Loyal Technology Co Ltd v. Artlight Electrical Manufacturing Co Ltd and Another
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HCA 15596/1999 IN THE HIGH COURT OF THE HONG KONG SPECIAL ADMINISTRATIVE REGION COURT OF FIRST INSTANCE ACTION NO. 15596 OF 1999 ----------------------
---------------------- Before: Deputy High Court Judge Gill in Chambers Dates of Hearing: 30 and 31 July 2008 Date of Judgment: 19 August 2008 ---------------------- J U D G M E N T ---------------------- 1.There are two matters before me. 2.The first, an application by the defendants, is to dismiss the action for want of prosecution under O.34 r.2 for failure to set the matter down pursuant to a Master’s order made in September 2005, and for inordinate and inexcusable delay under the inherent jurisdiction of the court. 3.The second is an application by the plaintiff for leave to file an expert’s report, with consequential right for the defendants to do the same, and for an extension by 60 days of the Master’s September 2005 order. 4.Mr Shipp representing both defendants accepted at the outset that if they fail to convince me that the action should be dismissed, he would be hard-pressed to oppose the plaintiff’s applications. Thus the focus is on the defence’s application. 5.The action is for breach of copyright of component parts, including electronic circuitry, of a toy, being a pair of two-way walkie-talkie radios. They have the appearance of a set of earphones with a stalk microphone. 6.The plaintiff got things underway with a letter before action sent to the 1st defendant in January 1999. The writ issued in September of that year. Now, nearly 9 years later, with no trial date yet fixed, the defence puts the blame for a delay which it claims to be inordinate and inexcusable squarely on the plaintiff and its lawyers, which delay has caused the defendants prejudice, for in the long lapse of time they have lost touch with key witnesses, and the memories of others have dimmed, to the extent that a fair trial will no longer be possible. 7.There are, in particular, two periods of inactivity. The first falls within the limitation period, a feature of which is that had the defence made and been granted this application following expiry of that period, the plaintiff could have filed a second writ. The second falls outside the limitation period and is ongoing, so that if this application is successful that will be the end of the matter. That said, Mr Shipp has submitted that I am entitled to consider both periods in the exercise of my discretion as to whether to grant or decline the defendants’ application. I accept this to be so. 8.The first period ran from September 2000, at which time the plaintiff filed a summons for directions, which directions were ordered by a Master in October, to December 2002, when the plaintiff applied to join the 2nd defendant and to file an amended statement of claim. 9.The second period began to run from September 2005 when a Master made an order giving leave to set the action down for trial within 42 days, which order has not yet been complied with. In April 2008 the plaintiff made its application for leave (again) to set the case down for trial. This prompted this the defence application to seek a dismissal. 10.The plaintiff through its counsel Mr Ling does not take material issue with the proposition that there have been delays which arguably are both inordinate and inexcusable. But its case is that during the history of the litigation both sides have from time to time by their won conduct or inactivity contributed to this. And there has been acquiescence by the defence in respect of the 1st period, revealed in contemporaneous correspondence and by conduct, which I am entitled and should take into account in exercise of my discretion. 11.Furthermore, there is no prejudice to the defence that is not of their own making. The issues have all along been well-known, and the key players identified. If the defendants failed to keep in touch and have now lost contact then they have only themselves to blame, particularly where on their account this “lost” testimony would have gone to the “heart and soul” of their case. Background 12.Both the plaintiff and 1st defendant (respectively LTC and AEMC) make and sell toys, usually with an electric or electronic component. Both have factories in Dongguan, where the manufacturing is carried out. 13.LTC is owned and run by Law Yee San (Y S Law). He has all along had conduct of this case through the events leading to the litigation and to date. 14.AEMC was at the time in question owned and controlled by a brother and sister Tony and Cindy Law. Tony Law was during the material time the hands-on managing director, responsible for research, development and production; hands on to the extent that he would spend half of his time at the factory in Dongguan. He is the 2nd defendant, latterly joined. 15.In 2002 Tony Law left AEMC to pursue his own independent endeavours. His co-director Cindy Law remains in control. At the material time she was responsible for marketing and sales. The Action 16.LTC’s case is that it commissioned the design of its product in or around October 1995. The author of the designs of 8 pieces of plastic components was Lee Wai Ming. The author of 4 designs of the electrical circuitry was Chu Hung Wai. LTC claims copyright in these 12 designs. It first offered the completed product for sale in or about July 1996. 17.A product markedly similar to LTC’s including similar packaging was discovered on a stand manned by AEMC at the Hong Kong Toys and Games Fair held in January 1999. An investigator engaged by LTC bought an example of this product from AEMC posing as a customer in August 1999. 18.It is LTC’s case that the componentry and circuitry complained of are so closely similar, if not identical, to that of LTC, that it could only have been copied by AEMC or its agent. 19.It is AEMC’s case that on its behalf Tony Law commissioned one Li Ping based and trading in the PRC to create and design a headset walkie-talkie, from scratch. He was the author of 3 original design sketches and drawings. Following this it commissioned a company known as LQIC in the making of mechanical and production drawing and moulds and tooling from which emerged the product LTC complaints of. One Luo Wei Ming of LQIC was responsible for creating the remaining 11 of the 14 artistic works AEMC claims now to be original works of which it is the rightful owner. An important aspect of its defence is that this activity was undertaken in 1994 and 1995, which preceded production by LTC. However, because of disruption in AEMC’s workforce following the departure of a shareholder who took with him key personnel, the sales of AEMC’s product did not materialize until March 1998. 