XCHRX ANHEUSER-BUSCH, INCORPORATED v. BUDEJOVICKY BUDVAR, NARODNI PODNIK

HCA 11095/1999

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NO. 11095 OF 1999

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D E C I S I O N

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1. This is an application by the Defendant under O. 12 r. 8 of the Rules of the High Court to discharge and set aside the order of Master Lok on 25 August 1999 whereby leave was granted to the Plaintiff to serve the writ on the Defendant out of jurisdiction and for a declaration that the court has no jurisdiction over the Defendant in respect of the subject matter of the claim or the relief or remedy sought in the action. The grounds of the application are that the Plaintiff's case does not fall within any of the sub-clauses referred to in O. 11 r. 1(1) of the Rules of the High Court and that the Plaintiff has not made out a sufficient case on the merits to warrant the exercise of the discretion of the court in its favour. The Defendant also seeks to discharge the order alleging that the Plaintiff had failed to make full and frank disclosure of all material facts at the ex parte application before the Master.

2. In the Defendant's summons, an additional ground for its application was relied on and this relates to forum non conveniens. I was informed by Ms Winnie Tam, who appeared on behalf of the Defendant, that the Defendant does not take any issue on this point and it is not in dispute that Hong Kong is the appropriate forum for the trial of the action.

3. In the Defendant's summons issued on 20 January 2000, the Defendant also seeks a declaration that the writ has not been duly served on it in compliance with O. 11 because service of the writ on the Defendant's office in the Czech Republic was not effected through the courts in the Czech Republic, by any authorized Government agent in the Czech Republic or through any relevant consulate or embassy facilities in the Czech Republic. Under the civil procedure provisions in the Czech Republic, a petition to commence proceedings on other parties to the proceedings has to be served by the courts in the Czech Republic. After the Defendant's summons was issued and on 22 February 2000, the Plaintiff's solicitors made a request to the Chief Secretary for Administration in Hong Kong through the Registrar of the High Court that the concurrent writ of summons be sent through the proper channel to the Czech Republic for service on the Defendant. On 19 May 2000, the Plaintiff's solicitors were advised by the Chief Secretary for Administration that the Ministry of Justice of the Czech Federal Republic had successfully served the documents on the Defendant. As it is accepted by the Defendant that the writ has now been duly served, the Defendant does not seek the declaration regarding service in its summons. The matter was brought to my attention only insofar as this may have a bearing on the costs of the application.

The Plaintiff's claim

4. The Plaintiff is a corporation organized under the laws of the State of Missouri in the United States of America. It is a brewer of beer and the registered proprietor of the following trade mark registrations in Hong Kong: "BUDWEISER", "BUD" and "Budweiser KING OF BEERS". The Plaintiff's beer has been sold, marketed and promoted in Hong Kong under and/or by reference to the aforesaid marks and the Chinese trade mark "百威" since 1982.

5. The Defendant is a Czechoslovakian corporation established under the laws of the Czech Republic and is the brewer of the "Budejovicky Budvar" beer which it exports to many countries including Hong Kong. The Defendant asserts that "Budejovicky" is the Czech translation of "Budweiser".

6. The Plaintiff's causes of action against the Defendant are in trade mark infringement and passing off. The claim in trade mark infringement is founded on 2 bases. Firstly, it is alleged that the Defendant is a joint tortfeasor with a Hong Kong company, Solar Max Limited ("Solar Max") in that there was a common design between the Defendant and Solar Max for the sale, supply and export of the Defendant's beer to Hong Kong for sale, distribution and consumption in Hong Kong. It is alleged that the use of various labels on the bottles of the Defendant's beer has infringed the registered trade marks of the Plaintiff. The labels on the bottles of the Defendant's beer complained of are as follows:

(1) a neck label with the marks "BUDEJOVICKY" and "BUDVAR";

(2) a front label bearing prominently and conspicuously

(a) the marks "Budejovicky" and "Budvar" in a stylized script;

(b) on a band in the lower portion the marks "BUDWEISER" and "BUDVAR"; and

(3) a rear label bearing the marks "Budejovicky" and "Budvar" in a stylized script.

7. Further, the Plaintiff complained of the use by the Defendant of the word or mark "Budejovicky" on the label of its beer in juxtaposition with the Plaintiff's "BUDWEISER" trade mark.

8. The second basis for trade mark infringement is one of direct infringement in the use by the Defendant on its stationery (in particular its letterhead and its Confirmation of Sales forms) of the words "Budweiser Budvar" represented prominently in the same script, style and manner as the words "Budejovicky Budvar" are represented on the main front label of the bottle of the Defendant's beer. The Plaintiff also complained of the use by the Defendant of the marks "BUD", "BUDVAR", "BUDWEISER BUDVAR", "BUDVAR" and "BUDWEISER BUDBRAU" in a repetitive fashion on its Confirmation of Sales forms.

