WING HING (1956) CO LTD v. NISSIN FOODS CO LTD

HCA 1988/2017

[2021] HKCFI 638

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NO 1988 OF 2017

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J U D G M E N T

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A INTRODUCTION

1.  Originating in Japan, “出前一丁 (Demae Ittacho)”[1] brand instant noodles (“DI Ramen”) are a Hong Kong household name. 

2.  The Plaintiff (“Wing Hing”) was involved in locally promoting and distributing DI Ramen. The Defendant (“Nissin HK”) is the local subsidiary of the brand creator, Nissin Foods Holdings Company Limited (“Nissin Japan”).

3.  Wing Hing brings two claims against Nissin HK: one for contractual breach and the other as to brand name goodwill ownership.

B.  FACTUAL BACKGROUND

B1.  Basis for findings

4.  Wing Hing’s two claims arise from the same factual background.

5.  In reaching the factual findings set out in this and later parts of my judgment, I have considered the witnesses evidence and documentary record based on the well-established general principles on the assessment of such evidence: see for example Hui Cheung Fai & Another v Daiwa Development Limited HCA 1734/2009, unrep. 8 April 2014, §§77-80 (DHCJ Eugene Fung SC); Gestmin SGPS SA v Credit Suisse (UK) Ltd [2013] EWHC 3650 (Comm) §22 (Leggatt J as he then was); Re Mumtaz Properties Ltd [2012] 2 BCLC 109 §14 (Arden LJ as she then was).

6.  The following summary is of background facts that are either undisputed or, in my judgment, clearly established on the evidence at trial.

B2.  1960s-70s: DI Ramen starts in Hong Kong

7.  Nissin Foods Holdings Company Limited[2] (“Nissin Japan”) was founded by Mr Momofuku Ando in Japan in the 1950s.

8.  In around 1968, Nissin Japan registered the trade mark “出前一丁” in Japan. Around the same time, Nissin Japan began manufacturing, marketing, and selling DI Ramen on the Japanese market under the “出前一丁” brand (“the Brand Name”).

9.  About a year later, in 1969, Mr Tong Pak Wing (“Mr Tong”) trading as an importer, exporter, and distributor of foreign goods under the name of “Wing Hing & Company” (“WHC”)) began importing DI Ramen for Hong Kong distribution.

10.  In her evidence, Mrs Sachiko Tong (“Madam Tong”) recounted the business history of her husband Mr Tong and WHC and their efforts to promote DI Ramen in Hong Kong in the 1960s-70s and beyond. This was largely unchallenged by Mr Dawes SC on Nissin HK’s behalf. Mr Dawes fairly acknowledged, and I readily accept, that Mr Tong played a significant role in promoting DI Ramen in the Hong Kong market for many years. Mr Dawes also recognised that Wing Hing may well much goodwill “when it comes to their ability to distribute”, a topic I will turn to later. I also accept Madam Tong’s evidence that over time, she and Mr Tong developed a good working relationship with the Ando family.

11.  Nissin Japan’s own endeavours within Hong Kong from the 1970s are discussed in an article (supplied with Wing Hing’s List of Documents) by Professor Yoshiko Nakano of the University of Hong Kong entitled “From Dried Seafood to Instant Ramen” (“the Nakano Article”). The Nakano Article is full of vivid historical information on the development of instant noodles in Hong Kong, and in particular DI Ramen, from the 1960s to recent times.

12.  As traced in the Nakano Article, by the late 1970s Nissin Japan was itself engaging in a range of development efforts in relation to the Hong Kong market. To this end, Nissin Japan registered “出前一丁” as a Hong Kong trade mark on 31 October 1978. Further, on 1 May 1979, Nissin Japan entered into an agency agreement with Mitsubishi Corporation (Hong Kong) Limited (“MCHK”).

13.  While there are differences (discussed below) between Wing Hing and Nissin HK as to the extent of MCHK’s role in the local DI Ramen business over the years, the 1979 agreement shows that MCHK had been appointed by Nissin Japan as an non-exclusive agent for the distribution of DI Ramen in Hong Kong from a fairly early stage.

14.  Indeed Madam Tong in her witness statement states (at §9) that in 1970, Nissin Japan appointed three authorised Japanese dealers, namely Mitsubishi Shoji Corporation, Itochu Corporation and Toushoku Corporation, and that Wing Hing was asked “to choose one”. According to Madam Tong, at the advice of the original authorised dealer, Yoshikawa, Mr Tong “chose to work with Mitsubishi”.

B3.  1980s: Nissin Japan’s corporate re-structuring

15.  On 19 October 1984, Nissin HK was incorporated as the local subsidiary of Nissin Japan pursuant to a corporate restructuring exercise. For brevity, where nothing turns on a distinction between Nissin Japan and Nissin HK, they shall collectively be referred to as the “Nissin Group”.

16.  In 1985, Nissin HK acquired a parcel of land at the Tai Po Industrial Estate in the New Territories on which a noodle factory was constructed, and began running mass production lines for its food products, including DI Ramen. In effect, Nissin Japan localised its supply chain in Hong Kong.

B4.  1980s-2016: Distribution upon Wing Hing’s and Nissin HK’s incorporation

17.  It is common ground that since Nissin HK’s incorporation in 1984 and up to 13 December 2016, Mr Tong and subsequently Wing Hing (which was incorporated in 1988 and acquired its present name in 1995) were in the business of distributing DI Ramen to local retailers such as supermarkets, convenience stores, and eateries.

18.  The documentary context for this period includes two sets of contracts, each expressly described on their face as “Master Agreement[s]”.

19.  On 1 October 2008, Nissin HK and Itochu Hong Kong Limited (“Itochu”) entered into a Master Agreement for Sale and Purchase (“the Itochu MA”). Under the Itochu MA, Itochu agreed to buy, and Nissin HK agreed to sell, certain listed products (including DI Ramen) for re-sale to a specified sub-distributor, Yau Shing Hong Provisions Limited (“YSH”).

20.  It was expressly contemplated that YSH would place delivery orders with Nissin HK directly as Itochu’s agent, and Nissin HK’s acceptance of such orders would constitute a contract between Itochu and Nissin HK, instead of one between Nissin HK and YSH. Consistently with this, the relevant “contract of purchase” would be directly issued by Nissin HK as seller to Itochu as buyer (or what Nissin HK’s submissions term a “first-tier distributor”), to “distributors” as identified at Schedule 2 of the Itochu MA (or what Nissin HK’s submissions refer to as “sub-distributors”).

21.  Wing Hing did not seek to contest Nissin HK’s observation on the arrangements under the Itochu MA, namely that the overall effect was there would be no direct contract between Nissin HK and the sub-distributor (i.e. YSH) throughout the ordering process, notwithstanding that, as a matter of logistics, it was the sub-distributor that was expected to place delivery orders with Nissin HK as Itochu’s agent.

22.  The same day as the Itochu MA (1 October 2008), Nissin HK and MCHK entered into a Master Agreement for Sale and Purchase with materially identical terms (“the MCHK MA”).

