LAU TAK WAH ANDY v. HANG SENG BANK LTD.

CACV612/2001

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF APPEAL

CIVIL APPEAL NO.612 OF 2001

(On appeal from High Court Action No.3968 of 1999)

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J U D G M E N T

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Hon Stone J (giving the judgment of the Court) :

The appeal

1. This is an interlocutory appeal mounted by the defendant herein, Hang Seng Bank Limited. It is from an Order of Mr Justice Cheung made on 27 March 2001 whereby he ordered, inter alia, that the defendant do answer interrogatories numbered 1, 2, 4, 5, 12 and 13 of the interrogatories without order served by the plaintiff on 27 October 2000. The defendant now asks this court to set aside this Order, and for an order that the interrogatories in question be withdrawn.

2. This is the third occasion upon which the subject of these interrogatories has been judicially canvassed. The objective observer might think that it provides a prime example of expensive (and non-productive) satellite litigation. Be that as it may. The matter was first debated before Master Betty Kwan, who by Orders dated 6 February 2001 acceded to the defendant's application by summons dated 27 November 2000, and ordered that interrogatories numbered 1, 2, 4, 5, 6, 7, 12 and 13 be withdrawn. In turn, this Order was appealed by the plaintiff, Mr Lau, to Mr Justice Cheung, the learned judge allowing the appeal in part, to the extent that the Order of the Master was varied to provide that the defendant answer six of the interrogatories, the judge below taking the view that items 6 and 7 rightly had been ordered to be withdrawn.

3. In answer to the defendant's Notice of Appeal dated 10 April 2001, the plaintiff has filed a Respondent's Notice dated 25 May 2001. There is no cross-appeal.

The factual background

4. The defendant is a well-known bank in Hong Kong. The plaintiff is a well-known entertainer. In this action, the plaintiff claims to have a substantial reputation and goodwill not only as a prominent entertainer, actor and singer, but also as an advertiser, promoter and endorser of goods and services in Hong Kong and Asia generally.

5. In short, Mr Lau's complaint against the bank is that his name, photograph, image and likeness have been wrongly used by the bank on and in the promotion of its credit cards and phone cards absent his licence or consent. Thus, it is alleged, the defendant has passed off its credit cards and phone cards as being credit cards and phone cards promoted or endorsed by the plaintiff, or that such cards are marketed and promoted by the bank under a commercial arrangement with Mr Lau, when in fact they are not.

6. It seems clear that the passing off action as now mounted is not of the conventional variety of passing off of goods and services, but that it involves that which is generally described as "character merchandising", which today appears to be a major business in its own right in a variety of fields.

7. The defendant bank denies passing off. It further denies misrepresentation, which is alternatively pleaded. Reliance by the defendant on the terms of a licence agreement with TVB is, it is agreed, not an issue in this appeal.

8. Against this background, we consider now the six interrogatories the subject of this appeal.

Interrogatories 1, 2, 4 and 5

9. Interrogatories 1 and 2 relate to credit cards, whilst nos. 4 and 5 relate to phone cards. They are drawn in the following terms :

"(1) What is the total number of applications for credit cards under the 'Hang Seng StarSelect' programme?

(2) What is the total number of the applicants who have selected a photograph, image or likeness of the Plaintiff in their applications for Hang Seng credit cards?

(4) How many Hang Seng credit cardholders were qualified to apply for the 'Megastar Collectible Phonecards' featuring a photograph, image or likeness of the Plaintiff?

(5) How many applications were received for the 'Megastar Collectible Phonecards' featuring a photograph, image or likeness of the Plaintiff?"

