LEWIS ROAD CREAMERY LTD v. KEEN TOP INTERNATIONAL LTD AND OTHERS

HCA 1529/2015

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

HIGH COURT ACTION NO 1529 OF 2015

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REASONS FOR DECISION

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Introduction

1. This concerns the defendants’ application for:

(a)   the judgment (dated 19 October 2015) entered against the 1^st defendant (“Keen Top”) be set aside, and leave be given to Keen Top to defend this action;

(b)  the order for substituted service of the writ herein and the statement of claim herein on the 2^nd defendant (“Mr Huang”) and the 3^rd defendant (“Mr Li”) be set aside;

(c)   the proceedings in this action be stayed on the ground that the appropriate forum for the same is in the Mainland and not Hong Kong.

2. At the end of the hearing, I dismissed the above application.  Below are the reasons for so deciding.

Background

3. The plaintiff (“Lewis Road Creamery”) was incorporated in New Zealand and commenced business in 2012.  Its main business has been the sale and development of the “Lewis Road Creamery” brand (“the LRC brand”) dairy products, especially butter, milk and flavoured milk, which were produced in New Zealand.  Lewis Road Creamery’s affirmation claimed that it had established a successful business and a trade reputation both in, and outside of, New Zealand.

4. Keen Top is a Hong Kong company with a registered office in Ma On Shan, Hong Kong.  According to Mr Huang’s affirmation, Mr Huang has effectively been the controlling mind of Keen Top, while Mr Li has been described as a “silent partner”.

5. Mr Huang said he is a Chinese national and resides in Guangzhou.  He also disclosed that he:

(1)  set up Keen Top in 1995 for trading in chemical products importing them from Japan, Korea and the US into China;

(2)  had kept Keen Top (from 1999 to about 2006 or 2007) mainly to hold an office unit in Hunghom and to collect rent therefrom;

(3)  “… left Hong Kong for New Zealand in 2001, staying there until May 2004” (para 23(ii), Mr Huang’s 2^nd affirmation).  He then returned to China;

(4)  (together with Mr Li) had operated an ice cream parlour franchise and ice cream wholesale business in China;

(5)  became aware of Lewis Road Creamery (and probably also the LRC brand) in October 2014 (from a New Zealand newspaper and several business news website articles) and understood it to be a boutique dairy product manufacturer focusing on cheese and butter products, and introduced a chocolate milk which seemed to be quite popular;

(6)  read that Lewis Road Creamery was planning to enter the China market (including the ice cream market) later.

6. Further, Lewis Road Creamery asserts that Mr Huang’s daughter is still residing in New Zealand, and that Mr Huang might well have assets there.  Mr Huang has not disputed these.

7. Mr Li has not filed any affidavit evidence, and little is known of him save that Mr Huang claimed Mr Li, also a Chinese national, is his business partner and resides in China.

8. Keen Top has applied to register the LRC brand in China in November 2014.  The LRC brand was registered in Keen Top’s name in relation to meats and processed foods and staple foods.

9. It is also common ground New Zealand dairy products (including ice cream) has gained popularity in China, probably caused by the local population’s recent perception of the same as products of quality.

This action

10. Lewis Road Creamery commenced this action in July 2015.  The causes of action which appear in the statement of claim (as opposed to those appearing in the general indorsement) are:

(a)   conspiracy to injure Lewis Road Creamery’s business;

(b)  unlawful interference with Lewis Road Creamery’s business;

(c)   passing off;

(d)  Keen Top’s application to register the LRC brand is an instrument of deception.

The causes of action referred to in sub-para (a) and (d) were the focus of dispute during the hearing of the defendants’ application.

11. Judgment was entered against Keen Top on 19 October 2015 in default of Keen Top filing a defence.

12. The relief sought herein, and granted in the default judgment, include:

(1)  an injunction requiring Keen Top to assign the LRC brand trade mark application to Lewis Road Creamery;

(2)  an injunction restraining the defendants from using the LRC brand trade mark.

The stay application

13. Because Keen Top is a Hong Kong company, it is not open to the defence to argue that Hong Kong courts do not have jurisdiction over it.

14. The plank of the defendants’ stay application was premised on:

“… the real crux of [Lewis Road Creamery’s] claim (however creatively pleaded it causes of action are) essentially concerns PRC law, PRC intellectual property rights, … with any potential damage suffered being in the PRC … ” (para 5, defendants’ skeleton submissions).

The “creative pleading” referred to above:

“[relies] on dressed up causes of action of ‘conspiracy to injure’ and ‘instruments of deception’” (para 3, defendants’ skeleton submissions).

