WONG TO YICK WOOD LOCK OINTMENT LTD v. MERIKA MEDICINE FACTORY LTD AND ANOTHER

HCA 562/2014

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NO 562 OF 2014

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AND

HCA 2589/2014

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NO 2589 OF 2014

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AND

HCMP 1550/2014

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

MISCELLANEOUS PROCEEDINGS NO 1550 OF 2014

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	IN THE MATTER OF SECTIONS 52 AND 53 OF THE TRADE MARKS ORDINANCE (CAP 559)
	and
	IN THE MATTER OF AN APPLICATION BY WONG TO YICK WOOD LOCK OINTMENT LIMITED FOR AN ORDER TO REVOKE THE HONG KONG TRADE MARK REGISTRATION NO 301048518 FOR “WONG DO YUK SINGAPORE TSUNG TANG MEDICINE CO 黃道玉 星加坡宗檀藥業公司” (“THE SUBJECT MARK”) REGISTERED in class 5 in the name of Sun Ascent Development Limited 旭昇發展有限公司 and for    a declaration of invalidity in respect of the Subject Mark

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(Heard together)

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JUDGMENT

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INTRODUCTION

1.  There are the following three actions before the court, all of which having been taken out by the same plaintiff, Wong To Yick Wood Lock Ointment Limited (黃道益活絡油有限公司) (“WTY”), namely:

(i) HCA 562/2014 (“Action 1”);

(ii) HCA 2589/2014 (“Action 2”); and

(iii) HCMP 1550/2014 (“Action 3”).

2.  On 23 January 2015, an order was made that Action 2 and Action 3 are to be dealt with and tried at the same time.[1]  Yet, no milestone day has been fixed in respect of any of the three actions.

3.  By three summons filed on 9 March 2016,[2] WTY asks that (a) several parties be added as defendants to Action 1 and Action 2 respectively; and (b) there be a consolidation of all three actions.

4.  Mr Shipp, counsel for WTY, informs the court since his client has managed to settle with some parties and is likely to settle with some others in respect of Action 2 and that some parties have no objection to the proposed joinder and consolidation, the remaining “live” parties which are germane to the present applications are as follows:

	Existing defendants	Parties intended to be added
Action 1	• Merika Medicine Factory Limited (“Merika”) • Sun Century Holdings Limited (“Sun Century”)	• Law Kok Bun Robin (“Robin”), Chairman & Managing Director of Merika • Hui Wa Him Heusen (“Heusen”), director and shareholder of Sun Century • Xu Hualong (“Hualong”), Director & former shareholder of Sun Century
Action 2	• Sun Ascent Development Ltd (“Sun Ascent”)	• Treasure Trend Limited (“Treasure Trend”) • Heusen • Hualong, General Manager and shareholder of Treasure Trend and General Manager of Sun Ascent
Action 3	• Sun Ascent	Nil

OBJECTIONS OF THE DEFENCE

5.  Mr Tang, counsel for Sun Century and Sun Ascent, and Ms Ling, counsel for Merika, object to the proposed joinder and consolidation.  Although Robin is technically not yet a party to the present proceedings, Ms Ling indicates that she also has instruction to act on his behalf. 

6.  In summary, Mr Tang submits that WTY’s present applications are just a belated attempt to delay the proceedings, intending to bring the defendants/respondents to their knees.  Mr Tang stresses that WTY owes the court an explanation as to why the applications for joinder and consolidation had not been made earlier.  As regards the proposed consolidation, it is submitted that there are no common issues, factual or legal, between Action 1 and Action 2 and that there would not be any risk of inconsistent findings if the two cases were tried separately. It is further submitted that even though Sun Century and Sun Ascent may be controlled by the same family, the two actions cannot be said to have arisen out of the same transaction or series of transactions.  It is submitted that the proposed consolidation would not save court’s time and costs but would rather delay and prolong the trial.

7.  In summary, Ms Ling submits that there is no basis to join Robin as a defendant and she relies on the legal principle stated in MCA Records Inc v Charly Records Ltd[3] that a director will not be treated as liable with the company as a joint tortfeasor if he does no more than carry out his constitutional role in the governance of the company.  It is further submitted that Robin’s presence in Action 1 is not necessary to ensure that all matters therein be effectually and completely determined and adjudicated upon.  As regards the proposed consolidation, Ms Ling, whilst accepting that it is a case management decision by the court, submits that a consolidated trial of the three actions would cause undue delay, that Merika or Robin had no relationship with the parties in the other two actions, that there are no common questions of law or fact, that the actions do not arise out of the same transaction or series of transactions and that no court time or costs would be saved.  Finally, it is submitted that having the actions tried together or one after the other would be a much more time and cost effective manner to manage the three actions.