9. It is averred by the Plaintiff that the marks used by the Defendant constitute an infringement in that:

(1) "BUDWEISER" is identical to the Plaintiff's "BUDWEISER" trade mark and is deceptively or confusingly similar to the Plaintiff's "BUD" trade mark;

(2) "BUDEJOVICKY" is a mark deceptively or confusingly similar to the Plaintiff's "BUDWEISER" and "BUD" trade marks;

(3) "BUDVAR" is a mark deceptively and/or confusingly similar to the Plaintiff's "BUDWEISER" and "BUD" trade marks.

10. As for the Plaintiff's cause of action in passing off, the Plaintiff relies on the same particulars set out above for the claim in trade mark infringement.

11. I should also mention here by way of background that the writ in this action was issued on 9 July 1999 and that a concurrent writ was issued on 1 September 1999 pursuant to Master Lok's order. The Plaintiff had brought an earlier action against Solar Max as the 1st Defendant and the Defendant herein as the 2nd Defendant in High Court Action No. A824 of 1997. The writ in the previous High Court Action was issued on 23 January 1997 but the Plaintiff did not apply for leave to serve it on the Defendant out of jurisdiction at any time and the action was defended only by Solar Max. The causes of action against the defendants in the earlier High Court Action are essentially the same as those against the Defendant in the present proceedings, save and except that the Plaintiff had initially pleaded and relied on an agreement in 1911 made between the Plaintiff and the Defendant herein alleging that it was a term of the agreement that the Defendant herein would not outside Europe use the word "BUDWEISER" as a trade name or trade mark in relation to beer and that the Defendant would not use the word "BUDWEISER" on and/or in relation to its beer other than as a true description of the geographical origin thereof. In the last amendment of the Statement of Claim in that action, which was amended at about the time the writ in the present proceedings was issued, all references to the 1911 agreement were deleted and the Defendant herein was removed as the 2nd Defendant in that action, leaving Solar Max as the only defendant. That action is now at an advanced stage. Discovery and inspection have been completed and an order was made that witness statements should be exchanged in February 2000.

12. The Plaintiff's solicitors did not disclose the earlier High Court Action to Master Lok when the Plaintiff sought leave to serve the writ herein out of the jurisdiction. It is the Defendant's contention that in failing to do so, that was material non-disclosure and that the ex parte order made by Master Lok should be set aside on this ground.

The governing principles in Seaconsar

13. It would be convenient first to set out the principles governing an application to set aside service of a writ out of jurisdiction as laid down by the House of Lords in Seaconsar Far East Ltd v. Bank Markazi Jomhouri Islami Iran [1993] 3 WLR 756. This case is the leading authority on the proper approach to be adopted in this kind of application and a summary of the principles laid down by Lord Goff in Seaconsar is found in The Supreme Court Practice 1999 Vol. 1 at paras 11/1/9-12. The point on appeal to the House of Lords was whether the trial judge had erred in applying too strict a standard on the question whether the plaintiff had established a sufficient case on the merits, the trial judge having proceeded on the basis that the plaintiff must establish its case on the balance of probabilities. The Court of Appeal, which was united in the opinion that the trial judge had applied too strict a standard, was divided on the proper standard to apply. The majority considered that the plaintiff had to establish a "good arguable case" on the merits, whereas the judge in the minority was of the opinion that it was enough for the plaintiff to show that it had a case on the merits which was worthy of consideration. In the argument before the House of Lords, attention was concentrated on the question of the strength of the case on the merits which a plaintiff has to establish to justify the grant of leave to serve proceedings out of jurisdiction under O. 11.

14. Lord Goff, who gave the leading judgment, pointed out that the previous decision of the House of Lords in Vitkovice Horni a Hutni Tezirstvo v. Korner [1951] AC 869, was concerned primarily not with the strength of the Plaintiff's case on the merits, but with the standard of proof applicable when considering whether the jurisdiction of the court has been sufficiently established under one or more of the paragraphs of O. 11, r. 1(1). Lord Goff suspected that it was a failure to appreciate this point that had led to the belief that the "good arguable case" test established in Korner's case is as applicable to the merits of the plaintiff's case as it is to the question of jurisdiction under O. 11 r. 1(1), as had been stated in successive editions of The Supreme Court Practice: see the 1993 edition, para. 11/1/6, p. 85. Lord Goff considered that a distinction should be drawn between the standard of proof in considering whether jurisdiction has been sufficiently established under one of the sub-paragraphs in O. 11 r. 1(1) and that in respect of the merits of the Plaintiff's claim, which goes to the exercise of the court's discretion to grant leave for service out of jurisdiction. The proper approach is neatly encapsulated in the following passage in Seaconsar:

"Accordingly, a judge faced with a question of leave to serve proceedings out of the jurisdiction under Order 11 will in practice have to consider both (1) whether jurisdiction has been sufficiently established, on the criterion of the good arguable case laid down in Korner's case, under one of the paragraphs of rule 1(1), and (2) whether there is a serious issue to be tried, so as to enable him to exercise his discretion to grant leave, before he goes on to consider the exercise of that discretion, with particular reference to the issue of forum conveniens." (at 767H)