15. Based on the above, the defendants’ case was that the more appropriate forum for resolving the dispute between the parties is the Trademark Office in the Mainland (“China TMO”).

16. In order to make good their above case, a major issue the defendants would have to establish was that the causes of action pleaded herein are mere “creative” “dress ups” (in the sense that they are unmeritorious).  For the reasons set out under the heading “The setting aside default judgment application” below, I am not satisfied that they could do so.

17. Further, by reason of the matters set out below, I do not agree that the Mainland is the more appropriate forum for resolving the dispute in this action.

18. The tort of “conspiracy to injure” is constituted by:

“… merely … the combination and its objects … ” (Clerk & Lindsell on Torts 2014 21^st Ed, para 24-06).

The above was elaborated in Clerk & Lindsell:

“… the tort of conspiracy to injure allows a claimant to succeed by reason of damage flowing from a combination alone, without proof of further illegality, provided the courts regard the object of the combination as illegitimate by reason of a predominant purpose to injure the claimant” (Clerk & Lindsell, para 24-07).

19. In Hong Kong, such tort is different from an objection to a trade mark registration application (or the objection which can be raised against such an application).  The relief available to the claimant is also different.  In relation to relief, I agree with Lewis Road Creamery that an injunctive relief is available as a matter of Hong Kong law, and can provide better protection to it (than a mere award of damages, or a mere rejection of Keen Top’s trade mark application).

20. Further, Lewis Road Creamery has alleged that the conspiracy (that is, the “tortuous agreement”) was committed by Mr Huang and Mr Li in Hong Kong.  For this reason, Hong Kong law is applicable.

21. Probably to counter that allegation, the defendants have filed affirmation evidence stating (in effect) that:

(a)   Mr Huang and Mr Li were Chinese citizens and ordinarily resident in China;

(b)  Mr Huang travelled to Hong Kong only once or twice in a year, and stayed for one or two days only;

(c)   Mr Huang’s businesses were in China, and all of his businesses in Hong Kong have either ended, or only exist in name;

(d)  the addresses used by Mr Huang and Mr Li (or Keen Top and other Mr Huang’s Hong Kong businesses) (in Ma On Shan, Sai Wan Ho, Lai Chi Kok and Tin Shui Wai) were addresses of former employees, who were kind enough to permit Mr Huang and Mr Li (and their Hong Kong businesses) to use the addresses only for convenience.

These will be discussed under the heading “The setting aside default judgment application” below.

22. Because of the reasons given in para 18 to 20 above, I do not agree with the defendants’ claim that the plaintiff’s causes of action can be fully ventilated before the China TMO.

23. There is a bare assertion in the opinion given by a China law firm (engaged by the defendants) to the effect that the dispute herein can be put forth before (and resolved by) the China TMO.  However, the statutory provisions given by the firm to support such an opinion had not been quoted; nor has the reasoning for such an opinion been satisfactorily provided.

24. The court is under no obligation to accept an expert’s unexplained opinion even if the subject falls within his expertise; thus, in the court of appeal’s decision in Full Wisdom Holdings Ltd and Others v Traffic Stream Infrastructure Co Ltd and Others [2004] 2 HKLRD 1016, para 23:

“In studying the validity of any opinion based on foreign law, the court does not simply accept any stated conclusions as being correct, even where there may be no legal opinion contradicting it. The court is entitled to (and indeed must) look at the basis of the legal reasoning as well as the terms of the State Council Notice in determining what weight, if any, should be attached to the Opinion. It is to be noted that there was no mention of any distinction between profitable and loss making joint ventures or of restitution and there was no attempt to address the ‘prospective’ nature of Part III of the State Council Notice. The Opinion was singularly lacking in legal analysis. In these circumstances, as a matter of principle, it would be wrong to attach any weight to it.” (emphasis supplied)

25. Although Mr Huang and Mr Li asserted that they were ordinarily resident in the Mainland, their place of residence is relatively close to Hong Kong (that is, in Guangzhou).  There is also no suggestion they would encounter difficulties to come here to attend court hearings. In fact, the materials placed before the court suggested the contrary (see, for example, para 5(1) to (3) above).

26. Further to the matters above, as Lewis Road Creamery pointed out (and this is unchallenged by the defence), a Hong Kong judgment enjoys a juridical advantage when it comes to the enforcement of a foreign judgment in New Zealand (where Mr Huang is said to possibly own some assets); a Hong Kong judgment is directly enforceable upon registration in New Zealand whereas a Mainland judgment is not.

