BUILDTECH ENTERPRISE INTERNATIONAL LTD AND OTHERS v. OK CONSTRUCTION MATERIALS (SUPPLY) CO LTD

HCIP 14/2021

[2021] HKCFI 1837

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

INTELLECTUAL PROPERTY PROCEEDINGS NO. 14 OF 2021

(formerly HIGH COURT MISCELLANEOUS PROCEEDINGS

NO. 132 OF 2021)

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	IN THE MATTER OF The Trade Marks Ordinance (Cap. 559)
	AND IN THE MATTER OF Hong Kong Trade Mark Registration No. 302462085
	in Class 19 in the name of OK Construction Materials (Supply) Company Limited (可以建材(供應)有限公司)
	AND IN THE MATTER OF an application for a declaration of invalidity of the said registration by (1) Buildtech Enterprise International Limited (俊溢企業國際有限公司); (2) Buildtech Enterprise Limited (俊溢企業有限公司); (3) Chow, Ka Hung (周嘉鴻); (4) Chow, Siu Lun (周紹麟)under the said Ordinance (“TMO”) for pursuant to section 53(3)

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REASONS FOR DECISION

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1.  This is the substantive hearing of the summons dated 13 April 2021 (“Summons”) for security for costs by the Defendant against the Plaintiffs in the sum of about $1.28 million under O 23 r 1(1)(c) of the Rules of the High Court (“RHC”), Cap 4A and s 905 of the Companies Ordinance (“CO”), Cap 622. In the hearing on 22 June 2021, I dismissed the Summons with no order as to costs. I now give my reasons.

Background

2.  This action concerns the Plaintiffs’ application for invalidation of Trade Mark No. 302462085 “” registered in class 19 on 10 December 2012 by the Defendant pursuant to, amongst other grounds, ss 53(3) and 11(5)(b) of the Trade Marks Ordinance, Cap. 559.

3.  In gist, the Defendant’s grounds in support of the security for costs application are that:

(i)  the registered office addresses of the 1^st and 2^nd Plaintiffs and the residential addresses of the 3^rd and 4^th Plaintiffs were falsely stated in the Originating Summons dated 28 January 2021 (“OS”) and such false statements were deliberate; and

(ii)  the 1^st and 2^nd Plaintiffs, being limited companies, are not in a position to satisfy any adverse costs orders which may be made against them.

4.  The following facts are not in dispute:

(i)  The parties are in the construction materials business and have in the past supplied, amongst other things, Taiwan-manufactured angle beads bearing an “OK” pattern to their respective customers in Hong Kong.

(ii)  The 2^nd and 1^st Plaintiffs are Hong Kong companies incorporated in 1999 and 2002 respectively whilst the Defendant was incorporated in 2001.

(iii)  The 4^th and 3^rd Plaintiffs are father and son and they are ordinarily residents in Hong Kong.  The 4^th Plaintiff is a director and shareholder of the 2^nd Plaintiff.  The 3^rd Plaintiff is a director and shareholder of the 1^st Plaintiff and he is also a shareholder of the 2^nd Plaintiff.

(iv)  In the OS:

(a)  the residential addresses of the 3^rd and 4^th Plaintiffs are stated to be at House 137, Wang Toi Shan Shan Tsuen, Pat Heung, Yuen Long, New Territories, Hong Kong (“House 137 Address”); and

(b)  the registered office addresses of the 1^st and 2^nd Plaintiffs are stated to be at DD106, Lot 1341, Kam Sheung Road, Ng Ka Tsuen, Kam Tin, Yuen Long, New Territories, Hong Kong (“DD106 Address”).

(v)  On 16 January 2020, the 3^rd Plaintiff acquired a property known as No 78, Ma On Kong, G/F, Pat Heung, Yuen Long, New Territories, Hong Kong for $6 million (“Ma On Kong Property”).

(vi)  Prior to November 2020, the registered office addresses of the 1^st and 2^nd Plaintiffs were the DD106 Address.  On 24 November and 23 December 2020, the registered office addresses of the 1^st and 2^nd Plaintiffs were respectively changed to DD114 Lot 709B Wong Chuk Yuen, Sheung Tsuen, Yuen Long, New Territories (“DD114 Address”) pursuant to the two Notices of Change of Registered Office.