23.  Under the MCHK MA, MCHK agreed to buy, and Nissin agreed to sell, certain listed products (including DI Ramen) for re-sale to others in Hong Kong. This time, the next-tier parties – what Clause 2 of the MCHK MA refers to as “[MCHK’s] distributors in the Territories” – were unspecified.

24.  Clause 4(2) of the MCHK MA notably provided that:

“The Distributors, as agents for [MCHK], shall place delivery order(s) with Nissin, the acceptance by Nissin shall constitute a contract of the transaction of such Products between Nissin (as seller) and [MCHK] (as buyer); and [MCHK] shall issue a contract of purchase in its form (“CP”) to Nissin, and Nissin shall counter-sign and return the CP to [MCHK]”.

25.  It is common ground that there is no written contract akin to the Itochu MA or the MCHK MA as between Wing Hing and Nissin HK during the captioned (or any) period.

26.  At ground-level, the evidence shows a standard administrative and logistical process by which Wing Hing obtained its supply of DI Ramen, with these main steps:

(1)  Wing Hing would arrange its truck to pick up the products from Nissin HK’s warehouse.

(2)  One of Nissin HK’s subsidiaries, namely Nissin Foods (H.K.) Company Limited (“the Nissin Subsidiary”), would issue a “Delivery Note” evidencing the name and quantity of the products collected by Wing Hing.

(3)  The Nissin Subsidiary and MCHK would enter into a “Contract of Purchase” in respect of the products collected by Wing Hing.

(4)  MCHK and Wing Hing would enter into a “Contract of Sale” in respect of the products collected by Wing Hing with MCHK’s general terms and conditions set out in the reverse side (“the MCHK-WH Contracts”).

(5)  MCHK would issue an invoice to Wing Hing in respect of the relevant MCHK-WH Contract.

(6)  Wing Hing would settle the purchase price of the products collected by paying a cheque drawn in favour of MCHK in the amount specified in the relevant MCHK-WH Contract and the corresponding invoice.

(7)  MCHK would finally issue a receipt to Wing Hing.

27.  As stated in Nissin HK’s written Closing Submissions (§21), there is at the same time “no dispute that [Wing Hing] and [Nissin HK] worked closely together and assisted each other in many different aspects regarding the distribution of DI Ramen to retailers”.

28.  It is also essentially undisputed that, for the most part, the popularity and sales of DI Ramen continued to grow throughout this period. As noted in the Nakano Article (p.24), DI Ramen was consumed in “vast quantities” by the Hong Kong public, with the Brand Name being consistently ranked in the top ten of Wellcome’s annual “Vote for Your Favourite Brand” contest. The “bright Chinese red packet with a Japanese delivery boy” design was firmly “a Hong Kong icon in its fifth decade”.

B5.  2016 and after: Termination and post-termination events

29.  On 13 December 2016, Nissin HK’s representatives went to Wing Hing’s office to inform the latter of Nissin HK’s decision to terminate the business relationship from March 2017 onwards.

30.  On 15 December 2016, Nissin HK issued a note to Wing Hing recording the discussion in the meeting two days prior, which was copied to MCHK.

31.  The 15 December note was written in Chinese and states:

 

“致：榮興(1956)有限公司

承蒙 貴公司一直以來的支持。

本公司已於2016年12月13日敬告 貴公司，將於明年2017年3月起停止與 貴公司之間所有出前一丁包裝麵及其他即食麵的銷售。

因此為了於明年3月前逐步減少 貴公司的成品倉存量，本公司將於明日2016年12月16日起開始調整貴 公司的出貨量。

另外，今後如有出現產品數量不足的情況，為了穩定對市場的供應，本公司會隨時以補充產品達致足夠數量為目的送出貨品。

敬請 籌安

日清食品有限公司

2016年12月15日

副本抄送  香港三菱商事會社有限公司”

Translation

“To: Wing Hing (1956) Company Limited

Thank you for your company’s support so far.

Further to our notice on 13^th December, 2016, we are going to terminate the sale of all Nissin Demae Iccho packed ramen as well as other instant noodles with your company with effect from March 2017.

In order to gradually reduce the stock of your company’s Nissin goods before March next year, we plan to adjust the quantity of products to be transported to your company.

In addition, in case of insufficient products, we will at any time replenish the products to a sufficient level in order to stabilize the market supply.

Sincerely

Nissin Foods Company Limited

15^th December 2016

The copy was also sent to Mitsubishi Corporation (Hong Kong) Limited.”

32.  Wing Hing launched the present action in August 2017.

C.  ISSUES ARISING

C1.  Wing Hong’s core case

33.  Wing Hing chiefly contends that:

(1)  Since around 1969, there was an oral distribution agreement between Mr Tong and Nissin Japan, by which Mr Tong would be Nissin Japan’s “sole distributor” of DI Ramen in Hong Kong (“the Alleged Oral Agreement”).

(2)  Since 1986, there was a novation of the Alleged Oral Agreement to the effect that Wing Hing and Nissin HK stepped into the respective shoes of Mr Tong and Nissin Japan, resulting in a direct contract between Wing Hing and Nissin HK. Pursuant to the novated agreement, Wing Hing was therefore contractually entitled to be Nissin HK’s sole distributor of DI Ramen in Hong Kong.

(3)  After Nissin HK’s Tai Po manufacturing facilities became fully operative, Nissin HK would instruct MCHK as Nissin HK’s agent to issue an invoice to Mr Tong / Wing Hing for the supply of DI Ramen.

(4)  By reason of “business efficacy” and / or “course of dealings”, there was under the Alleged Oral Agreement (when it was made and then through novation) an implied term that it could not be unilaterally terminated unless reasonable notice was given to the other party (“the Alleged Implied Term”).

(5)  In or around 1991 to 1992, Wing Hing turned down a request from a Korean instant noodle manufacturer for Wing Hing to be its sole Hong Kong distributor. Wing Hing says that it did so on the strength of Nissin HK’s “representation” that Wing Hing should not accede to the request whilst it was still Nissin HK’s sole distributor (“the Alleged Representation”). In his opening submissions for Wing Hing, Mr Pang SC confirmed that the company does not advance any contractual claim based on the Alleged Representation as a free-standing ground. The Alleged Representation, if established, would simply support Wing Hing’s factual case on the existence of a sole distribution agreement between it and Nissin HK.

(6)  On 13 December 2016, Nissin HK breached the Alleged Implied Term by seeking to terminate the Alleged Oral Agreement on 2.5 months’ notice. On Wing Hing’s case, the prevailing circumstances were such that the Alleged Implied Term required 3 years’ notice.

(7)  Wing Hing suffered “loss of revenue” due to the breach, and claims (a) damages in lieu of the 3 years’ notice allegedly required, (b) damages in lieu of 3 years’ interest “which ought to be charged by [Wing Hing] to [Nissin HK] as [Wing Hing’s] extension of trade finance to [Nissin HK]”, and (c) damages for storage charges incurred”.

(8)  Mr Tong owned the goodwill in the brand name “Demae Iccho 出前一丁”(i.e. the Brand Name) “when used in relation to instant noodles (ie DI Ramen) in Hong Kong”, by reason of Mr Tong’s contribution to the local success of DI Ramen, and by reason of Mr Tong’s goodwill amongst shop owners and retailers.