20.A feature of the apparent similarity of the componentry and circuitry of the competing products is that AEMC indicated an intention to counterclaim for LTC’s infringement of its original artistic works. Although it did not in the end do so and removed from sale its product, its defence, positively averred, is that it all along has been and remains the owner of original artistic works. The Application 21.It is not contested that for a defendant to succeed in an application to dismiss made either under O.34 r.2 or the court’s inherent jurisdiction he must show that there has been inordinate and inexcusable delay, and that thereby there cannot be a fair trial, or it is likely that the delay has or will cause serious prejudice. 22.This is well settled, and the principles set out at page 268 in the English Court of Appeal case Allen v Sir Alfred Mc Alpine [1968]2 QB 229 by Salmon LJ are consistently followed. 23.Although there is evidence adduced for LTC in opposition to the application, to the effect that delay such as it has been as to part was the fault of the defence, and that otherwise there was acquiescence, at least in the first period, I do not need to dwell on whether or not the first limb has been established because of Mr Ling’s concession. 24.Looking at the chronology and reading the evidence of Y S Law as to why it has all taken so long, I cannot but comment that Mr Ling’s concession is a proper one. As Salmon LJ in Allen said at page 267:
25.I accept that for the course of the first period in question, there were examples of the defence contributing to the delay, and others of taking no issue with periods of inactivity. But the plaintiff and its legal representatives must accept responsibility for the second tranche; it really is inordinate and inexcusable that having applied for leave to set down after 42 days, there was simply nothing done for 3 years. And, on any view, a sum total of 9 years is an awfully long time. 26.LTC as the driving force towards judgment had a duty to keep matters moving along, and is the more blameworthy for not doing so. 27.It is in respect of the 2nd limb wherein the contest in this application lies. 28.The defence protests that because of that delay none of the authors of the artwork which each side claims is original are available to make witness statements and give evidence. As far as their’s are concerned they have lost touch with Messrs Li Ping and Luo, and by all accounts Messrs Lee and Chu on the side of LTC have disappeared as well. 29.The short point made is that with both sides claiming originality of artistry it would be impossible for resolution without evidence from these authors to be before the court in evidence and tested in cross-examination. 30.Tony Law who on his account was the instigator of discussions which led to the designs coming into being, has deposed to difficulties of his own. With the history going back 14 years, his own memory of events has dimmed to the end result that he has no cogent tale that he can impart to the court. 31.Is that state of affairs the direct result of the delay and is the defence prejudiced? 32.I come to consider that next. Discussion 33.A feature of the defence mounted is not just that LTC is put to proof; there is the positive averment that AEMC thought of the concept first and its designers got there first. In such circumstances those controlling AEMC and Tony Law himself had a particular reason to bring on board these designers, and that meant getting statements from them and their papers and drafts and so on in readiness for the delivery of crucial evidence. 34.So, what steps were taken? 35.Tony Law in his affirmation sets out in full what was done in the early years:
This was prompt indeed, but with respect, hopelessly inadequate without following it up, with co-operation evident and the evidence fresh in everybody’s minds. 36.But there was no follow up and in fact no further steps were taken; then it was, but not until 2004, that attempts were made to contact Messrs Li and Luo again. By then they had left their former posts and disappeared. Tony Law deposed that this was directly because of the dilatoriness of LTC in prosecuting its case. But it is hard to see how or why that could be, given that the second period of delay did not begin to run until 2005. 37.Of course each case has to be considered on its merits. But in a case where the defence claimed prejudice for the plaintiff’s inordinate delay, Hunter v Skingley [1997] 1 WLR 1466, Hirst LJ said this at p.1472:
And further on he said:
38.Similar circumstances prevail here, save that the testimony of Messrs Li and Luo might conceivably have been weightier then just significant. 39.On his own memory loss Tony Law deposes as to this:
40.Given the “hands on” role he played in the development of a brand new product whose original design was orchestrated by him, it is hard to believe that he would not have the key points of the history of that development in his head and on contemporaneous notes, particularly with the advent of litigation in which his own integrity and that of the company he ran is being challenged. But his witness statement on the topic, made back in January 2005, is decidedly spare of any sort of detail. 41.He speaks of “vaguely recalling” meeting Li Ping and having discussions with him and the concept drawings emerging from them. But the statement is gravely lacking in particulars, given the role he says he played in the creation of this innovative product. 42.By contrast, Y S Law in his statement does condescend to considerable detail. 43.It is simply not enough for AEMC and Tony Law to plead the originality of the designs, identify the designs and the authors thereof, and then for Tony Law to say “I cannot remember, the action against me must go”. Conclusion 44.In putting their positive defence the two defendants may well be at a disadvantage. But they cannot blame LTC for that; the inordinate and inexcusable delay was not the root cause of that. They are, as Mr Ling submitted and I accept, the authors of their present predicament. 45.The application fails because as I find the second limb of prejudice or inability to run a fair trial has not been made out. The Result 46.The application for dismissal is dismissed with costs nisi to the plaintiff in any event. 47.The applications to file expert reports (by both sides) and for extension of time to set down are granted, with no order as to costs. This costs order is also nisi. 48.In respect of both costs’ orders, if the parties or either of them wish to argue them before they are made absolute, they must apply accordingly within 7 days and be ready to argue on or by 29 August next, that being my last day in office before retirement.
Mr C W Ling, instructed by Messrs Benny Kong & Yeung, for the Plaintiff Mr C Shipp, instructed by Messrs Robin Bridge & John Liu, for the 1st and 2nd Defendants Appeal by the defendants to Court of Appeal allowed and action for want of prosecution by the plaintiff dismissed by Court of Appeal. Please refer to CACV273/2008 dated 10 March 2009 |