ASOSIASI PPTKI HONG KONG LTD v. MEI FOO EMPLOYMENT AGENCY LTD AND OTHERS

HCA 57/2008

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NO. 57 OF 2008

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BETWEEN

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J U D G M E N T

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I. INTRODUCTION

1.  Asosiasi sues Allwin for breach of contract. It sues Mei Foo and Ms. Kathy Ho for trade mark infringement and passing off in connection with Asosiasi’s mark.

II. BACKGROUND

2.  Asosiasi is a company limited by guarantee. It members are Hong Kong employment agencies which place Indonesian domestic helpers with households here. Assosiasi arranges events and provides training and other services for Indonesian domestic helpers listed with Asosiasi members.

3.  Asosiasi operates in close cooperation with the Indonesian consulate here. A principal benefit to a Hong Kong employment agency of belonging to Asosiasi is that the consulate will generally only notarise domestic helper employment contracts obtained through Asosiasi members. In practice, it will be difficult (if not impossible) to arrange for the employment of an Indonesian domestic helper without the consulate’s notarisation of a relevant contract.

4.  There are membership fees and monthly dues which members of Asosiasi must discharge.

5.  Allwin is a member of Asosiasi, but Mei Foo is not.

6.  Mei Foo operates 2 small shops in Mei Foo Plaza, Shops 211 and 221. The shops are next door to each other. Ms. Ho is a director and sole shareholder of Mei Foo.

7.  Some time ago (exactly when is unclear) Allwin (acting through its director Mr. Tsui Ming Wai) and Mei Foo (acting through Ms. Ho) entered into an oral arrangement. By the arrangement Mei Foo would help find employers for Indonesian domestic helpers on Allwin’s lists. If Mei Foo successfully placed a helper for Allwin, Mei Foo could retain the profit from the transaction. Allwin would therefore not make a direct monetary gain from a placement of its Indonesian helpers by Mei Foo.

8.  But the arrangement was not an altruistic gesture on Allwin’s part. There was a commercial calculation behind the arrangement from Allwin’s standpoint. Indeed, Mr. Tsui believed that there would be substantial benefit to Allwin from the arrangement.

9.  Mr. Tsui’s anticipation was that, the more Indonesian helpers Allwin (with Mei Foo’s help) could place, the more attractive it would be for domestic helper recruitment offices in Indonesia to deal with Allwin. The recruitment offices would ask Allwin to find places in Hong Kong for their better skilled helpers. There would be a better prospect of Allwin’s customers (including those obtained through Mei Foo) being satisfied with the higher quality of domestic helpers on offer. As a result, Allwin’s reputation and clientele would be significantly enhanced.

10.  The arrangement with Allwin suited Ms. Ho. Not only would she be able to retain the profit from placing an Allwin domestic, but she would also be spared having to go to Indonesia regularly in order to negotiate with the recruitment agencies there. Ms. Ho wishes to focus on the management in Hong Kong of Mei Foo’s activities. The evidence is that Ms. Ho has entered into like arrangements with other employment agencies to enable Mei Foo to supply domestic helpers of other nationalities (for example, Filipino helpers) without having to travel from Hong Kong.

11.  Since at least September 2007 Shop 221 has been registered with the Indonesian consulate as one of 5 branch offices from which Allwin operates.

12.  There is evidence that Mr. Tsui had informed Asosiasi that Allwin was operating a branch office out of Shop 221 by January 2007 at the latest. The evidence is in the form of an update sheet which Mr. Tsui says that he personally handed to Asosiasi at its offices. Asosiasi denies having received such form. But it is unlikely, given the close cooperation between the consulate and Asosiasi, that the consulate would have registered Allwin’s operation out of Shop 221 without first checking that, according to Asosiasi' records, Allwin had a branch there. In all likelihood, Mr. Tsui lodged the update with Asosiasi in January 2007 and Asosiasi updated its records accordingly.

