XCHRX BAYERISCHE MOTOREN WERKE AKTIENGESELLSCHAFT v. SOGO HONG KONG CO. LTD. and J. AUTO CO. LTD. (Third Party)

HCA 16645/1998

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NO. A16645 OF 1998

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D E C I S I O N

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1. This is an application by the Plaintiff for summary judgment against the Defendant for an injunction to restrain the Defendant from passing off certain goods, viz. lighters, as and for goods associated with the Plaintiff, and for an order for delivery up or destruction of articles which would offend such an injunction, damages and an order for discovery.

Plaintiff's case

2. The Plaintiff is a well-known maker of motor vehicles, and it has for many years been marketing and selling its motor vehicles in Hong Kong by reference to a mark consisting of a circle, with the letters "BMW", surrounding two blue and two white quadrants ("the mark"). It is not disputed by the Defendant that the Plaintiff enjoys goodwill in Hong Kong as a maker of motor vehicles.

3. Nor is it disputed that the Plaintiff also sells in Hong Kong various accessories, including lighters, bearing the mark.

4. The Plaintiff's evidence is that in October 1997, there was displayed and sold at a counter in the Defendant's department store a lighter bearing the mark. It is not disputed by the Defendant that the mark is identical to the Plaintiff's mark.

5. The Plaintiff's case is that the lighter was not manufactured or authorised by it, and that accordingly the Defendant is liable to it in the tort of passing-off.

6. For reasons not canvassed before this court, no interlocutory relief was sought by the Plaintiff after the issue of a letter before action in November 1997. The writ was not issued until a year later, in September 1998. This Order 14 summons was issued in September 1999. Although the time taken in the prosecution of these proceedings is surprising, no point has been taken by Mr Peter Garland S.C., counsel for the Defendant, in respect of delay.

Issues raised by Defendant

7. The Defendant raised the following three issues which it says are triable issues :-

(1) there is evidence from Mr Li Kwong Sun, the person who had sourced the supply of the lighter for the Third Party (which is not involved in the O.14 application), that all lighters offered for sale at the counter in the Defendant's department store came from the Plaintiff or its authorised dealer, BMW Concessionaires (HK) Ltd;

(2) even if the lighter did not come from the Plaintiff or its authorised dealer, the Defendant was not liable in passing-off because it was not connected to the sale. The sale was effected by the Third Party, which had only been allocated space in the Defendant's department store to sell its (the Third Party's) goods;

(3) in any event, there is no evidence of material misrepresentation for the purposes of passing-off in that there is no evidence that any customer would be influenced to buy the lighter by a perception that the Plaintiff was responsible for the quality of the lighter.

1st Issue

8. In respect of the 1st issue, Mr Li Kwong Sun, who was a Counter Manager with the Third Party (and who, according to the Plaintiff's evidence, may still be employed by it), has deposed that he had started his employment with the Third Party in 1994. His duties included sourcing, displaying, offering for sale and selling the Third Party's goods at the counter at the Defendant's department store.

9. He says that he had sourced all the goods bearing the BMW mark, which were offered for sale at the counter of the Defendant's department store, from BMW Concessionaires (HK) Ltd and the Plaintiff. He says that they were the only two suppliers and sources for those goods.

10. He refers to a number of invoices showing purchases by the Third Party from BMW Concessionaires (HK) Ltd. They include purchases of lighters. However, no invoice for the lighter in question has been produced. Mr Li says that the Third Party has been unable to identify and locate this invoice due to lapse of time, the large number of goods bought and sold by the Third Party at the counter in question (which he says are in the thousands per annum), and that the paperwork from the supplier may have been disposed of or may have been misplaced.

11. The Plaintiff's evidence is that the lighter in question had not been manufactured by the Plaintiff and had not been sold and supplied in Hong Kong. There are two Affirmations from Dr Jorg Pohlman, who has been with the Plaintiff since 1997, and who has since 1998 been the Head of Trademark Department, and three Affirmations of Mr Lee Sum Yiu, who has been with BMW Concessionaires (HK) Ltd since 1992 and who is now its General Parts Manager.

12. Obviously, there is a stark contrast between Mr Li Kwong Sun's evidence and that of Dr Pohlman and Mr Lee Sum Yiu. It is well-established that in Order 14 proceedings, the court cannot embark on a mini-trial and decide material disputes of fact. Although the onus is on the defendant to show that there is a triable issue, the test is not whether he is to be believed, but whether his defence is believable in the context of undisputed evidence or evidence that is beyond reasonable dispute.

13. Mr Andrew Liao S.C., counsel for the Plaintiff, has asked the court to hold that Mr Li's evidence is not believable. Mr Liao has drawn attention to the fact of a separate action taken by the Plaintiff against the Third Party in respect of tie clips, key chains and key rings bearing the "BMW" mark which had been sold by the Third Party at its two shops in Mongkok. In that action, the Third Party had originally alleged in its Defence that the tie clips and key chains had been sourced from an Italian company, but that the key rings had been supplied by BMW Concessionaires. The action was settled but in the process of discovery made by the Third Party as part of the settlement, the Third Party had disclosed that the key rings had also been sourced from two Italian companies, contrary to the original defence.

14. Mr Liao also relies on the evidence of Dr Pohlman and Mr Lee Sum Yiu that the lighter in question had not been manufactured by the Plaintiff or sold in Hong Kong, and he also pointed to the fact that as the letter before action had been sent to the Defendant in November 1997, the Third Party had an early opportunity and ample time to locate the invoice, notwithstanding the lapse of time between the time of sale and the issue of the writ .