The setting aside service application

27. As the defendants’ fairly accepted, this application is “… [a] secondary [relief] ancillary to the [stay of proceeding] application … ” (para 7, defendants’ skeleton submissions).

28. I concluded that the “primary” application (stay of proceeding on the ground of forum non conveniens) should be (and was) dismissed.

29. I also noted the points made by Lewis Road Creamery that:

(1)  Mr Huang and Mr Li had not adduced evidence that they were not in Hong Kong at the time of service;

(2)  the addresses for service were the last known addresses which were earlier given by Mr Huang and Mr Li themselves.

The explanation they gave for such addresses (para 21(d) above) is not convincing.

The setting aside default judgment application

30. The relevant legal principles for setting aside a “regular” judgment (which this is) are trite:

(a) it is generally insufficient merely to show an arguable defence;

(b) a real prospect of success must be shown;

(c) in order to show that, the evidence adduced in support must carry some degree of conviction.

(Premier Fashion Wears Ltd and another v Li Hing-chung and another [1994] 1 HKLR 377, 383)

31. The evidence adduced by the defence has been summarized in para 5 and 21 above.  I observe that the defence has “played its cards close to its chest”.  For example:

(1)  despite the claims made in para 21(a) and (b) above, neither Mr Huang nor Mr Li produced any documentary evidence (such as immigration movement records) to support them;

(2)  in view of para 5(1) to (3) above, it is doubtful if Mr Huang had more than one nationality (or at least more than one travelling document);

(3)  not only was there no sworn evidence from Mr Li, the defence has not adduced evidence from other concerned individuals such as the former employees who allegedly permitted the defendants to use their Hong Kong addresses.

In any event, there is a general absence of particulars with regard to the factual case of the defence.

32. The defendants further contended that Mr Huang and Mr Li had acted bona fide and within the scope of their authority and therefore could not be liable for “conspiracy to injure”. The authority referred to in support of this contention was Lim Leong Huat v Chip Hup Hup Kee Construction Pte Ltd [2009] 2 SLR 318, 330-331, para 35.

33. But that decision cannot assist the defendants: first, in fact, the court’s determination therein was that the controlling director should be sued as a co-conspirator together with the defendant company.  Secondly, from the total tenure of the evidence, Mr Huang was the individual behind the scheme to register the LRC brand in the Mainland; Keen Top was nothing more than a corporate vehicle being used to carry out that scheme.

34. Further, what Mr Huang has done cannot be considered as bona fide.  His stated purpose for registering the LRC brand was:

“… to protect the market share of [Mr Huang’s Mainland ice cream business] as much as I could. One protective measure that occurred to me was to register [the LRC brand] in Mainland China before [Lewis Road Creamery] actually enters into the Mainland Chinese market” (para 16, Mr Huang’s affirmation).

This was in effect repeated at para 19, Mr Huang’s affirmation.  Mr Huang also mentioned another purpose for the registration (that is, to consider later what to do with the LRC brand based on the development of Mr Huang’s Mainland ice cream business), but I find that to be too vague and should not be given evidential weight.

35. The above stated purpose is only a polished way of saying the LRC brand was registered essentially as an anti-competition measure.  Such purpose cannot be a proper reason for registering a trade mark.  It does not constitute a proper reason in relation to a trade mark registration in Hong Kong; the defence has not adduced evidence the China registration system is drastically difference in this respect.  In fact, a registration with such unannounced purpose may well be regarded as an abuse of the trade mark registration system.

36. Lewis Road Creamery also pointed out (correctly) the defendants’ Mainland registration does not include “ice cream”, but other products (meats and processed foods and staple foods) instead.

37. With the above in mind, I concluded that the defence had not been able to establish a defence with a real prospect of success, be it a conspiracy to injure by legal means, or an unlawful conspiracy to injure.

38. In relation to “instruments of deception”, I noticed the authority cited by Lewis Road Creamery (Borri SPA v Tralaco Technology Ltd HCA 1170/2007 and HCMP 1352/2007 (19 August 2009)) which held that the registration of another person’s trade mark created a right which could be used as an instrument of deception.

39. As for the question of Lewis Road Creamery’s trade reputation in Hong Kong, it is sufficient for present purpose for Lewis Road Creamery to rely on an international reputation.

Other matters

40. The parties’ written submissions also mentioned various other points.  These have not been expressly set out or dealt with above.  This is so only because of the need to balance between the length of the reasons for decision and its comprehension.  It does not mean those other points are thought to be irrelevant (or have been overlooked).  To avoid doubt, those other points have also been considered.