3 September 2007
In Bray International Inc v Cheng Yuk Chor & Ors  HKCU 1377, the Court of First Instance had to determine whether to grant a continuation of an interim injunction given that the terms of the final injunction order sought were narrower than those presently in force. The Court held that the present form of the injunction was no longer tenable and that the Plaintiff should have amended its inter partes application. The Court ordered a continuation of the interim injunction in amended terms. Because of the Plaintiff's failure to amend its application promptly, the Court made a costs order nisi that the Plaintiff were to bear 2/3 of the costs of the present hearing.
The Plaintiff (Bray International Inc) is a USA company which makes fluid and gas flow products such as valves and actuators. The products are promoted and sold around the world under the brand name "Bray". In 1995, Bray set up a sales office in Hong Kong; the 9th Defendant, Louis Hui was employed to orchestrate the founding of the Hong Kong office. Cheng Yuk Chor and Jeff Lee, the 1st and 2nd Defendants respectively, were employed to manage sales and marketing of the Hong Kong sales office.
Calmart Limited was incorporated in Hong Kong in 1994. It is wholly owned and controlled by the 1st and 2nd Defendants. American Valve & Controls Limited is another Hong Kong company wholly owned and controlled by the 1st and 2nd Defendants. AVA Controls Inc, incorporated in California, is owned and controlled by the 1st Defendant. The three companies are respectively the 5th, 6th and the 7th Defendants. Chan Kai Cheung, the 8th Defendant, is the sole proprietor of Key Control, a firm that sells, maintains and repairs actuators.
In February 2007, the Plaintiff found out that senior employees in the Hong Kong office were covertly operating businesses in competition with itself. In particular, businesses were diverted to the 5th, 6th and 7th Defendants. The 8th Defendant was complicit as a vehicle through which Bray's funds were misappropriated. The preliminary investigation conducted indicated losses of not less than HK$31.32 million.
Hence, Bray brought this action against the senior employees involved, the incorporated companies and the 8th Defendant. Bray also applied for three injunctions which were granted ex parte. In the present hearing, the 8th Defendant applied to have the inter partes applications set down for hearing ahead of the other injuncted Defendants.
The Three Injunctions Previously Granted
An Anton Piller injunction was granted and various documents supporting the Plaintiff's claims were seized. A Mareva Injunction was granted to preserve such part of the HK$32 million said to have been unlawfully taken. Lastly, an interim injunction was sought to restrain unauthorised dealings by the Defendants with Bray's customers and products.
The Issue In This Hearing
According to the interim injunction order, the 8th Defendant could not engage in the sale of Bray's products or similar products without the express written consent of the Plaintiff. Further, the 8th Defendant was restrained from holding himself out to have the Plaintiff's authority or dealing in any way with Bray's products or similar products. The interim injunction had affected the business of the 8th Defendant greatly and caused him to have to virtually shut down his business. Hence, the 8th Defendant adamantly opposed to the continuation of the interim injunction.
In deciding whether to continue the interim injunction against the 8th Defendant, the Court considered the following questions:
Is there a serious question to be tried?
The Court held that there were serious questions to be tried in respect of the 8th Defendant's complicity in breaches by the 1st, 2nd and 9th Defendants; the 8th Defendant's involvement in a scheme to defraud the Plaintiff and its misappropriation of the Plaintiff's money.
If the Plaintiff succeeds after trial would it be adequately compensated in damages if the injunction were to be discharged?
The Court thought that the present interim injunction was difficult to justify under this head in its present form because the Plaintiff had agreed to an alternative substantive relief in place of the original interim injunction. In effect, the Plaintiff would be seeking an injunction to prevent passing-off of its products by the 8th Defendant; in other words, the terms of the substantive injunction claimed would be much narrower than that of the interim injunction previously granted.
The Court held that the interim injunction in its present form was no longer tenable; however, it agreed to grant an amended interim injunction in the terms proposed by the Plaintiff. The Court pointed out that the Plaintiff should have amended its inter partes application in the circumstances.
The Anton Piller order was discharged while the Mareva injunction remained in force pending trial or further order. The interim injunction was amended according to the terms proposed by the Plaintiff. Because of Plaintiff's failure to amend its inter partes application, it was ordered to bear 2/3 of the costs of the present hearing.
From this case, it can be seen that the Court is willing to grant an interim injunction in amended terms provided there is serious question to be tried and damages would not amount to adequate remedy for the applicant should it succeeds in the main trial. However, an applicant seeking to amend the terms of its substantive injunction should make amendments to its application promptly. Otherwise, the applicant would be penalised in terms of costs.
Author: Kenny Wong, Jessica Tse
For further information, please contact:
Phone: +852 2843 4414
Fax: +852 2103 5055
Phone: +852 2843 4287
Fax: +852 2103 5174