FAST-LINK EXPRESS LTD v. FALCON EXPRESS LTD

HCA 2040/2005

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NO. 2040 OF 2005

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J U D G M E N T

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Introduction

1.  This is a passing off action.  Both parties are involved in the business of freight forwarding.  The basis of the Plaintiff’s action is that the first two characters of its name in Chinese, “Fay Yeung”, by which it is commonly known and referred to in the freight forwarding business has also been adopted by the Defendant and that the Defendant is, as a result, guilty of passing off itself as the Plaintiff.  The application before me is for an interim injunction as appears in the summons [pages 29-30 of the bundle] to prevent the Defendant from using “Fay Yeung” as part of its name, until trial or further order as well as for additional orders which are said to follow naturally from the making of the principal order, if I am minded to make it.

2.  The particular feature of the application, and of the action as a whole, is that it is said that the way that the Plaintiff conducts its business and is almost exclusively communicated with by its customers, is by telephone.  When the telephone is answered by the Plaintiff’s telephonist, he or she will say “Fay Yeung” and that the Plaintiff is invariably asked for and referred to by its customers as Fay Yeung rather than by its full Chinese name of Fay Yeung Cargo Delivery Company Ltd.  Fay Yeung has therefore become its “nome de guerre” under which it does business.

3.  The complaint is that the Defendant also calls itself Fay Yeung, as part of its name and although the Chinese characters for Fay Yeung are different and do not have the same meaning in its case, aurally or, phonetically, they sound identical in both Cantonese and Putonghua.  This is said to confuse customers or potential customers into believing that they are doing business with the Plaintiff when in fact they are in communication with the Defendant.  It is this confusion of one company for the other that is said to give rise to the cause of action and which the Plaintiff seeks to put an end to.

The Law

4.  The law of passing off has been distilled by Lord Oliver of Aylmerton into a few short sentences in his speech in Reckitt and Coleman Properties Ltd v. Borden Inc. (1990) 1 WLR 491 the “Jif lemon case” at 499 D-H as follows:

“The law of passing off can be summarised in one short general proposition – no man may pass off his goods as those of another.  More specifically, it may be expressed in terms of the elements which the plaintiff in such an action has to prove in order to succeed.  These are three in number.  First, he must establish a goodwill or reputation attached to the goods or services which he supplies in the mind of the purchasing public by association with the identifying “get-up” (whether it consists simply of a brand name or a trade description, or the individual features of labelling or packaging) under which his particular goods or services are offered to the public, such that the get-up is recognised by the public as distinctive specifically of the plaintiff’s goods or services.  Secondly, he must demonstrate a misrepresentation by the defendant to the public (whether or not intentional) leading or likely to lead the public to believe that goods or services offered by him are the goods or services of the plaintiff.  Whether the public is aware of the plaintiff’s identity as the manufacturer or supplier of the goods or services is immaterial, as long as they are identified with a particular source which is in fact the plaintiff.  For example, if the public is accustomed to reply upon a particular brand name in purchasing goods of a particular description, it matters not at all that there is little or no public awareness of the identity of the proprietor of the brand name.  Thirdly, he must demonstrate that he suffers or, in a quia timet action, that he is likely to suffer damage by reason of the erroneous belief engendered by the defendant’s misrepresentation that the source of the defendant’s goods or services is the same as the source of those offered by the plaintiff.”

Presently, I will need to consider each element of these ingredients in order to decide whether the Plaintiff should have its injunction.

The Court’s approach to an application for an injunction

5.  These principles are so well known that ordinarily it would not be necessary to say very much on this subject but, on this occasion, I will need to make clear how I propose to approach my task having regard to Mr Leung’s submission, on behalf of the Defendant, that this is an injunction that will in effect be dispositive of the whole action and that as a result the Plaintiff’s case has to be very much more compelling then would be looked for in the usual case to which the American Cyanamid regime applies.  The American Cyanamid principles have been summarised in Order 29 r.1 of the RHC [29/1/9] pages 513-514 of the 2006 edition of Hong Kong Civil Procedure.  The essential features are that “there is a serious question to be tried” and second that “the balance of convenience lies in favour of making an injunction”.

