LA CHEMISE LACOSTE S.A. v. CROCODILE GARMENTS LTD.

HCA No. 2401 of 1995

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

HIGH COURT ACTION NO. 2401 OF 1995

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J U D G M E N T

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Introduction

1. The Plaintiff ("Lacoste") was established in the 1930's. Without going into the details of its subsequent development, or the colourful story as to how a logo in the form of a crocodile came to be used by it, Lacoste's business grew since then and became one of the well-known brands in many parts of the world regarding casual or sports clothing and related goods such as sports equipment. Lacoste's logo consists of a crocodile in a curled posture with its head facing right (when one is facing the logo) ("the Emblem Mark").

2. On the other hand, the Defendant ("CGL") was established in Hong Kong in the late 1940's: see the witness statement of Mr. Tom Chan. Since then, it has grown to be one of the well-known local garment suppliers. A line of the goods sold in its shops has been casual and sports clothing. For the purpose of this action, CGL's logo is in essence a crocodile also in a curled posture but with its head facing left (when one is facing the logo).

3. Given this background, it is hardly surprising that before long, the two parties would consider the other party's logo confusingly similar to its logo. This in fact happened and erupted, so far as Hong Kong was concerned, when Lacoste began to import its goods to Hong Kong in the 1970's: see para. 5 to 8 of the witness statement of Mr. Tom Chan. This cumulated in litigation brought by CGL since about late 1979 against local retailers which sold goods bearing the Emblem Mark. Naturally, these retailers turned to Lacoste for help and Lacoste instructed lawyers to defend these proceedings.

4. Shortly later, the parties considered it more beneficial to settle these proceedings by entering into some kind of commercial arrangement. As a result, 3 agreements were signed by the parties:-

(a) an agreement headed "Settlement Agreement" dated 1 May, 1980 ("the Settlement Agreement");

(b) an agreement headed "Licence Agreement" dated 1 May, 1980 ("the Licence Agreement");

(c) an agreement headed "Distribution Agreement" dated 1 July, 1980 ("the Distribution Agreement").

These 3 agreements are collectively called "the 3 Agreements" or "the Agreements".

5. The present action was brought about by the difference in the parties' understanding of the provisions of the Settlement Agreement. CGL considered it was entitled to and did apply for the registration of its logo in mainland China, that is:-

(a) various applications between June, 1993 and December, 1993;

(b) some 20 applications on 1 March, 1995;

(c) an application on 30 June, 1995.

Further, there were also some 17 other undated applications for registration (set out in Lacoste's voluntary particulars of para. 4 of the Statement of Claim dated 7 September, 1995) (all the aforesaid are collectively "the Subject Applications"). On the other hand, Lacoste considered the Subject Applications constituted a breach of the Settlement Agreement.

The Issues

6. Counsel for the parties have very sensibly agreed the main issue of this action to be as follows:-

" ... is the Defendant in breach of the Settlement Agreement by applying for the registration in the PRC of the Subject Applications comprising a crocodile device, which are 'confusingly similar' with the Plaintiff's Emblem Mark?":-

see para. 1 of the Plaintiff's written opening submissions and para. 1 of the CGL's written closing submissions.

7. Defence counsel have also helpfully set out the subsidiary issues which require determination:-

(a) as a matter of construction of the Settlement Agreement, does the phrase "any trademark confusingly similar with the Emblem Mark" in Clause 6(5) include the Subject Applications?

(b) in deciding issue (a) above, do Clause 6(9) of the Settlement Agreement and Article 1 of the Licence Agreement constitute an acknowledgement that the Subject Applications do not cause or are incapable of causing confusion and that the same are not confusingly similar with the Emblem Mark?

(c) if the answer to issue (a) above is affirmative, are the devices in the Subject Applications confusingly similar with the Emblem Mark?

(d) if the answer to issue (a) above is negative, is CGL nevertheless estopped from alleging that the Subject Applications are not confusingly similar with the Emblem Mark? Alternatively, has the Settlement Agreement been subsequently varied to the effect that any crocodile device mark would be confusingly similar to the Emblem Mark?