15. Thus, in assessing the merits of the plaintiff's case, the standard of proof to apply is a serious question to be tried. As explained by Lord Goff, "if, at the end of the day, there remains a substantial question of fact or law or both, arising on the facts disclosed by the affidavits, which the plaintiff bona fide desires to try, the court should, as a rule, allow the service of the writ." (at 763E). This is a "lesser burden" and a "lower standard of proof" compared to the "good arguable case test" which is applicable to the question of jurisdiction under O. 11 r. 1(1) established in Korner (at 765C-D, 766B). As Lord Goff has stated, "if jurisdiction is established under rule 1(1), and it is also established that England is the forum conveniens, I can see no good reason why any particular degree of cogency should be required in relation to the merits of the plaintiff's case." (at 767D).

16. The House of Lords held that the majority of the Court of Appeal had erred when they held that the plaintiff had to establish a good arguable case on the merits. It was sufficient for the plaintiff to establish a serious issue to be tried regarding its claim.

Should the principles in Seaconsar be applied

17. I have set out the principles laid down in Seaconsar in some detail because it was submitted by Ms Tam that I should not apply the principles in the House of Lords decision which is not binding on me but is only of persuasive authority. It was submitted that as a judge sitting at first instance, I am bound by the decisions of the Court of Appeal in Wo Fung Paper Making Factory Ltd v. Sappi Kraft (Pty.) Ltd [1988] 2 HKLR 346 and R. Leslie Deak and Anr v. Deak Perera Far East Ltd (in liquidation) [1991] 1 HKLR 551. It was held by the Court of Appeal in these decisions, which are pre Seaconsar, that the plaintiff is required to show a "good arguable case" on the merits, being the test laid down in Korner's case (see Wo Fung, supra. at 357E-H, 358F-G; Deak, supra. at 544).

18. Mr John Yan, who appeared for the Plaintiff, made no submission in this respect. He merely argued that regardless of which test I am to apply, the Plaintiff would have established a sufficient case on the merits.

19. I should point out that Ms Tam also cited to me a first-instance decision in Hong Kong in which the plaintiff claimed infringement of copyright and trade mark and the test of "good arguable case" was applied in considering the merits of the Plaintiff's claim (Mattel Inc v. Tonka Corp [1991] 2 HKC 411). It is a curious feature that all the cases cited to me on both sides, being cases relating to intellectual property rights in which the defendant had applied to set aside the writ served out of jurisdiction, were all decided before the House of Lords decision in Seaconsar, and all these English decisions had applied the test of "good arguable case" regarding the merits of the plaintiff's claim.

20. In my own research, I have found the decision of the Court of Appeal in Bonus Garment Company v. Karl Rieker Gmbh and Co Kg & Anr [1995] 3 HKC 721, 13 October 1995. This case was concerned with an order granting leave to serve a defendant out of jurisdiction and it was common ground before the Court of Appeal that in considering the merits of the plaintiff's case, the standard of proof to apply is a serious question to be tried on having regard to the House of Lords decision in Seaconsar. The majority in the Court of Appeal (Nazareth, V-P and Bokhary, JA) came to the view that there was no serious question to be tried in respect of the plaintiff's claim against the defendant (at 726, 728 and 729). Liu, JA, who was in the minority, came to a different view by applying the same test in Seaconsar (at 730-1).

21. Apart from this decision of the Court of Appeal, I have found a number of decisions all decided by Stone J in the Commercial List in which he applied the principles in Seaconsar. They are as follows: Daewoo Hong Kong Limited v. Mana Maritime Inc and Ors [1997] HKLRD 1264; Inchcape J. D. H. Limited v. Baltrans Exhibition & Removal Limited and Anr [1997] HKLRD 1278; Heliopolis Co Ltd and Ors v. Euroscan Express (HK) Ltd and Anr [1998] 1 HKC 323; and Ferromin Limited v. Nittetsu Shoji Company Limited, HCCL No. 41 of 1998, 29 January 1999.

22. It seems that our courts have moved with the times and I am not going to put the clock back and follow the decisions of the Court of Appeal decided before Seaconsar. I am free to follow the principles in that case in view of the subsequent Court of Appeal decision in Bonus Garment Company and the standard of a serious question to be tried is to be applied when I come to consider the merits of the Plaintiff's case.

Is the Plaintiff's case within O. 11 r. 1(1)

23. This aspect of the application has been lightly argued by Ms Tam. She has concentrated her attack on the insufficient merits of the Plaintiff's case.

24. Mr Yan submitted that the Plaintiff's case is within O. 11 r. 1(1)(b) (i.e. where an injunction is sought ordering the defendant to do or refrain from doing anything within the jurisdiction, whether or not damages are also claimed in respect of a failure to do or the doing of that thing) and (1)(f) (i.e. where the claim is founded on a tort and the damage was sustained, or resulted from an act committed, within the jurisdiction).