The relevant legal principles

5.  O 23 r 1 of the RHC provides:

“(1)  Where…it appears to the Court –

………

(c)  subject to paragraph (2), that the plaintiff’s address is not stated in the writ or other originating process or is incorrectly stated in therein,

… … …

then if, having regard to all the circumstances of the case, the Court thinks it just to do so, it may order the plaintiff to give such security as it thinks just.

(2)  The Court shall not require a plaintiff to give security by reason only of paragraph (1)(c) if he satisfies the Court that the failure to state his address or the mis-statement thereof was made innocently and without intention to deceive.”

6.  An order for security for costs is not intended to be a sanction against the use of an incorrect address without a proper explanation.  There should be an element of deception in the misstatement in order to justify an order for security for costs. This is why a plaintiff can avoid giving security by showing that he did not have any intention to deceive under r 1(2).  The purpose of an order for security under O 23 r 1(1)(c) is not to facilitate enforcement of judgments. It is targeted at deceitful plaintiffs only and not those who do not have assets readily amenable to easy execution.[1]

7.  The principles governing the application for security for costs under s 905 are also well established.

8.  The burden is on the defendant to establish by credible evidence that there is reason to believe that the plaintiff company will not (as opposed to may not) be able to pay the costs of the defendant if it is successful in its defence. The defendant is not expected to produce conclusive evidence of the plaintiff’s lack of means.  It suffices for the defendant to point to the surrounding circumstances or adduce some credible evidence in support of such belief.  It is then up to the plaintiff company to adduce such evidence as it thinks fit to demonstrate its means or to contradict the defendant’s evidence.  The court shall decide whether a reasonable person with ordinary experience of daily life would consider the plaintiff unable to pay such costs.  The fact that the plaintiff has a nominal paid-up capital is not by itself sufficient to trigger the court’s jurisdiction to order security.[2]

Discussion

9.  In my judgment, the evidence available at this stage does not justify the court to order any of the Plaintiffs to pay security for costs whether under O 23 r 1(1)(c) of the RHC or s 905 of the CO.

10.  It is true that the registered office addresses of the 1^st and 2^nd Plaintiffs were incorrectly stated in the OS.  In November and December 2020, they had already informed the Companies Registry that their registered office addresses were changed to the DD114 Address.  In such case, the old address, i.e.  DD106 Address, stated in the OS must be incorrect.

11.  It was odd that when the Defendant’s solicitors made enquires with the Plaintiffs’ solicitors on such issue, the Plaintiffs’ solicitors initially insisted that the addresses stated in the OS were correct.  Nevertheless, this could not have been an attempt to mislead or deceive the Defendant as the correct addresses can easily be found in the updated returns of the 1^st and 2^nd Plaintiffs at the Companies Registry.  If they had any intention to deceive the Defendant about their registered addresses, they would not have bothered to inform the Companies Registry of their change of registered office addresses.

12.  The 3^rd and 4^th Plaintiffs have provided the House 137 Address as their addresses in the OS.  According to the Defendant, such address is “incomplete” or “non-existent”, based on its inquiries with real estate agents and the Lands Registry.  However, based on the various correspondence (including electricity and water bills and correspondence with the Inland Revenue Department, insurance companies and banks) supplied by the Plaintiffs, it can be seen that the family of the 3^rd and 4^th Plaintiffs could be contacted through the House 137 Address.  If the House 137 Address is an incomplete or non-existent address, one cannot explain why the 3^rd and 4^th Plaintiffs could have obtained such correspondence.  Whether Madam Yau stated in some of these correspondence is indeed the wife of the 4^th Plaintiff is quite a non-issue.   The fact remains that the mailings can reach the House 137 Address.

