Health & Beauty International Holdings Ltd v. Chau Ming Wah and Others

HCA 68/2012

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NO 68 OF 2012

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J U D G M E N T

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INTRODUCTION

1.The plaintiff claims against the defendants for:

(A) infringement of copyright in the plaintiff’s works;

(B) infringement of registered design; and

(C) defamation.

2.The claim against D3 has been dismissed on terms on 1 August 2014. The claim against D4 has been stayed on the same day as D4 has been dissolved. This trial is only against D1 (Mr Chau) and D2 (collectively “the defendants”).

3.Mr Chau has a counterclaim for remuneration from his employment in the plaintiff, including bonus for sale of the plaintiff’s products.  However, the reliefs sought have been dealt with in DCCJ 2862/2011.  Other claims (for damages for breach of 肖像權 and damages to business affairs of D2) are raised in the witness statement of Mr Chau and have not been pleaded; so they will not be considered.

UNDISPUTED BACKGROUND

4.The plaintiff was and is carrying on the business of distributing health products in Hong Kong.

5.Mr Chau was employed by the plaintiff as a medical director and general manager from May 2010 to February 2011.  D2was a partnership (with Mr Chau being one of the partners) which carried on the business of health-related conferences and trading.  D2 had a business address at Mr Chau’s home.

6.By virtue of an assignment dated 26 October 2011 (“the copyright assignment”), the plaintiff has been the assignee of the copyright in a low frequency therapy apparatus named Eaulier Systemic Curer (愛麗健全身療效器) (“the plaintiff’s product”), previously known as 極樂仙人.

7.The plaintiff was and is the owner of the registered design in the plaintiff’s product.

8.Since Mr Chau ceased working for the plaintiff, the plaintiff learnt that the defendants had been promoting 易調美按摩器 (“the defendants’ product”) with similar appearance and functions as the plaintiff’s product.  The plaintiff engaged agents (“the agents”) to investigate the defendants.

THE PLAINTIFF’S CASE

9.The plaintiff claims that the defendants, in the course of business, possessed or sold the defendants’ products which infringed the plaintiff’s copyright and registered design; and Mr Chau defamed the plaintiff.  The plaintiff’s allegations are tabulated as follows:

Date	Place	Alleged Infringement of CR or RD	Defamation
5 August 2011	Mr Chau’s home	Sale of a defendants’ product to the agents for $16,000	1st offending words (Plaintiff cheated customers by saying its product was made in Japan)
12 August 2011	Mr Chau’s home	Admission to the agents of sale of 60-70 sets of defendants’ product
19 August 2011	Central Library	Possession or sale of defendants’ product	2nd offending words (Plaintiff’s product not made in Japan but Shenzhen
20 August 2011	Central Library	Possession or sale of defendants’ product	3rd offending words (Plaintiff cheated customers with false certificates)

All of these occasions had been video recorded.

10.The defendants have failed to accede to the plaintiff’s demand to retract the offending words or cease the alleged infringements.

11.The defendants deny any infringement of the plaintiff’s rights or sale of infringing products.  They point out that the alleged infringement took place before the copyright assignment.  They say that one栗克儉 (“Mr Li”) was the original designer who merged 2 massaging machines to produce the plaintiff’s product.  There are 80 differences between the plaintiff and defendants’ products. 

12.Mr Chau admits saying the 3 sets of offending words but relies on the defence of justification. 

THE PLAINTIFF’S WITNESSES

13.The plaintiffs called Ms Ku (PW1), Mr Kwok (PW2) and Mr Cheung Chun (beneficial owner of the plaintiff) (PW3) as witnesses. 

14.Ms Ku and another agent, Mr Chan (see his name on the receipt issued by Mr Chau), visited Mr Chau at his home on 5 and 12 August 2011.  I accept that Ms Ku did not use her real identity and relationship with Mr Chan.  Mr Chan did most of the talking with Mr Chau whilst she video-recorded the events.  She produced the DVD (Exhibits P5 and P6) and the machine bought from Mr Chau (Exhibit P1).  She was not the maker of the report.

15.Ms Ku could not remember a lot of details.  I accept that it was because the events happened some 3 years ago and her memory was only refreshed from watching the DVDs and the transcripts.  Mr Chan did not give evidence to corroborate her.

16.Ms Ku has left the employment of the plaintiff already.  She has no interest in the outcome of the present proceedings.  She was firm in her evidence and remained unshaken in cross-examination. In his closing submission, Mr Chau still called her a “fake” witness pretending to be Bobo who went to his home.  Ms Ku could not remember if she had used the name Bobo.  However, I see no reason to doubt her evidence and I accept the same.

17.Mr Kwok was an agent who video-taped an occasion at the Central Library.  He has twice corrected the dates of the video recording, first by his witness statement and then in his oral evidence. He was shown the DVD when he was asked to prepare a witness statement.  His has now confirmed that he had video recorded the event on 19 August 2011 but he was not sure if he had gone to the Central Library on the 20^th.

18.Mr Chau’s only challenge was that the DVD of 19 August 2011 was in fact about what he and the 2 agents said on 5 August 2011, which he retracted subsequently. There is nothing to let me doubt that Mr Kwok did video record the event on 19 August 2011 (Exhibit P7) and I accept his evidence.

