BURBERRY LTD v. ADVANCE HARBOUR TRADING LTD AND OTHERS

HCA 912/2007

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NO. 912 OF 2007

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REASONS FOR DECISION

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I.  INTRODUCTION

1.  On 19 November 2008, I gave summary judgment:

(1)  by consent, against the 1^st and 2^nd Defendants for trademarks infringement and passing-off.  The judgment included, after hearing arguments, an option for the Plaintiff to elect between the remedies of an account of profits and damages.

(2)  after hearing arguments, against the 1^st Defendant for his infringement of trademarks and passing-off.  The judgment also included an option for the Plaintiff to elect between the remedies of an account of profits and damages.

2.  I indicated that I would hand down my reasons for the above decisions.  This is what I do now.

3.  The 2^nd and 3^rd Defendants are the directors of the 1^st Defendant.  There is no dispute that the 1^st Defendant had been selling and trading counterfeit goods to which forged trade marks of the Plaintiff’s were applied.

4.  For the purpose of the summary judgment application, the contentions between the parties are within a narrow compass, which could be summarized as follows.

5.  In relation to the claim against the 1^st and 2^nd Defendants, as I have mentioned above, they consent to a judgment to be entered against them for all the reliefs sought by the Plaintiffs, save and except that the Plaintiff is no longer entitled to elect between the remedies of damages and an account of profits.  The 1^st and 2^nd Defendants say that the Plaintiff has before this judgment already elected for the remedy of an account of profits or alternatively, it is now estopped from pursuing a claim for damages. 

6.  For the 3^rd Defendant, he contends that no summary judgment should be given since there is a triable issue as to whether he, albeit a director of the 1^st Defendant, had been personally involved in the 1^st Defendant’s wrongful acts of infringement and passing-off.  It is the 3^rd Defendant’s case that he was never involved in these activities.

II.  Background facts

7.  The following facts, unless otherwise stated, are not in dispute in this application.

8.  The Plaintiff is an internationally well-known company engaged in the business of designing, manufacturing, marketing, distributing and selling throughout the world and in Hong Kong apparels and fashion accessories under or by reference to its registered trademarks of “BURBERRY”, the Equestrian Knight device and the Burberry Check. 

9.  The 2^nd and 3^rd Defendants are and were the only shareholders and directors of the 1^st Defendant.

10.  In July 2005, various raids were conducted by the Hong Kong Customs & Excise Department at the 1^st Defendant’s office and warehouse.  Large quantities of goods of apparels and fashion accessories, which bore the Plaintiff’s trademarks, were found.  These however were not the Plaintiff’s products and the trademarks were forged.

11.  All the Defendants were convicted of offences under the Trade Description Ordinance and Crime Ordinance in relation to these goods in the District Court in May 2007.  The 2^nd and 3^rd Defendants were respectively sentenced to imprisonment.   

12.  The 3^rd Defendant however has appealed against the conviction to the Court of Appeal.  The appeal, after some delays caused by the 3^rd Defendant’s change of counsel and amendments to the grounds of appeal, is yet to be fixed for a hearing. 

13.  On 7 May 2007, the Plaintiff brought the present claim against the Defendants for trademarks infringement and passing off.  The Plaintiff claims the usual reliefs, including various injunctions against the Defendants and an order for delivery up of infringing materials and products.  The Plaintiff further claims an inquiry as to damages or, at its option, an account of profits.

III.  Discussion

Applicable principles

14.  The principles applicable to a summary judgment application are well established and not disputed. 

15.  It is for the defendant to show a triable defence, which  should condescend to particulars, and which is capable of belief or is not frivolous.  Further, a bare assertion by a defendant does not necessarily raise a triable issue, as the Court at the summary stage is still entitled to assess the assertion against the available evidence, in particular the contemporaneous documents and undisputed facts, to see whether it is reasonably capable of belief:  See Hong Kong Civil Procedure 2009, paras 14/4/4, 14/4/9.

Summary judgment against the 3^rd Defendant

16.  As I mentioned above, the only defence raised by the 3^rd Defendant against the granting of summary judgment is that he was never personally involved in any of the 1^st Defendant’s acts of infringement and passing off.  As such, he is not liable either as a principal or joint tortfeasor.  

17.  In this regard, it is the 3^rd Defendant’s affirmation evidence that:

(1)  Although he was a shareholder and director of the 1^st Defendant, the mastermind of it was the 2^nd Defendant.  He usually only carried out what the 2^nd Defendant had instructed or asked him to do.

(2)  Insofar as the 1^st Defendant’s business was concerned, he did not handle the documents concerning the counterfeit goods and that he did not have any knowledge of the infringing activities until he was arrested and told by the Customs & Excise officers[1].   His main involvement in the 1^st Defendant’s activities was in relation to other trading businesses unrelated to these counterfeit goods.