(9)  Upon Wing Hing’s incorporation, Mr Tong’s goodwill in the Brand Name was assigned to Wing Hing along with WHC’s business.

C2.  Nissin HK’s core case

34.  In response, Nissin HK’s mainly contends that:[3]

(1)  As a matter of fact, there was no distribution agreement between Mr Tong and Nissin Japan as alleged or otherwise. Wing Hing’s claim to the contrary has no evidential basis.

(2)  Because the Alleged Oral Agreement did not exist, there could be no novation for Wing Hing to become a party to a direct contract with Nissin HK, in which case Wing Hing has no basis to contend for an implied term, breach or damages.

(3)  In any event, (a) there is no factual basis for the novation claim, (b) there is no legal or factual basis for the Alleged Implied Term to be imported on the ground of “business efficacy”, “course of dealings” or otherwise, (c) there is no basis in the claim that 2.5 months’ notice was unreasonable in the circumstances, and (d) the 3 pleaded heads of damages are unsustainable as a matter of fact and law.

(4)  The reality is that Mr Tong / Wing Hing were at all material times operating at one level below Nissin HK’s first-tier distributors in the supply chain, such as MCHK with whom Nissin HK actually had a direct distributorship contract. As such, Mr Tong / Wing Hong was only ever the Nissin Group’s non-exclusive sub-distributor, with whom no equivalent contract (oral or otherwise) was ever made.

(5)  Nissin HK did not make the Alleged Representation, whether as alleged or otherwise. In any event, the existence of the Alleged Representation is irrelevant.

(6)  There is no factual or legal basis on which to maintain Mr Tong was the owner of the goodwill in the Brand Name. It follows that there was no goodwill for Mr Tong to assign to Wing Hong upon its incorporation.

(7)  In any event, there is no factual or legal basis on which to maintain that Wing Hong remains the owner of the goodwill in the Brand Name.

C3.  State of play / live issues

35.  At trial, Mr Pang SC fairly and appropriately clarified Wing Hong’s position on a range of matters, including the essential nature of its evidential case on the Alleged Oral Agreement (Wing Hing accepts that its case is entirely inferential), and the status of the MCHK MA (Wing Hing accepts that it is not sham agreement).

36.  Further, in keeping with his measured and balanced approach throughout the proceedings, (without formally resiling from its written case on the pleadings and in opening) Mr Pang did not press the goodwill aspect of Wing Hing’s case in the course of trial.

37.  The live issues at this stage can be reduced and stated as follows:

Contract claim

(1)  Did the Alleged Oral Agreement exist?

(2)  If it existed, did the Alleged Oral Agreement contain the Alleged Implied Term?

(3)  Assuming its existence, was the Alleged Oral Agreement novated so that Wing Hing and Nissin HK became parties to it?

(4)  Did Nissin HK breach the Alleged Implied Term in terminating its relationship with Wing Hing on 2.5 months’ notice?

(5)  Assuming Nissin HK breached the Alleged Implied Term, what damages, if any, are due to Wing Hing?

Goodwill claim

(6)  Does Wing Hing own the goodwill in the Brand Name within Hong Kong?

D.  CONTRACT CLAIM

D1.  All-or-nothing

38.  Wing Hing accepts that its contractual case is all-or-nothing in the sense that, to succeed against Nissin HK, it must prevail as to (1) the Alleged Oral Agreement’s existence, (2) the Alleged Implied Term’s existence, (3) novation, and (4) breach of the Alleged Implied Term by Nissin HK.

39.  For the reasons that follow, Wing Hing is unable to establish its case on any of the main issues. In my judgment, its contractual claim is clearly untenable.

D2.  Existence of the Alleged Oral Agreement

40.  The dispute under this heading is one of fact, with Wing Hing bearing the burden to prove the existence of the Alleged Oral Agreement.

Absence of direct evidence

41.  The first matter to note is the total lack of direct evidence of the Alleged Oral Agreement in terms of first-person accounts from those purportedly present at the time of its formation.

42.  Stepping back, the stark position is that Wing Hing has advanced no positive case as to which natural persons were present on behalf of the alleged original parties to the agreement (Mr Tong and Nissin Japan), or where the agreement was formed. Wing Hing’s case is also markedly vague as to the precise content and parameters of the Alleged Oral Agreement, save that Mr Tong allegedly agreed to act as Nissin Japan’s sole distributor of DI Ramen in Hong Kong, and that the contractual distribution relationship was – by implication rather than express agreement – subject to the requirement of reasonable notice of termination, i.e. the Alleged Implied Term.

43.  As to when the agreement was formed, Wing Hing asserts (essentially on the inferential basis addressed further below) that it was in or by 1969 but has made no attempt to supply any further particulars.

44.  Against that backdrop, four factual witnesses were called at trial:

(1)  Madam Tong, the wife of Mr Tong and a director of Wing Hing. As stated in Madam Tong’s evidence, she ran the business of WHC and later Wing Hing together with Mr Tong from 1959 until Mr Tong’s passing in 2012.

(2)  Mr Tong Ping San Peter (“Peter Tong”), the son of Mr Tong and Madam Tong. Peter Tong essentially adopted the evidence of Madam Tong and was not cross-examined by counsel on behalf of Nissin HK. There is no dispute that Peter Tong worked closely with his parents in Wing Hing since 1992.

(3)  Mr Poon Sze Yuen Ronald, Wing Hing’s Chief Accountant, who joined the company in 1998.

(4)  Mr Tse Chi Ping Roy, the General Manager of Nissin HK, having joined the company in 2008.

45.  As will be evident through the rest of this judgment, none of the witnesses struck me as fundamentally unreliable or untruthful, and indeed for the most part their evidence on primary factual matters was unchallenged.

46.  Specifically as to the Alleged Oral Agreement, given that this was on Wing Hing’s case formed by 1969, none of the witnesses besides Madam Tong were in any position to give direct evidence on its formation, much less on particulars such as who acted on behalf of Nissin Japan, or where and precisely when the Alleged Oral Agreement was entered into.

47.  As to Madam Tong, it is striking – and perhaps a prime mark of her truthfulness as a witness – that she candidly accepted when cross-examined that, despite her many years of closely working with Mr Tong, her husband, in the DI Ramen business, she had “no idea” as to whether there was any oral agreement between Mr Tong and Nissin Japan in or around 1969.

48.  This in effect leaves Wing Hing with no direct witness as to the formation of the Alleged Oral Agreement, or indeed any witness who claims to have been informed of the existence of any legal agreement between Mr Tong / Wing Hing and Nissin Japan / Nissin HK for the distribution of DI Ramen by a person with first-hand knowledge of the matter.

49.  In terms of contemporaneous documentary evidence, Wing Hing relies heavily on two early (1969) newspaper advertisements of DI Ramen, which refer to WHC as the “總代理” of DI Ramen. On the stand, Madam Tong indicated that these ads were produced by WHC with Nissin Japan’s approval. The ads might loosely be characterised as “direct” contemporaneous evidence as to how the parties may have understood WHC’s role and status at the time. 

