XCHRX TAIPAO RESINS CHEMICAL CO. LTD. v. CHUNG-PAO RESIN CHEMICAL CO. LTD. AND OTHERS

HCA16246/98

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NO.16246 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 Defendants for a declaration that the court has no jurisdiction over the Defendants in respect of the matters raised in paragraph (7) of the Re-amended Writ of Summons and paragraphs 6 to 16 of the Statement of Claim ("the relevant matters") and, alternatively, for an order that the relevant matters be stayed on the ground of forum non conveniens.

2. The Plaintiff is a limited company. The 1st Defendant is a shareholder. The issues raised in the relevant paragraphs of the Statement of Claim include an allegation of breach of duty by the 1st Defendant in failing to comply with the Plaintiff's instructions to register the Plaintiff's trade mark "Tai Pao" in Taiwan and China in the name of the Plaintiff. The trade mark came to be registered in the name of the 3rd Defendant which is controlled by the 1st Defendant. This issue is one of the issues arising in the petition presented by, inter alia, the 1st Defendant to wind-up the Plaintiff on the just and equitable ground. That petition is due to be heard in February 2000. The question as to who has the right to use the trade mark in China and Taiwan would thus be resolved in those proceedings. It is common ground that the parties would be bound by the determination of that issue for the purposes of this action.

3. By way of background, on 1 September 1999, I refused an application by the Plaintiff that the action be consolidated with the winding-up petition. Both the petition and the action were to be restored for mention on 14 October 1999. On 13 October, the Defendants took out the present summons for a stay. As a hearing had already been fixed for 3 November 1999 for the application by the Petitioner in the winding-up proceedings to strike out certain parts of the evidence filed in those proceedings, directions were given for the stay application to be heard at the same time. That is how this stay application came on before me.

The jurisdictional point

4. It is common ground that the Tai Pao trade mark is not registered in Hong Kong. It is the Defendants' case that the true nature of the claim in question is ownership of the trade mark and is not a passing off action. At one stage, counsel for the Defendants contended that his clients, being the registered owners of the trade mark in China and Taiwan, have the right to use it anywhere in the world. Counsel then resiled from this proposition and accepted that the issue between the parties is who has the right to use the marks in Hong Kong.

5. In my judgment, the jurisdictional argument raised by the Defendants is misconceived. The fact that the mark is registered in other countries is irrelevant to a passing-off action if the Plaintiff succeeds in establishing his right to use the marks in Hong Kong. The Trade Mark Ordinance expressly left the action for passing-off unaffected. See section 36. As stated in Wadlow on The Law of Passing Off, 2nd Ed. p.2,

"Passing-off and the law of registered trade marks deal with some overlapping factual situations, but deal with them in different ways and from different standpoints. Passing-off emphatically does not confer monopoly rights in any names, marks, get-up or other indicia, nor does it recognise them as property in their own right."

The cause of action arising from the pleading in question is one in passing-off. It is not an action for infringement of a trade mark. That must be so. Since the mark is not registered in Hong Kong, the action brought by the Plaintiff cannot be an infringement action.

Forum non conveniens

6. It is common ground that the principles stated in Spiliada Maritime Corporation v. Cansulex Ltd. [1987] 1 AC 460 apply when deciding whether or not the proceedings should be stayed on the ground of forum non conveniens. As Lord Goff stated (at 476 C) :

" The basic principle is that a stay will only be granted on the ground of forum non conveniens where the court is satisfied that there is some other available forum, having competent jurisdiction, which is the appropriate forum for the trial of the action, i.e. in which the case may be tried more suitably for the interests of all the parties and the ends of justice."

The burden is on the Defendant to show not only that Hong Kong is not the natural or appropriate forum for the trial, but to establish that there is another available forum which is clearly or distinctly more appropriate than the Hong Kong forum. The "natural forum" is that with which the action has the most real and substantial connection. The connecting factors to which the court will have regard include not only factors affecting convenience or expense (such as availability of witnesses), but also other factors such as the law governing the relevant transaction and places where the parties respectively reside or carry on business (at 478 A-B).