8. As regards the last of Defence counsel's subsidiary issues (set out at sub-para. (d) above), although Defence counsel referred to "any" crocodile device mark, I understand that to be referring to the device marks relating to the Subject Applications only.

9. For the purpose of this action, the parties agree the crocodile device marks used in the Subject Applications were the same as the mark registered by CGL with the Hong Kong Trade Marks Registry as registration No. 19 of 1954 ("CGL's Mark"): see para. Para. 7(b) of the Re-Amended Defence, para. 4 of the Re-Amended Reply and para. 6 of CGL's written closing submissions.

Burden of Proof

10. The Defence contends, and the Plaintiff accepts, that the burden of proving that the Settlement Agreement has been breached (as well as the subsidiary issues relating to this issue) lies with the Plaintiff.

Findings of Fact

11. To a large extent, the evidence adduced by the parties has been recorded in (if not in fact consisted of) documentary records. Further, Lacoste called the following witnesses:-

(a) Mr. Michel Lacoste;

(b) Mr. Bernard Lacoste;

(c) Mr. Jean-Phillipe Polart;

(d) Mr. Robert Campbell.

CGL called one factual witness, Mr. Frankie Tam. The parties also called their respective expert witness to give evidence relating to market survey, that is, Mr. David Bottomley for CGL and Dr. Shen Shi Ming for Lacoste.

12. At para. 11 and 32 to 34 of CGL's closing submissions, counsel argued that Michel Lacoste's testimony regarding the New Zealand trade mark proceedings was not truthful. Counsel further argued in those paragraphs that the positions taken by both parties in various previous trademark related proceedings were motivated by tactical self-interest.

13. While I do not necessarily find that this witness was intentionally lying, his answers in cross-examination is yet another example of how the positions taken by the parties in different earlier (and current) trade mark-related proceedings could be (and often were) contradictory over whether there was similarity between their respective marks. I agree with counsel for CGL that the shifts in their stance appeared to be related to how their interest was better served. I therefore find that the evidence relating to the parties' assertions or statements in these proceedings regarding whether one party's mark was or was not confusingly similar to another's mark to carry very little weight.

14. Besides this point, credibility of witnesses is of little importance in this action. This is to be expected as the issue in this action is substantially related to the construction of contractual provisions. Further,

(a) the relevant contractual documents (in particular the relevant contractual provisions) which need to be construed are in writing;

(b) in any event, the facts in question occurred more than some 18 to 19 years ago and therefore the recollection of the witnesses regarding them (when not recorded in documents) is either faulty and unreliable, or likely to be distorted consciously or unconsciously to suit his own purpose;

(c) credibility of the factual witnesses has very little relevance to the issue of the circumstances surrounding the 3 Agreements because they are largely undisputed and, even if disputed, are recorded in (or consisted of) contemporaneous documents.

Relevant Circumstances surrounding the Settlement Agreement

15. The Plaintiff submitted that the following circumstances were relevant to the construction of the Settlement Agreement:-

(a) the recognition by the parties of their respective positions and history in Hong Kong and worldwide at the time of the Agreements; Lacoste's turnover in the world was about US$500 million and CGL was by then an established and "admired publicly listed company in Hong Kong";

(b) CGL's interest in the Agreements was really only to protect its position in Hong Kong;

(c) by the time of the Agreements, various proceedings existed in Hong Kong, Denmark and the U.K. regarding the registration, attempted registration and use of the respective crocodile device marks (and also the word mark).

16. Counsel for CGL argued in their written closing submissions a major surrounding circumstance relevant to the construction of Settlement Agreement was the parties' agreement that the Settlement Agreement was related to Hong Kong alone (as was stated in a letter dated 11 December, 1979). In fact, during the trial, numerous correspondence passing between the parties (or their legal representatives) were referred to (including the said letter of 11 December, 1979). The Defence argued that they (in particular the said letter of 11 December, 1979) were part of the surrounding circumstances: see para. 10 and 11 of CGL's closing submissions.

