XCHRX THE TIN BOX CO OF AMERICA INC AND ANOTHER v. CHAN KWOK SUM SAM AND OTHERS

HEADNOTE

An Interlocutory Injunction should specify precisely what a Defendant is prohibited from doing. It should not be couched in broad terms.

An injunction restraining a defendant from "disclosing ... confidential information and/or trade secrets acquired by the defendant during the defendant's employment" is far too wide to be granted at the interlocutory stage let alone at an ex parte stage and possibly even at trial.

Similarly an injunction to restrain "the Defendant passing off ... by selling ... a product not manufactured by the Plaintiff in such manner as to lead to the belief that ... it is manufactured by the Plaintiff" is too wide to be granted at the interlocutory stage.

ACTION NO. A10671

IN THE SUPREME COURT OF HONG KONG

HIGH COURT

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D E C I S I O N

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1. This is unfortunately another example of a case where a plaintiff perceiving that it might have a legitimate claim proceeds to commence proceedings on a basis that exceeds the legitimate bounds of any cause of action which it might have and unfortunately then proceeds to apply for the most severe forms of order that the law has on an ex parte basis and to enforce those to the full limit and beyond what they are entitled.

2. The proceedings suffer in my view from two major defects: first of all, the injunctions which were granted were wrongly framed and they do not address the root cause of the Plaintiff's complaint and go far beyond it; and, the second point is that the Plaintiff in applying for those injunctions has unfortunately made serious misstatements which leave me with very little alternative but to discharge the order.

3. Bearing in mind the consequences of it which is likely to be very expensive for the Plaintiff, I doubt whether the costs of these proceedings that the Plaintiff will have incurred by the end of today will be less than a seven-figure sum. Nevertheless, that seems to be the inevitable consequence of what has happened. As such it is likely that both parties will retire from this court perhaps not entirely satisfied with the proceedings.

4. This, as I say, is an application to discharge an order which was made ex parte and an application for the continuance of the injunction.

5. The Plaintiffs in this case are the Tin Box Company of America Inc and its Hong Kong subsidiary TBC International (HK) Ltd. The lst Defendant is a Mr CHAN Kwok-sum who was formerly an employee of the 2nd Plaintiff but was dismissed on the lst of September of last year. The 2nd Defendant is a trading firm of his in his name and the 3rd Defendant is a company in which he has a substantial interest and is a Director.

6. Briefly, the lst Plaintiff and, in so far as its operations are carried on in Hong Kong, the 2nd Plaintiff is a company which is a wholesaler of 'TIN BOXES'. These are decorative tin boxes and I have been shown a catalogue and sample. It is fair to say I think that it is a small to medium-sized firm or company in the United States of America and it has, as I say, one subsidiary in Hong Kong. It has a connection with a company in Mexico which is a manufacturer. It also has its goods manufactured in China. The 2nd Plaintiff was set up in Hong Kong some time ago and the lst Defendant was the sole employee employed by the 2nd Plaintiff for a long time but in more recent years there have been other employees of the 2nd Plaintiff. I think the Plaintiff's business has largely been centred upon sales in the United States of America although there have been some sales outside that jurisdiction.

7. The Plaintiff's evidence is directed to showing that it has perhaps some reputation in the word 'TIN BOX' as it relates to the lst Plaintiff's business. However, there is at any rate at the ex parte stage certainly no evidence that the Plaintiff's goods as opposed to its business had any reputation in the word 'TIN BOX'. When the evidence however is examined, it seems that there is almost no case to support a passing off action in relation to the words 'TIN BOX', even in relation to the Plaintiff's business, let alone the goods. I have been shown the catalogues of the Plaintiff and they refer to simply 'The Tin Box Company' on the front and in very small letters on the back. Throughout the rest of the catalogues, there is no reference to the Plaintiff's name.

8. During the course of the lst Defendant's employment, it seems that he set up business to a certain extent in competition with the Plaintiff's business. However, as a result of the Anton Piller order and various affidavits and affirmations which have been filed, it seems that whatever business was conducted by the lst Defendant whilst he was so employed was rather minimal. Nevertheless, there can be very little justification for what he did. He also seems to have made an investment with a company which was responsible for making 'TIN BOXES' for the Plaintiff, namely, a company by the name of Yee Hing. He made that investment, namely, about 20% investment, in the manufacturing facility in the People's Republic.

