NG LAI OI AND ANOTHER v. HUI TSZ CHUNG t/a AMERASIA TRADE CO

HCA 966/2015

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NO 966 OF 2015

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DECISION
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1.  On 4 May 2015 the plaintiffs commenced proceedings against the defendant for infringements of trademark and passing off. The 1^st plaintiff and the 2^nd plaintiff are respectively the exclusive licensee and the registered owner of the marks “Miyuki’s” which are registered as Trade Mark No 300609264 (“Trade Mark”) in class 29 (covering poultry and other food products) and class 30 (covering frozen strawberry with ice cream and seasonings). The plaintiffs also claim to be owners of the unregistered marks “美雪” and “Miyuki’s （美雪）” (“Marks”). The plaintiffs claim that they have been selling poultry, chicken meat products and chicken skewers (“Food Products”) under the Trade Mark and the Marks in Hong Kong ever since 2006.

2.  On 4 May 2015, the plaintiffs issued a summons (“Summons”) to seek interlocutory injunctions to restrain the defendant from infringing the Trade Mark, by passing off their business as the business of the 2^nd plaintiff, or as a business connected to or associated with the 2^nd plaintiff by the use of a mark confusingly similar to the Trade Mark or the Marks, and generally from selling, offering for sale or supply, putting on the market, importing or exporting, advertising or stocking for the practice of offering for sale any poultry and other food products, including frozen strawberry with ice cream and seasonings under or by reference to the Trade Mark, any of the Marks, or any mark confusingly similar thereto.  By the Summons, the plaintiffs also sought an order for the defendant’s delivery up to the plaintiffs’ solicitors, for safe custody until trial, of all articles, papers, materials and items of the defendant which bear the Trade Mark, any of the Marks, or any mark confusingly similar thereto.

3.  On the return day of the Summons on 8 May 2015, the Court gave directions for the filing of evidence, upon the defendant’s undertakings offered to the Court (“May Undertakings”), that they would not sell or offer for sale, advertise, put on the market or supply, in Hong Kong, or export, the Food Products which bear the Trade Mark or any of the Marks, or any mark comprising the word “Miyuki’s” or “美雪”, save and except Food Products provided or to be provided by the 2^nd plaintiff to the defendant.

4.  At the adjourned hearing of the Summons more than 3 months thereafter, on 18 August 2015, the parties confirmed to the Court that after 8 May 2015, there had been no correspondence or contact between the parties as to how the Summons was to be disposed of, apart from the filing of evidence pursuant to the directions of the Court and counsel’s exchange of skeleton arguments shortly before the hearing on 18 August 2015.  It was only at the hearing on 18 August 2015 that counsel informed the Court that the defendant was prepared to give an undertaking in terms of the draft order prepared by the plaintiffs’ counsel, which was a revision of the terms of the Summons.  The plaintiffs were prepared to accept, and the defendant was prepared to give, an undertaking for the defendant’s delivery up only of “materials and articles” bearing the Trade Marks, any mark confusingly similar thereto, or the Marks, which are used for labeling, packaging or advertising the Food Products.  In respect of the prohibitive injunction sought in the Summons, the Court was first informed that the defendant’s undertaking would not extend to the “importing” the Food Products, nor to the “stocking” of the Food Products for the purpose of offering same for sale.  In the course of arguments and as a result of queries raised by the Court, counsel for the defendant was finally able to confirm that the defendant’s undertaking would cover importing and stocking the Food Products for the purpose of offering them for sale.

5.  The issue remaining in dispute was whether the defendant should be ordered to pay the costs of the Summons and of the hearing, as the plaintiffs maintain.  Counsel for the defendant also sought costs on the basis that the plaintiffs had no grounds to insist on injunctions (instead of the undertakings, which were only offered at the hearing), for lack of a serious question to be tried in respect of the plaintiffs’ claims, and because damages would be an adequate remedy, and there was delay in the plaintiffs’ application for the injunctions sought. 