25. In considering whether the Plaintiff's case is within one of the sub-paragraphs in O. 11 r. 1(1), I apply the standard of proof of good arguable case. What this means, as explained in Korner's case, is that the court will not at this stage require proof to its satisfaction. It will require something better than a mere prima facie case. Where questions of fact are concerned, the practice is to look primarily at the plaintiff's case and not to attempt to try disputes of fact on affidavit. It is of course open to the defendant to show that the evidence of the plaintiff is incomplete or plainly wrong. On questions of law, the court may go fully into the issues and will refuse leave if it considers the plaintiff is bound to fail in establishing that its case comes within one of the sub-paragraphs of O. 11 r. 1(1).

26. In respect of the Plaintiff's claim for an injunction ordering the Defendant to do or refrain from doing anything within the jurisdiction, Ms Tam's written submission is that there is no act within the jurisdiction committed by the Defendant which called for an injunction. She seemed to have abandoned this in the course of her oral submissions as she has told me that she does recognise that the cause of action pleaded does attract the relief of an injunction. If I have misunderstood Ms Tam here, I am still of the view that the Plaintiff has established a good arguable case that its case comes within O. 11 r. 1(1)(b). I hold that the cause of action as pleaded does attract the relief of an injunction, notwithstanding that the Defendant has not conducted any sales in Hong Kong but has only sold to Solar Max, which is an importer. If authority is needed, I refer to Puschner v. Tom Palmer (Scotland) Ltd and Anr [1989] RPC 430.

27. As for the Plaintiff's reliance on O. 11 r. 1(1)(f), Ms Tam has initially submitted that insofar as the cause of action in trade mark infringement is concerned, this is not a claim "founded on a tort" praying in aid the case of Def Lepp Music and Ors v. Stuart-Brown and Ors [1986] RPC 273, which was concerned with infringement of copyright. It was held that acts done outside the United Kingdom cannot be the subject of an infringement action in the English courts as copyright under the English Act is strictly defined in terms of territory. Further, the common law rule in private international law that an act done in a foreign country is a tort and actionable as such in England if it is "actionable as a tort" according to English law and actionable according to the law of the foreign country where it was done has no application in this instance because the only wrong under English law that the plaintiff can rely on for this purpose is breach of the statutory rights conferred by the Copyright Act 1956. This right under English law is a statutory right, not a tort at common law. For the above reasons, a successful action cannot be brought in England for alleged infringement of United Kingdom copyright by acts done outside the United Kingdom and the service of the writ on the foreign defendants was set aside on the ground that any claim against these defendants based on breach of the plaintiffs' United Kingdom copyright is bound to fail.

28. In her submissions in reply, Ms Tam informed me that she does not propose to rely on Def Lepp Music. In any event, I am of the view that Def Lepp Music does not assist the Defendant here. Firstly, the Plaintiff has also brought a claim in passing off, which undoubtedly is a claim founded on a tort. Secondly, there are dicta to the contrary in PSM International plc Specialised Fastener Products (Southern) Ltd [1993] FSR 113 (where Def Lepp Music was not cited). At p. 116, it is stated that "infringement of copyright is and always has been treated as a tortious invasion of a property right" for the purpose of founding jurisdiction under the Brussels Convention on Jurisdiction and the Enforcement of Judgments in Civil and Commercial Matters to sue a defendant in a state other than his state of domicile on a matter relating to "tort or quasi-delict". Thirdly, it is doubtful whether Def Lepp Music is authority for the proposition that copyright infringement is not a tort for the purposes of O. 11 r. 1(1)(f), as would appear to be the view of the editors of The Supreme Court Practice 1999 at para. 11/1/33 (see Clerk and Lindsell on Torts, 17th ed. para. 24-02). Mr Yan has also drawn my attention to Unilever Plc v. Gillette (UK) Ltd [1989] RPC 583 in which the plaintiff's claim was one of patent infringement on the basis of joint tortfeasance and leave to serve out of jurisdiction was granted on, inter alia, O. 11 r. 1(1)(f) (see p. 588).

29. Ms Tam also submitted that the Plaintiff has not satisfied the latter part of O. 11 r. 1(1)(f) by which the Plaintiff is required to establish that "damage was sustained, or resulted from an act committed, within the jurisdiction". She has not developed this argument at all. I hold that the requirement in the latter part of the provision is also satisfied in that the Plaintiff's business in Hong Kong would have been affected, if there were tortious acts committed by the Defendant as alleged.

30. I hold that the Plaintiff has established a good arguable case that its case does fall within O. 11 r. 1(1)(b) and (f).

31. I turn to consider the main thrust of the Defendant's argument that the court should decline to exercise its discretion to grant leave for service out of jurisdiction because the Plaintiff has not established a sufficient case on the causes of action as pleaded. The standard of proof I apply in this instance is a serious question to be tried.

Infringement of trade mark - use of mark on stationery

32. I propose to deal with this first because this is the simpler of the two bases relied on by the Plaintiff for trade mark infringement. In considering the Plaintiff's case, I have looked at all the evidence filed up to the date of the hearing, not just the evidence which was before the Master at the time of the ex parte application.