13.  Asosiasi provides its members with a label bearing the Asosiasi logo. Members are supposed to display the label at a prominent place in their premises. According to Mr. Chow Suk Hong, an Asosiasi director, in practice there is no limit to the number of labels which a member can ask from Asosiasi.

14.  Allwin has obtained at least 6 labels from Asosiasi, one for Allwin’s main office and one for each of Allwin’s 5 branch offices. The label was posted at the glass entrance door to Shop 221. From photos produced to this Court, it is apparent that on 1 November 2007, the entrance door to Shop 221 bore Mei Foo’s name in addition to Asosiasi’s label. Under cross-examination, Mr. Tsui stated (and I accept) that in November 2007 there was a large sign (about 5 feet in length) bearing Allwin’s name on the wall inside Shop 221 facing the entrance door. Further, Allwin’s Hong Kong business registration was displayed somewhere within Shop 221.

15.  Mei Foo’s Shop 211 never displayed the Asosiasi label or Allwin’s name.

16.  In the early evening of 1 November 2007 Asosiasi’s solicitors (Yim & Co.) sent their legal executive Mr. Lam Chun Kwong to Shop 221 in order to engage in what might be described as an “entrapment” exercise. The photos which I just mentioned were taken by Mr. Lam on that occasion. Asosiasi relies on what transpired during Mr. Lam’s visit to Shop 221 in support of its actions against Mei Foo and Ms. Ho.

17.  Having taken the photos, Mr. Lam entered Shop 221 and engaged Ms. Ho (who was inside) in conversation. Mr. Lam claimed to be interested in employing an Indonesian domestic helper. He said that in the past he had encountered “a lot of problems with employment agencies”. He added that, to his understanding, there was “an association organized by the Consulate ... to promote the interests of employment agencies and Indonesian domestic helpers in Hong Kong by the name of Asosiasi”. He asked whether Mei Foo was a member of Asosiasi.

18.  In reply, according to Mr. Lam, Ms. Ho pointed to the Asosiasi label on the door of Shop 221 and said that Mei Foo was an authorised Asosiasi member and “rest assured that [Mei Foo] would be able to provide legal and proper employment agency services”. Ms. Ho is then alleged to have handed over a folder with information on 8 Indonesian helpers for Mr. Lam’s consideration. Mr. Lam left after saying that he would think about 1 of the 8 helpers shown and after obtaining a photocopy of that 1 helper’s particulars.

19.  Not surprisingly, Ms. Ho could not recall the incident. She says that, in all likelihood, she would have informed Mr. Lam that good quality Indonesian helpers were available through Allwin. She doubts that she would have claimed to be an Asosiasi member. If there had been an enquiry about membership in Asosiasi, she believes that she would have answered that, to the best of her knowledge, Allwin was an Asosiasi member.

20.  I have no doubt that Mr. Lam visited Shop 221 as he stated in evidence. I have no doubt that he obtained a photocopy from Ms. Ho of the particulars of 1 Indonesian domestic helper.

21.  But, otherwise, I have to treat Mr. Lam’s evidence with extreme caution. His was an exercise in entrapment. He made no audio recording of what was said at the relevant time. Instead, he only jotted his recollection of his conversation with Ms. Ho afterwards.

22.  It is probable in my view that Mr. Lam’s recollection may have been coloured by the nature of the exercise which he was carrying out. I cannot regard Mr. Lam as a neutral or impartial witness. For instance, Mr. Lam denies noticing the large sign bearing Allwin’s name when he entered. It is difficult to imagine how he could have missed the sign unless he was concentrating exclusively on obtaining evidence against Ms. Ho for this case.

23.  Further, given that Allwin’s name was prominently displayed in Shop 221, it would not have made sense for Ms. Ho to claim that Mei Foo (as opposed to Allwin) was a member of Asosiasi. It would not have assisted Ms. Ho to act in Mei Foo’s name, because (Mei Foo not belonging to Asosiasi) the consulate would never have notarised a relevant employment contract. It would only have been if Mei Foo was acting as Allwin’s agent and made that fact known in pertinent documentation, that a domestic helper could have been placed.