6.  Costs are in the discretion of the Court, which will take into consideration matters such as the conduct of the parties, the reasonableness, necessity and proportionality of the course of action they pursue, and to the extent possible and necessary at different stages of the proceedings, the merits of the parties’ claims. 

7.  On the entirety of the evidence, the plaintiffs have established a serious question to be tried, that the defendant had infringed the Trade Mark, or passed off his products or business as that of the plaintiffs’, or as being associated with the plaintiffs, by importing and offering for sale Food Products which bear the Trade Mark, the Marks “Miyuki’s （美雪）” and “美雪”.  This is clear from the evidence of the defendant supplying quotations to Hung Wan (one of the plaintiffs’ customers) for sale of Food Products under the mark “美雪”, photographs of the Food Products supplied by Penglai Minhe Food Co Ltd (“Penglai”) to the defendant in packaging bearing the Trade Mark and the Marks, and photographs of Food Products bearing the Trade Mark on the defendant’s website being offered for sale. 

8.  On the evidence adduced by the plaintiffs, as to the manner of the use of the Marks on the Food Products since 2006, and the sales of Food Products bearing the Trade Mark and the Marks from 2006 to 2015, the plaintiffs have also shown a serious question to be tried as to their reputation and goodwill in the Marks, and Food Products bearing the Marks.  On the defendant’s own case, the defendant placed orders for Food Products from Penglai by using “美雪” and referring to “美雪” poultry products. The defendant claims (affirmation of Lam Pui Yee Jessie of the defendant) that the defendant used this as reference to the specifications and standard of the Food Products they required from Penglai.  In my view, this is clear acceptance and acknowledgment by the defendant that the “美雪” Mark is known in the trade, between the defendant as wholesaler and importer and Penglai as manufacturer and supplier of Food Products, as to the type, quality, standards, specifications and/or packaging of the relevant Food Products.

9.  Whether or not the quotation issued by the defendant to Hung Wan referred to the Food Products which had been sold by the plaintiffs to the defendant; whether the order form issued by the defendant to Penglai for the Food Products to be supplied to the defendant was in the form exhibited to the plaintiffs’ affirmation, or in the form alleged by the defendant; whether the defendant had specified the Food Products to be supplied by Penglai to be exported to the defendant with and bearing the Trade Mark and the Marks; and whether the Food Products bearing the Trade Mark which are shown on the defendant’s website as being offered for sale are in fact the Food Products sold by the plaintiffs to the defendant, are all matters for cross-examination and for determination at trial, and cannot be resolved at the interlocutory stage.  Suffices it to say that the evidence reveals a serious question to be tried.  To the extent that the Court requires a higher degree of assurance for the grant of a mandatory injunction, I am so assured on the evidence.  It is also pertinent to note that the May Undertakings offered by the defendant, and accepted by the plaintiffs, and the draft order submitted on 18 August 2015 (“Draft Order”) already excluded from the prohibitive injunction the Food Products provided by the plaintiffs to the defendant.  The defendant’s dealings in the Food Products which was sold by the plaintiffs to the defendant were never restricted.

10.  The plaintiffs complain that the defendant had failed to show any arguable defence in the evidence which they filed in opposition to the Summons.  It is largely on this ground that they seek an order of costs against the defendant.

11.  I would agree that most of the facts and matters referred to in the affirmations filed on behalf of the defendant are irrelevant or unnecessary for the purpose of resisting the plaintiffs’ application by the Summons.  In this regard, I have highlighted to the parties in the course of the hearing the relevance and importance of bearing in mind the underlying objectives of the Civil Justice Reform: to increase the cost-effectiveness of the practice and procedure to be followed, to ensure that cases are dealt with as expeditiously as is reasonably practicable, to promote a sense of reasonable proportion and procedural economy in the conduct of proceedings, to facilitate the settlement of disputes and to ensure that the resources of the court are distributed fairly.  It is the duty of the parties to any proceedings and the legal representatives to assist the court to further these underlying objectives.  In deciding on the course of action to adopt in proceedings before the Court, parties (and their legal advisers in appropriate cases) should be prepared to bear the costs consequences, if the Court should find that they were unreasonable in their conduct of proceedings, had unnecessarily incurred costs and had failed to facilitate settlement of disputes which not only wastes the resources of the Court but is against their clients’ commercial interests.

