CHI WING AND LAW OI YING t/a SINGAPORE HEADWAY MEDICINE CO v. LAW YAN WAI t/a SINGAPORE MEDICINE CO

DCCJ 584/2021

[2022] HKDC 1049

IN THE DISTRICT COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

CIVIL ACTION NO 584 OF 2021

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DECISION

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1.  The Plaintiffs apply by way of Summons dated 27 October 2021 for (a) summary judgment against the Defendant; and (b) striking out the Counterclaim filed on 4 August 2021 by the Defendant.

2.  The Plaintiffs (“Ps”) are husband and wife and Madam Law Oi Ying is the wife of Chi Wing. At all material times, they have been trading as “Singapore Headway Medicine Co. 星加坡鴻威藥業公司” in the business of manufacturing, marketing and selling of various Chinese medicinal products (including medicinal oil products).

3.  The Defendant (“D”) is the brother of Madam Law. At all material times, D has carried on similar business as the Ps in the manufacturing, marketing and selling various Chinese medicinal products (including medicinal oil products) under the name “Singapore Medicine Company 星洲藥業”.

4.  On 18 July 2008, Ps, D and a company called Putai Limited (“Putai”) (collectively “the Contractual Parties”) entered into a written settlement agreement in Chinese (“the Settlement Agreement”) for the settlement of their various disputes arising from the Contractual Parties’ application, registrations and use of trademarks consisting of “骨刺靈”, “七星”, “垃圾草” and “雪山” with the Hong Kong Trade Marks Registry (“the Registry”).

5.  There is no dispute that Putai is a limited company incorporated in Hong Kong and that D has been a director and a controlling shareholder thereof.

6.  On 21 November 2019, Ps applied to register a mark incorporating the term “垃圾草” for Class 3 and Class 5 goods with application no. 305118480. D opposed the said application in its entirety on 12 June 2020 (“the Opposition).

7.  On 5 February 2021, Ps issued the writ with the statement of claim against D for breach of the Settlement Agreement and claimed for damages and an order that D shall withdraw his opposition. D filed his Defence on 4 August 2021 denying Ps’ claim.

8.  In his Defence, D contended that he had not breached the Agreement and that it was Ps who had breached the Agreement on the grounds that :-

(a)  Ps did not write to D and make a request to apply to register the mark which incorporated “垃圾草” in accordance with Clause 丙(1) of the Agreement.

(b)  Ps had not obtained the written consent in the form of Appendix 1 to the Agreement before applying to register such mark.

(c)  Ps had not obtained consent from D before applying to register such mark.

9.  In paragraph 10 of the Defence, D further pleaded that Ps were in breach of the implied term of the Agreement without particularizing the same.

10.  In D’s affirmation, he raised a further point (which has not been pleaded in the Defence) that the Settlement Agreement only covers Class 5 goods but Ps’ application included both Class 3 and Class 5 goods. Hence, D argues that he is entitled to oppose Ps’ application. Mr Au, counsel for D, confirmed that D would amend the Defence to incorporate this defence if leave to defend were to be given.

11.  Both parties agree that the issue before the court turns on the interpretation of the Settlement Agreement and, in particular, Clause 丙(1). The parties do not dispute the applicable legal principles. The general principles on contractual construction or interpretation are well-established. In Investors Compensation Scheme Ltd v. West Bromwich Building Society [1998] 1 WLR 896, Lord Hoffmann held (at 912F-913F):

(a)  Interpretation is the ascertainment of the meaning which the document would convey to a reasonable person having all the background knowledge which would reasonably have been available to the parties in the situation in which they were at the time of the contract.

(b)  Subject to the requirement that it should have been reasonably available to the parties and to the exception to be mentioned next, “background knowledge” includes anything which would have affected the way in which the language of the document would have been understood by a reasonable man.

(c)  The law excludes from the admissible background the previous negotiations of the parties and their declarations of subjective intent. They are admissible only in an action for rectification. The law makes this distinction for reasons of practical policy and, in this respect only, legal interpretation differs from the way we would interpret utterances in ordinary life.

(d)  The meaning which a document (or any other utterance) would convey to a reasonable man is not the same thing as the meaning of its words. The meaning of words is a matter of dictionaries and grammars; the meaning of the document is what the parties using those words against the relevant background would reasonably have been understood to mean. The background may not merely enable the reasonable man to choose between the possible meanings of words which are ambiguous but even (as occasionally happens in ordinary life) to conclude that the parties must, for whatever reason, have used the wrong words or syntax.