24.  Consequently, I prefer Ms. Ho’s evidence as to how she likely dealt with Mr. Lam’s visit. Such evidence seems to me more plausible on the balance of probability.

25.  The Writ was issued in January 2008. After it was served on Mei Foo, Mei Foo removed the Asosiasi label from the door to Shop 221.

III. DISCUSSION

A. Allegation of breach of contract by Allwin

26.  Asosiasi’s Articles of Association provide as follows in Art. 9:

“A member shall be liable to expulsion by a resolution of the Executive Committee if the member:-

....

(d)  Shall engage another company which is not a member of the Association or associate with another company which is not a member of the Association for the purpose of providing employment agency works relating to Indonesian domestic helpers; ...

....

Provided that at least 7 days before the meeting at which such resolution is to be passed the member shall have had notice thereof and of the intended resolution for his expulsion, and that the member shall before the passing of such resolution have had an opportunity of giving in writing any explanation or defence he may think fit.  A member expelled under this article shall forfeit all rights in any claim upon the Association, and shall have no claim on the property of the Association.”

27.  Mr. Roland Lau (appearing for the Defendants) does not dispute that the Articles constitute a contract between Asosiasi and its members (including Allwin).

28.  Ms. Louise Chan (appearing for Asosiasi) submits that the arrangement between Allwin and Mei Foo breaches Art. 9(d) as, in effect, Allwin was engaging or associating with Mei Foo (a non-member) in order to place Indonesian domestic helpers.

29.  I am unable to accept Ms. Chan’s submission.

30.  First, I agree with Mr. Lau that the ambit of Art. 9(d) is ambiguous.

31.  On one reading, Art. 9(d) could be a blanket prohibition against a member engaging or associating with a non-member for the purpose of providing any services whatsoever in relation to the placement of Indonesian helpers. On this wide construction, the prohibition would apply even where services are being rendered by a non-member in the name of a member, that is, by a non-member acting as agent for and on behalf of the member. But such a reading would make little or no commercial sense. Surely, it would be in the interest of all concerned, whether Asosiasi or its members, for members to be able to place as many qualified domestic helpers as possible. Why would Asosiasi by its rules be preventing a member from engaging agents (acting in the name of the member) to place domestic helpers on the member’s list? If the wider, non-commercial, reading of Art. 9(d) is what was truly intended from the start, one would have expected Art. 9(d) to make that crystal clear.

32.  It is more plausible that Art. 9(d) was meant to be read restrictively. A member is only proscribed from associating or engaging with a non-member purporting to place Indonesian domestic helpers on its own as principal. Thus, instead of treating the words “for the purpose of providing employment agency works relating to Indonesian domestic helpers” as modifying “engage another company”, it is more likely that those particular words form part of the description of “another company”. A member may not engage or associate with a company which is not a member authorised by the Association “for the purpose of providing employment agency works relating to Indonesian domestic helpers”.

33.  The latter, narrower, reading would make better commercial sense as obviously there could be embarrassment if a member associated with a non-member which purported to place Indonesian helpers not as agent of a member, but solely in the non-member’s own name. In such case, the non-member could be placing Indonesian helpers from its own lists, without any prior vetting of the quality of such helpers by recruitment or employment agencies belonging to Asosiasi.

34.  If the narrower reading is the correct one, Allwin could not be in violation of Art. 9(d). At all times, Mei Foo was only ever claiming to act on Allwin’s behalf and indeed was only placing Indonesian helpers on Allwin’s lists. On the evidence, Mei Foo never purported to act as principal in its own right, insofar as Indonesian helpers were concerned.

35.  Given the uncertainty over the scope of Art. 9(d), the provision must be read contra proferentem, that is, against Asosiasi, since Asosiasi is relying on the term and the term was drafted on Asosiasi’s behalf. In the absence of clearer words, the law construes Art. 9(d) as bearing the narrower meaning.

