CHANEL v. Y & FUNG GARMENT CO LTD

HCA 4483/2003

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NO. 4483 OF 2003

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J U D G M E N T

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1.  These are Order 14 proceedings.  The Plaintiff is the well-known French fashion house.  The Defendant owned and operated two shops, one at Tsim Sha Tsui and the other at Causeway Bay, which sell various items of ladies’ clothing.  The Plaintiff says that the Defendant has breached its trademark and is passing-off items of clothing as items manufactured by itself.  On this occasion, ladies tee shirts bearing the Chanel mark for which it has registered its trademark.  Various injunctions are sought as well as damages.

2.  The evidence comes from a Mr Chan who is employed as an investigator by a company called Aegis Intellectual Property Consultants Limited.  He says that on 3 August 2003 he visited the Defendant’s shop at Tsim Sha Tsui where he saw 20 ladies tee shirts on display offered for sale bearing the Chanel trademark which were being sold for $59.  He asked a saleslady about the source of supply but she declined to tell him.  He purchased a tee shirt for $59 which he has produced in evidence.  The price tag and hang tag incorporated the Chanel trademark.  He was given a shopping bag of the Defendant in which to take away his purchase.

3.  The following day, the 31^st August, he had an identical experience at the Defendant’s shop at Causeway Bay.  There he found 30 tee shirts on display.  The saleslady declined to tell him where the tee shirts had come from.  He purchased one for $59 and took it away in the Defendant’s shopping bag.  The price tag and hang tag also incorporated the Chanel trademark.

4.  If accepted this evidence would be sufficient to prove the case and entitle the Plaintiff to the relief that it asks for.  Nevertheless, this evidence is under fundamental challenge.  The Defendant says it has never sold such products and that Mr Chan cannot be telling the truth when he says he made these purchases.  No other construction can be put on the nature of challenge to his evidence.  The question, which I need to determine, therefore is whether the nature of the Defendant’s evidence is of sufficient cogency to raise a triable issue and so defeat an application for summary judgment.

5.  The authorities on Order 14 are well-known.  In Re Safe Rich Industries Ltd (1994) HKLY 183, Bokhary JA (as he then was) put it this way :

“The test at the summary stage is indeed as simple as whether the Defendant’s assertions are believable.  But it must be recognized — because failure to recognize it would create a debt dodgers charter —that whether the defendant’s assertions are believable is a question to be answered not by taking those assertions in isolation but rather by taking them in the context of so much of the background as is either undisputed or beyond reasonable dispute.”

It was put rather more graphically by Lord Lindley in Codd v Delap (1905) 92 L.T. 510 at 511 when he said that :

“Unless it is obvious that the defence put forward by the Defendant is frivolous and practically moonshine Order 14 ought not to be applied.”

More recently Bingham LJ (as he then was) expressed in this way in Crown House Engineering v Amec Projects Ltd (1990) 6 Const. L.J. 141 at 154 :

“… the procedure is entirely inappropriate where the Plaintiff’s entitlement to recover any sum is the subject of any serious dispute whether of fact or law.”

6.  There is no dispute that the Plaintiff is the holder of the trademarks that it relies on.  The matter turns on whether Mr Chan made the purchases that he said he did.  The contrary evidence comes from a Mr Lau, a director of the Defendant.  He says that the Defendant has never purchased the offending tee shirts for sale at its retail outlets.  He has made enquiries of the staff at the premises who confirm what he says.  His company is scrupulous as to the sale of such products and he has given firm instructions to ensure that such products are not purchased for sale to their customers.  He then refers to a number of matters which seek to argue the case such as the failure of Mr Chan to produce a receipt for his purchases.

7.  The question here is whether Mr Lau has done enough to force a trial.  Mr Man, for the Plaintiff, says he has not.  The case is overwhelming and a trial would be a complete waste of time for everybody.  Mr Tang, for the Defendant, submits that the plainest triable issue exists and that he will be asking for costs, in any event, if he succeeds because having seen his evidence the Plaintiff should have capitulated and pressed on to trial.  So there is serious disagreement.

8.  I have decided that the matter should go to trial.  Mr Lau has very firmly put in issue the fundamental basis of the Plaintiff’s case.  I am impressed by the lack of receipts despite the fact that Mr Man says this is of no significance.  Nevertheless, Mr Lau’s affirmation shows that receipts are a matter of course given by his sales staff and Mr Chan has not responded to this by further affirmation as to why he has not produced one.  There is nothing in Mr Tang’s point that the matter has not been reported to Customs and Excise by Chanel.  I agree that this case is relatively small beer, in the greater scheme of things, and that the Plaintiff may not have considered a report worthwhile.

9.  A matter that I am prepared that have regard to is the relative lateness of the Order 14 application, coming more than 18 months after the date of defence.  Mr Man has referred to the correspondence in between but this would not explain the delay. 

10.  I am not prepared to drive the Defendant from the judgment seat where such a fundamental challenge has been mounted.  I am afraid that, very frequently, what may turn out to be untruthful evidence has staved off judgment but this case can only be determined following a trial when the witnesses would have to face cross-examination and, indeed, the court will have a very much fuller evidential base from which to judge the truth of this matter.  As the evidence presently stands the Defendant’s evidence goes further than a bare or mere denial and that evidence must now be tested before the trial judge.  The Defendant must have unconditional leave to defend.