17. I agree the matters referred to by counsel for Lacoste (set out in sub-para. (a) to (c) above) are relevant surrounding circumstances. Save as to those matters, I consider that the correspondence is inadmissible to aid construction of the contractual provisions because they were part of the "negotiations" and/or "declarations of subjective intent" (as those words were used in Investors Compensation Scheme v. West Bromwich Building Society [1998] 1 W.L.R. 896 at p. 913A-B). I find that the correspondence is only admissible to show that the parties were in dispute who had the right to the trademark and there was a need for that matter to be resolved either by litigation or by agreement.

18. I reach the same conclusion regarding the parts of the witnesses' oral testimony or written statements which relate to "negotiations" and/or "declarations of subjective intent": see, for example, para. 30 of Mr. Bridge's statement, para. 13 of Mr. Tom Chan's statement, para. 19 of Mr. Bernard Lacoste's statement and para. 7 of Mr. Michel Lacoste's statement.

19. A matter also relevant to construction was the involvement of two Hong Kong solicitors in the drafting or approval of the Settlement Agreement. Mr. Robert Campbell was acting for Lacoste and Mr. Robin Bridge was acting for CGL at the time. Both were practitioners specializing in the area of intellectual property law: see the testimony of Mr. Campbell and para. 1 of Mr. Bridge's witness statement. The relevance of this will be dealt with further in the paragraphs regarding the meaning of "confusingly similar".

20. Another relevant matter to be taken into account was the overall arrangement reached as a result of the signing of the 3 Agreements. As stated earlier, the parties entered into 3 agreements. This will be set out in the following paragraphs.

21. In relation to the Settlement Agreement, the parties' agreement regarding their position in Hong Kong does not appear to be in dispute. It was summarized in the Judgment of the Court of Appeal in an earlier interlocutory appeal (regarding forum non conveniens) as follows:-

"It is plainly what Mr. Ma described as a 'carve-up' of the market and the use of the emblems and trademarks. Lacoste gave up ownership of [the] emblem within Hong Kong and ... " (at p. 3 of the transcript).

In essence, the "carve-up" arrangement was carried out through Lacoste allowing (and assisting) CGL to apply in CGL's name for the registration of the Emblem Mark in Hong Kong. Further, Lacoste would grant to CGL an exclusive right to use the Emblem Mark (in essence) for the distribution of Lacoste's goods in Hong Kong. A distribution agreement would also be executed for CGL to distribute Lacoste's goods in Hong Kong. In exchange, CGL "agreed not to apply outside Hong Kong for registration of trademarks confusingly similar to Lacoste's emblem" (the meaning of that phrase being the main issue of this trial) (see p. 3 of the Court of Appeal Judgment).

22. In short, it would appear that the Licence Agreement and the Distribution Agreement were intended to carry out the arrangement between the parties (set out above) and their provisions appear generally to be consistent with that arrangement.

Construction of the Settlement Agreement

23. In ascertaining the true meaning of the Settlement Agreement, the following matters have been taken into account:-

(a) although the Clauses of particular relevance or importance are Clauses 6(5) and 6(9), the Settlement Agreement must be looked at as a whole;

(b) the relevant surrounding circumstances set out above.

24. Hence, the sub-headings relating to this issue separately set out below are so set out only as to make it easier to understand the reasons for deciding this issue.

Clause 6(5)

25. Clause 6(5) of the Settlement Agreement reads as follows:-

"(5) Relation between the Parties outside Hong Kong

[CGL] shall not apply for registration nor cause, enable or assist any third party to apply for registration of the Emblem Mark or any trade mark confusingly similar with the Emblem Mark in any part of the world outside of Hong Kong save and except assistance rendered to [Lacoste] at their prior request in writing, such prohibition applying to each and every kind of goods in any class"

Clause 6(9)

26. This clause of the Settlement Agreement reads:-

"[CGL] undertakes not to use in Hong Kong any trade mark or trade name (including the Emblem Mark) in a manner likely to cause confusion between the products of or manufactured by [CGL] (on the one hand) and products of or manufactured to the order of [Lacoste] (on the other hand) except as according to the terms of the Distribution Agreement. [Lacoste] agrees that per se the use by [CGL] of a crocodile whether as a trade mark or as a trade name as it is represented in [CGL]'s registration no. 19/1954 does not cause such confusion".

