Auto-treasure Ltd. t/a Albert Jewelry Creation v. Noble Diamond Ltd. t/a Noble Jewellery and Another

CACV000184/1991

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Coram: Sir Derek Cons, V.-P., Liu & Godfrey, JJ.in Court

Date of hearing: 14th April 1992

Date of handing down judgment: 22nd May 1992

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J U D G M E N T

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Godfrey, J.

1. This is the plaintiff's appeal from an order of Mr Justice Mayo, who on 20th November 1991 refused an application by the plaintiff for specific discovery. The action is a copyright action. The plaintiff, which carries on business as a manufacturer and seller of jewellery, claims to be the owner of copyright subsisting in an original artistic work, namely, a drawing in respect of an adjustable spring ear clip. The 2nd defendant is a former employee of the plaintiff. He is now in charge of the factory where jewellery offered for sale by the 1st defendant is manufactured. The 2nd defendant joined the 1st defendant in March 19891, and the defendants admit that after that date the 1st defendant commenced to manufacture and sell adjustable ear clips similar to those of the plaintiff. The defendants deny the plaintiff's title to any copyright, and anyway deny any infringement. If (but only if) these issues of liability are decided in favour of the plaintiff, the plaintiff will be entitled, at its election, either to damages for infringement of copyright or to an , account of profits.

2. Now, in England and Wales, copyright actions are assigned to the Chancery Division of the High Court: see the Supreme Court Act 1981, Schedule 1, para.1(i) as amended by the Copyright, Designs and Patents Act 1988, Schedule 7, para.28(iii). Although, in Hong Kong, the local Rules of the Supreme Court recognize a need to treat separately some actions of a special nature (for example, admiralty actions, and contested probate actions) they do not, unfortunately, provide any separate machinery for dealing with Chancery actions, notwithstanding the special features which these actions also exhibit. Nevertheless, it must be right in Hong Kong to follow, so far as may be, the procedure which would be followed in an action of a similar character in England and Wales.

3. In a copyright action in England and Wales, assigned as it is to the Chancery Division, the usual practice of the Chancery Division will be followed. The judge, at the trial of the action, will determine all issues of liability, and, if liability is proved, the judge will direct an enquiry as to damages (or, if the plaintiff so elects, an account of profits). The judge will not embark on that enquiry, or account, at the trial. The enquiry or account will be made or taken in Chambers and will stay there unless some point of principle arises, in which case the point will be set down for argument before the judge in court. Discovery relating to the enquiry or account will not be ordered until the defendant's liability has been established and the plaintiff has elected whether to claim damages or an account of profits: see Fennessy v. Clark (1887) 37 Ch D 184. As Cotton, L.J. pointed out, in the context of that case (at p.187):-

"The court is always unwilling before the right to relief is established to make an order for discovery which may be injurious of the defendant, and will only be useful to the plaintiff if he succeeds in establishing his title to relief".

4. It is against this background that the problem which faced the judge in the instant case falls to be examined. .

5. The plaintiff applied by summons to the master for an order on the 1st defendant to "produce for inspection by the plaintiff and its solicitors at the office of the 1st defendant's solicitors the following documents, namely all invoices, production statements and accounting records relating to the production and sale of adjustable ear clips by the 1st defendant between the period 1st April 1989 to 31st March 1990 and to permit them to peruse the same and to take copies thereof or be supplied with copies thereof on payment of the proper charges".

6. This application was misconceived. Those advising the plaintiff had overlooked that you cannot have an order for production of documents for inspection until such documents have been the subject of discovery. The master, however, while apparently appreciating this and refusing to make the order for production for inspection for which the plaintiff had asked, did make an order for discovery of the documents mentioned.

7. The judge allowed the appeal of the 1st defendant from this order. The judge took the view that the documents related exclusively to the question of quantum rather than liability. He thought it walls apparent that the defendants had admitted that they had dealt with the ear clips; whether or not he was right about that, the defendants have certainly so admitted in this court. The judge said that he saw no advantage in departing from the English practice of having separate hearings in respect of liability and quantum. He said that he w is satisfied that the documents referred to related only to the question of quantum and that they should not have been ordered to be discovered at that juncture.