19.The DVD of 20 August could not be produced by Mr Kwok.  However, Mr Chau did not dispute the contents.  I accept it as evidence (Exhibit P8).

20.Mr Cheung Chun is the beneficial owner of the plaintiff.  He produced proof of the ownership of copyright and registered design and place of origin of the plaintiff’s product.  He was a straightforward witness.  Although repetitive and argumentative with Mr Chau in the witness box, he was honest and consistent.  He was not shaken in cross-examination.  I accept his evidence.

21.All of the video recording was without the consent of Mr Chau. Specifically, the Central Library forbade video recording.  Even so, there were no circumstances showing unfairness so as to justify exclusion of the DVDs from the evidence.

22.Mr Chau said that the video recordings had been tampered with, for which he produced no proof.  In fact, he had been given the DVDs for more than a year (as evidenced by Exhibits P2 and P3) but he had never raised such allegation before trial.  He eventually withdrew his allegation of tampering.

23.The DVDs have all been played in court in the presence of both parties. I have read out to the parties my notes of the contents and my observations after each DVD was played and the parties have confirmed my notes and observations to be correct.  In the presence of both parties, I have also identified from the reports of the agents/transcripts those parts which have not appeared in the DVDs or were just inferences of the reporter and which I shall disregard.

THE DEFENDANTS’ WITNESSES

24.On the defendants’ side, Mr Chau and Mr Li gave evidence. 

25.Mr Chau was not a reliable witness. 

(i) He made wild allegations, only to have to withdraw them subsequently, eg his assertion that some documents provided by him have not been put into the trial bundles; that the photocopying cut off the words “日本製造” when in fact that copy was provided by him.  See also paragraph 22 above.

(ii) His evidence was self-contradictory.  This was most apparent when he tried to explain away “giving out” or the sale of the defendants’ product detailed in paragraphs 53-59 below.

(iii) He got the credentials of Mr Li wrong even though Mr Li’s witness statement was made 4 months before his.

(iv) He spoke a lot on matters on which he had no personal knowledge but was told by Mr Li. 

Unless expressly stated to the contrary, I reject Mr Chau’s evidence.

26.Further, Mr Chau referred a lot to his “professional qualifications”. They are not relevant to the present case as the quality or functionality of the plaintiff or defendants’ product is not in issue.

27.The attachments to Mr Chau’s closing submission have never been adduced as evidence and I shall disregard them and those parts of the closing submission referring to them.

28.As for Mr Li, I do not find him to be a credible witness.  He was very evasive in answering even very simple questions like, whether Madam Huo was his wife.  When asked whether he knew the address of 漢方公司 (“Hanfang”), he said he did not, when the address was his own home address.  He would not tell the ownership of Hanfang even though his wife was the only contact person and his home address was its business address. 

29.Moreover, there were a lot of contradictions between his and Mr Chau’s evidence.  For example,

(i) Mr Chau admitted that he had come to know Mr Li and his wife through a web search for companies which sold low frequency therapy apparatus.  Mr Li tried to hide the business relationship by describing Mr Chau and himself as master and pupil.

(ii) Mr Chau said that he bought about 70 sets of the defendants’ product from Hanfang at a price of $5,000 per set, but Mr Li’s testimony was that the price was about $1,000 instead.

(iii) Mr Li had no personal knowledge of documents coming from him (eg Exhibit D3).

(iv) Mr Chau asserted that Mr Li was the author of the defendants’ product but Mr Li never claimed to have copyright.

30.Unless expressly stated to the contrary, I reject Mr Li’s evidence.

31.D3 has not given evidence on behalf of Mr Chau and so D3’s witness statement will be disregarded.

BREACH OF COPYRIGHT

32.There are 4 requirements to establish copyright infringement:

(1) That copyright subsists in the works relied on;

(2) That the plaintiff owns the copyright;

(3) That the defendants’ product constitutes an infringing copy of the plaintiff’s copyright works; and

(4) That Mr Chau has committed infringing acts.

See Fossil Inc v Trimset Ltd [2003] 3 HKLRD 11, at §§15-22; Teama Toys Ltd v Manly Manufactory Ltd & ors, HCA 1998/2004, 29 September 2008, Deputy Judge Harris SC (as he then was) at §18.

Requirements (1) and (2): Subsistence of copyright and ownership

33.By an assignment dated 26 October 2011 (“the copyright assignment”), the plaintiff acquired copyright from one Katsumi Adachi (the author) and his employer, a Japanese company called Toprun.  The copyright assignment, and design drawings and production drawings (collectively “the drawings”) annexed thereto were not disputed. 

34.Under clause A of the copyright assignment, both the author and Toprun had assigned the right to sue for past, present and future infringement to the plaintiff before issue of the writ.  It would of course have been proper for the plaintiff to plead the infringement to the assignors’ rights and the loss arising.  However, there is nothing to show that what the plaintiff is now seeking is in any way different to those suffered by the assignors.  The defect in pleading does not affect the plaintiff’s right to bring this action pursuant to clause A: Harvard Addhair Technologies Limited v Samson Professional Hair Weave Centre Limited & ors HCA 4404/1996, 5 October 1999, p 15, Chung J

35.Mr Chau claims that he was not aware of the plaintiff’s copyright.  He only knew that the plaintiff was the Hong Kong agent.  That, in my view, does not reduce his liability in breach of copyright.