(3)  Although he did sign one set of invoices which was related to some of the counterfeit goods, he only did so at the request of the 2^nd Defendant for convenience, as the 2^nd Defendant was not there.  He did not know that the goods covered under the invoices were counterfeit goods when he signed them.

18.  In light of the above, Mr Dennis Sit, counsel for the 3^rd Defendant, submits that there must be a triable issue on whether the 3^rd Defendant was himself involved in, and thus liable for, the tortuous acts as claimed:

(1)  As the 3^rd Defendant is now appealing against his conviction, the findings, if any, in the criminal proceedings on his involvement in the wrongful acts cannot be taken at face value to prove his civil liability for the present purpose.

(2)  The 3^rd Defendant has said on oath that he was never involved in any of the infringing and passing off acts. This evidence should and can only be rejected after being tested out at trial but not summarily.

19.  In my judgment, even without taking into account of the criminal conviction, I agree with the submissions of Mr John Yan, leading counsel for the Plaintiff, that the overwhelming contemporaneous documentary evidence disclosed by the Defendants before me demonstrates that the 3^rd Defendant’s assertion of non-involvement is not reasonably capable of belief.  The evidence I accept is as follows:

(1)  In the Statement of Claim, which is verified by the 7^th Affidavit of Jim Sze Wing in support of the O.14 application, it is pleaded that the 3^rd Defendant is also known as “Jim” as appeared in the following various documents concerning the counterfeit goods.  The 3^rd Defendant has not disputed this.

(2)  An order form placed by the 1^st Defendant’s Japanese buyer (Tatou Ltd) in relation to some of the counterfeit goods was addressed specifically to the 3^rd Defendant (as Mr Jim).  The 3^rd Defendant has not disputed this nor explained in his opposing affirmations as to why the order form should be so addressed to him.

(3)  At least one receipt relating to the posting of a parcel of some of the subject matter counterfeit goods to a Japanese company (JR TRAD) shows that the 3^rd Defendant (as Jim) was the sender.  The 3^rd Defendant has not disputed this nor explained in his opposing affirmations as to why he was named as the sender.

(4)  The invoice (No. 0507-2111) relating to this shipment of counterfeit goods issued in the name of “Tung Wai Fashion Garment Fty” (the Plaintiff through counsel submits that this is a fictitious company, which suggestion is not challenged or disputed by the 3^rd Defendant’s legal representative) shows that the purchase price was to be paid into the joint bank account of the 2^nd and 3^rd Defendants. 

(5)  A number of documents relating to the supply to the 1^st Defendant of the counterfeit Burberry products by one Asia Company were addressed to the 3^rd Defendant (as “Jim” or “Jim Ng”).  The 3^rd Defendant has not disputed this nor explained in his opposing affirmations as to why all these documents were addressed to him.

20.  The undisputed and contemporaneous documents identified above, coupled with the 3^rd Defendant’s total lack of explanations as to why these documents concerning the counterfeit goods were related to him as appeared, show clearly that the 3^rd Defendant was closely involved in the acts of infringement and passing off in handling their purchases from the supplier, and selling and causing them to be delivered to the commercial buyers.  

21.  In the circumstances, the 3^rd Defendant has failed to show that his assertion of non-involvement in any of the pleaded tortuous acts of infringement of trademarks and passing off is reasonably capable of belief. The 3^rd Defendant has not therefore demonstrated to me that there is a triable defence to the Plaintiff’s claim. 

22.  Summary judgment should thus be given.

23.  As I indicated above, I come to this conclusion without taking into account of the 3^rd Defendant’s conviction, one way or the other.

Summary judgment against the 1^st and 2^nd Defendants

The 1^st and 2^nd Defendants’ contention

24.  The issue as to whether the Plaintiff has irrevocably elected for the remedy of an account of profits arises in the following manner.

25.  On 15 November 2007, in light of the Defendants’ default in complying with an unless order to file and serve a list of documents, on the application of the Plaintiff, an interlocutory judgment was granted against the Defendants.  In this interlocutory judgment, it was adjudged that, inter alia, the Defendants do pay the Plaintiff “damages, or at the Plaintiff’s option, an account of profits to be assessed.”

26.  On 11 December 2007, the Plaintiff took out a Summons (“the Inquiry Summons”) seeking directions on an inquiry for an account of profits by the Defendants, as well as an order that the Defendants do pay the Plaintiff the amount found due on the taking of the account, and an interim payment in light of the inquiry.

27.  On 24 December 2007, the Defendants took out their Summons to seek to set aside the interlocutory judgment.

28.  On 27 December 2007, at the first call-over hearing of the Inquiry Summons, and upon the objection of the Defendants to the granting of any reliefs thereunder, Master J Wong adjourned the application for substantive arguments to a date to be fixed, and gave directions for the filing of evidence.