Meaning of "Confusingly similar" in Clause 6(5)

27. When considering the phrase "confusingly similar" in Clause 6(5), I bear in mind that this provision was contained in a document which was examined and approved by 2 solicitors specializing in intellectual property law in Hong Kong, that is, Mr. Campbell for Lacoste and Mr. Bridge for CGL. Their contributions to the draft document were clearly stated in their respective witness statements: see, for example, para. 5-8 of Campbell's statement and para. 26-29 and 31 of Bridge's statement.

28. In Chitty on Contracts (1999) 28th Ed., para. 12-119, the learned authors said:-

"Special meaning of words. ... In those cases where [the words] are to be understood in a special sense extrinsic evidence is admissible to prove that special sense. Thus evidence may be called to explain technical terms of science of art ... ".

(Similar remarks can be found in Chitty, para. 12-051 and 12-058). In view of:-

(a) the involvement of these specialist practitioners;

(b) the purpose for which the Settlement Agreement was entered into by the parties;

(c) the context in which the phrase "confusingly similar" was used in Clause 6(5) as well as in the whole contract,

I find that the phrase "confusingly similar" bears the same meaning as that phrase is used in trademark law in Hong Kong.

Was It Intended CGL's Mark Should Not be Covered by Cl. 6(5)?

29. CGL argues that this question must be answered in the affirmative as a matter of construction because of the following matters.

30. First, there is a difference in the wording used in Clause 6(5):-

"... the Emblem Mark or any mark confusingly similar with the Emblem Mark ... " (underline supplied),

as opposed to the wording used in Clause 6(9):-

"... not to use ... any trade mark ... in a manner likely to cause confusion between the products of or manufactured by [CGL] ... and products of or manufactured to the order of [Lacoste] ... per se the use ... of a crocodile ... as it is represented in ... registration no. 19/1954 does not cause such confusion" (underline supplied).

Similar wordings were used in Article 2(a) of the Licence Agreement and Article 12(a) of the Distribution Agreement.

31. CGL's counsel argued that if the parties had intended Clause 6(5) to include CGL's mark, it would have expressly referred to it (as has Clause 6(9) expressly referred to CGL's goods). For example, Clause 6(5) could have specifically provided "[CGL] shall not apply for registration ... of it own crocodile device mark ... " or "[CGL] shall not apply for registration ... of a crocodile device mark as registered in registration no. 19/1954 ... " or some other similar wordings. In other words, the maxim "expressio unius est exclusio alterius" applies so that the absence of such an express reference in Clause 6(5) shows that this clause was not intended to apply to CGL's Mark.

32. Secondly, Lacoste has acknowledged in Clause 6(9) (as well as Article 1 of the Licence Agreement) that per se the use by CGL of a crocodile as it is represented in CGL's registration No. 19 of 1954 does not cause confusion with the Emblem Mark. It is implicit in this argument that this "acknowledgement" was not limited to the parties' respective positions in Hong Kong but was applicable worldwide.

33. Thirdly, CGL pointed out that Clause 6(5) was admitted by the Lacoste witnesses to have been "borrowed" from a term in Lacoste's standard form contract. CGL argued that this shows that the clause was not intended by the parties to cover the dispute then existing between them.

34. I shall deal with these 3 arguments under separate sub-headings below.

Difference in the wordings of Cl. 6(5) and 6(9)

35. Although it was not expressly stated by CGL's counsel, their argument on this point appears to be based on the maxim "expressio unius est exclusio alterius". In Chitty, at para. 12-089, this maxim was said to mean: "The express mention in an instrument of a particular person, power or thing may show an intention to exclude any other person, power or thing".

36. As stated earlier, Counsel for CGL argued that the difference between the wording of Clause 6(5) and that of Clause 6(9) shows that the restraint outside Hong Kong intended by Clause 6(5) was not to cover the CGL's Mark: see para. 7 of CGL's closing submissions.