7. I now turn to consider the connecting factors in the context of the action.

Place of residence

8. The Plaintiff, the 2nd, 3rd and 4th Defendants are Hong Kong companies. The 1st Defendant and the directors of the 2nd, 3rd and 4th Defendants are residents of Hong Kong. The records of the companies, being Hong Kong companies, are kept in Hong Kong. Nothing here points to any jurisdiction other than Hong Kong as being the appropriate forum.

Witnesses and evidence

9. The Defendants accept that the issue as to ownership of the trade marks registered in China and Taiwan is to be resolved in the winding-up proceedings. Those proceedings are due to be heard in Hong Kong in February 2000. The Defendants further accept that that finding will be binding for the purposes of this action. In those circumstances, I fail to see the logic of the contention that Hong Kong is not a suitable forum for investigating and determining whether the right to use the marks in Hong Kong is vested in the Plaintiff or the Defendants. Further, if the relevant matters are to be tried elsewhere, it is not apparent how the finding made in the winding-up proceedings can be binding on a foreign court. In my judgment, having conceded that the ownership issue is to be determined in the winding-up proceedings, it must follow that it is also the appropriate forum for establishing who is entitled to use the marks here which is a necessary element of any claim to a passing-off action.

10. As to acts of passing-off, the letter dated 17 August 1998 from Asia Electric Industrial Company Limited, a long-standing customer of the Plaintiff, is prima facie evidence of an act of passing-off occurring in Hong Kong were the Plaintiff to establish its entitlement to use the marks. The fact that other acts are alleged to have taken place in China does not necessarily render China the more appropriate forum. This is a case where the relevant witnesses are necessarily not resident in a single jurisdiction. Whether the proceedings are to be in Hong Kong, China or Taiwan, foreign witnesses would be involved. Indeed, the resolution of the issue to be decided in the winding-up proceedings and the issue of entitlement to use the marks here would involve foreign witnesses. Involvement of foreign witnesses in the action is therefore neutral in terms of identifying the appropriate forum.

Place of business

11. Whilst orders are solicited in China, they are sent back to the Plaintiff's Hong Kong office for processing. Goods are then delivered to the customer's designated factories in China. Payment for the goods are effected in Hong Kong. What is quite clear is that whilst certain business activities are carried on outside of Hong Kong, the Plaintiff, the 2nd and 3rd Defendants are Hong Kong companies which carry on business here. The necessary records would obviously be maintained here. Even if certain business activities took place in China, as noted above, that would only be a factor to be taken into account : it would not, of itself, be determinative.

Satisfaction of judgments

12. The Plaintiff seeks remedies by way of an injunction as well as damages to compensate for losses. Whilst injunctive relief is available both in Hong Kong and China, the Defendants have assets in Hong Kong against which the Plaintiff can enforce a judgment. It is not apparent that the Defendants have assets in China. To this extent, therefore, Hong Kong would be the more appropriate forum.

Conclusion

13. Having regard to all the factors set out above, I am not persuaded that there is an alternative forum which is the appropriate forum for the trial of the action. Accordingly, the Defendants' application for a stay is dismissed.

14. I also make an order nisi that the costs be to the Plaintiff.

Summons for directions

15. Counsel for the Plaintiff and the Defendants made submissions as to the appropriate directions to be made depending on whether the Defendants' application for a stay were successful. Having regard to the conclusion I have reached, I direct as follows :

1. The Defendants do file a Defence to paragraphs 6 to 16 (inclusive) of the Statement of Claim within 14 days from the date of the Order to be made herein;

2. the Plaintiff do within 21 days from the date of Order to be made herein file and serve on the Defendants a list of documents;

3. the Defendants do within 21 days from the date of Order to be made herein file and serve on the Plaintiff a list of documents;

4. there be inspection of documents within 7 days after the service of the lists of documents;

5. all expert reports (if any) intended to be used at trial be mutually exchanged within 28 days from the date of the Order to be made herein;

6. within 7 weeks from the date of the Order to be made herein, parties do file with the Court and mutually exchange signed written statements of all witnesses as to fact;

7. costs be in the cause.