50.  In my judgment however, these materials are at best of limited assistance to Wing Hing’s case: 

(1)  There are obvious limits as to how far one can read into media ads for a consumer product, aimed at mass public consumption, for the purposes of assessing whether a legal agreement existed. 

(2)  Further, as Mr Pang SC accepted at trial, the words “總代理” as used in the context of newspaper ads may be somewhat elastic and capable of conveying a range of senses. Indeed, Nissin HK contends that the words “代理” should be read as “agent” rather than “distributor” (the translation advocated by Wing Hing), and makes the point that “總” can mean “prime”, “main” or “general” rather than “sole”.

(3)  More fundamentally in my view, the ads in question say nothing about whether Wing Hing’s role in respect of DI Ramen – even assuming at highest that the ads (accurately) described the role as “sole distributor” – was undergirded by any formal and binding legal agreement, and on what specific terms. That again is entirely expected, given that the primary purpose of the ads was simply to promote DI Ramen to the wider public.

(4)  To the extent that a further or secondary purpose of the ads was to inform interested parties of the fact that DI Ramen could be sourced through WHC, that fact is not disputed in these proceedings.

(5)  In sum, the newspaper ads carry limited weight at best. They are in my assessment far from sufficient to substantiate Wing Hing’s case on the existence of the Alleged Oral Agreement, whether taken on their own or in conjuction with its other points.

Indirect evidence / inferential case

51.  It is common ground that in assessing whether an oral agreement was made, the court may consider the parties’ conduct after the alleged time of contracting: see for example Bottrill v Harling [2015] EWCA Civ 564 at §§14-16, §§19-21 (Longmore LJ); Yu Man Fung v Chiau Sing Chi Stephen [2020] HKCFI 2923 at §37 (Coleman J).

52.  With the clear difficulties in establishing its case by direct evidence, Wing Hing has focused its efforts on inviting the court to infer from the overall span and circumstances of the parties’ conduct since 1969 that the Alleged Oral Agreement did indeed exist.

53.  The basic approach of Wing Hing’s inferential case involves: (1) highlighting various facts and matters in the parties’ (or their predecessors’) dealings over many years, few if any of which are disputed as matters of primary fact; and (2) contending that these matters can only be (or are best) explained by the existence of the Alleged Oral Agreement, such that the court should find on the balance of probabilities in Wing Hing’s favour.

54.  It bears emphasis here that Wing Hing has repeatedly disavowed any attempt on its part to advance a claim based on any contract itself arising from the parties’ conduct, which spanned over many years from 1969. Wing Hing’s case is simply that the parties’ conduct is sufficient evidence from which to infer the making of the Alleged Oral Agreement – a discrete event which on Wing Hing’s case occurred by 1969 – or else not at all.

55.  Taking into account all the evidence before me and the points cogently advanced by counsel on both sides, Wing Hing falls well short of proving the Alleged Oral Agreement.

56.  The matter can be approached from numerous angles. A good starting point may be to recall the well-recognised commonsense point, succinctly summarised by Leggatt J (as Lord Leggatt JSC then was) in Blue v Ashley [2017] EWHC 1928 (Comm) at §49, that:

“Because the value of a written record is understood by anyone with business experience, its absence may – depending on the circumstances – tend to suggest that no contract was in fact concluded”.

57.  Under this light, the following points tend in my view to undermine Wing Hing’s case on the inherent probabilities:

(1)  As clear from Madam Tong’s evidence, Mr Tong was an able and experienced businessman who founded WHC in 1956 and proceeded to run a successful and sophisticated commercial operation for many years, dealing not only with the Nissin Group but also with a range of substantial companies such as supermarkets and other major retailers. A “mom and pop” set-up this was not.

(2)  It is equally clear that Nissin Japan (and later Nissin HK) were highly sophisticated operators. The evidence before me clearly shows that the Nissin Group were, as one would expect from a major corporate enteprise, highly attuned to the value and importance of clear written records of significant third party dealings.

(3)  The MCHK MA, which I will further address below, is a prime example of this tendency. That is particularly so to the extent that (as Wing Hing contends) MCHK’s role in the Hong Kong market for DI Ramen was peripheral. If that were indeed so – and yet Nissin HK still considered it important to have a detailed written agreement regulating the relationship – then it is all the less likely that the Nissin Group would have been content to proceed with what was on Wing Hing’s case an extensive sole distributorship arrangement, absent a clear written agreement.

(4)  Pausing here, that there was undisputedly no such written agreement (or indeed any later record or memorial of an oral agreement) in turn supports Nissin HK’s case that when it came to Wing Hing’s distribution of DI Ramen, the operative legal relationship was between Wing Hing and MCHK, whose dealings were governed by the MCHK-WH Contracts set out earlier (see Section B4 above).  

(5)  It is also notable that by a Memorandum signed on 1 April 1986, WHC and Nissin Japan went to the trouble of setting out in writing their agreement in respect of a “Special Sales Allowance” in relation to sales targets. The document is expressly limited to an effective period of one year, and notably makes no reference to the Alleged Oral Agreement or any foundational or framework agreement of that nature. 

(6)  The 1986 Memorandum further undermines any suggestion that, specifically as between the Wing Hing and Nissin entities, it was considered unnecessary or unhelpful to record agreed matters in writing. On any view, the matters that the parties saw fit to the 1986 Memorandum are far less fundamental than those purportedly settled in oral form only by way of the Alleged Oral Agreement.

58.  That the Alleged Oral Agreement would, if it existed, have arisen at an early stage in the parties’ relationship does not assist Wing Hing. In particular, there is no sound basis for assuming that formalities such as written agreements would have been of lesser concern at the time:

(1)  Generally speaking, it seems to me just as likely that parties near the start of a business relationship would be particularly concerned to carefully record any agreement between them.

(2)  By the late 1960s, Nissin Japan was a well-established and substantial corporation. Whatever Mr Tong or WHC’s approach may have been at the time, there is no reason to suppose that Nissin Japan would have been content to proceed without a written agreement or record if any agreement along the lines of the Alleged Oral Agreement had in fact been reached.

(3)  As further analysed below, it is at least as likely that Nissin Japan was content to proceed in its business relationship with Mr Tong and Wing Hing without an overarching direct contract in the form of the Alleged Oral Agreement, given its dominant commercial position.  

59.  As to Wing Hing’s claim that the business relationship between the relevant parties “had always been based on a very traditional Japanese system of friendship, trust, loyalty, personal relationship and honour”,[4] this potentially undercuts its own case that its relationship with Nissin Japan proceeded on a contractual footing. Leaving to one side the lack of particulars and evidence for Wing Hing’s trust-and-honour assertion, the position as so presented sits uneasily (at best) with the claim that the parties’ relationship has since the start been governed by binding legal obligations.