9. At some stage, that company (Yee Hing) put the lst Defendant in touch with a company by the name of Catimex. There is some dispute on the affidavits and I have affidavits from three people from Yee Hing (one is the proprietor and the other two are employees) which contradict each other. There is also some evidence which would tend to show that there maybe reasons as to why their evidence contradicts each other.

10. I am unable to make any final conclusion on the matter although it does seem to me that there are perhaps strong reasons to believe that the proprietor of Yee Hing did direct business in the direction of the lst Defendant as opposed to the 2nd Plaintiff probably because of the lst Defendant's personal interest in the manufacturing facility in the People's Republic. Nevertheless, be that as it may, there was some business with Catimex both in l993 and l994 which, if the lst Defendant had not set up a rival business, would presumably have gone to the Plaintiffs. This became known to the Plaintiffs. It was largely upon the basis of that that they started full inquiries and eventually terminated the lst Defendant's employment.

11. Having done that, they then applied for injunctions based on this evidence: An inquiry was made in March to the 2nd Plaintiff by a fictitious company which was actually a friend of Mr Roth, who is one of the leading lights of the lst Plaintiff. The enquiry was from Germany. Nothing had transpired from that but after the lst Defendant left the Plaintiff's employment a communication from him under the 2nd Defendant's name was made to this fictitious company - that company in Germany. I have to say, however, that the 2nd Defendant made no reference to the Plaintiffs but the communication from the 2nd Defendant was made as if the information relating to this fictitious person had come from the Trade Development Council. There were also inquiries made by the inquiry agent which seem to have been to a large extent inconclusive.

12. On the basis of that, the Plaintiffs applied before the Duty Judge in October of last year for a number of orders.

13. The first one reads as follows:

"That the lst Defendant whether by himself or by his servants or agents or any of them or otherwise whoever, be restrained, and an injunction is hereby granted restraining him until further order from using and/or disclosing to the 2nd and/or 3rd Defendants, or to any third party any of the lst and/or 2nd Plaintiffs' confidential information and/or trade secrets acquired by the lst Defendant during the lst Defendant's employment with the 2nd Plaintiff in particular the names, telephone numbers and addresses of the lst and/or 2nd Plaintiffs' customers and/or suppliers;"

14. That injunction is, for very obvious reasons, far too wide at an interlocutory injunction stage let alone at an ex parte stage and maybe even after trial.

15. It is vitally important in respect of confidential information, as indeed in respect of all other industrial property matters, that a defendant is told exactly what he may do and exactly what he may not do. This injunction is so broad that anyone seeing that has no idea as to what the Defendants are prohibited from doing or from not doing.

Mr Remedios on behalf of the Plaintiffs manfully grappled with this for some time but eventually this morning conceded that he could not maintain this injunction.

16. As I say, this injunction is in fact directed to the wrong matters. Even if one were to consider this injunction in respect of the names, telephone numbers and addresses of the lst and/or 2nd Plaintiff's customers, that is not the subject of the true complaint which the Plaintiff has. The Plaintiff does not, as I see it, have a complaint that its customers have been taken by the lst Defendant. It has a complaint that the lst Defendant set up a rival business whilst still employed by the Plaintiff.

17. Turning to the passing off injunction, that suffers from the same defect to the extent that it commences with a prohibition against:

"Passing off or attempting to pass off or procuring, enabling or assisting others to pass off, by making, selling, offering to treat, advertising or offering for sale,distributing or otherwise parting with possession of any tin box product not of the Plaintiffs as and for a tin box product of the Plaintiffs or as connected with the Plaintiffs ..." -

but then it goes on with the words:

"... or by the use thereon or in connection therewith of the word 'TINBOX' and/or its derivatives 'Tinbox', 'TinBox' or 'Tin Box';"