6.  Where the contest about the grant or refusal of an interlocutory injunction is effectively the only contest between the parties and it is clear that the action would never proceed to trial the additional considerations set out in the cases of NWL Ltd v. Woods [1979] 3 All ER 614 and Cayne v. Global Natural Resources Plc (1984) 1 All ER 225 and in Hong Kong see also Zheng Lie Lie v. Prosperfield Ventures Ltd (No. 1) (2003) HKC 33 will take effect.  These considerations are that in such a case the court should approach the matter on a broad principle of what it could do in its best endeavour to avoid injustice.  The matter is more fully expressed in the headdnote to the report in Cayne’s case (supra.) as follows:

“Where the grant or refusal of an interlocutory injunction will have the practical effect of putting an end to the action, the court should approach the case on the broad principle of what it can do in its best endeavour to avoid injustice and to balance the risk of doing an injustice to either party.  In such a case the court should bear in mind that to grant the injunction sought by the plaintiff would mean giving him judgment in the case against the defendant without permitting the defendant the right of trial.  Accordingly, the established guidelines requiring the court to look at the balance of convenience when deciding whether to grant or refuse an interlocutory injunction do not apply in such a case since, whatever the strengths of either side, the defendant should not be precluded by the grant of an interlocutory injunction for disputing the plaintiff’s claim at a trial.”

Kerr LJ analysed the matter further in his judgment at 236D-F with reference to the facts of the dispute before him:

“As was pointed out during argument, if this position were viewed as an application for summary judgment under RSC Order 14, then it would be clear beyond argument that Global must be given unconditional leave to defend because it would obviously be entitled to a full trial.  However, the grant of an injunction would obviously be entitled to a full trial.  However, the grant of an injunction would preclude this so far as can be foreseen at present for the reasons already stated.  In these circumstances it seems to me that it would be wholly wrong for this court, in effect, to decide the entire contest between the parties summarily in the plaintiff’s favour on the untested material before us.  This does not present any overwhelming balance on the merits in the plaintiff’s favour or any other overriding ground for an immediate injunction without a trial.  There is only a triable issue whose outcome is doubtful and that issue should be tried and not pre-empted.”

What would be the effect of the grant of an interim injunction in this case?

7.  Mr Pun, for the Plaintiff, says that this is all very well but, on a true analysis, the grant of an interim injunction would not be dispositive of the case as a whole.  There would need to be a trial and American Cyanamid principles should be applied to determine this application.

8.  In my judgment, whilst the injunction is not the only relief sought in the action, the injunction lies at the heart of the matter for these parties.  The Plaintiff brings the action to obtain an order that seeks to prevent the use of the Fay Yeung characters as part of the Defendant’s name.  This is the final judgment that it asks for in the writ and it is this, which it now also seeks on an interlocutory basis.  If the injunction goes to restrain the use of the Fay Yeung characters by the Defendant its consequences would be very far reaching.  It would have to stop trading under its present name pending the outcome of the trial.  Even if I were to order a “speedy trial” a number of months would elapse before it could take place.  The Defendant, who has been registered since May 2005 and trading since about August 2005 under its current Fay Yeung “label” would have to unscramble that corporate identity and find something else to call itself.  It is unlikely that, even if it were to succeed at trial, it would opt for a return to Fay Yeung.  Such chopping and changing would undoubtedly confuse its customers who may well form an adverse view of its commercial seriousness and even become suspicious of an organisation that changes its name from one thing to another and then back again.  I suspect therefore that if the injunction goes to prevent the Defendant from using Fay Yeung that would be the end of the matter for it and it would then continue under any new style that it decided to chose following the injunction.