60.  Another major problem with Wing Hing’s case is that alleged existence of a direct contractual relationship between it and Nissin HK clashes with the plain fact that Nissin HK interposed what it describes as a “first-tier distributer” in the Hong Kong distribution of DI Ramen, such that Wing Hing was only a sub-distributor. As noted in Nissin HK’s closing submissions:

(1)  Madam Tong’s own evidence is that Mr Tong originally obtained DI Ramen through an “authorised dealer” Yoshikawa Sangyo Corporation\ and that when Nissin Japan insisted in 1970 that Mr Tong choose among one of Nissin Japan’s three “authorised dealers”, Mr Tong “chose to work with Mitsubishi”.

(2)  In cross-examination, Madam Tong accepted that it has always been the case that Wing Hing was “not supposed to” pay Nissin HK and was instead supposed to pay through MCHK, Itochu or Toushuko.

(3)  There is no serious dispute that Wing Hing obtained its supply of DI Ramen by purchasing from MCHK (rather than from Nissin HK) by signing MCHK’s pro forma “Contracts of Sale” and paying the purchase price to MCHK.

(4)  This arrangement is consistent with the arrangement expressly provided for under the MCHK MA, namely for MCHK to purchase from Nissin HK for the purpose of resale to MCHK’s distributors and for MCHK’s distributors (such as Wing Hing) to place delivery orders with Nissin HK “as agents of [MCHK]” (see Clauses 2 and 4(2) of the MCHK MA).

(5)  As Mr Pang SC affirmed several times at trial, Wing Hing does not make the serious allegation that the MCHK contracts and documentation were sham arrangements. This is important since the MCHK MA provides in very clear terms that MCHK is Nissin HK’s distributor.

(6)  Nissin HK’s general manager Mr Roy Tse gave unchallenged evidence on the rationale and merits of the two-tier distributorship structure. All contracts involve counter-party risks. By interposing “first-tier purchasers” such as MCHK between itself and the sub-distributors, Nissin HK effectively shifts the sub-distributors’ default risk to MCHK, whilst accepting only the counter-party risk of MCHK; a company upon which Nissin HK “repose great trust”. As Mr Dawes SC put it, the arrangement is precisely to avoid the risk that Nissin HK would have to sue any sub-distributor for default, or that a sub-distributor such as Wing Hing can directly sue Nissin HK in relation to the supply of DI Ramen (as in the present case).

61.  As to the fact that Wing Hing and Nissin HK often in practice dealt directly with each other on various aspects of the distribution and promotion of DI Ramen, this was readily accepted by Nissin HK and is clear on the evidence. Wing Hing’s and Nissin HK’s regular direct dealings on the ground do not, however, give rise to any necessary or compelling inference that there must have been a direct contractual relationship between them. In my judgment, there were substantial practical reasons why Nissin HK would wish to communicate directly with Wing Hing and vice versa:

(1)  Given the immense popularity of DI Ramen in Hong Kong, Nissin HK was plainly in a much stronger commercial position than Wing Hing. The hard reality is that Nissin HK could always opt to collaborate with a different local sub-distributor if it were unhappy with Wing Hing’s performance, or indeed for a host of other possible reasons, which meant in effect that it was in a strong position to dictate terms, politely or otherwise (the evidence at hand indicates that the latter approach was generally taken).  

(2)  At all relevant times, Nissin HK had a stake in how DI Ramen was promoted to local supermarkets and other vendors. As such, it is wholly unsurprising that the parties communicated regularly for the purposes of discount and other promotion campaigns.

(3)  It is also unsurprising that a manufacturer and brand owner such as Nissin HK in the case of DI Ramen should be able to, and will, dictate the way its sub-distributors operate when it comes to how the products are marketed, and to guide the price at which the sub-distributors sell its products.  

(4)  Wing Hing was not the only entity which had little real choice except to comply with Nissin HK’s instructions. When cross-examined, Mr Roy Tse confirmed that MCHK also had little autonomy in deciding the price at which MCHK would sell DI Ramen products to Wing Hing. In re-examination, Mr Roy Tse further explained that Nissin HK would also suggest the price at which large retailers such as supermarkets would sell Nissin HK’s products.

(5)  As noted in Nissin HK’s closing submissions, the reality was that even large retailers were under commercial pressure to comply with Nissin HK’s directions as the manufacturer and brand owner. Again, the hard reality was that Nissin HK could always cut the supply of its products to them.

62.  Given Nissin HK’s undisputedly strong commercial position, Wing Hing’s case on the Alleged Representation (pursuant to which Wing Hing allegedly turned down a request from a Korean instant noodle manufacturer that Wing Hing be its sole Hong Kong distributor) is in my view untenable. Even if Wing Hing had indeed turned down the distribution offer, that could readily be understood by reason of Nissin HK’s dominant status.

63.  Lastly, while I have only placed limited weight on these matters, it is fair to note that:

(1)  In its first demand letter, in February 2017, Wing Hing premised its claim upon “a contract by conduct…inferred by course of dealing” between Wing Hing / Mr Tong and the Nissin Group. There was no mention at all of any oral agreement in this or any of the subsequent demand letters issued by Wing Hing’s solicitors.

(2)  This continued to be the case when Wing Hing filed its original Statement of Claim in August 2017. It was not until November 2019, when Wing Hing filed its Amended Statement of Claim that a new case based on the Alleged Oral Agreement was introduced. Correspondingly, there was no mention of any oral agreement in Wing Hing’s first round of witness statements filed in April 2019.

(3)  From the start of pleadings right up to completion of trial, Wing Hing has been unable to provide any particulars as to the circumstances of the formation of the Alleged Oral Agreement, including when it was made, who represented Nissan Japan, what were the precise express terms etc. 

64.  In sum, Wing Hing fails to prove the existence of the Alleged Oral Agreement.

D3.  Novation

65.  It is common ground that the novation issue arises only if Wing Hing can prove the Alleged Oral Agreement, absent which there cannot have been any contract to novate.

Principles on novation

66.  The applicable legal principles are uncontested.

67.  Novation is a consensual act requiring the objective manifestation of consent by the existing contracting parties. As stated in Chitty on Contract (33^rd edn, 2018) at §19-087:

“Novation takes place where the two contracting parties agree that a third, who also agrees, shall stand in the relation of either of them to the other. There is a new contract and it is therefore essential that the consent of all parties shall be obtained: in this necessity for consent lies the most important difference between novation and assignment.” (my emphasis)

68.  Acceptance of novation may be inferred from acts and conducts which amounted to the performance of obligations of the agreement novated: Enterprise Managed Services Ltd v Tony McFadden Utilities Ltd [2011] 1 BCLC 414 at §24 (Coulson J).

69.  A party asserting novation must however “clearly establish” it by evidence. As David Steel J explained in The Tychy (No.2) [2001] 1 Lloyd’s Rep 10(at 24):[5]

“(a) Novation involves the creation of a new contract where an existing party is replaced by a new party. (b) Thus, novation requires the consent of all parties, including in particular the party which is thereby accepting a new person as his debtor or as his counterpart under an executory contract. (c) The consent may be apparent from express words or inferred from conduct. (d) The consent must be clearly established on the evidence as being only consistent with the intent of achieving a novation.” (my emphasis)

This case

70.  Wing Hing does not dispute that, to claim against Nissin HK on the Alleged Oral Agreement, it bears the burden of proving two incidents in a chain of novation:  

(1)  First, after Nissin HK was incorporated on 19 October 1984, Mr Tong, Nissin Japan, and Nissin HK all consented to the Alleged Oral Agreement being novated to the effect that Nissin HK would step into Nissin Japan’s shoes (“the Nissin HK Novation”).

