Jet Tone Films Ltd v. Lau Yuen Chui Lillian t/a Lambiance Design and Multimedia

CACV 186/2005

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF APPEAL

CIVIL APPEAL NO. 186 OF 2005

(ON APPEAL FROM HCA NO. 742 OF 2005)

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BETWEEN

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Before : Hon Ma CJHC and Tang JA in Court

Date of Hearing : 12 July 2005

Date of Judgment : 12 July 2005

Date of Reasons for Judgment : 25 July 2005

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REASONS FOR JUDGMENT

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Hon Tang JA (giving the reasons for judgment of the Court):

1.In July 2004, the plaintiff commissioned the defendant to produce a website for the film “2046” (“the Film”).  There was no written agreement. 

2.In relation to such work, the defendant sent to the plaintiff two invoices both dated 5 November 2004 for $50,000 and $62,500 respectively.

3.The plaintiff has paid $50,000 but refused to pay the balance on the ground that the fees invoiced had exceeded the plaintiff’s budget which the plaintiff had been led to believe would not be exceeded.

4.On 21 March 2005, the defendant sued the plaintiff for the balance of $62,500 in the District Court, DCCJ 1311 of 2005.

5.Since mid-March 2005, the website had been taken down by the defendant and became inaccessible to the public.

6.On 26 April 2005, the plaintiff commenced the present proceedings.  By summons dated 26 April 2005, the plaintiff sought various orders against the defendant.  On 17 May 2005, Yam J made the following orders:

“	IT IS ORDERED that :-
	1.	The Defendant do make the website as commissioned by the Plaintiff for the film “2046” (“the Website”) available forthwith to the public and to make all reasonable effort to maintain the Website for 1 month;
	2.	The Plaintiff do pay HK$4,000.00 to the Defendant forthwith being the admission, maintenance and supporting charges of the Website for 1 month;
	3.	Upon the compliance of paragraph 2 hereof by the Plaintiff, the Defendant do deliver up all files, documents, materials in its possession, custody, power or control which are necessary for the hosting and maintenance of the Website by the Plaintiff and containing information of visitors to the Website after the Defendant has maintained the Website for 1 month pursuant to paragraph 1 hereof;
	4.	The Plaintiff do pay a sum of HK$62,500.00 into Court within 14 days from the date hereof; and
	5.	The costs of this application be in the cause.”

7.On 20 June 2005, Yam J refused a stay upon the Plaintiff’s undertaking “not to take the subject matters of paragraph 3 of the order made by Yam J dated 17 May 2005 out of this jurisdiction.”

8.This is the defendant’s appeal.

9.The plaintiff relies on section15 of the Copyright Ordinance, Cap. 528 (“the Ordinance”) which provides:

“	15.	Commissioned works
		(1)	Where a work is made on the commission of a person and there is an agreement between the author and the commissioner of the work which expressly provides for the entitlement to the copyright, copyright in the commissioned work belongs to the person who is entitled to the copyright under the agreement.
		(2)	Notwithstanding subsection (1) and sections 13 and 103, the person who commissioned the work –
			(a)	has an exclusive licence to exploit the commissioned work for all purposes that could reasonably have been contemplated by the author and the person who commissioned the work at the time the work was commissioned; and
			(b)	has the power to restrain any exploitation of the commissioned work for any purpose against which he could reasonably take objection.”

In particular, the plaintiff relies on section 15(2)(a) such that the plaintiff was entitled “to exploit the commissioned work for all purposes that could reasonably have been contemplated by the author and the person who commissioned the work at the time the work was commissioned”.

10.It is the plaintiff’s case that it was thus contemplated that the plaintiff would be able to host the website with its own server and that the plaintiff should be able to update the website.

11.It seems to be the defendant’s case that even on payment of the said fees, the plaintiff was not entitled to have the website transferred to it.  Alternatively, at most, the plaintiff was entitled to be provided with the website but not the source codes so that the plaintiff would not be in a position even to update the website, unless the defendant was prepared to do it for the plaintiff in which event a further fee would be payable.