36.Mr Chau, however, claims that Mr Li who worked for the Risuo Factory in Shenzhen (“the Factory”) was the true author of the plaintiff’s product.  Mr Chau even alleges that the drawings (Exhibit D2) attached to the copyright assignment bore Mr Li’s initials “LKJ”. 

37.However, Mr Chau’s version was not corroborated by Mr Li.  In his oral evidence, Mr Li did not claim copyright in the plaintiff’s product or the drawings. He admitted that the Factory asked him to do the drawings and part of the drawings were made by him, but refused to admit that they were made for Toprun, or that Toprun had copyright.

38.I find nothing from the defendants to contradict the plaintiff’s evidence.  Requirements (1) and (2) are established.

Requirement (3): Copying

39.Copying is a question of fact, the burden of proof of which is on the plaintiff.

“Proof of copying. It is for the claimant to prove copying, this being a question of fact, the standard being the ordinary civil standard. In most cases copying can only be deduced by inference from all the surrounding circumstances because normally there will be no evidence from anyone “being present and looking over the [defendant’s] shoulder” at the time he designed or made his work. The case will therefore normally start with establishing substantial similarity combined with the possibility of access. Where there is substantial similarity, this is prima facie evidence of copying and also of access. Once a prima facie case is established in this way, it is often said that a shift in the evidential burden takes place which the party charged may refute by evidence of independent creations or by giving some alternative explanation for the similarities. The task of the judge is then to decide, on the evidence as a whole, whether or not there has been copying. This can be summarised by saying that proof of sufficient similarity, coupled with proof of the possibility of access, raises a prima facie case or inference of copying for the defendant to answer. …” Copinger & Skone James on Copyright (16^th ed), para 7-17.

40.Minor changes do not assist a defendant.  The test of similarity is by a comparison in the eyes of inexpert customers: Li Po Fai t/a Landford Industrial Company v Radiant Electronics Ltd, HCA 1213/2001,  26 July 2001, per Deputy Judge Woolley.

41.As Barker J observed in Tang Fun Kee Manufacturing Co Ltd v Fortuna Plastic Manufactory [1980] HKLR 184 (at 189):

“The defendants nevertheless say that, even so, the defendant does not infringe the registered design. Whether it does or not is a matter of fact. I have to judge the matter solely by the eye. In deciding whether or not there has been infringement I must do so with the inexpert eye of a customer - I must consider solely the shape and configuration and not the object for which the article was made. (See Hecla Foundry Co. v Walker Hunter & Co.). I am entitled to look not only at the registered design but also at the article manufactured therefrom. And I then can lay that side by side with the alleged infringing article and make my comparison. I must also apply what has been called somewhat infelicitously: ‘the doctrine of imperfect recollection’. In the case Valor Heating Co. Ltd. v. Main Gas Appliances Ltd. Whitford J. said at p. 878:-

‘In considering registered designs you must consider infringement not merely upon the basis of a side by side comparison, but also upon the basis of having had a look at the registered design, then having gone away and come back and perhaps been put in a position of deciding whether same article is the one you originally saw.’ ”

42.In addition to similarity, proof of the possibility of access is one element in raising a prima facie case of copying.  If it is very unlikely that a defendant could have had access to the claimant’s work, the inferential case of copying stemming from similarities will be weakened. Since it is a question of fact, whether an inference can be drawn must depend on the circumstance in the case. If the objective similarities are of a very high degree, the court may (not must) draw an inference that the defendant has access to the plaintiff’s works. However, the court must have regard to other relevant circumstance in the case before deciding whether such an inference is drawn. It is just a matter of common sense.  Natuzzi Spa v De Coro Ltd HCA 1702/2001 at §§141 & 142, 16 January 2007, J Lam J (as he then was).

43.The plaintiff’s product (Exhibit P4) resembled the drawings.  Exhibit P4 and the defendants’ product (Exhibit P1) bear resemblance in shape, configuration and size.  The distinctive features of the plaintiff’s product are the 2 raised foot plates and the function buttons appearing on the surface of the panel.  These features appear in similar places on the defendants’ product.

44.I have identified the following differences in the defendants’ product:

From the front top view

(i) The 2 sides of the shell are curved;

(ii) The shape of the inward part of the 2 feet plates are curved instead of straight; the 2 feet plates have a thicker gold colour; the central space between the 2 feet plates is 1 cm less than the plaintiff’s；

(iii) The defendants’ product does not have remote control and so there is no button light at the top middle part of the panel;

(iv) The name of the product and the use of simplified Chinese characters are different; but the places where the names, words and buttons appear are the same except for the words “WAVE” (on the plaintiff’s product) and “intensity” (on the defendants’ product);

(v) Different colours are used for the buttons with light;

(vi) The triangles for the intensity buttons point in different directions;

(vii) There is an additional button to show vibration;

(viii) The defendants’ product does not have the characters “強度”. 