29.  Before the restoration of the substantive hearing of the Inquiry Summons, on 19 March 2008, the Defendants successfully set aside the interlocutory judgment.

30.  Despite that, on 14 April 2008, there was another hearing of the Inquiry Summons before Master S Kwang for directions.  The Plaintiff sought an amendment to the summons, while Defendants’ counsel maintained their objection to the granting of any reliefs under the Inquiry Summons.   The learned Master granted leave to amend the summons and further adjourned the substantive hearing of the amended Inquiry Summons to a date to be fixed.

31.  On 16 June 2008, the Plaintiff issued the present Summons for summary judgment. 

32.  The Inquiry Summons has not been restored and fixed for the substantive hearing.

33.  The 1^st and 2^nd Defendants now say, given that the Plaintiff has taken out the Inquiry Summons and has since maintained its position to proceed with the Inquiry Summons, it has “elected” irrevocably the remedy of account of profits, and is therefore not entitled to have an option to choose between that and the remedy of damages.   As a result, the summary judgment to be given against the 1^st and 2^nd Defendants should not include the relief (as sought) that the Plaintiff is still entitled to choose between these two remedies.

34.  I am not persuaded by the 1^st and 2^nd Defendants’ arguments.  My reasons are as follows.

35.  As explained below, it is well established that a claimant is in general not to be required to elect or to be found to have elected between inconsistent remedies before judgment is obtained and before he is able to make an informed choice.   Further, the doctrine of election is based on common sense and equity in the circumstances of each case.

36.  In Island Records Ltd v Tring International PLC^[2], the plaintiff (an owner of certain copyright in sound recordings) claimed against the defendant for infringement of the copyright.  It sought summary judgment on the basis of the defendant’s admissions.  One of the questions that fell to be determined at the hearing was whether the plaintiff had to elect between the remedies of an account of profits and damages.  On the question of when election had to be made, Lightman J said the following^[3]:

“Four principles are clear.  First, where a plaintiff can apply in proceedings in the alternative for damages and an account of profits, he cannot obtain judgment for both: he can only obtain judgment for one or the other: see Neilson v Betts (1871) LR 5 HL 1 and De Vitre v Betts (1873) LR 6 HL 319 at 321.  Secondly, once judgment has been entered either for damages or an account of profits, any right of election is lost: any claim to the remedy other than that for which judgment is entered is forever lost: see United Australia Ltd v Barclays Bank Ltd [1941] AC 1 at 30.  Thirdly, a part should in general not to be required to elect or found to have elected between remedies unless and until he is able to make an informed choice.  A right of election, if it is to be meaningful and not a mere gamble, must embrace the right to readily available information as to his likely entitlement in case of both the two alternative remedies.  It is quite unreasonable to require the plaintiff to speculate totally in the dark as to whether or not the sum recoverable by way of damages will exceed that recoverable under an account of profits.  In analogous situation, it has been held unreasonable to require a plaintiff to speculate whether a payment into court is sufficient to satisfy his claim for damages for infringement of copyright before he has been afforded inspection of the records of sales in the defendants books: see Mate & Son v Samuel Stephen Ltd (1928-1935) Mac CC 257 at 261.  Fourthly, the exercise of the right of election should not be unreasonably delayed to the prejudice of the defendant.”  (emphasis added)

37.  Later, on the issue of election between two alternative remedies, Lord Nicholls in Tang Wing Hong Alan v Capacious Investments Ltd^[4], on hearing an appeal from the Hong Kong, said the following^[5]:

“Alternative remedies

Faced with alternative and inconsistent remedies a plaintiff must choose, or elect, between them. He cannot have both. The basic principle governing when a plaintiff must make his choice is simple and clear. He is required to choose when, but not before, judgment is given in his favour and the judge is asked to make orders against the defendant. A plaintiff is not required to make his choice when he launches his proceedings. He may claim one remedy initially, and then by amendment of his writ and his pleadings abandon that claim in favour of the other. He may claim both remedies, as alternatives. But he must make up his mind when judgment is being entered against the defendant. Court orders are intended to be obeyed. In the nature of things therefore, the court should not make orders which would afford a plaintiff both of two alternative remedies.

In the ordinary course, by the time the trial is concluded, a plaintiff will know which remedy is more advantageous to him. By then, if not before, he will know enough of the facts to assess where his best interests lie. There will be nothing unfair in requiring him to elect at that stage. Occasionally, this may not be so. This is more likely to happen when the judgment is a default judgment or a summary judgment than at the conclusion of a trial. A plaintiff may not know how much money the defendant has made from the wrongful use of his property. It may be unreasonable to require the plaintiff to make his choice without further information. To meet this difficulty, the court may make discovery and other orders designed to give the plaintiff the information he needs, and which in fairness he ought to have, before deciding upon his remedy. A recent instance where this was done is the decision of Lightman J in Island Records Ltd v Tring International plc [1995] 3 All ER 444.The court will take care to ensure that such an order is not oppressive to a defendant.