8. If the views expressed by the judge are read in relation to the copyright action with which he was dealing, the decision of the judge, and the reasons which he gave for arriving at it, cannot be assailed. The fact that the defendants have manufacture and sold adjustable ear clips similar to those of the plaintiff is not in dispute. (If it had been in dispute, the documents might well have been held relevant to that dispute.) The plaintiff's title to the alleged copyright, and whether what has been done by the defendants amounted to an infringement of that copyright (if it subsists), are in dispute, but the documents are not relevant to that dispute. So the discovery at this stage of the documents here asked for "is premature, must impose trouble and annoyance upon the defendant to no purpose if the verdict be in his favour on the question of liability, and ought not to be granted" : see the successful argument for the defendant in Fennessy v. Clark, above, at p.186, and the case cited in support of it.

9. The conclusion of the judge in the instant case that the documents ought not to have been ordered to be discovered "at this juncture" was therefore plainly correct. The judge appropriately mentioned, in the course of his judgment, O.24, r.8, which provides that on the hearing of an application for specific discovery "the court, is satisfied that discovery is not necessary, or not necessary at that stage of the cause or matter may dismiss or, as the case may be, adjourn the application and shall in any case refuse to make such an order if and so far as it is of opinion that discovery is not necessary either for disposing fairly of the cause or matter or for saving costs".

10. It follows that this appeal must be dismissed.

11. Before this Court, much was made of the fact that there had been, in the instant case, no order for a "split trial" of the issues of liability and quantum. Accordingly, the plaintiff argued, the judge had been wrong to treat the matter as he did. This argument overlooks the fact that this action is a copyright action, the course of which in Hong Kong ought to follow as closely as may be the appropriate Chancery practice. In an ordinary common law action for damages the practice will be different. The general policy is no doubt that all disputes in the same proceedings should be tried together. Where as in the ordinary case all questions of liability and quantum are to be dealt with at one trial, no distinction falls to be drawn, as a general rule, between discovery of those documents which relate to the question of liability, and those which relate to the question of quantum. But where there is an order for a "split trial" (more accurately, where the issue of liability in the action is ordered to be tried before the issue of damages) the order for a "spilt trial" provides for discovery to be limited to the issue of liability in the action: see, for example, Atkins Court Forms, 2nd Edn., Vol.23 (1988 Issue), at pp. 155, 156; Chitty and Jacob's Queen Bench Forms, 21st Edn., at pp.420, 421.

12. In the absence of such an order, in an ordinary common law action it may indeed be difficult to justify an order for discovery which proceeds on the footing that documents relating to quantum do not fall to be discovered at the same stage as documents relating to liability. That said, it must again be emphasised that the judge in the present case was dealing with a copyright action, a Chancery action in which the practice differs from that of an ordinary common law action for damages. His judgment should not be read as having any application to the latter. If the reasons given by the judge in the present case for the conclusion to which he came are read as limited to the sort of action with which he was dealing, the attack on his judgment mounted by the plaintiff based on the absence of an order for a split trial ceases to be of any relevance. But a defendant in an ordinary common law action should be aware that, absent an order for a spilt trial, he may well be ordered to disclose at one and the same time all documents in his possession and power relating to the issue of damages as well as those relating to the issue of liability.

Sir Derek Cons, V.-P.:

13. I agree with my Lord that, having regard to the nature of the claim and to the admissions made on behalf of the defendants, the judge's view that discovery of the documents sought would be at this stage premature is unassailable. I too would therefore dismiss the appeal.

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Liu, J.:

14. I too would dismiss the appeal for the reasons given by Godfrey, J.

Sir Derek Cons, V.-P.:

15. In handing down these judgments dismissing the appeal, we make an order nisi that the plaintiff appellant shall pay the defendant respondents' costs.

Representation:

Ms Audrey Eu, inst'd by M/S Chan, Lau & Wai for the Plaintiff/Appellant

Mr John M.Y. Yan, inst'd by M/S Lam & Lau for the Defendants/Respondents