(ix) Instead of using the characters “快-中-慢” for the menu button, the defendant’s product uses “小-中-大”;

(x) There are different Chinese and English descriptions for the A to E buttons;

(xi) Some Chinese characters are different:

•  主機改爲 “主體”；

•  墊片改爲 “能片”；

•  端子改爲 “插座”.

(xii) The length of the defendants’ product is 1 cm shorter than the plaintiff’s;

From the back

(xiii) The socket is at the bottom of the machine;

From the bottom

(xiv) There are 33 differences including the vent spaces, sizes, numbers and location of screw holes and descriptions on the label.  There are a few more screw spaces on the defendants’ product and the “windows” are oval shape instead of rectangular.  The drawings do not cover the bottom of the plaintiff’s product but the registered design does.  The label does not form part of the drawings or registered design.

Others

(xv) The defendants’ product does not have the “approved” and “warning labels.  It is lighter than the plaintiff’s product.  However, all of these are not part of the drawings or registered design.

45.Despite the number of differences, I find that they are not matters of substance in the eyes of an inexpert customer.  Having had a look at the defendants’ product and having gone away and come back, an inexpert customer would not have noticed if the plaintiff’s was a different product.  He would have considered the differences to be mainly in translation of words.  He would hardly have considered the back and bottom views to note the differences.  I find there to be substantial similarities between the plaintiff and defendants’ product.

46.As to the question of access, Mr Cheung’s evidence, which I accept, is that Mr Chau had to market the plaintiff’s product whilst he was under the employ of the plaintiff.  Mr Chau also admits that between 17 April 2010 and 26 February 2011, he had held 16 lectures on behalf of the plaintiff to promote the plaintiff’s product.  In my view, the defendants had access to the plaintiff’s product.

47.The defendants have not begun to show independent creation or provided explanation for the similarities.  They claim that the pulse theory (脈衝原理）has been in use for 25 years and there was no patent for it.  However, the issues before the court did not concern patent or the functions of the products, just their outward appearance.

48.Requirement (3) is established.

Requirement (4): infringement

49.The DVDs (Exhibits P5 and P6) and Ms Ku’s evidence prove that Mr Chau had sold the defendants’ product to the 2 agents on 5 August 2011.  Mr Chau claimed that it was just a trial sample, but he never told the 2 agents so.

50.The price was bargained down from $26,000 to $16,000 with warranty for 3 years.  I accept that at the instigation of Mr Chan, Mr Chau issued a receipt on A4 paper for $18,000.

51.I do accept that it was the agents who first brought up the idea of asking Mr Chau to compare the plaintiff and the defendants’ product, and then invited him to sell one item to them.  It was not, as Mr Chau asserted in his witness statement, an “open” sale, but that did not affect the question of liability.  Just that sale on 5 August 2011 would have been in breach of the plaintiff’s copyright. 

52.Mr Chau’s intention to continue selling was reflected in his telling the agents not to tell others of the discount but introduce 4 buyers to dilute the discount given to the 2 agents.

53.Further, the DVD for 5 August 2011 captured Mr Chau as saying “40-50 部易調美出咗去”.  Under cross-examination, he denied selling but asserted that he was giving out the 40-50 sets free of charge, for research and healing purposes.

54.Mr Chau’s evidence was plainly incredible.  Why would he need to mention the 40-50 sets to the 2 agents?  Moreover, on his own evidence, each set cost $5,000 (or only $1,000 on Mr Li’s evidence).  He was giving out a lot of money! 

55.Mr Chau also talked about the use of raw materials from Japan and an engineer (whom he confirmed under cross-examination to be Mr Li) who returned from Japan to work for a PRC company.

56.Clearly, Mr Chau was trying to impress upon the agents the popularity of the defendants’ product and that its quality was no worse than that of the plaintiff’s.  That was the tone of a saleman.

57.Mr Chau’s denial of sale was flatly contradicted by what he said twice on 12 August 2011, namely, that he had “sold 60-70 sets” and “sold 70 sets”, respectively.  Despite having watched the DVD played in court, Mr Chau said that the 2 remarks were wrong.

58.In an attempt to explain away his sale of 70 sets, Mr Chau said, for the first time in the witness box, that he had only sold 30 to 35 sets to D3 at a price of $300,000 odd.  This average sale price of $10,000 per set was much lower than that to the 2 agents.  It was clearly intended for onward sale by D3 at a profit of $5,000 each.  It made the story of “giving out” 40-50 sets for free more incredible.

59.What was even more incredible was that upon D3’s request, Mr Chau had returned $180,000 to him but the 30-35 sets remained with D3.  There was no commercial sense in such move.  Mr Chau was clearly making up his case as he went along.

60.Moreover, Mr Chau’s evidence was contradictory to Mr Li’s.  Mr Chau said that he bought about 70 sets from Mr Li in July to 12 August 2011, at an average price of $5,000 each.  Mr Li first denied selling to Mr Chau between March and August 2011, then said he did not recall clearly although he did manufacture the defendants’ product in 2011.  In any case, Mr Li only mentioned a sale price of $1,000 per set.

