Umg Recordings, Inc. and Others v. Profit Chart Development Ltd and Others

HCA 472/2010

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NO. 472 OF 2010

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BETWEEN

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Before: Hon Chung J in Chambers

Date of Submissions: 8 July 2011

Date of Handing Down Further Decision: 15 July 2011

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FURTHER DECISION

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Introduction

1.Written decision on the plaintiffs’ summonses for summary judgment, interlocutory injunction and interim payment, and the defendants’ summons for stay of this action, was handed down on 24 June 2011.

2.Directions were given in the said decision for further submissions to be made in connection with RHC Ord. 14 r. 6(1), and on the costs of the applications.

Interim Payment

3.On 8 July 2011 the plaintiffs’ solicitors sent a letter to court.  The relevant part reads:-

“We ... note that in p. 9 paragraph 22 [of the said written decision] remarked that ‘The plaintiffs indicated during the hearing they would not pursue their application for interim payment; no order is made thereon.’

We have checked our records … and were in agreement [with junior counsel and solicitors for both sides] that leading Counsel … did not abandon her position on interim payment, but had only indicated that she had nothing more to add on this point in reply … ”.

4.As a result, the court listened to the audio recording of the hearing (which spanned over 8 and 9 June 2011).  The relevant part of the hearing took place on 9 June.  On that day, defence leading counsel carried on with his submissions in opposition from 10am until about 2:37 pm (which included an exchange between court and counsel regarding the interim payment application (from about 12:31 pm until lunch break)).  Leading counsel for the plaintiffs commenced her reply submissions at about 2:37 pm and completed it by about 4:42 pm.

5.The official transcript shows the following submissions of plaintiffs’ leading counsel (from about 4:34 pm onwards):-

“My Lord, … if my Lord were to order summary judgment in favour of the plaintiff …my Lord would be making an adjudication construing the terms of the K-Net Licence …

On the other hand, my Lord, if my Lord were to say, well, there may be a trade practice issue which deserves trial and my Lord were to give leave to defend, that still does not mean that a stay application ought to be granted …

The interim payment issue I shan’t press, but my Lord, in our respectful submission, there is no case made out on the stay. My Lord, I again refer to my submissions on what the CT [Copyright Tribunal] proceedings were about and how the issues were framed … ” (emphasis supplied).

6.Because the parties somehow see fit to accept that the interim payment application was still alive (despite the language chosen by leading counsel), I will proceed on the accepted basis.

7.The defence argument in opposition can be summarized as:-

(a) the plaintiffs’ cause of action is tortuous rather than contractual in nature. In other words, the plaintiffs are claiming damages in tort and not the fees provided for in a licence;

(b) liability is denied. Hence, if the court grants leave to defend (as the court did in the decision of 24 June 2011), there is a serious doubt whether the plaintiffs will be able to establish liability in tort;

(c) insofar as the claim is based on any licence, it becomes a subject-matter falling within s. 163 (reference to the Copyright Tribunal of expiring licence) and/or s. 164 (the Copyright Tribunal may award interim payment and restrict application for interlocutory injunction), Copyright Ordinance (Cap. 528).

The defence also mentioned a letter having been sent to the plaintiffs earlier regarding payment pending the resolution of their dispute, but nothing fruitful came out so far.

8.The relevant principles are set out in Hong Kong Civil Procedure 2011, Vol. 1:-

“… [the respondent may show cause] on the merits by showing that there is a serious doubt whether the plaintiff will recover anything … The court must be ‘satisfied’ that the plaintiff will obtain judgment for substantial damages or for a substantial sum apart from damages and costs … It should be observed, however, that the test prescribed by [Ord. 29] r. 11(1)(c) and r. 12(c) is whether the court is satisfied that the plaintiff will succeed in his claim against the defendant, rather than whether he is likely to succeed … ” (para. 29/11/1).

9.Further to para. 7 and 8 above, because the claim is tortuous, it is difficult to ascertain the amount of interim payment based on affirmations filed in interlocutory applications (and which contain at best sketchy evidence on quantum).  Unlike claims for personal injury damages or mesne profits, for example, “comparables” are not readily available in cases of this sort.

10.Consequently, I agree with the defendants the plaintiffs have not been able to satisfy me the above test has been met.

11.Further, to a large extent the issues raised in the summary judgment and interim payment applications overlap as regards the defendants’ liability and quantum of damages.  The reasons given earlier for refusing to give summary judgment are thus applicable here and will not be repeated.

12.For the above reasons, the interim payment application is dismissed.

Claim against D28 to D34

13.I agree with the defence further submissions to the extent the averments against these defendants in the statement of claim are deficient (see also para. 15 and 22(a), decision dated 24 June 2011).

14.For this reason, the part of the statement of claim concerning them ought to be struck out.

15.However, this appears to be a case where the plaintiffs may be able to put forth a proper claim if given an opportunity to do so.  The action against these defendants is thus not dismissed at this stage.

Stay of Proceedings

16.I also agree with the defence further submissions and disagree with those of the plaintiffs in this regard (see especially para. 8 to 13, 18 and 20 to 21, decision dated 24 June 2011).

Costs

17.Finally, subject to the paragraph below, I agree with the defence submissions on costs and disagree with those of the plaintiffs.

18.In relation to D28 to D34, whether a claim brought against them is proper has to await the filing of the amended statement of claim (if any).

Conclusion

19.By reason of the matters above, the following directions are appropriate:-

(1) the statement of claim against D28 to D34 be struck out and this action against them be dismissed with costs unless by 4:00 pm on 5 August 2011 the plaintiffs file and serve an amended statement of claim setting out their claim against the said defendants;

(2) the claim against D1 to D27 and D35 (and, in the event the plaintiffs comply with sub-para. (1) above, this action) be stayed pending the determination of the on-going CT applications or until further order;

(3) liberty to apply for further directions upon the removal of the above stay.

20.The appropriate costs orders are:-

(a) the costs of the summary judgment application against D1 to 27 and D35 be to the defendants to be taxed if not agreed;

(b) in the event the plaintiffs comply with para. 19(1) above, the costs of the summary judgment application against D28 to D34 be to the defendants to be taxed if not agreed;

(c) in the event the plaintiffs comply with para. 19(1) above, the costs of this action against D28 to D34 up to the amendment of the statement of claim be to those defendants to be taxed if not agreed;

(d) in the event the plaintiffs should fail to comply with para. 19(1) above, the costs of this action (including those of the summary judgment application) against D28 to D34 be taxed on an indemnity basis if not agreed.

There be a certificate for the attendance of two counsel at the hearing on 8 and 9 June 2011 in respect of the above costs (Ord. 62 r. 32, 1^st Schedule, Part II, para. 2(3)).

Messrs Wilkinson & Grist, for the Plaintiffs

Messrs Tony Au & Partners, for the Defendants

Please refer to CACV262/2012 for the relevant appeal(s) to the Court of Appeal.