18. When the injunction is considered carefully, what that amounts to is that there is an injunction against the Defendants from selling a 'TIN BOX' under or by reference to the word 'TIN BOX'. That, it seems to me, is about as broad an injunction in respect of a passing off as I have ever heard suggested. It seems to me almost untenable that an injunction could be granted in those terms. The word 'TIN BOX' is such a descriptive epithet that I would very much doubt that such an injunction could be granted in any circumstances. But, as I indicated at the beginning, this injunction relates to the products. The Plaintiff's evidence at least at the commencement of these proceedings at the ex parte stage was that the words 'TIN BOX' related to their business and they gave and attempted to give no evidence of any reputation in relation to their products by the use of the word 'TIN BOX'. In my view, again, this injunction in these terms is untenable.

19. Now coupled with these ex parte injunctions was both an Anton Piller application order and also a Mareva injunction order. The Mareva injunction order is distingished by the fact that there is no limit as to the amount which was restrained. I find myself with no alternative but to discharge the ex parte order in any event for this reason, first and foremost: that on the application for the injunction, Mr Roth, who is the Vice President of the lst Plaintiff and a Director of the 2nd Plaintiff and swore the affidavit on behalf of the Plaintiffs, gave evidence that:

"... in l993, a British company calling itself Tin Box International Ltd. tried to do business in the United States but was ordered by the Southern District State Court of New York to cease use of such a trade name on the basis that it contravened US legislation outlawing unfair competition and deceptive practices.."

20. He adds:

"I have not heard of that company since."

21. Unfortunately, that statement is inaccurate. It is inaccurate because although proceedings were commenced, there was no concluded decision of the Southern District State Court of New York or any other court. The action was compromised. It was compromised on the basis that the defendant who was an English company was able to go on supplying certain customers using its name as before and the action was withdrawn on that basis with no costs and no damages albeit costs being an unusual feature of U.S. litigation.

22. Now I regard that misstatement as being very important. Of course I cannot say whether the matter is determinative, but given my view of the passing off injunction which was applied for and the scepticism with which I would have approached any such claim prior to looking at any evidence, had I seen a statement like that, I myself might have been taken aback and considered that there may well be some merit in the Plaintiffs' claim for passing off as framed in that injunction. Had I, however, been told that there was an out-of-court settlement on the basis that the action was dropped with no damages and the Defendant could carry on using the name at least for certain customers one of which was also a customer of the Plaintiffs, I would have taken a very different view of the matter or might have taken a very different view of the matter. In my view, this is a very material misstatement.

23. One can well understand that it was made in over-exuberance and in ignorance but ignorance is not altogether pardonable because it would appear that it was Mr Roth's father who signed the settlement letter and it was on the lst Plaintiff's notepaper as opposed to their attorney's notepaper.

24. This misstatement on its own, in my view, is sufficient to require the ex parte injunction to be discharged.

25. There are a number of other matters, however, which I should refer to.

26. In the first place, any mere perusal of some of the trade literature and magazines in Hong Kong would have shown that there was no exclusivity in the Plaintiff in the use of the word 'TIN BOX' in relation to 'TIN BOXES' and indeed it appears that this very company, again "The Tin Box International Ltd", is still carrying on business and that is also to my mind a serious matter.

27. Another matter to which I should draw attention which I consider is very material when it comes to the question of whether there should have been any fortification of the cross undertaking as to damages is this. Mr Roth, in his affidavit, commences by describing the Plaintiffs as a 'Multi-national Group' founded by his father in l952. The reason how that came in appears to have been that the creative packaging catalogue of the lst Plaintiff refers to the lst Plaintiff as having been founded in l952. It was not. But more important than that the word 'Multi-national' when applied to companies has a specific connotation.

28. I accept entirely what Mr Remedios has said that when one reads the affadivit carefully one gets a much clearer picture of what the Plaintiffs' organization really is, how big it is - and as I say it is a small to medium-sized company, but one has to bear in mind that the 2nd Plaintiff, as now established in the evidence, has only a paid-up captial of $1,000. That was not disclosed at the ex parte stage. And when one takes into consideration that there is no reciprocal enforcement of judgments between Hong Kong and the United States of America, it may well have been a matter which the ex parte judge would have taken into account in deciding whether or not to order fortification.