33. I have already summarized the Plaintiff's case regarding its cause of action under this head in the earlier part of this judgment. I have looked at the Confirmation of Sales form or invoice exhibited to the first affidavit of the Defendant's solicitor, Mr Timothy Hancock, and the letterhead and packing list of the Defendant exhibited to the fifth affirmation of the Plaintiff's solicitor, Mr Kenny Wong. Mr Yan has drawn my attention to the case of Cheetah Trade Mark [1993] FSR 263 in which it was held, on an application for summary judgment, that the use of a registered trade mark on invoices and delivery notes is just as much an infringement as stamping the mark on a container for the goods and that use of a registered trade mark on an invoice, even if rendered long after sale and delivery, is still a use in the course of trade. Ms Tam's argument here is that for there to be an actionable infringement of trade mark, there must be a trade in goods bearing the infringing marks, for which proposition she cited the 12th edition of Kerly's Law of Trade Marks published in 1986, para. 14-06. She submitted that in the present case, there was no trade carried on by the Defendant in the goods bearing the registered trade marks of the Plaintiff being "BUDWEISER", "BUD" or "Budweiser _{KING OF BEERS}".

34. The extract in Kerly referred to by Ms Tam was before Cheetah Trade Mark was decided. Mr Yan has provided me with an extract from the First Supplement to the 12th edition published in 1994 in which reference was made by the authors to the Cheetah case at paras 2-07 and 14-08. As pointed out by Mr Yan, in the Cheetah case, there was no use of the infringing mark at all on the Defendant's goods and no trade in goods bearing the infringing marks. I am of the view that the Plaintiff has established a sufficient case of infringement of trade mark on this basis in showing that there is a serious question to be tried.

Infringement of trade mark - joint tortfeasance

35. I will not repeat the Plaintiff's pleaded case on this basis. I need to consider first whether there was infringement of trade mark before I consider whether a case of common design is sufficiently established.

36. Ms Tam has mounted a vigorous attack as to whether the Defendant's use of various marks complained of in the bottle labels would constitute infringement. Firstly, it was argued that the Defendant's marks of "BUDEJOVICKY" and "BUDVAR" on the neck, front and rear labels of the Defendant's beer bottles could not be regarded as marks "identical with or nearly resembling" the Plaintiff's registered trade marks under section 27(1) of the Trade Marks Ordinance, Cap. 43. In section 2(4), it is provided that references in the Ordinance to a near resemblance of marks are "references to a resemblance so near as to be likely to deceive or cause confusion." Mr Yan has accepted that with the different registered trade marks of the Plaintiff, the Plaintiff's case on some of these marks may be stronger than others, but that is a matter for trial. I accept Mr Yan's submission here. Applying the standard of a serious question to be tried, I am of the view that at the very least, the Plaintiff has made out a sufficient case that the Defendant's mark of "BUDVAR" is a mark nearly resembling the Plaintiff's trade mark of "BUDWEISER" and "BUD". I note that "Budvar" means "Bud brew" and that "var" is the Czech word for "brew". In view of the foregoing conclusion that I have reached, it is perhaps unnecessary for me to deal with the other points taken by Ms Tam on infringement. However, in deference to the detailed arguments addressed to me, I would also give my views on the other points of Ms Tam.

37. Regarding the marks "BUDWEISER" and "BUDVAR" which appear on a band in the lower portion of the front label of the Defendant's bottles, Ms Tam's point is that one must read these alleged infringing marks in the context in which the words appear. The words which were printed on the band in the lower portion of the bottle label (this is a brown bottle produced by the Plaintiff's solicitors at the hearing) are in three lines and are as follows:

38. The words "BUDWEISER BUDVAR" are given the greatest prominence of the words that appear in the band. The words "national enterprise", which appear beneath, are given lesser prominence. And the words "BREWED AND BOTTLED BY THE BREWERY" are given the least prominence and noticeable only on a close reading.

39. Another version of the Defendant's beer, which is in a green bottle, is exhibited to the first affidavit of Mr Hancock. The difference with the label on the bottle produced by the Plaintiff's solicitors is that the relevant words appear in two lines instead of three, that there is a comma after the words "BUDWEISER BUDVAR" and the words "NATIONAL CORPORATION" appear after the comma on the same line and are given equal prominence as the words " BUDWEISER BUDVAR".

40. It is submitted by Ms Tam that the marks "BUDWEISER" and "BUDVAR" on the band in the lower part of the Defendant's label, when read with the other words printed on the band, merely denote the name of the company that is the brewer of the beer, i.e. the Defendant. Ms Tam has also relied on the saving provision in section 34 which provides that "no registration of a trade mark shall interfere with - (a) any bona fide use by a person of his own name or of the name of his place of business, or of the name, or of the name of the place of business, of any of his predecessors in business." Lastly, she has referred me to the case of Pompadour Laboratories Ltd v. Stanley Frazer [1965] RPC 7 to illustrate the proposition where there is a coincidence between the name of the proprietor of the trade mark and the trade mark itself, there is no use of the plaintiff's trade mark "in a trade mark sense" if it is not a reference to the plaintiff's mark at all but merely a reference to the plaintiff's name.