(2)  Secondly, after Wing Hing was incorporated on 26 August 1988 and Mr Tong’s business was injected into the company in 1999, Mr Tong, Nissin HK and Wing Hing all consented to the Alleged Oral Agreement being further novated to the effect that Wing Hing would step into Mr Tong’s shoes (“the Wing Hing Novation”).

71.  At trial, Wing Hing’s efforts to substantiate the Nissin HK and Wing Hing Novations essentially went no further than reliance on the alleged lack of change in how the various parties dealt with one another since 1969.

72.  Wing Hing’s efforts to prove the Wing Hing Novation boiled down to a single paragraph in its written closing submissions (§59):

“Subsequently, when Mr. Tong’s business was injected into the Plaintiff, there was no change in how the parties conducted their relationship with each other. This is supported by Mr. Tse’s evidence. On that basis, the Court would be able to easily infer a novation”.

73.  Wing Hing’s case on the Nissin HK Novation was even more diffuse and hardly featured at trial (if it did at all) as a distinct matter.

74.  In my judgment, the overall conduct of the parties is far from being “only consistent” with the intent of achieving a novation of the Alleged Oral Agreement for Mr Tong / Wing Hing to (continue to) be the “sole distributor” of DI Ramen in Hong Kong.

75.  Even if one assumes for discussion that the Alleged Oral Agreement existed in the early days, there are many factors which militate against the finding of either of the two incidents of novation. As Mr Dawes SC and Mr Lee highlight in their written closing submissions:

(1)  Madam Tong’s own evidence that Mr Tong chose in 1970 to work with Mitsubishi among the three authorised dealers is an admission that, whatever the position before then, from 1970 onwards Mr Tong would have been aware that he would no longer be the “sole distributor” of DI Ramen in Hong Kong.

(2)  Wing Hing’s case on the Nissin HK Novation taking place after latter’s incorporation in 1984, and the Wing Hing Novation taking place sometime after 1999, is also contradicted by the fact that the Nissin Group had by then formally appointed MCHK as a first-tier distributor. As such, it is hard to see how the Nissin Group could possibly have consented to Mr Tong / Wing Hing being the “sole distributor” of DI Ramen in Hong Kong as alleged in Wing Hing’s case.

(3)  The existence of the 1979 Agency Agreement and the two 2008 Master Agreements (i.e. the MCHK MA and the Itochu MA) further militate against the finding that the Nissin Group had any intention to consent to the novation of any sole distributorship arrangement as respects DI Ramen.

(4)  Likewise, the continued interposition by the Nissin Group of MCHK as a “first-tier” distributor throughout the years also pushes against any finding that the Nissin Group intended to consent to the novation of any direct distribution agreement with Wing Hing.

(5)  Indeed, the conduct of the parties after Nissin HK’s incorporation and the injection of Mr Tong’s business into Wing Hing is entirely consistent with Mr Tong / Wing Hing being a sub-distributor working closely together with the Nissin Group in the distribution of DI Ramen to retailers and generally willing to comply with the directions of the Nissin Group as the brand owner and manufacturer.

76.  Wing Hing thus fails to make out its case on novation.

D4.  The Alleged Implied Term

77.  As with novation, Wing Hing’s case on the Alleged Implied Term is premised on the existence of the Alleged Oral Agreement. Having found against Wing Hing on the existence of the Alleged Oral Agreement, I need only briefly deal with its case on the Alleged Implied Term, to explain why the contractual claim would in any event fail on this limb.

Principles on implied terms

78.  The modern approach to the implication of contractual terms is familiar from authorities such as Kensland Realty Ltd v Whale View Investment Ltd (2001) 4 HKCFAR 381 and Marks & Spencer Plc v BNP Paribas Securities Services Trust Co (Jersey) Ltd [2016] AC 742. In particular, it is common ground that those alleging an implied term must show that the term is:

(1)  reasonable and equitable;

(2)  necessary to give business efficacy to the contract;

(3)  so obvious that “it goes without saying”;

(4)  capable of clear expression; and

(5)  not contrary to any express term of the contract.

79.  Specifically in respect of an alleged implied term requiring the giving of reasonable notice of termination:

(1)  As stated in Lewison on the Interpretation of Contracts (7^th edn, 2020) at §6.170:

“Where a contract is terminable on reasonable notice, what period of notice would be reasonable will normally be determined as at the date of the giving of notice. Relevant factors will include the degree of formality of the contract, the length of the relationship, the nature of the commercial enterprise, and the importance of the contract to the parties.”

(2)  Where an implied term as to the giving of reasonable notice of termination of a distribution agreement is established, the question of what constitutes reasonable notice is guided by the basic notion that a party should be afforded with reasonable time to enable an orderly winding up of the relationship and to enter into alternative arrangements: Distribution Ltd v Amann & Sohne Distribution Ltd v Amann & Sohne GMBH & Co KG & Anor, HCA 1459/2006, unrep. 30 April 2009 at §27 (Sakhrani J).

Is the Alleged Implied Term established and was it breached

80.  As I see it, the fundamental problem for Wing Hing’s case here is the lack of evidence for the claim that, without a 3 year (or indeed any significant) termination notice period, no orderly winding-up of the parties’ relationship was possible.

81.  That being so, it is difficult for Wing Hing to prove the existence of the Alleged Implied Term by reference to the needs of business efficacy or obviousness, and bearing in mind the high degree of uncertainty as to what may have in fact been expressly agreed by the parties to the Alleged Oral Agreement, if it existed (see for example Marks & Spencer Plc v BNP Paribas Securities Services Trust Co (Jersey) Ltd (above) at §28).

82.  In any event, even assuming that some notice period requirement can be properly implied, there is in my judgment no good basis for finding that Nissin HK breached that requirement by giving Wing Hing 2.5 months’ notice of termination. As Mr Dawes SC emphasised in closing:

(1)  Wing Hing has not provided any evidential basis for its view that the reasonable notice period should be no less than 3 years (which Mr Pang SC at trial frankly accepted is very much on the long side).

(2)  There is no evidence that it would require 3 years to enable an orderly winding up of the relationship and enter into alternative arrangements. Indeed, the minutes from the last monthly meeting in April 2017 (which was held after the termination) suggest that the parties were in fact able to effect an orderly winding up of the relationship by the end of the 2.5 months’ notice given.

83.  It is also notable that, as with its case on the existence of Alleged Oral Agreement, Wing Hing has shifted its case on breach in the course of this dispute. It was Wing Hing’s original claim that at least 5 years’ notice should have been given in the circumstances. By contrast, Wing Hing now claims that the reasonable notice period should be no less than 3 years. For the reasons above, that lesser period is still far longer than anything the evidence before me can sustain.