12.  In the submissions made on behalf of the defendant, counsel referred repeatedly to the “lack of concrete evidence” and lack of “conclusive evidence”, and the plaintiffs’ failure to prove their case. These submissions and the facts adduced by the defendant in support of such submissions are inappropriate at this stage of an application for interlocutory injunction.  What is required to be established by the plaintiffs is a serious question to be tried, for infringement of trademark and passing off.  Whether there is concrete evidence to substantiate their case is a matter for trial.

13.  The arguments made on the lack of similarity between the Trade Mark “Miyuki’s”, and the Marks “Miyuki’s （美雪）”and “美雪”, and the plaintiffs’ alleged failure to prove the likelihood of confusion, are also untenable.  The likelihood of a reasonable purchaser of Food Products bearing the mark “Miyuki’s （美雪）” or “美雪” being confused that these goods are connected with, or are the same as, Food Products which bear the Trade Mark “Miyuki’s” is but plain and obvious.  Whether or not purchasers can pronounce “Miyuki’s” or understand its meaning is immaterial, when they can see the obvious similarity on the packaging, which is all but identical to the plaintiffs’.  Identical names and packaging are used for the Food Products sold by the plaintiffs and those offered by the defendant.  On such materials, for the defendant to suggest that evidence of actual confusion is required is, to say the least, unreasonable.

14.  Counsel also argued for the defendant that deception is required for passing off, and that the defendant had never represented to its customers that the Food Products they sold were those of the plaintiffs, “so as to deceive” such customers.  This is not an arguable defence. The authorities are clear that the “misrepresentation” which is the ingredient of passing off does not have to be made fraudulently, or with any intention to deceive (para 5-8, The Law of Passing-Off, Christopher Wadlow).  A misrepresentation “calculated” to deceive simply means, for the purpose of passing off, likely to deceive, as Lord Oliver explained in Reckitt & Colman v Borden [1990] 1 WLR 491:

“[The plaintiff] must demonstrate a misrepresentation by the defendant to the public (whether or not intentional) leading or likely to lead the public to believe that goods or services offered by him are the goods or services of the plaintiff.”

15.  Nor is innocence a defence to a claim of trademark infringement.  Counsel’s reference to and reliance on Pringle of Scotland Limited v Fung Yun Fong, Gloria HCA 236/2005, 3 May 2005, is totally out of context.  The reference to misrepresentation and deception has been explained above.  The reference to dishonest intent in the judgment was in the context of the plaintiff’s reliance in that case on s 21 (2) and dishonest practices for defeating the application of s 21 (1) of the Trade Marks Ordinance Cap 559 (“Ordinance”).

16.  I am satisfied that the plaintiffs have established a serious question to be tried that by offering Food Products under and by reference to the Trade Mark and the Marks, the defendant has misrepresented to its customers that their Food Products are the same as those offered by the plaintiffs in terms not only of origin, ingredients and taste, and where they are sourced, but also that they satisfy the standards of control and sale practices of the plaintiffs, such that it is likely to lead the public to believe that the Food Products are in fact those offered and controlled by the plaintiffs.

17.  As for the defendant’s reliance on s 20 of the Ordinance, it can even be said at this interlocutory stage that this is totally misconceived.  The manufacturer and supplier of the Food Products on the Mainland, Penglai, has no rights whatsoever in the Trade Mark and the Marks, which are the property of the plaintiffs, to whom Penglai simply sells and supplies Food Products.  Penglai never put the relevant Food Products which bear the plaintiffs’ Trade Mark and the Marks on the market with the consent or authority of the plaintiffs.  Penglai simply had no right to sell the Food Products which bear any of the Trade Mark and the Marks to the defendant.  It could only supply Food Products which bear the Trade Mark to the plaintiffs.  Nor did the plaintiffs, at any time, put the relevant Food Products (which were supplied by Penglai to the defendant but which bear the plaintiffs’ Trade Mark and the Marks) on the market.  The Food Products which were supplied by Penglai to the defendant under, by reference to, and bearing the Trade Mark and the Marks were simply unauthorized.  On the facts of this case, there is no exhaustion of rights under s 20 of the Ordinance.