61.I find that apart from the sale on 5 August 2011, Mr Chau had sold the defendants’ product, in breach of the plaintiff’s copyright. He had at least bought 70 sets from Mr Li and sold 70 sets.  He claimed that the 70 sets meant 40 to 50 sets + 35 sets but it is not necessary to resolve this issue until the time comes for him to give an account. 

62.The DVDs for 19 and 20 August 2011 (Exhibits P7 and P8) did not show any sale or promotion by the defendants.  The video recording started from the time Mr Chau answered questions of the audience.  I also accept Mr Chau’s evidence that the Central Library forbade sale of any product and the defendants had not sold any there on 19 and 20 August.

63.According to Mr Chau, because of the plaintiff’s acts of interference (by secret video recording and disorderly conduct) at the Central Library, the defendants had stopped all lectures, replies to enquires or promotion of the defendants’ product since 21 August 2011.  Further, apart from holding 3 seminars for free on 19-21 August 2011 and renting D3’s office for one month in June/July 2011 for preparing the seminar and having an address for applying for certification of the defendants’ product, there were no other business activities. There was nothing from the plaintiff to contradict this.  I accept the same to be true.

64.Given my finding that Mr Chau is not a reliable witness and his denial of infringement in the light of the evidence, there is risk of his further infringement.  There should be an order restraining the defendants from infringing the plaintiff’s copyright.  I will also order them to give an account of the profits, as requested by the plaintiff.

INFRINGEMENT OF REGISTERED DESIGN

65.On 23 June 2006, Toprun registered the design of a low frequency apparatus in Hong Kong in Design Registration No. 0601621.4 under the Registered Designs Ordinance, Cap 522 (“RDO”).  By a written assignment dated 23 May 2011 (“the registered design assignment”), Toprun assigned all its rights in the registered design and all the rights, title, and interest of the Toprun therein to the plaintiff absolutely.  On 28 June 2011, the registered design assignment was registered under the RDO.  All of these happened before the acts of infringement.

66.Pursuant to section 31(1) of the Ordinance, the registration of the plaintiff’s design gives the plaintiff the exclusive right to make in Hong Kong or import into Hong Kong for sale, or hire, or for use for the purpose of trade or business; or to sell any article to which the plaintiff’s design has been applied.

67.The right in a registered design is infringed by any person who, without the consent of the registered owner and while the registration is in force does anything which by virtue of subsection (1) is the exclusive right of the registered owner.

68.For the same reasons given in paragraphs 43-61 above, I find that the defendants had infringed the plaintiff’s registered design.  I grant a similar order for an injunction and an account of profits as paragraph 64.

DEFAMATION

69.There were 3 occasions in which Mr Chau admittedly said the words complained of and they were video recorded.

70.Firstly, on 5 August 2011, Mr Chau said to the 2 agents the following words (“the 1^st offending words”): 

(1)  “其實呢佢地就參考咗我既研究去講，但係佢地講呢就講得唔準確、唔清楚，講起上來總之就乜都得，乜都得，乜都得，比人印象唔知真定假，你又唔係權威又唔係盛… …”

(2)  [指向原告人的產品] “呢D就冇學術性既野啦，唔識得學術係咩名啦…我地就知道醫療的requirement點樣達到，佢地呢度呢唔識嘅… …”

(3)  “以前呢就日本搞好哂，寄來比佢，佢就賣比人。而家呢就整條生產線係深圳…自從舊年起…所有將會係香港同埋大陸嘅生意，唔再係日本機…但係佢就講係日本造，佢仍然係呃人… …呢度就係呃人啦… …呢度呃人啦，[指着報紙上的字「日本製造」]，呢四個字就係呃人啦，即係話呢少少就日本造，其他個d就係大陸造，然後溝溝埋溝溝埋，就賴貓賴貓賴貓。因為我係嗰度做咗一年研究，所以知道佢地嘅手法… … 佢托我去幫佢研究架嘛”。

71.The plaintiff says that in their natural and ordinary meaning, the 1^st offending words meant or were understood to mean that:

(a)  The plaintiff cheated its customers;

(b)  The plaintiff was dishonest with its customers;

(c)  The plaintiff cheated its customers by falsely representing that the Plaintiff’s product was made in Japan whereas, in truth and in fact, it was made in Shenzhen;

(d)  The plaintiff did not have the requisite qualification about its business or its products;

(e)  The plaintiff did not meet the requirement of the business of selling low frequency therapy apparatus;

(f)  The plaintiff was an unscrupulous merchant;

(g)  The plaintiff was irresponsible in selling its products;

(h)  The plaintiff took a free ride on Mr Chau’s research.

72.Secondly, on 19 August 2011, whilst answering the question from a member of the audience at the Central Library, Mr Chau spoke the following words (“the 2^nd offending words”): 

“佢呢就話，個間公司就話日本製造，以前係日本製造，而家呢佢係深圳開咗個廠，其實係深圳造，佢就照賣日本造，講大話。”

73.The plaintiff says that in their natural or ordinary meaning, the 2^nd offending words meant or were understood to mean that:

(a)  The plaintiff cheated its customers;

(b)  The plaintiff was dishonest with its customers;

(c)  The plaintiff cheated its customers by falsely representing that the Plaintiff’s product was made in Japan whereas, in truth and in fact, it was made in Shenzhen; and

(d)  The plaintiff was lying.

