Re United States District Court for The Central District of California Under No. Cv 06-6508 Rswl (Cwx)

HCMP 1367/2007

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

MISCELLANEOUS PROCEEDINGS NO. 1367 OF 2007

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Before : Hon Sakhrani J in Chambers

Date of Hearing : 11 October 2007

Date of Judgment : 12 October 2007

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J U D G M E N T

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1.By an order of Master de Souza made on 14 August 2007 it was ordered that the respondent Chan Ming Yiu (“Chan”) be examined under oath in relation to matters set out on page 2 of the letter of request dated 26 June 2007 (“the letter of request”) issued by the United States District Court for the Central District of California in the USA.  The order was granted pursuant to the letter of request.

2.By summons dated 20 September 2007 Chan applied for an order to set aside or vary the master’s order.

3.This is the hearing of Chan’s application.

4.The grounds relied on are:

(1)	that the Court has no jurisdiction to give effect to the letter of request as what is sought by the letter of request is in the nature of pre-trial discovery;
(2)	that what is sought is in the nature of a fishing exercise; and
(3)	that the letter of request is vague, uncertain and oppressive.

5.The question of the Court’s jurisdiction to make an order for evidence to be obtained is governed by sections 75 and 76 of the Evidence Ordinance, Cap. 8.  This has been considered in Prediwave Corporation & another v. New World TMT Limited [2007] 4 HKC 207 at 214, paragraphs 18 to 22.  It is not necessary to set this out here.

6.It is clear that pre-trial discovery is not permitted.  The emphasis is on the obtaining of evidence for use at the trial in the requesting court.

7.The proceedings in the United States District Court, Central District of California (“the US proceedings”) were commenced by Wham-O, Inc. (“Wham-O”) as plaintiff against SLB Toys USA Inc. (“SLB”) doing business as Toyquest as defendant.

8.Wham-O’s claims against SLB are for infringement of trademark in respect of the WAVE RIDER trademark, trademark dilution and unfair competition.  Both Wham-O and SLB deal in, inter alia, water toys and waterslide toys and they are direct competitors.

9.Wham-O first used the WAVE RIDER trademark in its waterslide toys in 1998.  In December 2005 the WAVE RIDER trademark was registered in the name of Wham-O in the United States Patent and Trademark Office.

10.Wham-O alleges in the US proceedings that SLB has infringed Wham-O’s said trademark by manufacturing and marketing water related toys using its trademark.  In particular, Wham-O complains that SLB has been marketing and selling water related toys under the name Motorized WAVE RIDER and a waterslide toy under the name Banzai Falls WAVE RIDER.

11.Mr Dale, for Chan, submitted that the intention of the letter of request was to obtain pre-trial discovery as opposed to the obtaining of evidence for use at trial.  That being so, it was submitted that the Court has no jurisdiction to give effect to the letter of request.

12.I am not persuaded that the effect of the letter of request was to obtain pre-trial discovery rather than evidence for use at the trial.

13.As Mr Dale pointed out, there are references to “discovery” and “discoverable information” in the letter of request in the passages he identified.  That does not, however, conclusively show that what was sought by the letter of request was pre-trial discovery.

14.It is clear, it seems to me, that on a proper reading of the letter of request as a whole and the evidence in support of the application for the master’s order, the substance of the letter of request was a request for evidence to be obtained for use at the trial of the US proceedings.  There will be a jury trial and the trial has been fixed to commence on 4 December 2007.

15.The letter of request starts of at page 1 by requesting “international judicial assistance to obtain evidence to be used” in the US proceedings.  The judge in the US proceedings has identified the relevant pleadings and the issues.  The letter of request sets out the position that in its defence SLB claims that it merely provides “design services” and “ideas” to its parent company Manley Toys Limited (“Manley”) a Hong Kong company.  SLB’s position is that Manley and not SLB is responsible for any allegedly infringing conduct.