12.Shortly before the hearing of the appeal the defendant filed the 3^rd affirmation of Lau Yuen Chui, Lillian.  No application was made to seek leave to adduce additional evidence.  At the hearing, Mr Stephenson, counsel for the defendant, applied for leave to adduce such additional evidence.  The application was refused by us.  There was no acceptable reason for the admission of new evidence which was sought to be used in support of a new point.  The new point being that compliance with para. 3 of the order would involve the disclosure of the source codes in relation to which the defendant claimed that “ the defendant believes its proprietary codes are a most valuable asset and ought not to be revealed to any other party”.  However this point had not been taken below.  Indeed, according to the judge, the defendant did not object to para. 3 of the order.  Mr Stephenson submitted that in the court below, counsel, who then appeared for the defendant, had not realized the implications of the order. 

13.There is support for the plaintiff’s case in the e-mail messages exchanged between the plaintiff and the defendant: for example, in the     e-mail sent on 21 January 2005 at 8:33 p.m. from the defendant to the plaintiff, where it said “when we received the cheque from you, we will provide you a logon ID and password that will give you full control of the domain.  From the control panel, you can control every aspects (sic) of the domain; you can upload files, delete files…etc.  We will also continue to support you should there be any problems with the server.”

14.There is also an e-mail sent on 25 February 2005 at 6:45 p.m. from the defendant to the plaintiff:

“As mentioned in my last mail, you have a choice to have us continue to host your site or have your site host by another company.  If you would like to have us to host the site for you, we would continue to provide any necessary support should there be any technical problems.  There would be absolutely no reasons for us to bring down the site once payment is made in full.  If you should choose the latter choice, we would return all the files you need to put the site together and for which you have paid for in a CD to you.  You are free to host it anywhere as you like.  I believe that it would be to your best interest to have the site up since we have been receiving mails from your visitors or returning visitors asking about your site.”

15.It is also clear from the e-mail sent on 3 March 2005 at 6:52 a.m. that the defendant claimed that the fees already invoiced was not a buyout price “ of all our designs” and that “ a buyout of all rights for any design work would be extra charges”.

16.Section 15 of the Ordinance is unique to Hong Kong.  According to the plaintiff, its exclusive license to exploit the website must reasonably include the right to host, maintain, update and use the website for the plaintiff’s business purposes.  It is unnecessary for us to decide whether that is so.  Suffice it for us to say that we believe there is a sufficiently high degree of assurance that, on the evidence before us, the plaintiff would be entitled to the relief at trial. 

17.We see no reason to interfere with the judge’s exercise of discretion.  Nor why we should disagree with the judge’s exercise of discretion.  It is clear that, on the evidence before the judge, the balance of convenience was all in favour of the plaintiff.  The plaintiff needs the website to be available for the promotion of the film before its launch in North America in August.  On the other hand, it is clear from the e-mails quoted above the defendant was agreeable to the plaintiff using its own server to host the website.  Even if it is correct that extra payment would be required before the defendant would release information to enable the plaintiff to update or modify the website, the e-mail sent on 3 March 2005 at 6:52 a.m. quoted in para. 15 above, shows that it was just a question of payment.  Thus, the defendant can be compensated by payment of damages.  On the other hand, it would be difficult to assess the plaintiff’s loss. 

18.However, the judge’s order should be amended by incorporating an undertaking as to damages by the plaintiff.  We also record that the plaintiff’s undertaking given on 20 June 2005 will continue until trial or further order. 

19.For the above reasons, we have dismissed the appeal with costs.

Mr Kevin K H Pun, instructed by Messrs Stephen Lo & P Y Tse, for the Plaintiff

Mr Paul Stephenson, instructed by Messrs Burke, Fung & Li, for the Defendant