Guangzhou Green-enhan Bio-engineering Co Ltd and Another v. Green Power Health Products International Co Ltd and Others

HCA 4651/2002
HCA 2802/2003
HCMP 74/2004

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NO. 4651 OF 2002, 2802 OF 2003 and

MISCELLANEIOUS PROCEEDINGS NO. 74 OF 2004

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BETWEEN

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(The Consolidated Action)

Before: Hon Lam J in Chambers

Dates of Hearing: 13 & 14 April 2005

Date of Ruling: 14 April 2005

Date of Handing Down Reasons for Ruling (in Open Court): 21 April 2005

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REASONS FOR RULING

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1.Judgment in this case was handed down on 8 April 2005.  On 13 April 2005, the Defendants applied ex parte on notice for stay of execution.  At the hearing in that late afternoon, I indicated to the parties that as the order has yet to be finalized, it was premature to deal with any application for stay.

2.Mr Wong SC then applied for a gagging order in the interim.  The relief sought, as subsequently set out in a draft order placed before the court on 14 April 2005, was in the following terms,

“1.	Subject to paragraph 2 below, the Plaintiffs be restrained from making and/or publishing any representation to the effect that the First Defendant’s products sold under or by reference to the names or marks ENHANVOL and/or 盈康活are
	(1)	not genuine goods or 正貨; and/or
	(2)	liable to endanger public health
		until the determination of the intended application for a stay of the execution of the order to be drawn up in accordance with the Judgment of the Hon Lam J dated 8 April 2005.
2.	Nothing in paragraph 1 shall restrain the Plaintiffs from making or publishing an accurate report or representation of any part of the said Judgment.”

3.The relief was sought against the background that after 8 April 2005, there were reports in several newspapers about the judgment.  On 11 April 2005, the 1^st Defendant made a public announcement in the Oriental Daily that it intends to lodge an appeal and the litigation only concerned the product name and had nothing to do with the quality of the same.  The 1^st Defendant indicated it would continue to sell high quality lingzhi products to the public and further announcement would be made later.

4.On 13 April 2005, two advertisements appeared in the newspaper.  The first one is in the nature of a public announcement by the Plaintiffs about the result of the litigation.  Mr Wong criticized it as being partisan as it only touched upon aspects of my judgment which is favourable to the Plaintiffs.  The second one is an advertisement placed by Care and Health Limited, the current distributor for the Plaintiffs’ products.  It urged consumers to buy LingzhiMaster products by claiming that those were “正貨” and announced a programme for giving 50% discount to buyers who bought LingzhiMaster products with an empty ENHANVOL or ENHANOID bottle.  Counsel suggested these advertisements could form the basis of a new claim by the 1^st and 2^nd Defendants for defamation or malicious falsehood.

5.Mr Liao SC offered certain undertakings on 13 April 2005 and the matter was adjourned to 14 April 2005 when the court had more time to deal with the application.

6.At the hearings on 13 and 14 April 2005, I enquired with Mr Wong as to the juridical basis for seeking relief on ex parte basis.  Having heard submissions, I was not satisfied that there is sufficient justification for proceeding on such basis.  I therefore directed that the matter be adjourned to 25 April 2005 for inter parte hearing.  I also gave direction for the filing of evidence and skeleton submissions.  The final order will also be settled at that hearing and the question of stay of execution will be addressed.  I now give reasons why I declined to entertain the application on ex parte basis.

7.The advertisements on 13 April 2005 formed the basis of the Defendants’ application.  Although counsel contended that the advertisements gave rise to new causes of action by the Defendants against the Plaintiffs, the Defendants did not issue a new writ and the application was not argued before me as an application for interlocutory injunction in the context of a new action.  In such circumstances, it is not appropriate for the court to consider the viability of the Defendants’ claims based on defamation or malicious falsehood nor should it be influenced by considerations solely relevant to such new claims that have yet to be advanced.  As I have said in Kabushiki Kaisha Yakult Honsha v Yakudo Group Holdings Ltd (No.3) [2003] 1 HKLRD 391 at Paras.19 and 27, if a plaintiff does not deem it appropriate to pursue the matter by way of a new claim, the court should be vigilant in guarding against considerations solely relevant to a potential new claim being slipped in by the backdoor.  

8.On 14 April 2005, Mr Wong submitted that immediate relief as prayed for is necessary in order to prevent the frustration of the intended application for stay of execution.  He argued that the stay application and the appeal would be rendered nugatory if the Plaintiffs were permitted to place advertisements similar to the 13 April 2005 advertisements in the meantime.  The argument hinges on the contention that without immediate relief, the goodwill stemming from the names ENHANVOL and/or 盈康活 would be completely destroyed, thus leaving it pointless for the Defendants to pursue with the appeal.  This was the justification put forward for urgent hearing.

9.With respect, I have great difficulties with the basic premise in that argument.  We are only talking about the interim period between 14 and 25 April.  The goodwill pertaining to the names ENHANVOL and/or 盈康活has been built up by activities over the years.  I do not see how it could be said that such a goodwill would be completely wiped away in a week’s time by advertisements placed by the Plaintiffs in the form similar to the 13 April advertisements.  Whether such advertisements could properly be characterized as acts destroying the goodwill in question as opposed to actions for reclaiming what, according to what I found in my Judgment, should have been the Plaintiffs’ in the first place is a matter to be debated.  I expect further submissions on this point and I would not express any final view on that.  In any event, the Defendants could place their own advertisements to counter the effect of the Plaintiffs’ advertisements.  In fact, the Defendants had tried to counter the effect of newspaper reports of my judgment by placing public announcements in newspapers.  The submission that without any ex parte relief, the intended application for stay and intended appeal would be rendered nugatory seems to me to be unreal.  I do not think the Defendants would suffer any loss or harm that could not be adequately compensated by an award of damages if no immediate relief is granted.  Hence, I do not think justice demands the court to act on ex parte basis in this instance.

10.Ex parte applications should be the exception rather than the rule.  For recent expositions on the relevant principles, see the judgment of Rogers VP in L v C [2004] 2 HKC 387 at Paras. 6 to 8 and the judgment of Ma J (as he then was) in Brand Farrar Buxbaum LLP v Samuel-Rozenbaum Diamond Limited HCA No.A5191 of 1998, 8 May 2002 at Paras. 24 to 29.

11.Another unsatisfactory aspect of the application is that the Defendants have not included in their evidence the financial statements of the 1^st Defendant and the financial position of the 2^nd Defendant.  This court therefore has no means to assess whether the Defendants would be good for any undertakings as to damages if my judgment on ownership of goodwill is upheld by the Court of Appeal.

12.Whilst the Defendants have taken the precaution of giving notice to the Plaintiffs of their ex parte application, I am not satisfied that the matter is so urgent that immediate relief have to be granted pending the inter parte hearing on 25 April 2005.  I therefore gave directions accordingly on 14 April 2005.

13.Lastly, I would hand down the Reasons for Ruling in open court.  This would enable either party to make reference to my judgment without further leave in case of perceived misrepresentation of my ruling in whatever form.  I do not see any good reason why the content of the Reasons for Ruling should be withheld from the public domain. 

Mr Andrew Liao, SC and Mr Philips Wong, instructed by Messrs Sit, Fung, Kwong & Shum, for the Plaintiff

Mr Ronny Wong, SC, Miss Winnie Tam and Mr C W Ling, instructed by Messrs S K Lam, Alfred Chan & Co., for the 1^st and 2^nd Defendants