29. I find myself compelled to discharge the ex parte order despite Mr Remedios' strong submissions that the lst Defendant in carrying on a business as a rival to the Plaintiffs whilst still employed by them was not acting honourably to say the least and he even used the expression 'robbing the Plaintiff blind'.

30. I then come to the question of what injunction, if any, should be granted now. For these purposes, I will proceed upon the basis that I would, if circumstances are appropriate, have granted an injunction despite the fact that I have discharged the injunction and despite the fact that there are obiter dicta that if there has been a material misstatement the Plaintiff should gain no benefit from an ex parte order granted on the basis of it. However, that matter is not a matter which calls for decision today because I am clearly of the view that this is not a proper case to grant any further relief even were I to be disposed to consider it.

31. In the first place, as I have indicated, Mr Remedios has indicated that he does not pursue the application for an injunction in respect of confidential information. It is a possibility that an injunction can be granted in respect of the use of information which has been acquired in the past and still continues to be used. The question sometimes arises as to whether when that information eventually becomes public the defendant might be the only person restrained from using it. However, I am absolved from having to consider such matters on this application and I proceed to the question of passing off.

32. This morning Mr Remedios has indicated that he sees a difficulty in pursuing an application in respect of passing off in relation to the words 'TIN BOX' and he has put forward a proposed alternative injunction which reads as follows:

" Passing off or attempting to pass off by making, selling, offering to treat, advertising or offering for sale, any tin box product not manufactured by or for the Plaintiffs, in such a manner as to represent or lead to the belief that the tin box sold, offered to treat, advertised or offered for sale by the Defendants are manufactured by or for the Plaintiffs or are manufactured by the Defendants under the Plaintiffs licence."

33. That as I indicated to Mr Remedios again maybe said to fall within the objection that it is not precise enough at the interlocutory injunction stage for the Defendant to be aware of what he may do and what he may not do.

34. I had not realized at the time until I asked Mr Remedios whether he considered the use by the Defendants of the 2nd Defendant's fliers (copies of which I have and which are exhibited) would constitute a breach of that injunction that it was so contemplated. To my surprise, Mr Remedios said he considered it would. This I think underlies the difficulty of framing an injunction in broad terms which does not specify precisely the matter which is complained of.

35. Be that as it may, as I have indicated, the Plaintiff's evidence in my view does not begin to establish any reputation in the products in relation to the words 'TIN BOX'. I very much doubt, given the cases such as the Office Cleaning Case1, that the Plaintiff may ever be able to establish a reputation in that, certainly not on the evidence which is before the court today.

36. In relation to the Plaintiff's name the Plaintiff of course has a reputation in its own name 'The Tin Box Company of America Inc.' or perhaps 'The Tin Box Company of America', but when I turn to look now at what the Defendant has done and particularly in recent years I cannot see that it is appropriate at this stage to grant any relief.

37. The Anton Piller order was executed to its full extent and despite the fact that it might be objected that having discharged the ex parte order it might be said that I should not look at the yield of the Anton Piller order I would propose to do so. I propose to do so in any event because it is in the evidence.

38. The lst Defendant has produced a chart which is exhibited as CKSS-16 to his affidavit of the 23rd of December which details to the full extent the ten transactions which he says have been made in respect of 'TIN BOXES'. Apart from the fact that they are minimal, they do not, it seems to me, demonstrate a case of passing off.

Mr Remedios made a very strong submission in relation to the Catimex transactions - that those showed passing off. But one has to remember that first of all Catimex was not a customer of the Plaintiffs. It seemingly was not aware of the Plaintiffs. It was a customer of Yee Hing if anybody and was referred by Yee Hing to somebody who could supply them with the product.

39. The documentation which the lst Defendant was responsible for does make reference to TBC. I am not convinced that is any more than a reference to the place where the lst Defendant was working from and presumably carrying on his activities from.