37. With respect, I do not agree. Clause 6(9) of the Settlement Agreement (and Article 2(a) of the Licence Agreement and Article 12(a) of the Distribution Agreement) is intended for another purpose, namely, what trade mark or trade name can be used by CGL on products of Lacoste and those of CGL so as not to cause confusion. Clause 6(9) of the Settlement Agreement (as well as the Licence Agreement and Distribution Agreement) is also intended to cover the parties' positions in Hong Kong. It was in such context that the provision that "per se the use by CGL of a crocodile as it is represented by registration No. 19 of 1954 does not cause such confusion" was made. As will be explained further, the last sentence of Clause 6(9) was intended to serve certain purposes: see the discussion under the sub-heading "Whether Lacoste acknowledged there was no confusion". Thus, I do not consider that the difference in the wordings per se shows an intention to narrow the ambit of Clause 6(5). Rather, this question will have to be decided by ascertaining the true meaning of that provision based on its wording and the relevant surrounding circumstances. Lewison: The Interpretation of Contracts (1997) 2nd Ed., para. 1.10 recognises the futility of asking why the matter was not expressly provided for when the learned author said:-

"Since almost any dispute about the interpretation of a contract involves rival meanings, it is seldom helpful to ask why the parties did not adopt one of those rival meanings in their contract".

38. Further, the absence of an express reference to CGL's Mark in Clause 6(5) is only one factor to be taken into account. The other factors relevant to this aspect are set out below.

39. First, the purpose of Clause 6(5) was clearly to limit what CGL could register as a trade mark in any part of the world (other than in Hong Kong, which was expressly dealt with in Clause 6(9)). The type(s) of trade mark which CGL could not register according to Clause 6(5) would be "the Emblem Mark or any trade mark confusingly similar with the Emblem Mark". While it is true that CGL's Mark was not expressly referred to, CGL's Mark is equally not expressly excluded in this clause. Thus, the mere lack of express reference to CGL's Mark in Clause 6(5) is neutral.

40. Secondly, the parties clearly intended to regulate their respective positions regarding the use of trade mark by entering into the Settlement Agreement. In relation to their positions within Hong Kong, that would be regulated by Clause 6(9) whereas in relation to their positions outside in other parts of the world it would be regulated by Clause 6(5). If CGL's argument is correct, the net result would be that Lacoste has in effect given up its rights to the use of the Emblem Mark in Hong Kong but obtain no concession whatsoever regarding the use of CGL's Mark outside Hong Kong. Such a result would, to say the least, be unreasonable. The reasonableness or otherwise in the result is a factor to be considered in the construction of contractual terms: see Chitty, text to nn. 35 to 37 and Lewison, para. 6.13.

Whether Lacoste acknowledged there was no confusion

41. As stated above, the last sentence of Clause 6(9) provides that: "... per se the use ... of a crocodile ... as it is represented in ... registration no. 19/1954 does not cause such confusion". CGL's counsel put forward the following arguments arising from this:-

(a) the parties agreed that registration No. 19/1954 (and therefore the Subject Applications) does not cause the type of confusion contemplated by Clause 6(9);

(b) the type of confusion contemplated by Clause 6(9) (and Article 2(a) of the Licence Agreement and Article 12(a) of the Distribution Agreement) was "confusion relating to the use in Hong Kong by CGL of any trademark or trade name (including the Emblem Mark) in a manner likely to confuse the public into believing that CGL's products are those of [Lacoste]": see para. 8, CGL's closing submissions;

(c) there is no substantial difference between that type of confusion and that contemplated by Clause 6(5).

42. While it may be that there is no substantial difference between the type of confusion contemplated by Clause 6(9) and that contemplated by Clause 6(5), it does not follow that the last sentence in Clause 6(9) (which in essence is an acknowledgement or concession made by Lacoste in that clause) should somehow be applicable to provisions or matters beyond Clause 6(9). There is a "quantum leap" about this argument which I do not understand (or agree). I consider that the last sentence of Clause 6(9) was only intended to apply to the situation provided for in that clause because:-