84.  With all this in view, Wing Hing fails to establish that Nissin HK was subject to and breached the Alleged Implied Term.

D5.  Damages

85.  Damages only arises as a live issue if Wing Hing succeeds on all the preceding issues addressed in this judgment. Since the opposite is true – Wing Hing has failed on every preceding issue – I will again deal with this aspect of its contractual claim in summary terms.

86.  Simply put, had Wing Hing prevailed in establishing a breach of the Alleged Implied Term by Nissin HK, I would have dismissed Wing Hing’s claim for damages on essentially the same grounds advanced by Nissin HK. These grounds may be shortly stated as follows.

87.  On Wing Hing’s first head of claim, for damages in lieu of 3 years’ notice based on its alleged average net profits in the past 5 years:

(1)  Quite apart from failing to account for Nissin HK having given 2.5 months’ notice, Wing Hing has failed to prove that Nissin HK’s alleged breach caused the loss of profit pleaded.

(2)  In particular, it appears that the figures in §5(g) of Wing Hing’s Re-Amended Statement of Claim are derived from certain analyses made by Wing Hing’s Chief Accountant Mr Poon Sze Yuen (“Mr Poon”) to estimate the net sales and costs attributable to the sale of DI Ramen.

(3)  In his witness statement, Mr Poon failed to explain and justify the process by which he analysed the raw data so as to arrive at the said figures. In cross-examination, Mr Poon admitted that his choice of attributing 50% of the actual total costs on loading and transportation was based on the reasoning (what Mr Dawes SC referred to as the “crude logic”) that Wing Hing’s trucks would generally have to make two kinds of trips, one from Nissin HK’s warehouses to Wing Hing’s warehouses, and another from Wing Hing’s warehouses to Wing Hing’s customers. More accurate calculations could have been made by taking into account the actual trips made, the distance travelled, and so on.

(4)  Similarly, even when he was given the opportunity to explain in cross-examination, Mr Poon could hardly justify the adoption of what he admitted to be an “arbitrary” figure of 70% as the percentage of administrative expenses attributable to the sale of DI Ramen.

88.  As to Wing Hing’s second head of claim, for damages in lieu of 3 years’ interest which ought (says Wing Hing) to be charged by it to Nissin HK as an extension of trade finance, Nissin HK’s response is that this head is simply irrecoverable. In particular:

(1)  This head is premised upon the argument that the alleged wrongful termination obviated the need for Wing Hing to extend trade credit to its retailers. Properly analysed, this conferred a benefit to Wing Hing, not a loss.

(2)  Leaving aside the dispute over the existence of the Alleged Oral Agreement, there is no suggestion that Nissin HK ever agreed to pay Wing Hing any interest for the alleged extension of trade finance.

89.  Wing Hing’s third head claim, for the storage charges, is likewise irrecoverable:

(1)  The storage charges for the period from November 2016 to 13 December 2016 were incurred before the alleged breach. No damages can be given on account of any loss before the cause of action arose.

(2)  The storage charges for the period from 14 December 2016 to February 2017 would still have been incurred absent the alleged breach.

E.  GOODWILL CLAIM

E1.  The claim

90.  Shortly put, Wing Hing contends that Mr Tong had built up and owned, until Wing Hing’s incorporation and the injection of Mr Tong’s business into the company, valuable goodwill in the Brand Name when used in Hong Kong. 

91.  In particular, Wing Hing alleges that Mr Tong imported and introduced DI Ramen to retailers and shop owners in Hong Kong in May 1969, and that he was responsible for introducing the DI Ramen product and Brand Name to the retailers, shop owners and the public at large. Wing Hing says ­– and no one really disputes – that Mr Tong and Wing Hing have widely advertised and promoted DI Ramen in Hong Kong over the years. 

92.  Wing Hing’s case on goodwill is largely confined to its pleadings and written opening submissions. At trial, very little was further said for Wing Hing on the goodwill claim though the claim was formally maintained. As analysed below, the claim is unsustainable.  

E2.  General principles

93.  The following general principles are not disputed:

(1)  Goodwill is broadly defined as “the benefit and advantage of the good name, reputation, and connection of a business. It is the attractive force which brings in custom. It is the one thing which distinguishes an old established business from a new business at its first start”: Commissioners of Inland Revenue v Muller & Co's Margarine Ltd [1901] AC 217 at 223 (Lord Macnaghten); Menfond Electronic Art & Computer Design Co Ltd v Wong Wang Tat  HCA 293/2011, unrep. 3 January 2013 (DHCJ Lisa Wong SC, as she then was) at §76.

(2)  Goodwill ownership beteween contracting parties is determined in the first instance by the contract. Absent provisions governing ownership, the court has to apply the “control” test and the “public perception” test to the facts to determine the ownership of the goodwill. The former focuses on asking who was, as a matter of fact, responsible for the character, quality control, and production of the products. The latter examines the public perception regarding who was responsible for the products. See Guangzhou Green Enhan Bio-Engineering v Sun Yat-Sen University HCA 4651/2002, unrep. 8 April 2005 (Johnson Lam J, as he then was) at §§52, 82-84.

(3)  The court begins with the two tests above as the starting points, and then sees if the answer is confirmed or repudiated by other facts. As stated in Oriental Food Industries Sdn Bhd v Sze Hing Loong Development Ltd HCA 2094/2011, unrep. 12 February 2015 at §32 (DCHJ Bebe Chu, as she then was, quoting Wadlow on the Law of Passing-Off(5^th ed) at §§3-140 – 3-141):

“… The [public perception test] is the more important, but it does not provide a complete answer to the problem because in many cases the relevant public is not concerned with identifying or distinguishing between the various parties who may be associated with the goods. If so, actual control provides a less decisive test, but one which does yield a definite answer.

To expand, the following questions are relevant as to who owns the goodwill in respect of a particular line of goods, or, mutatis mutandis, a business for the provision of services:

(1)  Are the goods bought on the strength of the reputation of an identifiable trader?

(2)  Who does the public perceive as responsible for the character or quality of the goods? Who would be blamed if they were unsatisfactory?

(3)  Who is most responsible in fact for the character or quality of the goods?

(4)  What circumstances support or contradict the claim of any particular trader to be the owner of the goodwill? For example, goodwill is more likely to belong to the manufacturer if the goods are distributed through more than one dealer, either at once or in succession. If more than one manufacturer supplies goods to a dealer and they are indistinguishable, the dealer is more likely to own the goodwill.

If one of these gives a result, the goodwill may generally be assumed to belong to the actual manufacturer of the goods.” (my emphasis)

(4)  Where a foreign business engages a local distributor to sell its products in another jurisdiction, the following principles are material:

(a)  Provided that the foreign business is recognised as the ultimate source of the goods, the goodwill in the goods generally belongs to the foreign business.

(b)  The state of the public mind appears to be the most important factor.

(c)  It is not necessary for the foreign business to be known by name, provided its existence is known or assumed.

(d)  The goodwill “most clearly” belongs to the foreign business if the foreign business is in fact predominantly responsible for the character or quality of the goods, and the local business is held out as representing the foreign one, either expressly or by implication.