(e)  The “rule” that words should be given their “natural and ordinary meaning” reflects the common sense proposition that we do not easily accept that people have made linguistic mistakes, particularly in formal documents. On the other hand, if one would nevertheless conclude from the background that something must have gone wrong with the language, the law does not require judges to attribute to the parties an intention which they plainly could not have had.

12.  There is also no dispute between the parties on the legal principles relating to O.14 application for summary judgment: The burden is on the defendant to show triable defence. Judgment will only be given where the defence put forward is frivolous and practically moonshine. Christie Mansion & Woods Ltd & Anor v Chritrs (Group) Ltd [2013] 2 HKC 215, at 219-221.

Discussion

13.  For easy reference, I shall set out Clause 丙(1) of the Settlement Agreement which states that

“星州、浦泰及鴻威同意其各自包含“垃圾草”的商標與本協議其他方包含“垃圾草”的商標共存，同意本協議其他方註冊及使用包含“垃圾草”的商標，唯各方在使用包含“垃圾草”的商標時，須在貨品包裝上印上各自的公司名稱， 以避免混淆。另如任何一方提出包含“垃圾草”的商標的註冊申請，本協議其他方同意在申請註冊一方提出要求下及14天內，提供書面同意書（樣本見附件一），確認其同意申請註冊一方註冊包含“垃圾草”的商標。”

14.  The basis of Ps’ claim is that by reason of the Settlement Agreement, the parties have agreed to give each other the right to register the trademark “垃圾草”. When D filed his opposition to Ps’ application to register the trademark, D has breached the Agreement.

15.  Mr Au, counsel for D, argues in essence that pursuant to the Settlement Agreement, Ps have to request and obtain a prior written consent from D when they apply for registration of the trade mark “垃圾草” as agreed under Clause 丙. He further argues that Clause 丙(1) and the Appendix Form ensures that the other party can consider, assess and confirm the applying party’s registration of the mark before giving his consent.

16.  With respect, I find D’s proposed interpretation entirely inconsistent with the wordings of the Agreement. D’s proposed interpretation suggests that a party retains a right to refuse to agree to the other party’s application for registration. This is unsupported by the language of the clause. I reject D’s proposed interpretation.

17.  I agree with Mr Wong, counsel for Ps, that under Clause 丙(1) the Contractual Parties have agreed:

(a)  to the co-existence of each of the other Contractual Parties’ respective trademark(s) which incorporates the Chinese words “垃圾草”;

(b)  to each of the other Contractual Parties’ registration and use of their respective trademark(s) which incorporates the Chinese words “垃圾草”;

(c)  when a Contractual Party is using the “垃圾草” trademark, the respective party must print its company’s name on the package of its goods, in order to avoid any confusion, and

(d)  that if any of the Contractual Parties file an application for the registration of a trademark incorporating the Chinese words“垃圾草”, the other Contractual Parties agrees to, upon the request of the Contractual Party applying for the trademark registration, provide within 14 days a written consent (specimen of which was enclosed as Appendix 1 of the Settlement Agreement) to confirm its consent to the Contractual Party’s application for the registration of a trademark incorporating the Chinese words “垃圾草”.

18.  I am of the view that on a proper interpretation of Clause 丙(1), each of the Contractual Parties can apply and “register” any mark incorporating the term “垃圾草”. Each party is also entitled to “use” any mark incorporating the term “垃圾草”. The right to register is unconditional and there is no qualification to such right. However, the right to “use” is qualified by the following sentence such that each party has to print the name of the company on the packaging upon such use (“唯各方在使用包含“垃圾草”的商標時，須在貨品包裝上印上各自的公司名稱，以避免混淆”).

19.  The additional sentences “另如任何一方提出包含“垃圾草”的商標的註冊申請，本協議其他方同意在申請註冊一方提出要求下及14天內，提供書面同意書（樣本見附件一），確認其同意申請註冊一方註冊包含“垃圾草”的商標”, only oblige a party to provide written consent if the other party requests it. It cannot be construed, as D suggests, as a condition for the applying party to request for prior consent from the other party.

20.  As Ps had set out in the supporting affirmation which is not disputed, one of the situations is that during examination of a trade mark application by the Registrar, objection may be raised by reason of a conflict with an earlier mark. In such circumstances, the applicant will have to either file submissions to convince the Registrar, or to obtain the consent from the owner of the earlier mark, in order to proceed to the publication of the application. Further, it should be noted that the specimen consent form is to be issued to the Registrar of the Trademark Registry which also goes to support that the last part of Clause 丙(1) was intended to be used to facilitate the application process if such situation arises. Accordingly, I reject D’s contention in this regard.