41. I shall not set out in detail other cases referred by both parties on the last proposition except to say that I have read them in detail and considered them. They are Bismag Ltd v. Amblins (Chemists) Ltd (1940) 57 RPC 209; Harrods Ltd v. Schwartz-Sackin & Co Ltd [1986] FSR 490; Duracell International Inc and Anr v. Ever Ready Limited [1989] FSR 71; and Mattel Inc v. Tonka Corp, supra.

42. In the light of Ms Tam's submissions, I am inclined to think that the Plaintiff does not have an unanswerable case here in respect of the alleged infringement in the use of the marks "BUDWEISER" and "BUDVAR" printed on the band in the lower portion of the front label. This, however, is not the standard of proof to which the Plaintiff is required to satisfy the court in this application. I am inclined to think that there is an issue to go to trial on the question of the alleged infringement by the use of the marks complained of in the lower portion of the front label. I take the point made by Ms Tam that the marks complained of do not import an express reference to beer made by the Plaintiff. However, would there be an implicit reference here having regard to the manner in which the marks complained of were presented on the label? And would implicit reference suffice? These are not questions that could be answered clearly at this stage. I think it is a matter for trial.

43. As for the saving provision in Section 34, Mr Yan has taken an issue whether there was "bona fide use" by the Defendant of its own name on the bottle label. He pointed out that the Defendant's name, as appears in the writ, is "Budejovicky Budvar, Narodni Podnik", whereas the name of the brewer on the label is "Budweiser Budvar National Enterprise or Corporation". I was also referred to the evidence, in particular a letter of the Defendant to Solar Max dated 6 August 1996 in which the Defendant offered "the Czech version of Budweiser Budvar brand" for beer imported into Hong Kong. There are also bottle labels in which the Defendant uses interchangeably for its business in other countries and from these labels, one can see the variance of usage particularly the size and prominence of the "Budweiser" mark. It was submitted by the Plaintiff that such evidence showed that the Defendant had tried to sail as close to the wind as possible in an attempt to ride on the Plaintiff's marks and reputation. On behalf of the Defendant, Ms Tam has put forward a different interpretation on this evidence and submitted that it would appear from litigation in other jurisdictions that there are concurrent rights of the Plaintiff and the Defendant to use the "Budweiser" mark elsewhere. Again, the question of bona fide use by the Defendant of its name seems to me to be a matter for trial.

44. Lastly, Ms Tam has drawn my attention to the fact that the Defendant has applied for registration of the marks "Budejovicky Budvar and label" and "Budejovicky Budvar in script" in the Trade Marks Register in Hong Kong in respect of beers. Ms Tam submitted that as the Defendant's marks have been accepted for registration, this would support the Defendant's case that their marks are not "nearly resembling" the Plaintiff's registered trade marks, otherwise the Defendant's marks would not have passed the examination stage. It would appear from the 5th affirmation of Mr Kenny Wong that the Plaintiff has opposed the Defendant's applications and the opposition proceedings are pending. I do not think I can infer from this matter that there is no serious question to be tried on the issue of near resemblance.

45. Having come to the view that the Plaintiff has made out a sufficient case on infringement regarding the use of various marks on the labels of the Defendant's beer, I turn to consider common design. The first point is a pleading point taken by Ms Tam. She submitted that to mount a case on joint tortfeasance, the Plaintiff is required to establish not just a common design but the commission of a tortious act by one of the parties in furtherance of that common design. She has submitted that the act in furtherance of the alleged common design has not been pleaded in the Statement of Claim. I think there is substance in that criticism. Mr Yan has indicated that if it need be, he will seek leave to amend sub-paragraph (2) being the Particulars of Infringement in paragraph 8 of the Statement of Claim. That paragraph, as proposed to be amended, would read as follows:

"The agreement between the Defendant and Solar Max Limited, a Hong Kong company, for the sale, supply and export of the Infringement Beer to Hong Kong for sale, distribution and consumption in Hong Kong and Solar Max Limited has in fact sold and distributed the Infringing Beer in Hong Kong pursuant to such an agreement."

46. I grant leave to the Plaintiff to amend this paragraph in the manner as set out above.

47. The Plaintiff's case of there being a common design or a meeting of minds between the Defendant and Solar Max relating to the marketing and sale in Hong Kong of the Defendant's beer bearing the marks complained of is founded on the following matters:

(1) In the first letter dated 6 August 1996 from Solar Max to the export manager of the Defendant, Solar Max inquired whether the Defendant "would be in a position to export to Hong Kong and to work with us to build up the name of Budweiser - Budvar in Hong Kong" (emphasis supplied). Solar Max further stated that it was "interested in representing [the Defendant's] brand in Hong Kong and sell the largest quantity possible for [the Defendant] and for [Solar Max]" and that it wished to "build [the Defendant's] brand name in the appropriate outlets". Solar Max stated that it would pay for all promotional items ordered and requested the Defendant to quote the best price of the beer ex brewery and a price list for glasses and other promotional items. In the background material enclosed in that letter, Solar Max again stated that it would "like to work with [the Defendant] and select the niche for the world famous Budweiser, Budvar in bottled products" and expressed confidence that it could expand the sales.