16.As Ms Hurst explained in her affidavit (paragraphs 2.12 to 2.14) in its early pleadings SLB initially admitted that it markets and sells the infringing toys.  Shortly thereafter, however, SLB changed its story and filed a defence denying that it manufactures, sells or distributes any waterslide toy or toy products.  She produced a defence as exhibit “ALH-6” but that appears to be the early pleading and not the amended defence where SLB changed its story.  She explained that SLB now contends that it “consults with” and provides “design services” and “ideas” to a commonly owned company, Manley.

17.SLB’s position appears to be that it is Manley and not SLB who is responsible for any trademark infringement which is the subject matter of the US proceedings.  That is also what the letter of request states. 

18.In the view of the judge issuing the letter of request the assistance requested is necessary in the interests of justice and requests assistance to compel Chan to give evidence on 6 specific topics set out in the letter of request.  I shall return to the 6 specific topics later.

19.The judge also stated that Chan appears to have information that is both material and necessary to establishing the facts alleged and the claims asserted in Wham-O’s complaint and to meeting the defences raised by SLB.  And at page 4 of the letter of request it is stated that the application for “an order for evidence to be obtained” in Hong Kong is to be made by Wham-O’s agents/solicitors.

20.That the evidence to be obtained from Chan is to be used at the trial is also made plain by what Ms Hurst said at paragraphs 6.2 (1), (2) and (3) of her affidavit to the effect that Chan’s deposition should be videotaped so that the jury will be able to observe Chan’s demeanour at the trial.

21.It seems to me that whilst it may be said that the letter of request could have been better drafted, on a consideration of the letter of request as a whole and the evidence in support of the application for the master’s order it is clear that the substance and effect of the letter of request is to obtain the evidence of Chan for use at trial which, in the view of the judge issuing the letter of request, is both material and necessary to establishing the facts alleged and the claims asserted by Wham-O and to meeting the defences raised by SLB.

22.It is for the court in the US proceedings to consider what evidence would or would not be relevant to an issue in those proceedings (Prediwave at 216, paragraphs 37 and 38).

23.I am satisfied that the master had jurisdiction to make the order.

24.The next ground relied on is what is sought is in the nature of a fishing exercise.

25.The point is made that both Chan and Manley are non-parties in the US proceedings. 

26.I was referred to what Kerr LJ said In re State of Norway’s Application [1987] 1 QB 433 at 482 when dealing with “fishing”.  He said :

“

It is perhaps best described as a roving inquiry, by means of the examination and cross-examination of witnesses, which is not designed to establish by means of their evidence allegations of fact which have been raised bona fide with adequate particulars, but to obtain information which may lead to obtaining evidence in general support of a party’s case.”

27.I am satisfied that the examination ordered by the master pursuant to the letter of request is not a roving inquiry in the sense as described by Kerr LJ.

28.I would refer to what Sir Richard Scott VC (as he then was) said in First American Corporation and another v Sheikh Zayed Al-Nahyan and others [1998] 4 All ER 439 at 447 :

“

In my opinion, the disagreement between Ralph Gibson LJ and the majority in Re State of Norway’s Application (No 1) was not really one of principle.  The majority were not, in my view, taking a jurisdictional point.  Their view of the ‘fishing’ character of the request was based upon its width and led them to conclude that it would not be right to accede to the letter of request, not that they lacked power to do so.  I regard the case as authority for the proposition that, as a matter of discretion, a request for oral testimony should not be acceded to if the intention were to obtain information rather than to obtain evidence for use at the trial.  It is not, in my opinion, authority for any broader proposition.  Moreover, it is not always possible to draw a sharp distinction between, on the other hand, questions ‘designed to establish allegations of fact’ and, on the other hand, questions designed to extract ‘information which may lead to obtaining evidence in support of a party’s case (see [1989] 1 All ER 661 at 684, [1987] QB 433 at 482 per Kerr LJ).  There may be some questions which are obviously one or obviously the other.  But a number of questions may, potentially, lead either to an answer which is probative of an allegation of fact or to an answer which prompts a further line of inquiry without being probative, or to both.  In framing questions to ask a witness from whom no proof has been taken, the questioner can be expected to ask a number of preliminary questions in order to feel his way in.  This is not fishing.  It is a normal technique of examination.  A topic for legitimate questioning may have merely background significance.  I repeat that, in my opinion, if there is sufficient ground for believing that an intended witness may have relevant evidence to give on topics which are relevant to the issues in the action, a letter of request seeking an order for the oral examination of the witness on those topics cannot be denied on the ground of fishing.”