40. Those two transactions which took place in l993 and l994 are complete and the remainder of the transactions have all been explained by the Defendant in his affidavit and particularly the transactions in l995 resulted from a circulation by the 2nd Defendant or in the 2nd Defendant's name of catalogues and so forth to the various customers. Again the Plaintiffs have not been able to show either on these transactions or from any of the documents dealings with, or sales to, persons who had been customers of the Plaintiffs.

41. When one examines the documents which were seized on the Anton Piller order, one sees a large number of what are referred to as catalogues - but in my view they are simply fliers - of the Defendants were seized. It appears to me quite clearly that what the lst Defendant is doing is he is selling 'TIN BOXES' which were in some respects very similar of course since they are 'TIN BOXES' but in one respect should be a novelty item not to be found on the Plaintiffs' catalogue and I perceive no evidence here of passing off. In any event, even if the Catimex transaction could be considered as passing off, that took place whilst the lst Defendant was employed by the Plaintiff and the circumstances of passing off were really circumstances of the lst Defendant using the Plaintiffs' catalogue and business address. In those circumstances I do not think it right to grant any injunction now. As I have already said, the real complaint which the Plaintiff has is that the lst Defendant was carrying on a business which was a rival to the Plaintiffs at a time when he was employed. That as Mr Remedios has said is a matter of infidelity but unfortunately I cannot grant any injunction just because I happen to disapprove of the Defendant's conduct. The injunction must be related to a tort threatened.

42. In those circumstances I discharge the injunctions or discharge the order and I refuse to make any further orders on this application.

43. Turning to the Defendant's Summons of the 24th October, I intend to make an order in terms of paragraph 1; an order in terms of paragraph 4 - manadatory that the Plaintiffs or either of them shall not use any of the information obtained as a result of the ex parte order other than for the purposes of this action; an order for the inquiry as to damages in terms of paragraph 5; and, an order in terms of paragraph 6.

44. Turning to costs, I propose to make an order in terms of paragraph 7 with Certificate for two Counsel.

45. I do so for this reason: having carefully listened to Mr Remedios' submission, I accept that the Plaintiff has cause for complaint against the lst Defendant or seemingly so on the evidence. However, I have to remind the parties that the fact that a Plaintiff may have a cause for complaint in one respect does not justify him in obtaining blanket orders in respect of a number of other respects.

46. The Mareva injunction in my view was not justified upon any footing, even on the basis of the ex parte evidence which was filed. The combined Mareva and Anton Piller orders, it has been said in other cases, should be confined to the most serious cases that one can imagine and even then there is often very little justification for obtaining a Mareva injunction until after the Anton Piller has been obtained.

47. In this case there has been and there is today still no attempt at a quantification of the claim on which the Mareva is based. As a result the Mareva injunction is unlimited which is a matter which I would consider very gravely. The way the Mareva injunction has been used in the correspondence to attempt to restrict the Defendant in what I consider is a legitimate exercise of its right to be heard in court is in my view totally unjustifiable.

48. A Mareva injunction is placed upon a Defendant to prevent it dissipating its assets. A Defendant does not dissipate his assets by defending itself in court. Unless it can be said that costs are literally being thrown away I find it difficult to see how any justification can be put by restricting a Defendant as to the representation which it may employ. If a Defendant even of limited means wants to spend all its money on obtaining the best representation it can, that is its right.

49. In my view, in any event, in view of the material misstatements which have been made, the order must be that the Defendants have their costs on an indemnity basis forthwith with a Certificates for two Counsel.

50. The Plaintiffs' application for an interlocutory injunction must be dismissed. I likewise make an order that the Defendant should have their costs of that application and since I have ordered the costs on the discharge to be taxed and paid forthwith it would be appropriate to make that order in respect of the interlocutory injunction particularly as this is the end of this stage of these proceedings subject of course to any appeal. I make those orders.

51. Top Source Ltd. is a company whose documents were wrongly seized on the execution of the Anton Piller Order.

In view of the close connection between Top Source Ltd. and the Defendant, I am simply going to direct that a copy of my Decision be given to Top Source Ltd. It should be with an indication that they can apply to the Court for relief if they see fit.