NANYANG BROTHERS TOBACCO CO LTD v. N.V. SUMATRA TOBACCO TRADING CO

HCMP 723/2018

[2019] HKCFI 3115

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

MISCELLANEOUS PROCEEDINGS NO. 723 OF 2018

____________

____________

BETWEEN

____________

_________________

JUDGMENT

_________________

1.  This is the hearing for the appeal against the decision (“the Costs Decision”) of the Registrar of Trade Marks (“the Registrar”) dated 16 April 2018, under which the Appellant was ordered to pay the Respondent’s costs: (a) of and occasioned by the Appellant’s application for leave for cross-examination (“the Subject Application”); and (b) of the paper hearing requested by the Appellant’s solicitors dated 23 January 2018. The Respondent is the Applicant (“the Applicant”) whereas the Appellant is the Opponent (“the Opponent”) in the related trade mark application.

2.  This appeal arises out of a contested trade mark application. The Applicant seeks to register the subject mark in Class 34 (“the Subject Mark”) which is opposed by the Opponent. The hearing was originally scheduled to be heard on 13 March 2018.

3.  By way of a letter from the Opponent’s solicitors dated 12 January 2018, the Opponent applied to cross examine Mr Lewis Lionel Chanderson (“Mr Chanderson”) of the Applicant on his statutory declarations. Since “bad faith” is relied on as one of the grounds of opposition, the Opponent claims that it is entitled to test the veracity of the Applicant’s evidence regarding how the Subject Mark is alleged to have been devised.

4.  The Registrar provisionally refused the Subject Application on 15 January 2018. By a letter from its solicitors dated 23 January 2018, the Opponent requested for a paper hearing to deal with the Subject Application. The Registrar therefore gave directions for the filing of written submissions.

5.  By the written decision of the Registrar dated 2 March 2018 (“the Leave Decision”), the Registrar allowed the Subject Application. But since Mr Chanderson would not be available on the scheduled hearing date, the hearing was adjourned to a later date to be fixed with provisionally 2 days reserved. The Registrar had reserved the decision on costs.

THE REGISTRAR’S DECISION ON COSTS

6.  After receiving the parties’ written submissions on costs, the Registrar handed down the Costs Decision on 16 April 2018, ordering the Opponent to pay the Applicant’s costs: (a) of and occasioned by the Subject Application; and (b) of the paper hearing for the Subject Application as requested by the Opponent’s solicitors in their letter dated 23 January 2018.

7.  In the Costs Decision, the Registrar rightly identified 2 sets of costs involved in the Subject Application: (a) the costs of and occasioned (or thrown away or wasted) by the indulgence being granted and the cost of the summons by which the application for the exercise of a discretion was made; and (b) the costs of the contested hearing.[1]

8.  For the first set of costs, the Registrar took the view that there was considerable delay in the making of the Subject Application. As the Opponent was seeking the court’s indulgence in granting the Subject Application at a late stage, the Opponent should pay for the costs of the Subject Application.

9.  In respect of the second set of costs, i.e. the costs of the contested paper hearing, the Registrar took the view that the Opponent should pay those costs as well. The Registrar gave 4 reasons:

(i) The mere act of opposing the Subject Application was not unreasonable as the Applicant did not have sufficient time to understand the Opponent’s position and to negotiate a resolution.

(ii) The substantive submissions of the Opponent were only revealed in the reply round of the submissions.

(iii) The Opponent was not successful in justifying the delay in the making of the Subject Application by reference to the provisions in the Trade Marks Registry Work Manual (“the Work Manual”).

(iv) The Registrar only granted the late application in order to secure a just resolution of the disputes between the parties.

10.  The Opponent now appeals against the Costs Decision.

THE RELEVANT LEGAL PRINCIPLES

11.  There is no dispute between the parties about the following legal principles regarding appeals from the Registrar:

(i) On an appeal from a decision of the Registrar, the court should not interfere with the decision unless it is satisfied that it is wrong in principle. The kind of error in principle as may justify interference includes approaching the problem incorrectly, taking into consideration matters which the Registrar ought not to have taken into consideration, or omitting to take into consideration matters which should have been considered.[2]

(ii) On hearing an appeal from the Registrar, the Court of First Instance is exercising an appellate jurisdiction, testing against the relevant principles whether the Registrar was in distinct and material error in reaching the decision on the materials then before the Registrar. The Court of First Instance is not exercising a function as though it were a first instance court deciding on registration by reference to whatever may be the factual circumstances pertaining as at the date of the hearing of the motion by which the appeal is brought.[3]

12.  In Re NAKED[4], Rogers VP stated the following:

“In my view, the correct approach is that the Registrar’s opinion has to be fully and carefully considered. The Registrar has very particular experience. Any departure from the way in which the Registrar exercised his discretion has to be made upon a sound basis after giving full and most careful consideration to the Registrar’s views and reasons. The exercise of discretion by the Registrar should not be overruled simply because the court itself might have come to a different conclusion. Essentially, therefore, a similar approach should be taken to the exercise of discretion by the Registrar as by a judge.”