10. Mr Garland SC on behalf of the defendant bank took as his benchmark on this appeal the primary issue of materiality. In holding that these four interrogatories were relevant and necessary the learned judge was plainly in error, Mr Garland submitted. His argument was short. It ran thus. On the pleadings there was no issue between the parties in terms of Mr Lau's reputation as an entertainer, actor and singer. This assertion had been expressly admitted, and indeed, in the circumstances, it could hardly be otherwise. What had not been admitted, however, was the plaintiff's reputation as an endorser, promoter and advertiser of products and services. This was important because the thrust of the passing off action as now pleaded was that the defendant bank had passed off these cards as issued by it "as being credit cards and phone cards promoted and/or endorsed by the plaintiff and/or as being marketed and promoted under a commercial arrangement with the plaintiff". (Statement of Claim, paragraph 4)

11. Accordingly, the interrogatories in question must be viewed through this prism, said Mr Garland. Because in each of the four cases the answer, if ordered to be given, would be no more than a plain number. And such a number, whatever it might be in each case, had and could have no bearing on the plaintiff's reputation as an endorser, promoter or advertiser, which in the context of reputation and goodwill was the only live issue on the pleadings. It followed that whatever be the purely numerical response to each of these four questions, such numbers plainly were not revelatory as to the reason why applications were made by members of the public for credit cards or phone cards, and in particular whether application had been made for these cards because of Mr Lau's reputation as an entertainer/actor/singer (which was admitted), or whether it was because of Mr Lau's reputation as an endorser/promoter/advertiser of products and services (which was not).

12. Similarly, submitted Mr Garland, such purely numerical responses to these four interrogatories could not be relevant or material on the plain issue of misrepresentation. The alternative pleading (at paragraph 5 of the Statement of Claim) was that by its acts the defendant bank "misrepresented that the defendant's credit cards and phone cards were promoted and/or endorsed by the plaintiff and/or were marketed and promoted under a commercial arrangement with the plaintiff", and the mere number which would constitute the answer to each of these four questions could not be relevant or material in terms of reading the public mind which (absent a plea of fraud or intent to deceive on the defendant's part) constituted the only salient question on the misrepresentation issue.

13. For the plaintiff, Mr Kotewall SC sought to meet this argument by submitting that, at this stage of the proceedings, the concept of materiality and relevance was wide, and particularly so when the nature of the misrepresentation - involving the developing field of "character merchandising" - was, as a matter of law, likely to be controversial at trial. It was, he argued, essentially false and misleading to drive a wedge, as the defendant now attempted to do, between the probability of members of the public applying for these cards on the basis of Mr Lau's reputation as a popular entertainer as compared with whether such application was made because Mr Lau enjoyed a reputation qua advertiser and endorser.

14. The real point, submitted Mr Kotewall, was that applicants for cards bearing the plaintiff's likeness assumed such cards were good precisely by reason of Mr Lau's endorsement. In other words, there would be no question of any endorsement unless Mr Lau was well-known, and as a consequence the public associated the product or service which he endorsed with the desirability of that product or service. So that the issue of reputation and goodwill, both as an entertainer and endorser, was highly material, and represented something which was inextricably intertwined and not subject to arbitrary division.

15. If this be correct, said Mr Kotewall, the purely numerical responses to these interrogatories, whilst admittedly not conclusive in themselves, clearly had a signal bearing upon the issue of the plaintiff's reputation and goodwill, and quickly could demonstrate whether a substantial proportion of the credit card and phone card applicants in fact chose Mr Lau, which could not be immaterial to his reputation and goodwill both as entertainer and endorser, or whether, if few had chosen the products with his likeness, perhaps the contrary would be signified.

16. On reflection, we are not persuaded that this issue can be dismissed as perfunctorily as Mr Garland has suggested. In terms of broad approach, we accept Mr Kotewall's formulation of the position, particularly in light of the difficulties that will inevitably be thrown up in the emerging area of "character merchandising", the law with regard to which, no doubt, remains to be vigorously debated. In short, we are unconvinced by the defendant's argument as to the complete lack of materiality of the responses to these interrogatories.