Wadlow on the Law of Passing-Off at §§3-154 to 3-155, cited in Oriental Food Industries at §33.

94.  Importantly for this case, it is undisputed that in a typical supply chain involving multiple businesses, different levels of goodwill may co-exist. The manufacturer may have “manufacturer goodwill” as to the quality and character of the goods produced, the distributor “distributor goodwill” as respects its ability to source and select goods, the carrier “carrier goodwill” as to its delivery service, and so on. As Buckley LJ elaborated in Dental Manufacturing Co Ltd v C de Trey & Co [1912] 3 KB 76 (EWCA) (at 87-88):

“I do not doubt that a person dealing with the goods of another may have a goodwill in the business of dealing with them. A carrier who carries the goods of others may have a goodwill in his business of carrier. An agent who is the agent for the sale of goods of others may have a goodwill in his agency business, and, as such agent, may have a ‘get-up’ whose reproduction may entitle him to succeed in a passing-off action.”

95.  Accordingly, when parties contest ownership of “goodwill”, it is essential to be clear as to the type of goodwill claimed, and in relation to which business.

E3.  Analysis

Whether Mr Tong acquired ownership of the goodwill in the Brand Name

96.  Although ownership of goodwill is assessed at the time of writ, Wing Hing’s claim is premised on ownership as first vested in Mr Tong and subsequently transferred to Wing Hing. As Nissin HK observes, if in fact Mr Tong did not acquire the ownership of the goodwill in the Brand Name before Wing Hing’s incorporation, then Wing Hing’s goodwill case necessarily collapses.

97.  Before proceeding, I note that if the question before me were one of distributor goodwill (which it is not), then it may well be – as Nissin HK’s counsel fairly acknowledged during opening submissions – that Wing Hing had accrued such goodwill when it came “to their ability to distribute”. As Wing Hing noted in its opening submissions, a business which obtains its goods from third parties can also have goodwill which reflects the public trust in its ability to select or handle goods to a particular standard – that is to say distributor or carrier goodwill.

98.  Wing Hing’s present claim however goes to ownership of the Brand Name itself, i.e. ownership of the goodwill associated with the DI Ramen goods themselves. It claims ownership of the benefits and advantages flowing from the Brand Name “when used in relation to instant noodles in Hong Kong”.[6] 

99.  As Nissin HK points out, this is a kind of goodwill which emanates from the quality and character of the goods, not services. Since the core issue here is the quality and character of the goods themselves, there are two focal questions:

(1)  Applying the control test, who was, as a matter of fact, responsible for the character, quality control, and production of the products?

(2)  Applying the public perception test, who would the consuming public regard as responsible for the products?

100.  Taking the control test vantagepoint, the Nissin Group was clearly at all material times the manufacturer and responsible for the character, quality control and production of DI Ramen. Neither Mr Tong nor Wing Hing had any real role in this regard. There is no evidence or indeed claim that they significantly contributed to matters like the size, shape, flavour, texture or ingredients of DI Ramen, nor did they have any role in the manufacturing process. 

101.  I do not understand Wing Hing to dispute any of this. Overall, I am firmly of the view that under the control test the owner of the goodwill in the Brand Name prior to Wing Hing’s’s incorporation would have been the Nissin Group.

102.  Next, applying the public perception test, Nissin HK is in my assessment plainly right to maintain that the consuming public would have associated the Brand Name with its manufacturer rather than its distributor.

(1)  To my mind, this case falls squarely within the scenario in which the goodwill “most clearly” belongs to Nissin Japan as the foreign business as discussed in Wadlow (above).

(2)  In the first advertisement for DI Ramen published in a local newspaper, Mr Tong trading as WHC did not hold himself out to be the manufacturer or ultimate source of DI Ramen, but rather as 總代理. Regardless of whether these words are to be translated as “principal agent” (as Nissin HK suggests) or “prime distributor” (as Wing Hing prefers), it is obvious that the average consumer would consider Mr Tong’s role as selling products made by another:

(a)  The same advertisement showed the logo and name of Nissin Japan, both of which also appeared at the bottom right-hand corner of the get-up of the DI Ramen pack shown on the advertisement.

(b)  The advertisement further stated (and implied by showing the get-up with Japanese words) the Japanese origin of DI Ramen, and used it as a selling point. 

(3)  In my view, the average consumer would most likely consider Nissin Japan as the trade origin or source of DI Ramen, or at the least associate the product with a Japanese manufacturer (even if he may not know Nissin Japan by name). The present case is far-removed from those scenarios where a local business conceals the foreign origin of goods and holds itself out as the ultimate source of the goods (see MedGen v Passion for Life Product [2001] FSR 30 (Ch)). 

Whether Mr Tong acquired ownership of the goodwill in the Brand Name

103.  This issue only arises if Wing Hing passes the first hurdle of showing that Mr Tong had earlier acquired ownership of the Brand Name.

104.  It does not follow from Wing Hing being able to establish Mr Tong’s ownership of the goodwill in the Brand Name prior to Wing Hing’s incorporation that the company must necessarily be the owner of the goodwill as at the date of the Writ. The latter must be additionally proved. 

105.  The following matters strongly support Nissin HK’s position that it was the owner of the goodwill in the Brand Name as at the date of the Writ:

(1)  The evidence before me, including Wing Hing’s own evidence in the form of media articles and other such materials, clearly shows that after the injection of Mr Tong’s business into Wing Hing, Wing Hing’s marketing strategy for DI Ramen emphasised its Japanese origin.

(2)  At the material times in Hong Kong, the Nissin Group was well-known through widely broadcast TV commercials for its products featuring its logo and name. 

(3)  The get-up of DI Ramen packs and cartons over the years invariably included the logo and name of the Nissin Group. By contrast, P’s name or role was never stated. This conveyed a message to the consuming public that it was the Nissin Group that was the trade source or origin of DI Ramen.

(4)  There is unchallenged evidence that customer complaints were invariably handled by Nissin HK through the issuance of a formal apology letter in its name to the complainants. 

(5)  As earlier noted, the Nissin Group was at all material times actually responsible for the character, quality control, and production of the DI Ramen products.

106.  It is abundantly clear that under both the public perception test and the control test, the owner of the goodwill in the Brand Name as at the date of the Writ would have been Nissin HK. I see no other facts capable of repudiating the conclusion that both tests point to.

107.  While I place limited weight on the matter, it is notable that when asked during cross-examination why Wing Hing would do as it was told by Nissin HK on a range of operational and promotional matters, Madam Tong immediately responded: “because the brand belongs to Nissin”.

F.  CONCLUSION

108.  For the reasons above, Wing Hing fails on both its contractual and goodwill claims, which are accordingly dismissed.

109.  The parties agree that costs should follow the event. Nissin HK should therefore have its costs of the action, with certificate for two counsel.

110.  Lastly, my thanks to counsel on both sides: Mr Robert Pang SC leading Mr Vincent Lam and Kurt Ng for Wing Hing, and Mr Victor Dawes SC leading Mr Jason Lee for Nissin HK. While not quite instant, the trial process has certainly been made efficient and pleasant by their able assistance.