21.  In respect of the implied term pleaded under paragraph 10 of the Defence, it has not been properly particularized. D has not elaborated this point further in the affirmation filed or in his submissions, no triable issue has been demonstrated on the alleged breach of the implied term of the Agreement.

22.  As regards Mr Au’s argument that the Settlement Agreement only covers Class 5 goods, Ps disagree. Ps contend that the Agreement does not limit to Class 5 goods and that there should be no limitation. In the course of their submissions, both parties agree that in the opposition filed with the Trademark Registry D could choose to object to both Class 3 and 5 or just one of them. In the present case, D opposed to both.

23.  I agree with Mr Au that reading the Settlement Agreement as a whole, including in particular the preamble, Clauses 丙 (2) and 丙 (3), and the specimen written consent attached to the Agreement, it is reasonably arguable that the Settlement Agreement is intended to covers only Class 5 goods.

24.  There is no dispute that the various trademark disputes leading to the Settlement Agreement in 2008 were all related to Class 5 goods, including those related to the trademark “垃圾草”. The preamble of the Agreement under “鑒於” sets out clearly that the trademark disputes of the Contractual Parties related to Class 5 goods.

25.  Clause丙 (2) states that Singapore Headway Medicine Company agrees to withdraw the opposition filed against Singapore Medicine Company’s “垃圾草” trademark application No. 300363005 in Class 5 goods, and will withdraw the opposition with the Hong Kong Trade Marks Registry within 7 days of the signing of the Settlement Agreement.

26.  丙 (3) states that Singapore Headway Medicine Company and Putai agrees not to claim each other any fees (including lawyer’s fees) in relation to the opposition proceedings concerning Putai’s Class 5 “垃圾草” goods related application no. 300037250.

27.  It is also important to note that in the specimen written consent which was intended to be used for future registration and use by the Contractual Parties, it specifically refers to consent being given to trademark registrations for Class 5 goods.

28.  I am of the view that it is reasonably arguable that the Settlement Agreement covers only Class 5 products. Accordingly, I am satisfied that

(1)  there is a triable issue in respect of D’s opposition to Ps’ application for the mark incorporating the term “垃圾草” for Class 3 goods;

(2)  there is no defence and no triable issue in respect of D’s opposition to Ps’ application for the mark incorporating the term “垃圾草” for Class 5 goods.

29.  In respect of D’s counterclaim, it simply repeats what has been pleaded in the Defence. In view of my rejection of D’s proposed interpretation that Ps have to request and obtain a prior written consent from D when they apply for registration of the trade mark “垃圾草”, D’s claim against Ps for breach of the Settlement Agreement becomes unsustainable. It is plain and obvious that D’s counterclaim does not disclose any cause of action and/or that it is frivolous. I order that D’s counterclaim be struck out pursuant to O.18 r. 19 and or the inherent jurisdiction of the Court.

30.  In the Statement of Claim, Ps also claim for an injunction to permanently restrain D from, in any manner, challenging, obstructing and/or opposing any use, registration and/or application of any trade mark incorporating “垃圾草” by the Ps. I consider it far too wide and inappropriate in the circumstances of the present case. I am not minded to grant such injunction.

Orders

31.  I grant the following orders:

(1)  A declaration that the Defendant has breached the Settlement Agreement dated 18 July 2008 by filing opposition to the Plaintiff’s Trade Mark Application No. 305118480 “金波士垃圾草” relating to Class 5 goods;

(2)  The Defendant shall withdraw the Opposition relating to Class 5 goods within 14 days from the date of this Order;

(3)  Damages to be assessed in respect of the costs incurred by the Plaintiffs in the Opposition relating to Class 5 goods;

(4)  The Defendant’s Counterclaim be struck out;

(5)  Unconditional leave to the Defendant to defend the Plaintiffs’ claim in respect of his Opposition to Class 3 goods.

Costs

32.  In respect of the O.14 application, both Ps and D are partly successful. In the striking out application, Ps succeeded in striking out D’s counterclaim. In the circumstances, I shall exercise my discretion to order the Defendant to pay half of the costs. I shall make a costs order nisi that the Defendant do pay the Plaintiffs half of the costs of and occasioned by this application with certificate for counsel, to be taxed if not agreed. This costs order nisi is to become absolute after 14 days from the date of this decision absent any application to vary the same by summons.

33.  Lastly, I thank both counsel for their helpful submissions.