17. In our judgment, these interrogatories cannot be labelled irrelevant or immaterial to the plaintiff's reputation and goodwill as an advertiser, promoter and endorser of goods and services, notwithstanding that the prima facie ambivalence of the particular response to each of the questions may not, in themselves, directly be probative of this issue. In this connection, Mr Kotewall was surely correct in asserting that it was not the position that interrogatories are to be permitted only if conclusive on any given issue. To the contrary. The established position is that interrogatories may be ordered when, at the least, they relate to facts the existence or non-existence of which is relevant to the existence or non-existence of matters directly in issue, whilst the test of relevance is satisfied if the potential relevance of the subject matter interrogated suffices. The information now sought will almost certainly emerge at trial, whereat it is highly unlikely that such questions would be excluded as irrelevant, and, as Mr Kotewall further observed, it is far better that the plaintiff has this information (which is entirely within the knowledge of the defendant) at this relatively early stage so that it can assist in preparation of the plaintiff's case.

18. We also agree with the submission that answers to these questions are not immaterial in terms of the alternative plea in misrepresentation, which in these circumstances cannot so neatly be divorced from the issue of goodwill and reputation, given that misrepresentation is related to the extent of the plaintiff's reputation and goodwill, both generally and specifically in the area of promotion and endorsement of goods and services. It must be correct to say that the fact that the well-known celebrity chooses commercially to align himself with a particular product or service, by means of advertisement or endorsement or otherwise, is of relevance in terms of the demand thus generated for the goods or service in question. In this connection, we do not think that the learned judge below was far from the mark when he observed that a comparison of the total number of applications for credit and phone cards with those cards bearing the image of the plaintiff is a "tell-tale sign" of the plaintiff's reputation, and in our view it is not appropriate at this stage to preclude these interrogatories on the basis that the response will not be demonstrative as to whether the public is impressed with one aspect of Mr Lau's reputation and goodwill rather than another. In the public mind, the fact that these particular credit and phone cards are good enough for Mr Lau may well, it seems to us, be indicative of the perceived desirability of the product.

19. Viewed in this light, therefore, we are not minded to accept that these four interrogatories to which objection is made in this appeal should be ordered to be withdrawn because the answers thereto, when provided, are non-conclusive on a pleaded issue which is not admitted. Given the subject matter of this action the matter is not, in our view, susceptible to such clear-cut analysis. Accordingly, we do not consider that in holding as he did the learned judge below has been shown to have been plainly wrong in the exercise of his discretion with regard to these four questions, and in finding that these interrogatories were both relevant and also necessary in terms of disposing fairly of the cause or matter or for saving costs.

Interrogatories 12 and 13

20. These interrogatories are drawn thus :

"12. Have your ever, apart from the Hang Seng StarSelect programme and Megastar Collectible Phonecards, used the name, photograph, image or likeness of an entertainer, actor or singer in any advertisement and/or promotion for or in connection with, or the preparation therefor of Hang Seng credit card services or banking services? If the answer is yes, please identify each of such entertainers, actors or singers, the dates and periods over which their names, photographs, images or likeness or any of them were used.

13. Did you ever make arrangement, whether by way of sponsorship or otherwise, with an entertainer, actor or singer, or with persons or companies which managed their services, for the use of their names, photographs, images or likeness in preparation, advertisement and/or promotion for or in connection with Hang Seng credit card services or banking services? If the answer is yes, please identify each of such entertainers, actors or singers."

21. The plaintiff's case in this instance is that the defendant appears to have used or approached other personalities in the advertising or promotion of its credit cards and other banking services; for example, in the 'Megastar' programme names and images of no less than nine other artists were used. So it is said that the defendant may well have concluded agreements with some or all of these other artists in relation to this programme, and that this fact may tend to establish, inter alia, that the defendant realized the necessity in these circumstances for consent, that the purpose of using the plaintiff's name and likeness was to assist in the sale and marketing of the defendant's credit and phone card products amongst the targeted public, and that the defendant's conduct was calculated to lead members of the public into thinking that the plaintiff endorsed the defendant's credit and phone cards and that the plaintiff associated himself with the defendant in the promotion of these products - all matters of relevance, it is asserted, to key questions which will require determination at trial, in particular surrounding the issue of whether there was any wrongful appropriation of the plaintiff's professional or business reputation and goodwill, whether there was any wrongful association of the promotion of the defendant's credit and phone cards with an image properly belonging to the plaintiff (and correspondingly whether his permission is required for such an association), and whether as a consequence the plaintiff has suffered damage in terms of loss of fees.