15. These are strong arguments. However it must be remembered that the other action concerned different types of goods sold by the Third Party at its own shops, not at the counter in the Defendant's department store. The location of sale may be significant, because the conditions imposed by the Defendant on the Third Party for the allocation of space include requirements that goods sold be authentic, and there is evidence that the Defendant was concerned about this.

16. As for the goods sold at the counter in the Defendant's department store, there are invoices which show that the Third Party had sourced lighters (albeit not the type sold) from BMW Concessionaires, which would support Mr Li Kwong Sun's evidence to some extent.

17. As for the Plaintiff's evidence that it had never manufactured lighters of this type or sold them in Hong Kong, whilst it may be said that the Plaintiff is obviously in the best position to know this, it cannot be said that the reliability of Dr Pohlman's and Mr Lee Sum Yiu's evidence is beyond dispute. Mr Garland has pointed to the discrepancies between Mr Lee Sum Yiu's 1st Affirmation and one of his subsequent Affirmations, which discrepancies have not been explained by Mr Lee.

18. In his 1st Affirmation, he deposed that "the sales in Hong Kong of lighters bearing the Plaintiff's trademark up to October 1997" amounted to 213 lighters of 5 different models sold from 1993 to 1997. The exhibit in support of this assertion, the "stock status reports", is said to show the "cumulative number of lighters sold in Hong Kong". This is confirmed by Dr Pohlman who deposes that "for details of the lighters bearing the Plaintiff's trade marks sold in the market of Hong Kong, I would respectfully refer this Honourable Court to the Affirmation of Lee Sum Yiu ..." .

19. However, in his 3rd Affirmation, Mr Lee Sum Yiu refers to the "monthly stock status reports" from July 1993 to September 1997, but this time, some 14 models of lighters are shown to have been sold by BMW Concessionaires (HK) Ltd. No explanation has been given by Mr Lee Sum Yiu as to this discrepancy from his 1st Affirmation. Indeed the Statement of Claim still pleads the 5 models only.

20. It may be, as Mr Liao submits, that the Plaintiff has done a "more thorough check" for Mr Lee Sum Yiu's 3rd Affirmation, but in the absence of any explanation by the deponent, I do not think it would be right to grant summary judgment.

21. In my view, the evidence of Mr Li Kwong Sun is "shadowy" in the light of the evidence of Dr Pohlman that the Plaintiff had never manufactured a lighter of the subject type, but given the discrepancy in Mr Lee Sum Yiu's evidence, I consider that, in the exercise of my discretion, the appropriate order would be to give leave to the Defendant to defend, conditional upon it giving an undertaking in terms of paragraph 1 of the relief claimed in the Amended Statement of Claim, but restricted to lighters of the subject type, until determination of the trial or further order. Both counsel accept that Order 14 rule 4(3) is wide enough to permit the Court to grant in effect an interlocutory injunction, where a permanent injunction is claimed.

22. In making this order, I have taken into consideration the fact that the Plaintiff had not otherwise sought an interlocutory injunction, and if it had done so, it would probably not have been successful given its delay in seeking that relief. However, to impose any other condition (such as payment into Court) would be inappropriate in this case because the quantification of the amount to be paid in would be arbitrary.

23. I have also taken into consideration Mr Garland's submission of difficulty in compliance. In my view, there would be no difficulty in compliance since the order relates only to lighters of the subject type. In my view, this condition would be fair and just to both parties because there is no evidence that any other goods sold at the counter in the Defendant's department store contravened the Plaintiff's rights, and restricting the order to lighters of the subject type would make supervision easier for the staff of the Defendant. They would be able to see what was being offered for sale at the counter, and the terms of the Agreement between the Defendant and the Third Party are wide enough to enable the Defendant to prescribe the goods which may be exhibited and sold at the counter.

2nd Issue

24. As far as the 2nd issue is concerned, I should not say too much about it, save to say that this issue, by itself, would not have entitled the Defendant to unconditional leave.

25. The Defendant's connection to the sale is manifested in a number of ways. As required in the Agreement, the business carried out at the counter was carried out in the name of the Defendant. There was no reference to the Third Party. The sales procedure of the Defendant was used, the sales staff wore the Defendant's uniforms, and the invoice and receipt for the goods were issued by the Defendant.

3rd Issue

26. As for the 3rd issue, again this issue, by itself, would not have entitled the Defendant to unconditional leave. The evidence was that the Plaintiff has for some years been manufacturing lighters and selling them in Hong Kong. That is not disputed, and is indeed asserted by the Defendant as part of its defence. Therefore, it would be difficult for the Defendant to argue that the there was no misrepresentation of the subject lighter as goods for which quality the Plaintiff was responsible.

Order

27. Having considered the matters discussed above and in the exercise of my discretion, I would give leave to the Defendant to defend conditional upon its undertaking within 14 days that it would not, whether by itself, its directors, officers, servants or agents or any of them or otherwise howsoever, pass off or attempt to pass off or cause, enable or assist others to pass off lighters of the type exhibited as "CHK-1" to the Affirmation of Choi Hung Kai, Andy filed herein on 2 September 1999 as and for goods of the Plaintiff. I would also give an order nisi that should the condition be complied with, the costs of the Summons be in the cause. If the condition is not complied with, the Plaintiff would be entitled to sign judgment for the costs.