13.  In Capital Dynamics Sdn Bhd v Capital Dynamics Holding AG[5], DHCJ Manzoni SC had summarized the correct approach to an appeal against the decision of the Registrar. The learned Judge reiterated that the court should interfere with the Registrar’s decision only where it is satisfied that the Registrar acted on some wrong principles. This is a threshold test which must be satisfied before the court should thereafter engage upon the underlying merits of the decision.

14.  The appellate court will also be slow in interfering with an order of costs made by the lower court or tribunal. In Lai Siu Wai Louis & Anor v Ho King Yin Edwin & Ors[6], the Court of Appeal stated the following:

“…. it is well-established that costs orders are in the discretion of the court, and that an appellate court would not interfere unless the order was contrary to principles of law or was “demonstrably flawed”. Indeed, prior to the Civil Justice Reform, when leave was not required for interlocutory appeals, the only interlocutory appeal for which leave was required was an appeal from a costs order. That showed the court’s recognition of the width of the discretion given to the judges when making costs orders.”

15.  Further, the general rule of costs following the events does not apply in interlocutory proceedings.[7]  In Melvin Waxman & Anor v Li Fei Yu & Anor[8], a case cited by the Registrar in the Costs Decision, To J summarized the position as follows:

“Summing up on the post-CJR position, I think the court has much wider discretion as to costs in interlocutory proceedings. Unlike other proceedings, the general rule of costs following the events do not apply. The court is entitled to take into account all the circumstances of the case, including those set out in r 5, to make such order as it thinks fit. In the exercise of its discretion, the court may take the issue-based approach or may take into account merit of the parties’ case or the possible outcome of the action. The circumstances of interlocutory proceedings are so numerous that it is impossible to make any general rule. Costs to follow the event and costs be to the successful party’s costs in the cause are obvious options.”

MERITS OF THE APPEAL

16.  The Opponent has advanced 2 grounds of appeal against the Costs Decision.

(i) First ground of appeal

17.  Under the first ground of appeal, the Opponent’s main contention is that the Registrar erred in finding that there was delay on the part of the Opponent in making the Subject Application. The Opponent contends that the Registrar erred in failing to consider or to give sufficient regard to the fact that the Opponent had, at all material times, been relying on the Work Manual on the timing of making such an application. Further, even if there were such delay, the Opponent argues that there is no justification to order it to pay for the costs of the Subject Application.

18.  There is no merit in such ground.

19.  First, there is plainly no question that there had been substantial delay in making the Subject Application. It is not in dispute that the Opponent had already been advised by its senior and junior counsel on the need of cross-examination at an earlier stage of the proceedings[9], and in any event no later than 7 May 2015[10]. Despite that, the Subject Application was only made on 12 January 2018, i.e. more than 2.5 years after receiving such advice and shortly before the substantive hearing.

20.  The delay was obvious and substantial. It was under such circumstances that the Registrar rightly held that: “In my view, [the Subject Application] came at too late a stage where the focus should well be spent on the preparation of the imminent substantive hearing rather than on arguing whether or not leave should be granted for cross-examination.”[11]. The Registrar did not commit any error in making such finding. In fact, the Registrar was plainly right in finding that there was delay on the part of the Opponent.

21.  The Opponent seeks to justify the delay by relying on the following provision in the Work Manual under the Chapter on “Evidence”:

“Any party wishing to cross-examine any person who has filed a statutory declaration should notify the Registrar and the other party as soon as practicable after the date for the hearing of argument is notified to the parties.”

22.  As the notice of hearing was only given on 20 December 2017, the Opponent claims that there was no delay when it made the Subject Application on 12 January 2018. According to Ms Wong, counsel for the Opponent, her client cannot be faulted for simply following the guidelines contained in the Work Manuel, which was updated recently in 2017. If the Opponent were to make the Subject Application prior to the giving of the notice of hearing, the Applicant would probably have opposed the application on the ground that it was pre-mature. Further, she relies on a number of authorities such as Pharmedica GMBH’s Trade Mark Application[12], Re Application No. 300735066[13], Re Application No. 199405863 & 199500722[14]; Re Application No. 300954810[15], with a view to show that the Work Manual were often referred to and relied upon in trade mark applications.

23.  I cannot accept Ms Wong’s argument. As set out in the Court of Appeal’s judgment in Mattel Inc v De Luxe Manufacturing Ltd[16], the guidelines promulgated by the Registrar in the Work Manual are only guidelines and they do not have the force of law. Mr Wong, counsel for the Applicant, has also referred me to the following passage in the website of the Intellectual Property Department which succinctly summarises the legal status of the Work Manual:

“The Work Manual is a guide for the Trade Marks Registry in relation to examination of applications for registration and practice in other proceedings under the Trade Marks Ordinance (Cap. 559). The information contained is not adapted to any particular person's circumstances and many details, which may be relevant to particular circumstances, have been omitted. Accordingly, it cannot be relied upon to be a complete and authoritative guide and should not be quoted as or considered to be a legal authority. Full consideration must be given to all the relevant factors and each case must be considered on its merits.”