74.On 20 August 2011, again whilst answering the question from a member of the audience at the Central Library, Mr Chau spoke the following words (“the 3^rd offending words”): 

“(1) 我幫助係北京攞（醫療證），過橋抽板;

(2) 呢個係愛麗健呀嘛，我就話俾你聽你買呢個就呃你囉;

(3) 佢地有些認證是呃你;

(4)  你繼續聽佢嗡，就比佢呃多呢。”

75.The plaintiff says that in their natural or ordinary meaning, the 3^rd offending words meant or were understood to mean that:

(a)  The plaintiff cheated its customers;

(b)  The plaintiff is dishonest with its customers;

(c)  The plaintiff cheated its customers by falsely representing that the medical certificates relating to its products were genuine whereas, in truth and in fact, they were fake; and

(d)  The plaintiff ill-treated its employees.

76.A defamatory imputation is presumed to be false.  Therefore, the burden is on the defendant to show that the imputation is substantially true.  See Gatley on Libel and Slander (12^th ed), para 11.4.

77.The defence is one of justification, with 2 limbs to it:

(1)  That the plaintiff’s products were not manufactured in Japan but Shenzhen (“place of origin defence”).

(2)  That the certificates obtained by the Plaintiff were false (“false certification defence”).

78.But for the plaintiff’s acts of interference, Mr Chau claims that he would not have said the words complained of.  Hence the plaintiff should bear the responsibility.

PLACE OF ORIGIN DEFENCE

79.Mr Cheung testified that the plaintiff’s product was a medical device that would be used by hospitals in the Mainland and EU, which had strict requirements for the place of manufacture to be Japan. 

80.With regard to the plaintiff’s documents on the place of origin, my views are as follows:

(i)  The 3 certificates of origin dated 20 February, 7 June and 3 October 2012 issued by the Osaka Chamber of Commerce & Industry have no probative value as they were all issued after the dates of the offending words.  I accept that the plaintiff could not produce earlier certificates of origin as there was no requirement for the plaintiff to have them.

(ii)  The packing list dated 11 March 2010 did not show the place of origin.

(iii)  The waybills dated 19 March and 14 August 2010 showed that the plaintiff’s products were shipped from Japan.  The words “MADE IN JAPAN” were printed in the latter waybill.

81.Although Mr Chau said that the waybills were just documents of the carrier and not from the Japanese Chamber of Commerce, he admitted that he had no basis to challenge those contemporaneous documents.  On balance of probabilities, based on paragraph 80(iii), I find that the plaintiff’s product originated from Japan.

82.On the other hand, Mr Chau said that the plaintiff’s products were made in Shenzhen.  He relied on Mr Li’s email dated 20 September 2011 with some tables (“the email tables”).  However, Mr Chau admitted under cross-examination that he had no personal knowledge of the matters therein.  He further produced some tables for 2009-2011 allegedly obtained from Mr Li (Exhibit D3) and agreed that they might be inconsistent with email tables.

83.Neither could Mr Li identify the maker of Exhibit D3.  Mr Li never explained how, having left for 10 years since 2004, he could still gain access to Exhibit D3 allegedly from the Factory. He admitted that he had never seen any packing list or waybill in relation to the products in Exhibit D3 and he had no idea how they were shipped. 

84.Further, Mr Li admitted that an outsider would not be able to understand the destination of the products from the email tables themselves.  He could not explain why, as an engineer, he was able to understand the codes in the email tables. In cross-examination, when asked about what “SE54-WA-CN” meant in the email tables, he gave 3 explanations to the code “CN”:

(a) That the products were delivered in Mainland China;

(b) That China included Hong Kong; and

(c) That all products were shipped to Hong Kong.

Mr Li’s evidence as to the destination of the Factory’s product was simply unreliable.

85.Mr Chau further alleged that the plaintiff advertised in newspaper on 9 August 2011 “made in Japan, beware of infringement”.  In a later promotion event, the plaintiff changed its version to say that the plaintiff’s product was fabricated in China.  In subsequent newspaper advertisement it had removed the words “made in Japan, beware of fakes” altogether.  However, no such evidence was produced in support.

86.I am not satisfied that the place of origin defence was established.

87.In Mak Shiu Tong v Yue Kwok Ying (2004) 7 HKCFAR 228, the Court of Final Appeal stated, “Justification is, in effect, a further attack on the claimant by re-asserting the truth of what was published.”  This plea should not be lightly raised: per Ribeiro PJ, at §§42-43.

88.This principle applies with greater force in the present case.  This is because the assertion that the Plaintiff’s products were made in Shenzhen was tantamount to saying that the Plaintiff deceived its customers and was guilty of an offence under the Trade Description Ordinance, Cap 362.

FALSE CERTIFICATION DEFENCE

89.In paragraph 24 of his defence, Mr Chau asserts that all kinds of certificates of the plaintiff were misleading.  However, in breach of Order 82, rule 3(2), Rules of the High Court, he failed to give particulars.

90.It will simply not do for unpleaded issues to be slipped in when evidence is being given: Wing Hang Bank Ltd v Crystal Jet International Ltd [2005] 2 HKLRD 795, Ma CJHC (as he then was) at §6(2) and J Lam J (as he then was) at §23.  In any case, I have considered the defence of Mr Chau briefly. 