In the ordinary course the decision made when judgment is entered is made once and for all. That is the normal rule. The order is a final order, and the interests of the parties and the public interest alike dictate that there should be finality. The principle, however, is not rigid and unbending. Like all procedural principles, the established principles regarding election between alternative remedies are not fixed and unyielding rules. These principles are the means to an end, not the end in themselves. They are no more than practical applications of a general and overriding principle governing the conduct of legal proceedings, namely, that proceedings should be conducted in a manner which strikes a fair and reasonable balance between the interests of the parties, having proper regard also to the wider public interest in the conduct of court proceedings. Thus in Johnson v Agnew [1980] AC 367, the House of Lords held that when specific performance fails to be realized, an order for specific performance may subsequently be discharged and an enquiry as to damages ordered. Lord Wilberforce observed, at 398:

Election, though the subject of much learning and refinement, is in the end a doctrine based on simple considerations of common sense and equity.”

38.   Applying the above principles to the present case with the chronology concerning the Inquiry Summons as set out above, in my view, there is no binding election on the Plaintiff for the remedy of an account of profits:

(1)  The Plaintiff should not be held to the purported election made under the Inquiry Summons since the interlocutory judgment (the only basis upon which the summons was taken out) has already been set aside.  As repeatedly pointed out in the above authorities, in general, a party should not be held to have elected as between two alternative remedies before judgment and order for a particular remedy has been granted.

(2)  No decision or determination has been made for the inquiry of an account of profits under the Inquiry Summons.  No directions have been given to require the Defendants to provide evidence in relation to the account of profits.  In the premises, the Plaintiff has not been in a position to obtain all the available information to enable it to make an informed election.  Again, it should in general not to be held to have elected between the two remedies.

(3)  The chronology and the way in how the issue of election arose in this case as shown above do not in my view take the present case out of the general situation.  The Defendants have all along opposed to the Inquiry Summons, on the basis that they were to (and did) set aside the interlocutory judgment, and that the application for directions on the account of profits was premature.   As such, there has never been any reliance by the Defendants on this “election” on the part of the Plaintiff, nor have they suffered any inequity or prejudice as a result of the so-called “election”. 

(4)  For these reasons, I do not find that the Plaintiff has by reasons of the Inquiry Summons and the steps already taken under it elected the remedy of an account of profits. 

39.  Faced with the authorities of Tang Wing Hong Alan andIsland Records Ltd, Mr Lee, counsel for the 1^st and 2^nd Defendants, seeks to contend alternatively that the present case is a ­­pre-judgment election by reason of the Inquiry Summons.  What I understand this to mean is that, the Plaintiff is now estopped from pursuing the remedy of damages by reasons of its representation that it had opted for the remedy of account of profits through its conduct in taking out the Inquiry Summons, and its solicitor’s confirmation at the call-over hearing of the summons that it wanted an account of profit. 

40.  I cannot see how this could further assist the 1^st and 2^nd Defendants. 

41.  Insofar as the usual doctrine of estoppel is concerned, in order to succeed, the 1^st and 2^nd Defendants have to show that they had detrimentally relied on the representation and that it is now inequitable for the Plaintiff to resile from it. 

42.  But there is no such detrimental reliance or inequity in the present case. 

43.  As I have said above, the 1^st and 2^nd Defendants have all along opposed to the Inquiry Summons.  It is their own position that no directions and reliefs in relation to the account of profits should be granted.    They have never relied on the representation, let alone any detrimental reliance.  

44.  I therefore also conclude that the Plaintiff is not estopped from pursuing, at its option, the remedy of damages.    

IV.    Conclusion

45.  For the above reasons:

(1)  In relation to the 1^st and 2^nd Defendants, I grant by consent summary judgment against them in the terms as agreed between the parties (at the hearing).  I further grant judgment that the Plaintiff is entitled to elect, at its option, between the remedies of an account of profits and damages.

(2)  In relation to the 3^rd Defendant, I grant summary judgment against him in the terms as agreed between the parties at the hearing before me, which also include the option to elect between the two remedies. 

46.  I have already dealt with the costs orders at the oral hearing, and it is not necessary for me to repeat them here.

47.  Lastly, I would like to thank counsel for their sensible approach in this application, and their succinct submissions. 

[1] In relation to this assertion, the 3^rd Defendant’s counsel however fairly accepts that lack of knowledge of the infringement itself is not a defence.

[2] [1995] Fleet Street Reports 560.

[3] At 563.

[4] [1996] 1 HKC 401 (PC).

[5] At 407A-408B.