9.  This would be the effect of the injunction and accordingly, I propose to proceed on a more demanding basis akin to what Kerr LJ would have required.  It seems to me that where the consequences of the injunction would be as far reaching as I predict, the Plaintiff would need to show that it is at least very likely to succeed at trial before it can trigger the exercise of the this jurisdiction.  This approach would be more consonant with the court using its best endeavour “to avoid injustice and to balance the risk of doing an injustice to either party.”  While I appreciate Mr Pun’s point that this is not a case such as Zheng Lie Lie v. Prosperfield Ventures supra. where the very grant of the injunction would have been entirely dispositive of the action, the practical effect of the grant of the injunction which he now seeks would, as I have attempted to demonstrate, be the same.  It is for this reason that I must look for a case by the Plaintiff that has far more evidential strength that would be looked for in the ordinary American Cyanamid type of interlocutory application.

The evidence

10.  The Plaintiff has been doing business as a freight forwarder for some 13 years and it has done so with increasing success so that it expects its turnover this financial year to exceed $100 million.  Its success and the reputation has been recognised in the industry by it having been accepted into well respected industry organisations such as IATA and FIATA to name but two.  Such membership requires a solid track record and good reputation which it has acquired through the successful and sound management of those who run it.  The Defendant on the other hand is a young company, as I have already noted, operating only since August 2005 but, no doubt, those who have charge of its affairs are confident that as the months go by it will consolidate its position and hopefully qualify for membership of some, if not all, the respected trade organisations to which the Plaintiff belongs.

The elements of passing-off

(i) Goodwill and reputation

11.  Quite properly, Mr Leung for the Defendant, accepts that the Plaintiff enjoys the reputation and has the necessary goodwill which the law requires before an action for passing-off can get off the ground.  Even without that concession I would have so found in this case.

(ii) Has there been a misrepresentation by the Defendant to the public (whether or not intentional) that its services are the Plaintiff’s services?

12.  It is on this aspect that the issue has been joined on the merits.  In Cantonese “Fay Yeung” means Fly Ocean which Mr Leung submits is a perfectly commonplace combination of words, the use of which by the Defendant is not apt to cause confusion between itself and the Plaintiff.  In this regard Mr Pun says that the use of the name Fay Yeung by the Plaintiff for over 13 years now has become associated with it.  He relies on the case of McCain International Ltd v. Country Fair Foods Ltd (1981) RPC 69 in support of his submission that the name Fay Yeung, having been used by it for such a period of the time falls into the category of a “fancy name” as opposed to a “descriptive name” and as a fancy name was identifiable with the Plaintiff and its services.  Nevertheless, his principal contention is based on the confusion that is apt to be caused by the aural identity between the Plaintiff’s Fay Yeung and that of the Defendant.  In support of this he has referred to the case of Morcream Products Ltd v. Heatherfresh (Foods) Ltd (1972) RPC 799, a decision of Goff J.  This was a case where both parties were engaged in the frozen food business.  The Plaintiff used the name “Everfresh”.  They sought to obtain an injunction to prevent the Defendants from using the name Heatherfresh.  There was evidence of confusion over the telephone caused to customers of the Plaintiff by the Defendant’s use of their name.  The court granted the injunction.  In making the order the learned Judge made clear that it was not necessary to show that the Defendant had set out to deceive by the use of its name.  In response, Mr Leung has relied on a series of cases such as Office Cleaning Services Ltd v. Westminster Window and General Cleaners Ltd (1946) 53 RPC 39 and British Vacuum Cleaner Co. Ltd v. New Vacuum Cleaner Co Ltd (1907) 2 Ch. 312 and in Hong Kong, Land Power International Holdings Ltd v. Inter-Land Properties (HK) Ltd. (1995) 2HKC 146 C.A. where orders were refused because it was held that part of the Defendant’s names in those cases were merely “descriptive” words in common use and that therefore no confusion could have been caused by the Defendant’s use of the allegedly confusing words.  In each of those cases the words relied on could not be said to be “fancy words”.