18.  On the facts adduced at this stage, the only possible defence relates to the Food Products which the defendant had purchased from the plaintiffs, but as highlighted above, these have already been excluded from the defendant’s May Undertakings and from the Draft Order.

19.  The question of whether there was delay in the plaintiffs’ application in May 2015, when they first learned of the defendant’s offer of sale to Hung Wan in July 2014, depends on whether it can be established that the plaintiffs have suffered and will suffer irreparable damage if an interlocutory injunction is not granted by the court before trial. This application is made on inter-partes basis.  The plaintiffs explained that it has taken them time from July 2014 to gather evidence of the defendant’s dealings.

20.  The plaintiffs’ claims are for infringement of trade mark and passing off.  They have adduced evidence of their sales since 2006, and the decline in sales from April 2014 to March 2015, which they say is due to the defendant’s infringing activities, and his sale of Food Products bearing and by reference to the Trade Mark and the Marks at lower prices.  The plaintiffs claim that the loss of clientele and future business from their clients, as a result of the defendant’s infringing acts, is unquantifiable and irreparable. 

21.  I am satisfied that the plaintiffs have established that they will suffer irreparable damage if the injunction was not granted.  The exclusivity and distinctiveness of the Trade Mark and the Marks will be eroded, if the defendant is not restrained from dealing with and selling Food Products bearing and by reference to the Trade Mark and the Marks until trial, and if the plaintiffs succeed in establishing their claims at trial.  Such damage to the Trade Mark, the damage to goodwill, and the loss of custom, are all difficult to quantify and are irreparable.

22.  The balance of convenience weighs in favor of the plaintiffs.  The defendant will only be restrained from dealing with Food Products which bear the plaintiffs’ Trade Mark and the Marks, and is unrestricted in his business of selling other Food Products, including poultry products which do not bear the Trade Mark and the Marks.  The defendant is free to sell any of the Food Products which the plaintiffs had sold to him.

23.  In all, I agree that most of the arguments made on behalf of the defendant in opposition to the Summons are unmeritorious, and should not have been raised.  The substantial part of the hearing on 18 August 2015 was spent on dealing with the defendant’s arguments.  The defendant was not prepared at the commencement of the hearing to extend the May Undertakings to importation of the Food Products, and to stocking the said products for offering for sale.

24.  Neither side made any endeavor, after the hearing on 8 May 2015 and prior to the filing of evidence in compliance with the directions made on 8 May 2015, to clarify whether the Summons would be resisted in the event of the May Undertakings having been furnished, or whether the May Undertakings would continue until trial.  In that respect, I had already made it clear at the hearing that both sides had failed to further the underlying objectives of the Civil Justice Reform.  The costs of preparing the affirmations in opposition and in reply, and consequently the time and costs of the hearing on 18 August 2015, might have been saved, if the matters in issue could have been restricted or confined to areas on which the parties cannot agree.

25.  However, I am in agreement with the plaintiffs that, notwithstanding the May Undertakings, it is clear from the evidence filed on behalf of the defendant in May and August 2015 that he was opposing the Summons.

26.  In all the circumstances, I will order that the costs of the Summons (including the costs reserved on 8 May 2015) be in the cause, save that 50% of the costs of the preparation of the evidence filed after 8 May 2015 and all the costs of the hearing on 18 August 2015 are to be paid by the defendant to the plaintiffs, on the basis that these costs were unnecessarily and unreasonably incurred and wasted.  This is a mark of disapproval of the unmeritorious points unnecessarily raised in the evidence and in the submissions for the hearing.  The costs will include certificate for counsel for the plaintiffs.

27.  I also give leave to the defendant to file the affirmation of Lam Pui Yee Jessie, with costs to the plaintiffs.