(2) In the Defendant's reply to the above letter of the same date, the Defendant referred to the Plaintiff's trade mark registrations in Hong Kong and offered the Czech version of its "Budweiser Budvar brand name/label" to get around the "complicated" trade mark situation. In that letter, a promotional budget with extra promotional allowance according to agreement was offered to the Solar Max.

(3) On the reverse of the Confirmation of Sales forms of the Defendant are printed "General Sale and Delivery Terms". I note in particular the provisions under the headings of "rights granted", "trade marks", "advertising/promotions".

(4) The Defendant had supplied advertising and promotional materials to Solar Max, as appeared from various packing lists. Solar Max in turn supplied these promotional materials to various hotels in Hong Kong. The promotional materials were supplied by the Defendant to Solar Max by way of price reduction and the total financial budget for sales support agreed consequently with the importer, as appeared from an affidavit of the Defendant's solicitors filed in an application to register the Defendant's marks in Cambodia.

(5) In some instances at least, the Defendant had shipped its beer directly from its factory to Solar Max in Hong Kong and made arrangements for shipment to Hong Kong on a "freight and insurance pre-paid" basis.

(6) The Defendant had placed advertisement in a trade magazine seeking distributors in the Asia-Pacific region.

(7) According to the report of a newspaper in the Czech Republic in November 1997, it was stated that the Defendant has "successfully started beer exports, among others also to Hong Kong". This was said to be a "new sales strategy".

(8) After the writ in this action was issued and on 1 November 1999, the Defendant entered into an agreement with Solar Max whereby the latter is appointed as the Defendant's exclusive importer and distributor of the Defendant's beer in Hong Kong.

48. It is submitted by Mr Yan that on the above evidence, the Plaintiff has established a sufficient case for an inference of a common design to be drawn. He has taken me to the cases of Morton-Norwich Products Inc and Ors v. Intercen Ltd [1978] RPC 501; Puschner v. Tom Palmer (Scotland) Ltd and Anr, supra; Unilever Plc v. Gillette (UK) Ltd, supra; Intel Corporation v. General Instrument Corporation and Ors (No. 2) [1991] RPC 235; and Lubrizol Corporation and Anr v. Esso Petroleum Co Ltd and Ors [1992] RPC 281. Ms Tam has referred to some of the authorities cited by Mr Yan and referred me in addition to Unilever Plc v. Chefaro Proprietaries Ltd and Anr [1994] FSR 135. The cases cited to me by both parties are merely illustrations of whether the plaintiff has made out "a good arguable case" on common design (applying the law before Seaconsar) on the particular facts of the case, although they also contained helpful dicta on how the issue should be approached which I have noted.

49. The evidence here is not one way, as Ms Tam has submitted, and there are important differences between the agreement in November 1999 and the previous contractual terms in the General Sale and Delivery Terms, being the exclusive distributorship in Hong Kong and the obligation to purchase minimum volumes. Having reviewed all the evidence, I am satisfied that the Plaintiff has established there is a serious question to be tried on the allegation of common design and concerted practice. Disregarding the post-writ agreement in November 1999, I am satisfied there is sufficient evidence of a "tacit agreement" between the Defendant and Solar Max to combine to secure the doing of acts which in the event proved to be infringements of the Plaintiff's registered trade marks (see Unilever Plc v. Gillette (UK) Ltd, supra at 609).

Passing off

50. I will not repeat the Plaintiff's pleaded case in passing off. The point taken by Ms Tam here is that the Plaintiff has not made out a case of misrepresentation and that there is no evidence of confusion or deception, as it would be plain to anyone who has seen the Defendant's bottled beer that this is a Czech beer and the Defendant's mark of "BUDEJOVICKY" is not nearly resembling the Plaintiff's trade mark "BUDWEISER". Ms Tam submitted that the allegation of deception and confusion in the first affirmation of Mr Kenny Wong is a bare assertion and just ritual incantation. On the claim of passing off, Mr Yan submitted that in Hong Kong, in addition to the registered trade marks, the Plaintiff has since at least 1982 also been using the Chinese trade mark, "百威" on and in relation to its beer and that "百威" sounds like the Defendant's mark "BUDVAR". The question of whether there is bad faith on the part of the Defendant is a matter in issue. He submitted that there is a question to go to trial.