13.  Mr Pun’s response is that the case before me in distinct because I am concerned with aural identity in an industry where invariably contact is made by telephone and Fay Yeung is how both companies respond on the telephone and Fay Yeung is how both companies are asked for on the telephone.  The Plaintiff has been identified with this name for 13 years and confusion is inevitable if the Defendant is now allowed to use the same “call sign”, as it were.  Late on in the argument I asked Mr Leung whether his client might be disposed to provide an undertaking until trial not to use “Fay Yeung” in isolation, but to provide its full title which is distinct from that of the Plaintiff.  Such an undertaking has been offered.  This would not suit the Plaintiff because it is said that it is the words “Fay Yeung” that once used and heard will confuse, irrespective of what else might follow.  There is evidence of confusion already, from a Mr Wong who works for a company who the Plaintiff use to book space on aircraft for its client’s goods.  Mr Leung says that this is not the sort of confusion, which the law will seek to avoid because Mr Wong’s company is not a customer of the Plaintiff – it is the Plaintiff that is a customer of Mr Wong’s company.  Whilst this may be technically correct it seems to me that this may not matter very much provided the Plaintiff can show that it is likely to suffer damage by the confusion.

14.  In my judgment the use of Fay Yeung by the Plaintiff for over 13 years provides sufficient “uniqueness” to itself and to its services.  I say this notwithstanding that the meaning of these words “fly” and “ocean” are commonplace.  I am satisfied that a new company, the Defendant in this case, in the same business sector using a phonetically identical Fay Yeung could well cause a customer or a potential customer to confuse the Defendant for the Plaintiff.  This notwithstanding, as one would expect, the companies having different telephone and fax numbers.  I am persuaded to say that the Plaintiff’s use of Fay Yeung should be protected, not only because of phonetic identity but it is in combination with its persistent use of this name in this industry for over 13 years.  It seems to me that if both companies were relatively recent creations and, particularly so in the case of the Plaintiff, that the court would be far less inclined to intervene.  In this case the Plaintiff has built up its reputation and goodwill over 13 years – confusion is highly likely to occur if the Defendant is also permitted to use Fay Yeung in the same business sector.

(iii) Damage or the likelihood of damage

15.  This is the third necessary element.  The damage that is contemplated by the Plaintiff is the rather obvious one that given the two companies identically sounding names, customers or potential customers wishing to engage the Plaintiff may be confused into believing that they are dealing with the Plaintiff when, in fact, they are talking to the Defendant.  Given the very high likelihood for confusion the prospect of the Plaintiff suffering damage must inevitably follow.

Conclusion

16.  I am persuaded on the evidence that the Plaintiff has demonstrated a very high probability of success should the matter ultimately go to trial.  This evidence goes very much further than is required by American Cyanamid and in my judgment would comply with the expectations contemplated in the cases of NWL Ltd v. Woods and in Cayne v. Global Natural Resources Plc (ibid.).  This being my view of the strength of the Plaintiff’s case it becomes relatively more straightforward for the Plaintiff to show that the balance of convenience would favour the grant of the injunction and that damages would not be an adequate remedy.  In any event, again quite rightly, Mr Leung has recognised that it would be difficult for him to suggest that, if the Plaintiff clears the primary evidential hurdle, the balance of convenience would not favour the grant of the injunction.  The Plaintiff is willing to offer a cross undertaking in damages and to put up a bank guarantee of $1 million, this following my observation in the course of the argument that, notwithstanding the impressive turnover of over $1 million, there was no express evidence of the Plaintiff’s profitability which would indicate whether it would be able to comply with its undertaking as to damages.

17.  Now with a bank guarantee, in the sum offered, I am satisfied as to the strength of that undertaking.

18.  I will therefore grant an injunction in terms of paragraph 1(a) of the summons until trial or further order.  I do not consider it necessary to make the additional orders asked for.  This being the order I will now hear from the parties as to whether I should order a “speedy trial” and, if so, what consequential orders I should make.  I would think that having regard to my expressed views on the merits any trial of the action will have to be before another Judge.