22. Mr Garland says that this line of argument is patently incorrect, once again maintaining the fundamental irrelevance of these questions in terms of the liability issue. His key in this submission is the absence of any pleaded allegation of fraud or deception on the part of the defendant. In this context the learned judge specifically had held that the knowledge and state of mind of the defendant was relevant, but only on the question of misrepresentation and deception which, in these circumstances, said Mr Garland, involved no more than consideration of the effect of any misrepresentation by the defendant upon the state of mind of various members of the public - so that what the defendant may or may not have done in the past was nothing to the point.

23. For his part, Mr Kotewall submitted that even if in this area the defendant was relying upon the TVB agreement in order to justify its actions, it was not justifiable simply to ignore what had occurred between the defendant and other artists whose images were used in this particular credit and phone card promotion. What was crucial, he submitted, was the public acceptance of any given personality's ability commercially to move or market a product. So that even if, on a narrow construction, relevance of these interrogatories could not be demonstrated merely in terms of misrepresentation, nevertheless these interrogatories were certainly material to the issue of goodwill. Once again, said Mr Kotewall, these issues are interlinked, in that unless there is reputation and goodwill the issue of misrepresentation necessarily cannot arise. The defendant must have known from previous instances, he argued, that celebrities like Mr Lau have reputation and goodwill which they are in a position to market, and that is why the defendant may well have asked others for their permission prior to embarking upon this campaign. So that if and in so far as the judge below was incorrect in regarding these interrogatories solely in the misrepresentation context, in itself this was of no consequence given that these interrogatories in any event should be permitted under the representation and goodwill head; in short, if the plaintiff got home under this head rather than the other, this was of no import. The incontrovertible point, submitted Mr Kotewall, was that if the defendant bank indeed had sought other artists' prior permission, it must have realized that this was a commercially valuable area for a person such as the plaintiff.

24. The latter seems to us to be an obvious proposition, and in this factual matrix the TVB agreement obviously loomed large in terms of what the defendant did or did not do; indeed, it is of little surprise that TVB, we are told, now has been joined as third party to this action. In all the circumstances we are surprised that the bank sees fit to resist discovery of this nature, but in any event we are persuaded by Mr Kotewall's argument, albeit this aspect of the matter does not appear specifically to have been considered by the learned judge. We accept that it is rare in a passing off action for the plaintiff expressly to allege fraud or an intention to deceive - as Mr Kotewall observed rhetorically, why put up the evidential bar higher than is necessary? But in our view the fact that fraud or intention to deceive is not pleaded is not decisive of the instant point. In practice, if the court finds untoward behaviour by a defendant in terms of taking the commercial benefit of the plaintiff's goodwill, this seems to us clearly "a question to be asked and answered", and thus a matter which the court is entitled to take into consideration upon the issue of liability. This, in fact, appears to us to be the thrust of the extract from the judgment of Millett LJ (as he then was) in Harrods Limited v. Harrodian School Limited [1996] RPC 697, which was expressly relied upon by the judge below at the conclusion of his judgment.

25. It follows from the foregoing, therefore, that we do not consider it appropriate to interfere with the exercise of the discretion of the judge below in this regard either, although we do think it fair to observe that in this instance the learned judge may have been right for a reason to which he did not advert in the brief concluding part of his judgment which dealt with interrogatories 12 and 13.

Conclusion

26. In our judgment the interrogatories allowed in the court below serve a clear litigious purpose. The learned judge committed no material error sufficient to warrant vitiation of the exercise of his discretion. Indeed, in our view he came to the correct decision. We dismiss this appeal which, at bottom, has little residual merit. We further make an order nisi that costs are to follow the event.