24.  In the Leave Application[17], the Registrar made the comment that some of the provisions in the Work Manual may not be in line with modern practice, and he did not see the rationale why an application to cross-examine a witness should only be made after the hearing notice for the substantive hearing has been issued.

25.  In another trade mark application proceedings, Re Chitlink Electronic International Ltd[18], Mr Kripas, the Acting Registrar, also commented that the proper time for making an application for cross-examination should be after the conclusion of the evidence. In that case, the Acting Registrar was prepared to entertain the last-minute application bearing in mind his power to award costs to compensate the applicant.

26.  Costs order is an effective tool to regulate the conduct of legal proceedings. If the Work Manual does not have the force of law, the court should respect the Registrar’s view as to how proceedings should have been conducted in the Trade Mark Registry.

27.  The Opponent’s purported justification for the delay by relying on the Work Manual was raised before the Registrar[19], and was fully considered by the Registrar in the Leave Application.[20] Accordingly, the complaint that the Registrar had committed an error in “failing to consider or to give sufficient regard” to such argument is clearly incorrect.

28.  In her submissions, Ms Wong argues that the Registrar had wrongly relied on the case of Lessy SARL v. Pacific Start Development Ltd[21] and erred in considering the relationship between delay and the costs of the Subject Application by relying on entirely different and inapplicable principles on amendment of pleadings.

29.  I cannot accept such argument. The courts often have to deal with late applications where the parties are asking the courts to grant indulgence by making orders which should have been sought much earlier, for examples applications to file further witness statements or supplemental lists of documents shortly before trials. Parties seeking such indulgence, in particular when hearings would have to be adjourned by reason of such applications, are often expected to pay for the costs of the application. It is clear that the principle set out in Lessy SARL is not limited to interlocutory applications for amendments. It is generally applicable where the applicant is seeking the indulgence of the court.[22]

30.  Ms Wong has also referred me to the case of Re Moulin Global Eyecare Holdings Ltd.[23] and the English Trade Marks Registry Decisions of O/035/15 and O/140/15 to suggest that the courts or Trade Marks Registry might deal with costs relating to similar applications differently. However, each case would have to be determined according to its own facts. There is simply nothing to suggest that the Registrar’s decision in the present case was made contrary to established principles or flawed.

31.  Ms Wong also seeks to argue that the Registrar made an error in considering that the Work Manual was outdated when in fact the relevant subject rule and Chapter were just updated on 8 August 2017, and he had also failed to consider or give sufficient regard to the fact there was nothing to suggest to the Opponent that the said Chapter is not up-to-date or inapplicable.

32.  However, the Registrar did not actually hold that this particular Chapter on “Evidence” is out of date. He was merely commenting on the status of the Work Manual generally at page 7 of the Leave Decision. More importantly, whether or not this particular Chapter is up to date is quite irrelevant. The Work Manual simply does not have the force of law and the Opponent cannot rely on it to justify the substantial delay.

33.  Furthermore, even if the Work Manual does have the force of procedural law (which I do not accept it to be the case), there was nothing to stop the Opponent from notifying the Registrar and the Applicant of their intention to cross-examine Mr Chanderson. It is clear that his attendance at the hearing is crucial if he is going to be cross-examined. In order to secure his attendance and to avoid the adjournment of the substantive hearing, the Opponent should have alerted the Registrar and the Applicant of the Subject Application much earlier. The Opponent did not explain why it had failed to do so.

34.  As the Registrar found that there had been substantial delay in making the Subject Application, it was absolutely proper for him to treat such application as an indulgence to the Opponent to entertain a belated application which would have the effect of vacating the substantive hearing. Hence, the Registrar was entitled to order the Opponent to pay the first set of costs as identified in §7 above, and I find no merit in the first ground of appeal.

(ii)     Second ground of appeal

35.  Under the second ground of appeal, the Opponent contends that the Registrar erred in failing to consider or to give sufficient regard to the fact that in opposing the Subject Application, the Applicant had unduly and unsuccessfully adopted the Subject Application as an avenue in seeking to prevent the Opponent from relying on the “bad faith” ground of objection in the opposition proceedings. The Opponent contends that considerable costs were expended by the parties arguing on such matter and that the Registrar had failed to take such into account.

36.  This ground is more related to the second set of costs awarded by the Registrar, i.e. the costs of the contested hearing.

37.  Again I find no merit in such argument. In fact, the Opponent had argued this very same point in their costs submissions before the Registrar.[24]  Such contention was duly considered by the Registrar in the Costs Decision, and he had specifically explained why he considered that the Opponent should be awarded the second set of costs in the context of the present application. 

38.  The Registrar did not consider the Applicant’s opposition unreasonable. The Registrar gave 4 reasons in justifying this in the context of the present application.[25] The reasons given by the Registrar cannot be faulted. At the very least, it cannot be shown that the Registrar’s decision in this regard “was contrary to principles or was demonstrably flawed”[26].

39.  For the above reasons, I dismiss the appeal. I also make a cost order nisi that the costs of the appeal be to the Applicant which shall be made absolute 14 days after the date of the handing down of this Judgment.