51. I have noted the approach to be adopted by the court faced with a submission that the court should "grasp the nettle now and decide whether the claim is right or wrong, rather than allow a doubtful claim to go to trial" (see Unilever Plc v. Gillette (UK) Ltd, supra. at 602, per Mustill LJ). The question whether the Plaintiff does have a claim in passing off is not a "naked point of law". This is a matter for a trial judge to decide in the light of all the circumstances. In the present case, I am unable to say that the Plaintiff does not have "a fair propect" or "a fair possibility" of persuading the trial judge to draw the required inference of confusion in the minds of the public mistaking the Defendant's beer for the Plaintiff's beer. I rule that the Plaintiff has established a serious question to be tried on its claim of passing off.

Material non-disclosure

52. It would be appropriate to set out the principles applicable before I deal with the Defendant's allegation that the Plaintiff has failed to disclose material matters in the ex parte application. I remind myself what is required to be disclosed at the ex parte stage in applying for leave to serve a writ out of jurisdiction. In Wo Fung Paper Making Factory Ltd v. Sappi Kraft (Pty.) Ltd, supra at 356-357, Hunter JA had this to say:

"There are two stages to the enquiry. The first is the ex parte stage under Order 11. I emphasise that it is ex parte on documents. The practice does not envisage oral submissions ever being made except at specific request. Order 11, rule 4(1) specifies what the supporting affidavit has to show. At that stage it seems to me that the court has to come to a provisional view (it being an ex parte application) on three matters. The first is whether the applicant shows a prima facie case. I read the speeches in Vitkovice as accepting that that is the burden of that stage, it may be for the simple reason that when the court has only got one party's version before it, it can do very little more ..... Secondly, it has to consider the sufficiency in law of the facts alleged: for example, whether the applicant brings himself within any of the sub-rules and whether the facts alleged are sufficient prima facie to establish the cause of action alleged. Thirdly, the court has to consider the facts within the limited scope available. This really comes down to considering whether the facts are sufficiently asserted in an apparently credible manner."

53. Hunter, JA cited the following dicta of Fuad, VP in Citibank v. Express Ship Management Service [1987] HKLR 1184 on material non-disclosure:

"While the courts must be vigilant, and insist that full and frank disclosure be made in grounding affidavits for ex parte applications for injunctions, Anton Piller orders etc, it is essential to bear in mind the true principle upon which this rule is based. Unless the courts use the sanction which the principle gives them only where the non-disclosure is of facts which are relevant to the ex parte judge's 'weighing operation', an impossible burden would be placed upon applicants and their advisers, and affidavits ex abundanti will tend to contain all sorts of facts and exhibits which are not really necessary for the proper exercise of the court's discretion when ex parte relief is sought."

54. Thus, the test used in dealing with an application to set aside an ex parte order for non-disclosure is whether the court was fully informed of all the facts that are relevant to the weighing operation which the court has to make in deciding the ex parte application. An example in which the test was applied is Mattel Inc v. Tonka Corp, supra.

55. I turn to deal specifically with the matters alleged by Ms Tam that the Plaintiff should have disclosed but had failed to do so in the ex parte application.

56. Firstly, it is said that the Master was not told about the previous High Court action which was also brought against the Defendant (as the 2nd Defendant). The Plaintiff did not apply for leave to serve the writ in the earlier High Court action on the Defendant and subsequently obtained an order on its application to remove the Defendant as a party at about the time when the writ in the present proceedings was issued. The Defendant has not complained of delay or prejudice arising out of the earlier High Court action. I am unable to see how this matter would be relevant to the weighing operation of the Master at the ex parte stage.

57. Next, it is submitted that the pleadings of the Plaintiff and Solar Max in the earlier High Court action are relevant because they disclosed an agreement or declaration between the Plaintiff and the Defendant in 1911 to the effect that the Defendant had the right to use the word "BUDWEISER" as a description of geographical origin in relation to the beer brewed at its brewery at Budweis in Bohemia. I am unable to accept this is a matter material to the consideration of the Master. The 1911 agreement, if relevant, would only go to establish an arguable defence that may be raised by the Defendant. The Plaintiff's obligation is to show a serious question to be tried. This is not negatived by the fact that good arguable defences may exist.

58. The third matter complained of is that the Plaintiff had failed to produce the bottled beer of the Defendant to the Master. Ms Tam has submitted that visual presentation is important as well as the context in which the marks complained of appear on the Defendant's labels. These are no doubt material matters to be taken into consideration at the trial. At the ex parte stage, the Court is required to form a provisional view that the Plaintiff has shown a prima facie case. I am satisfied that the material facts have been sufficiently asserted in an "apparently credible manner".

59. For the above reasons, I do not think that the Defendant has made out a case on material non-disclosure.

60. For the reasons set out above, the Defendant has failed to establish any of the grounds relied on at this hearing to set aside the order of Master Lok granting leave to the Plaintiff to serve the writ on the Defendant out of jurisdiction. I therefore dismiss the Defendant's summons issued on 20 January 2000. As there would appear to be a valid point taken by the Defendant's solicitors regarding defective service of the writ at the time when the summons was issued, I will hear the parties on costs instead of making an order nisi as to costs.