RELEVANT LEGAL PRINCIPLES

Joinder

8.  It is well-established that O 15 r 6, the Rules of the High Court (Cap 4A),[4] enables the court at any stage of the proceedings to add a party to the proceedings.  It is important to bear in mind, however, that the purpose of joinder is to bring all parties to disputes relating to one subject-matter before the court at the same time so that the disputes may be determined without the delay, inconvenience and expense of separate actions and trials: Byrne v Brown[5] and Kwan Chi On v Hong Kong Baptist University.[6] It has been held that the rule should be construed liberally so as to ensure that, as far as possible, all matters in dispute between the parties are completely and finally determined, and all multiplicity of legal proceedings with respect to any of those matters is avoided: Lin Man Yuan v Kin Ming Holdings International Ltd.[7]

9.  As to whether a new party should be joined, the test is whether there is a bona fide claim and a proper question to be tried as between the plaintiff and the intended defendant that is necessary or just and convenient for resolution between them as well as between the plaintiff and the defendants in the present proceedings: Pang Kwok Lam v. Schneider Electric Asia Pacific Ltd.[8]  At this stage, there is no requirement for an applicant to show merits of his case under this rule: Wong Shan Shan v The Incorporated Owners of Yue Wah Mansion.[9]

Consolidation

10.  The court has a discretion, under O 4 r 9, RHC, to order consolidation of two or more causes or matters that are pending if it appears to the court that:

(i) some common question of law or fact arises in both or all of them; or

(ii) the rights to relief claimed therein are in respect of or arise out of the same transaction nor series of transactions; or

(iii) for some other reason it is desirable to make the order.

11.  Whether or not to order consolidation is a case management decision at the discretion of the court.  The relevant legal principles are helpfully set out in Komal Patel v Chris Au.[10] The ultimate aim of consolidation was to avoid wasting party and court resources in a multiplicity of proceedings that involve identical or similar issues and to protect defendants from the cost and vexation of having to defend in separate proceedings against essentially the same allegations.  To this end, it was noted that the essence of the matter is that the court will order different claims to be tried together when there is substantial overlap between them or where trying them separately would create a risk of irreconcilable decisions.  See generally Hong Kong Civil Procedure 2017, at §4/9/2.

ISSUES

12.  In view of the contentions of the parties, the major issues before the court are as follows:

(i) whether WTY has a bona fide claim against each and every one of the intended defendants and that there is a proper question to be tried between them that is necessary or just and convenient for resolution between them as well as between WTY and the existing defendants in the actions;

(ii) if so, whether it is an appropriate case for the court to exercise the discretion to order some or all of the intended defendants to be added as defendants; and

(iii) whether it is an appropriate case for the court to exercise its discretion to order consolidation of the three actions.

THE CASE OF WTY

13.  WTY is the manufacturer and trademark holder of “黃道益 活絡油”[11] which is a medicated balm well-known in Hong Kong.  Its case in the three actions is based on allegations of trade mark infringement and passing off.

14.  As regards Action 1, WTY alleges that Merika was the exclusive manufacturer of “黃道玉 活絡油” (“黃道玉 version 1”)[12] for a business known as “杏美行” (H M Hong) which is the business name of Sun Century.  Whilst both Merika and Sun Century assert that “黃道玉 version 1” was only available in Macao, WTY says that Sun Century has been its sole distributor in Hong Kong since 2011 which was on sale at T & D Pharmacy, a company which WTY says is also controlled by or associated with Heusen and Hualong.

15.  As regards Action 2, WTY alleges that a company called Sing & Japan together with a company called Mega Good and a Madam Chan (all of whom have settled with WTY) had manufactured a medicated balm to the order of Sun Ascent which in turn had sold and distributed as a version of 黃道玉 活絡油 (“黃道玉 version 2”) in a slightly different packaging from that of 黃道玉 version 1.  Moreover, Sun Ascent had wrongfully registered 黃道玉 version 2 as a trade mark in Hong Kong.[13]

16.  In Action 3, WTY seeks to invalidate and/or revoke the registered trade mark of 黃道玉 version 2 on the grounds of passing off, confusion, bad faith and non-use.