29.I respectfully agree. 

30.The requesting court has stated clearly in the letter of request that Chan appears to have information that is both material and necessary to establishing the facts alleged and the claims and to meet the defences of SLB.  Chan has relevant evidence to give on the 6 specific topics set out in the letter of request.  That being so, the letter of request cannot be denied on the ground of fishing.

31.The next ground relied on is that the letter of request is vague, uncertain and oppressive.

32.I am not persuaded that the letter of request is vague and uncertain.  The 6 specific topics set out on page 2 of the letter of request are as follows :

(1)	the nature of the relationship between Manley and SLB;
(2)	Manley’s knowledge of Wham-O’s WAVE RIDER’s trademark;
(3)	Manley’s knowledge of the cease and desist correspondence between Wham-O and SLB;
(4)	The importation into the United States of the Motorized WAVE RIDER and the Banzai Falls WAVE RIDER waterslide;
(5)	The sales in the United States of the Motorized WAVE RIDER and the Banzai Falls WAVE RIDER waterslide;
(6)	The decision to use the WAVE RIDER mark on the Motorized WAVE RIDER and the Banzai Falls WAVE RIDER waterslide.

33.The 6 topics are, in my view, sufficiently certain.

34.As to topic (1), there has been placed in evidence before me press reports showing a relationship between Chan, Manley and SLB.  In the press report (Los Angeles Times March 29, 2005) the following article in respect of SLB appears :

“	Toy Quest got its start in early 1997, when Dubinsky, then 28 years old, left toy maker MGA Entertainment, best known for its Bratz fashion dolls, to partner with Hong Kong trading company owner Samson Chan to start Manley Toy Quest.
	Chan made his money sourcing manufacturing for U.S. toy makers in exchange for commissions.  Seeing how profitable the toy business was, he wanted a larger share.  Dubinsky, former director of marketing for MGA, knew how to sell toys and wanted to break out on his own.”

35.In the press report (Los Angeles Times June 7, 2006) the following appears  :

“	Eager to create his own business, Dubinsky joined with Samson Chan of Manley Toys Ltd. Hong Kong, a “sourcing” company that helped U.S. toy companies find production facilities in Asia but that didn’t have its own product line.”

36.There is also before me evidence of corporate documents filed in California and New York.  These show that SLB was formerly called Manley Toys Ltd incorporated in New York.  The certificate of incorporation of Manley Toys Ltd was filed in New York on 29 July 1987.  The corporate name was later changed to Manley Toys USA Ltd before the change to SLB on 31 March 2003.  In the statement of information filed on 8 March 2005 with the Secretary of State in the State of California, the Chief Executive Officer (“CEO”) of SLB is said to be Brian Dubinsky.  In the statement of information filed on 22 May 2006 with the Secretary of State in the State of California, the CEO of SLB is said to be Chan.  The Chief Financial Officer is said to be Lisa Liu.  Both Chan and Lisa Liu are also said to be directors of SLB.

37.According to the Annual Return of Manley produced in evidence, Manley is a company incorporated in Hong Kong.  It has 2 directors, Chan and Lisa Liu.  Chan is a shareholder.  The other shareholder is Manley Overseas Ltd, a BVI company.  Chan is also the Chairman and CEO of Manley according to his affirmation.

38.Thus, it can be seen that Chan and Lisa Liu are directors of both Manley and SLB.  Chan is the CEO of both Manley and SLB.

39.I would observe that SLB did not oppose the application for the letter of request.

40.Because of the allegations made by SLB that Manley and not SLB was responsible for the infringing activities, the relationship between Manley and SLB is relevant.  Chan has not denied that he and Manley have a relationship with SLB.  On the material before the Court there is clearly a relationship between Manley and SLB.  That is one of the matters to be considered in the US proceedings.  There is, in my view, nothing vague or uncertain about topic (1).

