts of court. On the 30th May 1995, when the matter came before me with Mr. Felix Pao appearing for the Applicant, it was clear that the main complaint of the Applicant was that the Defendant Company had not changed its name by deleting the word LEGO from its name. There was no evidence that since the Judgment was entered, the Defendant Company had carried on any business or had passed off its business as that of the Plaintiff. The Applicant's case for contempts was not put on the basis of any subsequent carrying on of business by the Defendant Company or that there was any subsequent actual passing off. A subsidiary case of the Applicant for contempt was that there was no delivery up by the Defendant Company to the Applicant of what could be called "offending articles" and there was no filing of Affirmation.

6. The Respondents acted in person before me and Mr. Lee told the Court that there was no intention of the Defendant Company or its directors to disobey deliberately any order of the court. Mr. Lee said that the Defendant Company was forced to cease its business even before the Court Order was made and that heavy debts were incurred by the Defendant Company which did not really know what to do. Upon being told by the Court that the real objection of the Applicant was to the failure of the Defendant Company to change its name, Mr. Lee on behalf of the Defendant Company expressed its willingness to delete the word LEGO from its name and to take the necessary step to do so. The case was accordingly adjourned for 3 weeks.

7. On the resumed hearing on the 21st June 1995. I was informed by Mr. Pao that the word LEGO had been deleted from the name of the Defendant Company. Counsel for the Applicant also informed the Court that the Applicant had been advised by the Defendant Company through its Mr. Lee that the Defendant Company had not commenced any business and had destroyed all offending articles and did not have any to deliver up. The Applicant had accepted this assurance from the Defendant Company and I was informed by Mr. Pao that in the circumstances, the Applicant did not wish to pursue its application for contempts against the three Respondents. Mr. Pao however indicated that the Applicant would wish to have an Affirmation from the Defendant company confirming that it did not have any of the offending articles specified by the Judgment and Mr. Lee on behalf of the company gave an undertaking that such an Affirmation would be made and it was arranged that the Applicant's solicitors would prepare the appropriate Affirmation to be sworn by Mr. Lee on behalf of the Respondent Defendant Company.

8. What remained was the question of costs of the application for contempt and this proved to be troublesome. As Mr. Leung played a very minor role throughout, the Applicant did not seek any costs against him nor did Mr. Leung seek any order of costs against the Applicant. However, Mr. Pao on behalf of the Applicant submitted that in respect of the costs of the Motion, the Court ought to order costs against the Defendant Company and Mr Lee jointly and severally on a basis higher than standard scale or alternatively Mr Lee as a prime mover ought to pay at least half of the costs.

9. Mr. Pao submits that I have complete discretion in relation to costs and this must be right. Under section 52A of the Supreme Court Ordinance discretion over costs was given to the Court. In Arlidge & Eady on The Law of Contempt it was said at page 323 that:-

"The court has a complete discretion whether to order one party or another to pay the costs of a contempt application. It may order the contemnor to pay the costs, either on a common fund basis or as between solicitor and client. It may make no order as to costs. Or it may order the applicant to pay the costs of the application. But even if a technical contempt is proved the court may order the applicant to pay the costs of the motion if the contempt was too venial to justify its being brought to the attention of the court."

10. In Knight v Clifton [1971] 1 Ch. 700 it was held that in relation to contempt proceedings, the court has a complete discretion over costs. both with regard to whom and to what extent it should be paid and although it is possible for the court to award costs against a successful party, this should only occur in very exceptional circumstances.

11. In considering what appropriate order for costs I should make, it seems to me that I should bear the following in mind:-

(1)	This is an application for contempt which was not proceeded with, so that there was no finding by the Court of contempt against any of the three Respondents.
(2)	If the application was pressed on. then oral evidence would have to be given by inter alia Mr. Lee and Mr. Leung and having regard to the high burden of proof required, it is at least doubtful whether the alleged contempts could be fully proved against them.
(3)	In respect of Judgment against a company, a distinction had to be made between an alleged contempt by the company and an alleged contempt by a director of the company.
(4)	In respect of any alleged contempt by a director of a company for non-compliance with any order of the court made against the company, a director cannot be liable in contempt by virtue of his office and his mere knowledge that the order sought to be enforced was made and that to prove contempt against a director, resort had to be made under the general law of contempt and mens rea and actus rea would have to be proved. Director General of Fair Trading v Buckland [1990] 1 W.L.R. 920.
(5)	As Notice of the Motion for contempt seems to be somewhat different from the Judgment, any alleged contempt must be strictly proved by reference to the Judgment and only the Judgment.
(6)	The Judgment which is the subject matter of the contempt proceedings did not positively require the Defendant Company to change its name by deleting the word LEGO. If construed strictly, the Judgment only restrained the Defendant Company from carrying on business under name LEGO and from passing off the Defendant Company's business as that of the Applicant and there was no breach of this Judgment because the Defendant Company did not carry on business after the Judgment and there was no business it could pass off as that of the Applicant.
(7)	In relation to non delivery of offending articles, as it is accepted by the Applicant that there were no such articles which the Respondents could deliver, it is at least doubtful whether any contempt could be established against the Defendant Company.
(8)	In respect of the non filing of an Affirmation by the Defendant Company, technically and strictly speaking, if the application had proceeded to a final conclusion, the Court could find that there was a contempt by the Defendant Company.
(9)	It is likely, having regard to the unskilled and unsophisticated position of the Respondents and the fact that they were not legally advised by any lawyer of their own that if the Court should find there was a contempt. It would be more in the nature of what Lord Diplock called "technical contempt" in Attorney General v Times Newspapers [1974] 1 A.C. at page 312 meaning contempt which was too venial to justify its being brought to the attention of the court.
(10)	This is a case where neither the Applicant nor the Respondent Defendant Company could be said to be wholly successful or wholly unsuccessful.
(11)	Where a personal respondent had been wholly successful in contempt proceedings in that no contempt had been found against him. only in the most exceptional circumstances would the Court make an order of costs against such a respondent. Knight v Clifton
(12)	Where a corporate respondent which was likely to be liable for contempt took steps to assist the Court and thereby avoided a full hearing, the Court could reflect all these matters in its award of damages.
(13)	Although Mr. Lee could be said to be the prime mover of the Defendant Company, in the absence of oral evidence and a clear finding of contempt against him. the Court should not condemn him in costs and specially if it was intended to reflect the Court's disapproval of his conduct.
(14)	The circumstances show that this disastrous commercial venture of the Defendant Company had already inflicted heavy loss and damage and detriment on. Lee and that Lee could be said to have already been punished.

I do not find this matter at all easy. But taking everything into account and in the rather special circumstances of this case, it seems to me that fair justice will be done if I order, which I do, that:-

	(1)	the Defendant Company should pay half of the costs of the application to the Applicant on a party and party basis;
	(2)	there be no order of costs between Mr. Lee and the Applicant;
	(3)	there be no order of costs between Mr. Leung and the Applicant.

	(William Waung)
	Judge of the High Court

Representation:

Mr. Felix Pao instructed by Messrs Wilkinson & Grist for the Applicant

Mr. Lee Kam Wah of the 1st Respondent in person

Mr. Leung Cheung Tong of the 2nd Respondent in person

Lego New Enterprises Ltd. of the 3rd Respondent in person.