JOINDER

17.  It is WTY’s case that Sun Century, Sun Ascent, Treasure Trend and some other companies featured in the three actions are part of “a web” controlled by or associated with the family of Heusen and Hualong.  Since WTY has yet to prepare a draft statement of claim against Robin, Hualong and Heusen, the following is taken from Mr Shipp’s written submission.

Action 1

18.  According to an affirmation filed by Xu Huaren (the elder brother of Hualong) in Action 3, in May 2006 he, Hualong and Heusen had a meeting talking about developing a new product to be sold in Macao which eventually turned out to be 黃道玉 活絡油. It is said that in June 2006 Huaren and Heusen had a meeting with Robin to discuss the packaging and the manufacture of 黃道玉 version 1.  It is said that in July 2006, Huaren and the staff of HKW Medicine (which would include Hualong and Heusen) had another meeting with Robin and they came up with the design of the packaging for 黃道玉 version 1.  There is evidence, however, that 黃道玉 version 1 was sold not only in Macao but also in Hong Kong.  

19.  Based on the above, Mr Shipp submits that Robin’s participation in the design of the packaging of 黃道玉 version 1 and his subsequent procuring the manufacture thereof by Merika renders himself personally liable as a joint tortfeasor with Merika for his participation or involvement in ways which went beyond his constitutional role as a director: see MCA Records, ante.[14]  It is further submitted that Robin is also personally liable in his own right as a joint tortfeasor by his participation in coming up with the name 黃道玉 活絡油 and the packaging thereof by intending, procuring and sharing a common design that the infringement by Merika should take place: Unilever plc v Gillette (UK) Ltd.[15]

20.  In relation to Hualong and Heusen, Mr Shipp highlights the fact that they are the only two directors of Sun Century. Similarly to the case of Robin, it is submitted that by their participation or involvement in coming up with the name 黃道玉 活絡油 and the packaging thereof, both of them went beyond their constitutional role as directors and render them personally liable in their own right as joint tortfeasors with the company by intending, procuring and sharing a common design that the infringement by Sun Century should take place. 

21.  Lastly, Mr Shipp submits that WTY could have issued a separate writ against Robin, Hualong and Heusen seeking identical relief as in Action 1 and then sought a consolidation of the case against them with Action 1. However, that course would lead to a multiplicity of proceedings and incur unnecessary costs and expenses. 

Action 2

22.  According to an affirmation filed by Hualong in Action 3, he and Heusen wanted to develop a new product and they adopted the name 黃道玉 活絡油 and came up with a new packaging which turned out to be 黃道玉 version 2.  Then, Treasure Trend (a company of which Hualong was the general manager and a shareholder) placed orders for the manufacture of 黃道玉 version 2 by a pharmacy and sold it at retail level.

23.  Mr Shipp submits that Hualong and Heusen by adopting the name 黃道玉 活絡油 and the packaging for 黃道玉 version 2 render themselves personally liable in their own right as joint tortfeasors with Sun Ascent and Treasure Trend by intending, procuring and sharing a common design that the infringement should take place.  It is further submitted that WTY could have issued a new writ against Hualong, Heusen and Treasure Trend for trade mark infringement and passing off regarding their involvement in 黃道玉 version 2 and the packaging thereof seeking identical relief as in the 2589 Action and then seek consolidation between the new set of proceedings and Action 2. The present application for joinder is to avoid additional costs and a multiplicity of proceedings.

Consideration

24.  WTY does not have a draft statement of claim containing its allegations against the intended defendants.  Although a draft statement of claim is not a must for the application, it is plainly a good practice to have one and its absence is unsatisfactory for obvious reasons. However, I am satisfied that in the present case the absence of a draft does not prejudice the opposing parties.  This is because WTY’s case against the intended defendants is based on company registration documents and affirmations from the defence and is spelt out in Mr Shipp’s written submissions so that the opposing parties have been adequately informed of it.

25.  Having considered the written and oral submissions of the parties and the documents filed for the present application, I am satisfied that WTY has a bona fide claim against each and every intended defendant in Action 1 and Action 2 respectively.  Moreover, WTY’s allegations against Robin, Hualong and Heusen, if proved, are capable of leading to a finding that the three of them had proactively participated in the passing off and trademark infringement rather than merely exercising their voting rights as directors of their respective companies.  I am alive to the fact that WTK’s case against Robin, Hualong and Heusen is based on an affirmation filed by the defence in Action 3.  However, that is a matter of evidence.  As discussed above, at this stage there is no requirement for WTY to show merits of its case.  In short, for the purpose of joinder I am satisfied that there is a proper question to be tried as between WTY and each and every one of the intended defendants in Action 1 and Action 2.