91.There were 5 certificates shown in the plaintiff’s advertisement dated 20 April 2011 with brief descriptions underneath each of them.

92.Firstly, the plaintiff claimed to have “榮獲美國預防醫學協會認可”.  In fact, the so called 認可 was a Certificate of Approval issued by the Society of Preventive & Alternative Medicine, a non-government organization in Japan.  It certified that 極樂仙人 had been approved based on the examination of the product application, analysis data and clinical reports submitted to the Society for approval.  It did not state which aspect of the product was approved or what standard was met. 

93.It did not matter that the certificate was issued by an NGO.  What mattered was that Mr Cheung could not explain why there was a reference to USA. He said that it was information given to him by Toprun and even he himself had been misled.  To the extent that it made a reference to US approval, the plaintiff’s advertisement was misleading. 

94.Secondly, the plaintiff claimed to have “榮獲日本厚生省醫療認可”.  In fact, the certificate was stated to be “醫療用具輸入承認書”. The advertisement was taking the certificate out of context and misleading.

95.Thirdly, the plaintiff claimed to have “榮獲日本政府指定管理醫療器械認可”.  It was in relation to 極樂仙人.  Mr Chau was not able to establish that the certificate was not issued by the Japanese government.  His assertion that the plaintiff gave misleading information concerning this certificate was unfounded.

96.Fourthly, the plaintiff claimed to have “2008 年榮獲歐盟醫療器械認可”.  It was put to Mr Cheung in cross-examination that the certificate was not an approval to medical apparatus but just to show that the product passed the electricity test.  Mr Cheung denied the allegation and Mr Chau was not able to prove it.  Mr Chau was also not sure if the institute issuing the certificate was a government institute or just a designated authority.  His challenge to the plaintiff’s certificate was unfounded.

97.Fifthly, the plaintiff claimed to have “榮獲中國中央衛生部醫療器械認可”.  The certificate was issued by the State Food and Drug Administration.  (Contrary to Mr Ng’s submission, this certificate was referred to in A126, line 6.)  Although Mr Chau said that the reference to “中央” was 2 tiers higher, he had no proof in support.  His challenge to the plaintiff’s certificate fails.

98.I find that in relation to the 3^rd to 5^th certificates referred to above, Mr Chau was unable to show that they were misleading.

99.Further, inclusion of attachment 6 to Mr Chau’s witness statement contained an attempt to rely on an unpleaded subsequent event to justify an earlier allegation.  It was irrelevant and inadmissible.

100.In summary, I find that Mr Chau is unable to establish the place of origin of the Plaintiff’s product to be Shenzhen instead of Japan, or that 3 out of 5 certificates were false.  The defence of justification fails.

101.In relation to the 1^st offending words, as medical director, Mr Chau had done research for the plaintiff eg developing a file on acupuncture points (Exhibit P10) which the plaintiff had adopted (Exhibit P9) in its brochure.  It is not clear why the plaintiff said that the 1^st offending words bore a meaning that it did not have the requisite qualification about its business or products.

102.Further, the 1^st offending words did not refer to any “requirement” of the business of selling low frequency therapy apparatus.  What Mr Chan said as meeting “醫療的requirement” was a different thing.

103.I therefore find only parts (1) and (3) of the 1^st offending words established and their natural or ordinary meaning was as set out in paragraph 71(a)-(c), (f) and (g) above.

104.The natural or ordinary meaning of the 2^nd offending words bore the pleaded meaning.

105.I accept that the 5^th certificate was obtained by the plaintiff with the contribution of Mr Chau.  However, the 5^th certificate was issued only on 16 November 2011, 9 months after Mr Chau had left the employ of the plaintiff.  There was hardly any connection between the obtaining of the 5^th certificate and the termination of employment.  The plaintiff had used Mr Chau’s “expert” materials developed during his employment with the plaintiff (eg Exhibit P10).  I do not think it can be said that the plaintiff ill-treated Mr Chau in so doing.

106.I find that the 3^rd offending words carried the pleaded natural or ordinary meaning in paragraph 75(a)-(c) above.

107.Mr Chau had slandered the plaintiff.  The publication of the 3 sets of offending words was calculated to disparage the plaintiff in the way of its business as a distributor of health products.  Although the plaintiff’s agents had set him up, and his answers were spontaneous, Mr Chau had persisted in his disparaging remarks.  The offending words would have injured the plaintiff’s business reputation and exposed the plaintiff to public hatred, contempt and ridicule. 

OTHER DEFENCES

108.In his closing submission, Mr Chau raised other defences such as that his statements were made “unintentionally”, that he was “quoting a fair comment by a qualified privilege expert which was a justified truth (sic) fact made in good faith on a matter of public interest”, that he was giving a professional answer as to how the 2 products differed, that he was induced by the plaintiff’s own agent to answer privately to very few people around him at the end of the seminar, while most of the attendants were leaving and not paying any attention.  The environment was very noisy and confused. 