41.There is no dispute that Wham-O owns the registered trademark WAVE RIDER.  Manley’s knowledge of the same, through its officers, would be relevant to SLB’s allegations.  There is nothing vague or uncertain about topic (2).

42.The same can be said of topic (3).

43.Topics (4) and (5) are neither vague nor uncertain.  They deal with the importation into and sale in the United States of the two specific infringing items, the subject matter of the US proceedings.

44.There is also nothing vague or uncertain about topic (6).

45.A complaint was also made that all the pleadings and documentation filed in the US proceedings were not placed before the master before he made his order.  Ms Hurst explained at paragraph 2.18 of her affidavit that because of a protective order in the US proceedings where documents have been filed “under seal” and unavailable for public review, she has not produced all such documentation.

46.I am not impressed by the complaint made on behalf of Chan.  Chan is the CEO and a director of SLB a party to the US proceedings.  As such he would be in a position to know what documents have been filed in the US proceedings.  Chan does not say that he has not seen these documents.  I see no prejudice to Chan just because all the documents filed in the US proceedings have not been produced because of the protective order.

47.As a further ground of oppression, it is said that as Chan and Manley are not parties in the US proceedings it is possible that based on the testimony of Chan, Wham-O may join Manley and/or Chan as defendant in the US proceedings or file fresh proceedings against them.  This was said to be oppressive in the absence of an undertaking by Wham-O that it will not bring proceedings against Manley or Chan.

48.Mr Dale relied on First American Corporation where it was held that the letters of request were oppressive since allegations of complicity in a fraud had been made against the two intended witnesses and there was a possibility of their being joined as defendants in a civil action based on that alleged complicity.

49.First American Corporation is distinguishable on its own facts.  The plaintiffs there alleged in the proceedings in the US that between 1982 and 1986 the defendants had illegally conspired to obtain control of the 1^st plaintiff by acquiring control, through nominees, of the 1^st plaintiff’s holding company with funds provided by BCCI.  Between 1986 and 1991 Price Waterhouse UK (“PW”) had undertaken work relating to audits of the accounts of BCCI.  The plaintiff companies alleged that two partners in PW had been knowing participants in the conspiracy.  The letters of request were for the oral examination of those partners.  In those circumstances it was held that the letters of request were oppressive since allegations of complicity in the fraud had been made by the plaintiffs against the two intended witnesses and there was a possibility of their being joined as defendants based on that alleged complicity.

50.The circumstances in this case are quite different.  It must be remembered that it was not Wham-O but SLB that alleged in the US proceedings that Manley was responsible for the infringing activities.  Chan is the President and CEO of SLB.  He is also the Chairman and CEO of Manley.  As I have said, SLB did not object to the letters of request being issued.  I fail to see any oppression to Chan in giving effect to the letter of request in the absence of the undertaking sought. 

51.In exercising my discretion, the master’s order should not be set aside.  The application is dismissed.

52.I would, however, vary paragraph 3 of the master’s order by ordering that the deposition be taken by a practising barrister of at least 5 years’ standing instead of Mr Chu.  This is not disputed.

53.I have been told that Wham-O is agreeable to the making of an order that:

(a)	the deposition of Chan shall be for the purpose only of eliciting and recording testimony appropriate to be given at trial;
(b)	prior to the deposition, Wham-O should provide Chan with copies of all the documents that are sought to be put to him at the examination; and
(c)	SLB be entitled to be represented and to take part at the deposition.

54.I so order. 

55.Mr Dale sought a further direction that no question may be asked of Chan that in the opinion of the examiner is not a question that could possibly be asked by counsel examining a witness in chief at trial before the Court of First Instance in Hong Kong.  It is not appropriate to give this direction which I refuse to give.  It is for the Court in the US proceedings and not the Court of First Instance in Hong Kong that should determine what would be admissible and relevant evidence at trial.

Mr Dale of M/s Coudert Brothers in association with Orrick, Herrington & Sutcliffe LLP for Chan Ming Yiu, the Applicant

Mr David Chu of M/s Heller Ehrman for Wham-O Inc., the Respondent