26.  Furthermore, as regards O 15 r 6(2)(b)(i), I am satisfied that it is necessary to join the intended defendants as parties in Action 1 and Action 2 respectively so as to ensure that all matters in dispute may be effectually and completely determined and adjudicated upon.  As regards O 15 r 6(2)(b)(ii), I am also satisfied that it is just and convenient to order the joinder sought.  In reaching the above conclusion, I have not ignored the fact that the present application has not been made in a timely fashion.  This is because the affirmation of Huaren relied upon by WTK for the joinder was filed on 3 October 2014.[16] However, the first time WTK sounded out its intention to add the intended defendants was on 16 December 2015.[17]  There was therefore a time gap of about 14 months in between.  That said, the resultant delay is not, in my view, of such a length and nature as to make it unjust for the intended parties to be joined.  None of the actions has been set down for trial.  Moreover, any delay after 16 December 2015 was not caused by WTK.  Lastly, realistically speaking, Robin, Hualong and Heusen would have to give evidence as directors and persons in charge of their respective companies anyway.

Conclusion

27.  Based on the above, I exercise my discretion and grant leave for WTY to add as defendants the parties which it intends to add in relation to Action 1 and Action 2 respectively.

CONSOLIDATION

Consideration

28.  In considering whether there should be consolidation of the three actions, I bear in mind all that was said in the written and oral submissions of counsel, including, but not limited to, the following:

(i) Merika and Robin are concerned in Action 1 only.

(ii) Although there may be some similarities between the name of and packaging for 黃道玉 version 1 and 黃道玉 version 2, they are different products and therefore the cases against them for passing off and trademark infringement require separate consideration.

(iii) In case of consolidation, further discovery might be necessary on the part of the existing defendants and there would also be some additional costs incurred.  Moreover, some delay would be occasioned.

(iv) On the other hand, there are factual connections between the three actions such that they can be described as a series of transactions.  I note that it is WTY’s case that the torts were allegedly committed by a web of companies controlled by the family of Hualong and Heusen.  There are company records and affirmations from the defence showing that various companies featured in the three actions were related by way of common directors or shareholders.  Mr Shipp has also specifically drawn to my attention to the existence of business registration records showing that the aforesaid H M Hong (“杏美行”), a business name used by Sun Ascent prior to 10 August 2010, was immediately after that day used by Sun Century.

(v) There are other reasons in favour of consolidation in that there will be common defendants (Hualong and Heusen) in Action 1 and Action 2 as well as common witnesses in the three actions coming from the plaintiff’s side and the defence side.

(vi) There has already been an order that Action 2 and Action 3 be tried together which is not subject to any appeal.

(vii) None of the trials has been set down for trial. 

Conclusion

29.  In view of the above, having performed a balancing exercise, I am of the view that it would save costs and time and avoid multiplicity of proceedings to have a consolidation of all three actions.  Moreover, it would also be in the interests of justice to do so.  In all the circumstances, I grant leave for the consolidation sought.

ORDER

30.  Based on the above, I make the following orders:

(i) leave be granted for all the joinders sought as per WTY’s two summonses dated 9 March 2016 in Action 1 and in Action 2;

(ii) leave be granted for WTY to amend or re-amend, as the case may be, the Writs of Summons of Action 1 and 2 respectively and to file and serve the same within 7 days from the date of this judgment;

(iii) the new defendants in Action 1 and Action 2 to acknowledge service of the respective Amended Writ of Summons or Re-amended Writ of Summons, as the case may be, within 14 days thereafter;

(iv) service of the Amended Writ of Summons and Re-amended Writ of Summons, as the case may be, in Action 1 and Action 2 be dispensed with;

(v) Action 1, Action 2 and Action 3 be consolidated and carried on as one action under a new title, with Action 2 being the leading action (“the Consolidated Action”);

(vi) leave be granted to WTY to file and serve a Consolidated Statement of Claim for the Consolidated Action within 28 days from the date of this judgment;

(vii) leave be granted to the defendants in the Consolidated Action to file and serve their respective defence to the Consolidated Statement of Claim within 28 days thereafter;

(viii) leave be granted to WTK to file and serve its Consolidated Reply, if so advised, within 21 days thereafter.

COSTS

31.  I make an order nisi that the costs of three summonses be in the cause of the Consolidated Action.