13.  Another issue is why the 3^rd Plaintiff has provided the House 137 Address as his address in the OS when he had bought the Ma On Kong Property in January 2020.   According to the 3^rd Plaintiff’s explanation, he had lived in the House 137 Address before the purchase of the Ma On Kong Property in early 2020.  After the purchase, there was decoration work to be done in the Ma On Kong Property and so he continued to use the House 137 Address as his residential address.  Ms Cheung, solicitor for the Defendant, queries the genuineness of such explanation.  According to her, the 3^rd Plaintiff could have provided photos of the Ma On Kong Property to show the progress of the decoration work and other documents to show his intention to use the Ma On Kong Property as his matrimonial home.

14.  Despite the lack of such evidence, I accept the 3^rd Plaintiff’s explanation as a genuine one.  If the 3^rd Plaintiff had intended to deceive the Defendant or tried to avoid disclosing his ownership of the Ma On Kong Property, there was simply no need for him to have informed the Companies Registry of his change of address.  It would have been a routine in litigations to conduct companies searches of the parties involved in the proceedings.  Despite the provision of the House 137 Address in the OS, there should be no difficulty for the Defendant, through searches to be made in the Companies Registry and the Lands Registry, to find out the 3^rd Plaintiff’s ownership of the Ma On Kong Property.  Under such circumstances, I do not accept that the provision of the House 137 Address was a deliberate attempt made by the 3^rd Plaintiff to deceive or mislead the Defendant.

15.  Now I turn to the s 905 application.   The contention that the 1^st and 2^nd Plaintiffs will not be able to satisfy any adverse costs order made against them is based solely on the observations of the Defendant’s manager, Mr Wong Wai Cheung, about the nature of the office premises of the 1^st and 2^nd Plaintiffs at the old DD106 Address as “merely a shack covered by metal sheets” and without “any proper flooring”.  The Defendant then says that “if the conditions of their previous place of business are anything to go by, it is likely that this is a similar shack type of place, and unlikely to have much valuables there to satisfy any execution on a costs order made against the 1^st and 2^nd Plaintiffs”.

16.  However, observations of the old DD106 Address back in 2019 can hardly amount to an accurate reflection of the present financial position of the 1^st and 2^nd Plaintiffs as of 13 April 2021 (the date of the Summons).   Further, I agree with Mr Tse, counsel for the Plaintiffs, that observations of the physical appearance of the premises cannot constitute “credible testimony” that the 1^st and 2^nd Plaintiffs are financially incapable of satisfying an adverse costs order for there is no correlation between the two.  If anything, the condition of the premises simply reflects the nature of the businesses of the 1^st and 2^nd Plaintiffs, namely the supply of construction materials and equipment.

17.  It is not disputed that that the 1^st and 2^nd Plaintiffs have been carrying on their business for the past 20 years and both are very much a going concern.  This is substantiated by: (i) the presence of vehicles, building materials, machinery and office accommodation owned by the 1^st and 2^nd Plaintiffs at the new DD104 Address; and (ii) a signed tenancy agreement for the lease of the said address until 14 December 2023 at a monthly rent of $55,000.  Despite the lack of perhaps vehicles registration documents, all these show that the 1^st and 2^nd Plaintiffs are continuing to operate the same business that they have running for the past 20 years.

18.  In view of the aforesaid, I agree with Mr Tse that the Defendant has failed to meet the threshold of adducing credible evidence to substantiate the belief that 1^st and 2^nd Plaintiffs will be unable to pay the Defendant’s costs if it is successful in its defence.  Hence, despite the lack of evidence about their financial conditions produced by the 1^st and 2^nd Plaintiffs, there is no justification for the court to order security under s 905 of the CO.

19.  I therefore dismissed the Summons in the hearing. Despite that the Plaintiffs are successful in resisting the Summons, I take the view that the Plaintiffs are somewhat responsible for bringing suspicions upon themselves.  The addresses of the 1^st and 2^nd Plaintiffs were incorrectly stated in the original OS.  For the addresses of the 3^rd and 4^th Plaintiffs, there is no official record showing that there is actually a House 137 at the site in issue.  For the 3^rd Plaintiff, there is still a discrepancy between his address given to the Companies Registry and that stated in the OS.  Though I accept that the mistake and confusion are genuine, the Plaintiffs are mainly responsible for bringing suspicions upon themselves.  I therefore ordered that there be no order as to the costs of the Summons.