36.  There is a further difficulty with Art. 9(d).

37.  Strictly read, it does not actually say that a member engaging or associating with another member is automatically in breach of contract. All the provision says is that a member who engages in certain conduct with a non-member will be liable to expulsion by resolution of Asosiasi’s Executive Committee. Even then, expulsion will not be a matter of course. A member is entitled to an opportunity to defend its action and may thus persuade the Executive Committee that its engagement or association is justifiable.

38.  Art. 9 does not specify what is or what is not a legitimate defence to expulsion. In this particular case, the Executive Committee has not in fact put forward any resolution for Allwin’s expulsion. I understand that is because the Executive Committee wished first to see the outcome of these proceedings.

39.  But it is not for the Court to second guess the Executive Committee. There is likely to be a broad range of possible defences to a resolution for expulsion, as many as the variety of situations that may arise.

40.  Thus, even if (contrary to what I have just held) the wider construction of Art. 9(d) is the correct one, the Executive Committee would still have to consider whether Allwin has a valid justification for its association with Mei Foo and thereby a defence against expulsion. Accordingly, even if Ms. Chan were right in her reading of Art. 9(d), that need not necessarily mean that Allwin is in breach of the Articles. Allwin would still be entitled to have its case properly heard and considered by the Executive Committee.

41.  Ms. Chan attempted to bolster her case on Art. 9(d) by reference to other documents. But I did not find those documents compelling.

42.  First, Ms. Chan referred me to a resolution by Asosiasi’s Board dated 11 February 2009. That purported to “approve, confirm and ratify” a previous Board resolution dated 25 January 2006. According to the 2009 resolution, the 2006 resolution barred members from sub-licensing non-members to use the Asosiasi label.

43.  But one cannot by reference to a 2009 resolution determine whether Allwin was in breach of contract (in displaying the Asosiasi label at Mei Foo’s Shop 221) in November 2007. The 2009 resolution could be self-serving otherwise. One needs to look at the actual wording of the 2006 resolution.

44.  When I invited Ms. Chan to point to the specific words of the 25 January 2006 resolution which stated what the 2009 resolution purported to confirm and ratify, she could not direct me to any apposite words. The best that she could indicate was a paragraph warning that Asosiasi would take action against persons infringing its mark. Such paragraph is far from saying what the 2009 resolution alleges.

45.  Second, Ms. Chan suggested that I should attach weight to the way in which the Indonesian consulate construed Art. 9(d). But I do not see the relevance of the consulate’s views on how the Articles of a Hong Kong company should be read. It is for the Court (not the consulate) objectively to construe a term in an agreement in light of the factual matrix at the time of contracting.

46.  For the foregoing reasons, Asosiasi has failed to establish that Allwin was in breach of the contract.

B. Allegation of trademark infringement against Mei Foo and Ms. Ho

47.  Ms. Chan submitted that Mei Foo was in breach of Trade Marks Ordinance (Cap.559) s. 18(2). That provides:

“A person infringes a registered trade mark if:

(a)  he uses in the course of trade or business a sign which is identical to the trade mark in relation to goods or services which are similar to those for which it is registered; and

(b)  the use of the sign in relation to those goods or services is likely to cause confusion on the part of the public.”

48.  Asosiasi’s logo which appears on the Asosiasi label posted in Shop 221 has been registered within Classes 35 and 41. Class 41 is not relevant for the present purposes. Class 35 relates to:-

“Association services, namely, promoting the interests of employment agencies, business enquiry services relating to employment agencies industry activities which are provided in forum settings, business advisory services relating to establishing and coordinating standards for employment agencies, business negotiation services for lobbying on behalf of the employment agencies industry, public relations on behalf of the employment agencies industry; advertising; business management; business administration; office functions”.

49.  In my view, Asosiasi fails to make out a case of infringement under s. 18(2).

50.  First, I do not see how the requirement in s. 18(2)(a) can be met. Mei Foo is solely in the business of placing domestic helpers for Mei Foo’s own profit. Mei Foo is not an association of employment agencies and does not go about promoting employment agencies and their interests. There is no evidence that Mei Foo (acting through Ms. Ho) has ever used the Asosiasi label in relation to promoting the interests of employment agencies or the employment agency industry generally.