109.As these matters have not been pleaded, they shall not be considered. In any case, whilst the offending words were not pre-meditated, Mr Chau had never shown regret for what he said.  In any case, even if the offending words were uttered unintentionally, or that there were not many listeners, or that the environment was noisy, would only reflect on the quantum of damages but not the liability.

DAMAGES FOR DEFAMATION

110.A trading corporation or company has a trading character, the defamation of which may ruin it.  Accordingly it may maintain an action of libel or slander for any words which have a tendency to damage it in the way of its business and it is not necessary for it to prove special damage.  The injury to the company need not be confined to accrued loss of income, for the company’s goodwill may be injuried.  Gatley on Libel and Slander (12^th ed), §8.16.

111.On damages, I have considered the following authorities referred to me by Mr Ng, counsel for the plaintiff:

(a)  Yacoob v Asia Times Online Ltd [2008] 4 HKLRD 911, §163 where Reyes J awarded $150,000 to each corporation for libel. However, the facts of that case involved investigation journalism and the allegations were of money laundering, terrorist financing and drug trafficking, much more serious than and different in nature from the offending words in the present case.

(b)  Oriental Daily Publisher Ltd v Ming Pao Holdings Ltd (20120 15 HKCFAR 299, §20, where general damages of $50,000 were awarded to the corporate plaintiff for libel.  The offender, Ming Pao, had a readership of 110,000. 

(c)  Yu Ming Investment Ltd v Peng Ru Chuan Richard, HCA 814/2002, 5 May 2005, at §87, where Chung J dismissed the claim for slander but said, obiter, that if an award had to be made a sum of between $30,000 and $60,000 would be appropriate.  That case involved a remark about the plaintiff’s role in a listing project, which was made by the defendant at a meeting in front of a representative of the plaintiff’s clients.  The learned judge found that the words were only uttered briefly in front of a relatively limited number of people and were not repeated.

(d)  In Ming Kee Manufactory Ltd v Man Shing Electrical Manufactory Ltd [1992] 1 HKC 442, the defendant, a manufacturer of metal accessories, wrote a letter to BDC London, copied to BDC Ireland and Micromark HK, which were purchasers of electrical products manufactured by the plaintiff.  The court found there to be a serious libel in a situation of business rivalry where the defence of qualified privilege failed and awarded general damages of $50,000.

112.The DVDs show that Mr Chau was speaking calmly, politely and unhurriedly.  There were only 2 listeners to the 1^st offending words.  There was no evidence as to the size of the audience to the 2^nd and 3^rd offending words but it could be seen from the DVDs that it was the end of the seminar and attendants were leaving.  The environment was not quiet.  Although only uttered in response and not planned, the 3 sets of offending words were intended to disparage a competitor.  The 2^nd offending words clearly referred to the plaintiff’s product as of the 2^nd generation and the defendants’ an improved version.  The defendants, pursued the justification defence till the end of the trial. 

113.I award the plaintiff $20,000 as general damages in respect of the 1^st offending words, $40,000 in respect of each of the 2^nd and 3^rd offending words, making a total of $100,000.

114.The plaintiff, rightly in my view, abandoned its claim for aggravated damages since a company is hardly likely to be regarded as having feelings capable of being injured: Oriental Daily Publisher Ltd v Ming Pao Holdings Ltd (20120 15 HKCFAR 299, §124.

CONCLUSION

115.The plaintiff has succeeded in proving its claims in breach of copyright and infringement of registered design.  The defence of justification failed. D1 had defamed the plaintiff.  I order as follows:

(1)  There be an injunction restraining the 1^st and 2^nd defendants from breaching the plaintiff’s copyright and registered design as per prayers (1) and (2) in the statement of claim;

(2)  The 1^st and 2^nd defendants shall within 28 days give an account of the profits in relation to breach of the plaintiff’s copyright in the plaintiff’s product and pay to the plaintiff all sums found due upon the taking of the account;

(3)  The 1^st and 2^nd defendants shall within 28 days give an account of the profits in relation to the infringement of the plaintiff’s registered design and pay to the plaintiff all sums found due upon the taking of the account;

(4)  There shall be delivery up by the 1^st and 2^nd defendants of all infringing articles for the purpose of destruction as per prayers (4) and (5) of the statement of claim;

(5)  There be an injunction order restraining the 1^st defendant, whether by himself or by or through his agents whosoever where appropriate, from howsoever publishing and/or causing the publication of and/or participated in the publication of the offending words referred to in this judgment or similar slanders defamatory of and concerning the plaintiff; and

(6)  The 1^st defendant shall pay damages of $100,000 for slandering the plaintiff.

116.Costs should, as a matter of principle, follow the event and be to the plaintiff. 

117.On a nisi basis, I award the plaintiff costs of the action including the 2^nd pre-trial review on 1 August 2014.  Such order nisi can be varied by either party within 14 days by taking out a summons.

118.Mr Ng has identified the issues and provided virtually all the authorities in support of his case at the 2^nd pre-trial review.  In a case involving a litigant in person, such early preparation and helpful attitude is highly appreciated.  I thank Mr Ng for his assistance.

Mr Lawrence Ng, instructed by Tang, Wong & Chow, for the plaintiff

The 1^st defendant appeared in person

The 2^nd defendant was represented by the 1^st defendant