51.  Mei Foo simply posted the Asosiasi label in Shop 221 at the request of Allwin. Allwin made such request to comply with Asosiasi’s requirement that members display the logo in their offices, including branch offices.

52.  Second, regardless of the requirement in s. 18(2)(a), I do not believe that s. 18(2)(b) is met. It is alleged that the public is likely to be confused as to whether or not Mei Foo is an Asosiasi member. But, apart from Mr. Lam’s evidence, nothing was adduced at trial to establish the likelihood of confusion on the part of the public.

53.  Mr. Lam’s evidence needs to be treated with caution as I have discussed. In any event, Mr. Lam was certainly not confused. He must have known that Mei Foo was not an Asosiasi member, since the whole point of his going to Shop 221 was to obtain evidence against Mei Foo.

54.  In the absence of survey evidence or evidence from a representative sample of members of the public, I am unable to infer that there is a likelihood of confusion as alleged. In particular, given the prominent display of Allwin’s name within Shop 221 and given Ms. Ho’s likely response to enquiries (including those of Mr. Lam) about Indonesian helpers, I doubt that there could be confusion in the public mind.

C. Allegation of passing off against Mei Foo and Ms. Ho

55.  Ms. Chan relies on a dictum of Lord Diplock in Even Warnink Besloten Vennootscap v. J. Townend & Sons (Hull) Ltd. [1979] AC 731 (at 742) in support of her case on passing off. According to the dictum, passing off is established by showing:-

“(1) a misrepresentation (2) made by a trader in the course of trade, (3) to prospective customers of his or ultimate consumers of goods or services supplied by him, (4) which is calculated to injure the business or goodwill or another trader (in the sense that this is a reasonably foreseeable consequence) and (5) which causes actual damage to a business or goodwill of the trader by whom the action is brought or (in a quia timet action) will probably do so.”

56.  In my view, Asosiasi also fails to make out a case in passing off.

57.  First, I am unable to find a misrepresentation made in the course of Mei Foo’s trade to customers or potential customers. Asosiasi is presumably complaining that Mei Foo was holding itself out to the world as an Asosiasi member when it was not. But the evidence is that Mei Foo was only claiming to act as Allwin’s agent, which Mei Foo indeed was. I have already rejected Mr. Lam’s evidence that Ms. Ho pointed to the Asosiasi label in Shop 221 while asserting that Mei Foo belonged to Asosiasi. Mei Foo never claimed to be an Asosiasi member, as opposed to claiming to be an agent for an Asosiasi member (namely, Allwin).

58.  Second, I am prepared to accept that Asosiasi has built up some reputation and goodwill in relation to its logo. In particular, I am prepared to accept that, through advertising and other promotional campaigns, Asosiasi may have become known in Hong Kong for the services which it provides to employment agencies and Indonesian domestic helpers on members' lists. But I am unable to see how Mei Foo acting as Allwin’s agent for the purposes of placing Indonesian helpers on Allwin’s list could have the reasonably foreseeable consequence of damaging Asosiasi’s business or goodwill.

59.  Third, I do not see what damages Asosiasi can have suffered as a result of the display by Mei Foo of the Asosiasi logo at Shop 221 in furtherance of Mei Foo’s arrangement with Allwin. Ms. Chan faintly suggested that the entire or (at least) some part of the advertising expenses incurred by Asosiasi in the promotion of its name is the appropriate measure of damages. But I do not see why that should be the case. The advertising expenses incurred cannot be said to have gone to waste as a result of any of Mei Foo’s arrangement with Allwin.

60.  In summary, the ingredients of passing off have not been established. Nor has it been shown how any act by Mei Foo or Ms. Ho in connection with its arrangement of Allwin has led to any damage.

IV. CONCLUSION

61.  Asosiasi’s actions against the Defendants fail. The actions are dismissed. There will be an Order Nisi that Asosiasi pay the Defendants’ costs, such costs to be taxed if not agreed.