(a) as a matter of format, Lacoste's "acknowledgement" in Clause 6(9) was placed at the end, and forms part, of that provision. Although the heading of that provision "Use of Trade Mark/Trade Name" appears to be of general application, it is obvious from the express wording of Clause 6(9) (and CGL did not argue otherwise) that that provision only applies to the use of trademark or trade name within Hong Kong. If the parties had intended the last sentence of Clause 6(9) to apply both outside and within Hong Kong, it would have been set out as a separate provision in the Settlement Agreement;

(b) Mr. Bridge in his witness statement has explained the purposes of including this "acknowledgement": see para. 27 and 28 thereof. It was firstly needed to make sure that Lacoste should reverse the position taken in negotiations, that is, CGL's mark was confusingly similar to the Emblem Mark. Secondly, it was needed to overcome any potential problem arising from the decision in McGregor Trade Mark Case [1979] R.P.C. 36. The effect of that decision was that if a licence or registered user agreement relating to a trade mark should lead to confusion in the market, the trade mark licensed could be subject to cancellation. This last point was confirmed in para. 8 of Mr. Campbell's statement.

43. Based on the above, I find that the "acknowledgement" by Lacoste in Clause 6(9) is only limited to the situation in Hong Kong. Having reached that conclusion, I agree with Lacoste's argument that the presence of this "acknowledgement" reinforces Lacoste's case on the construction of Clause 6(5): see para. 7 of Lacoste's closing submissions. The "acknowledgement" in Clause 6(9) was needed because the parties were concerned that there may be confusion between the Emblem Mark and CGL's Mark in Hong Kong.

Relevance of the source of Cl. 6(5)

44. With respect to counsel for CGL, I do not agree that the source of Clause 6(5) is a relevant matter regarding the construction of this clause. Whether this clause found its origin in Lacoste's standard form contracts, or in books of precedent forms, or otherwise, the parties have decided that it should form part of their agreement. The true meaning and effect of this clause is still to be ascertained by adopting the cannons of construction at common law, taking into account the surrounding circumstances.

Conclusion on the Construction of Cl. 6(5)

45. Having considered all the matters set out above under the heading "Construction of the Settlement Agreement", I conclude that it was the parties' intention that Clause 6(5) is capable of covering CGL's Mark.

The "Contra Proferentem" Rule

46. CGL's counsel argue that if there is any ambiguity in the meaning and effect of Clause 6(5) or 6(9), the contra proferentem rule would favour CGL and a construction in CGL's favour should be adopted. This is because Lacoste was the drafter of Clause 6(5) and relies on this clause in this action. However, since I consider that there is no ambiguity in the true meaning and effect of Clause 6(5) or the "acknowledgement" provision in Clause 6(9), there is no need to consider this argument.

Are the Marks Confusingly Similar?

47. Since I concluded that Clause 6(5) of the Settlement Agreement is capable of covering CGL's Mark, it is necessary to consider the second subsidiary issue referred to by counsel for CGL. There are two issues in this regard:-

(a) what is the applicable law regarding the question of "confusingly similar";

(b) what evidence is relevant to this question.

The Applicable Law

48. There is no dispute between the parties that Hong Kong law is the applicable law of the Settlement Agreement. As stated earlier, I concluded that the phrase "confusingly similar" has the same meaning as that phrase bears in Hong Kong trade mark law. The parties differ however as to what the proper test is for determining the question of "confusing similarity".

49. Counsel for Lacoste argued that in determining this question, the concepts of "imperfect recollection" and "idea of the mark" are relevant. They further argued that the applicable legal principles are Hong Kong trade mark law principles which are largely similar to those in English trade mark law under the Trade Marks Act 1938 (and before the introduction of the Trade Marks Act 1994).

50. On the other hand, counsel for CGL submitted that the relevant legal principles are as follows. First, CGL accepts the following to be the correct legal test:-

"... the question is the single one of whether in all the circumstances there has been misrepresentation as to the source of the goods or the identity of the business, but it is often convenient to break this down into specific questions: what features of the plaintiff's goods are distinctive of him? To what extent and for what reasons? Are the defendant's goods sufficiently similar in those feature to be taken for the plaintiff's? And has the defendant taken other measures so as effectively to eliminate the possibility of confusion?": Wadlow: The Law of Passing-Off (1995) 2nd Ed., para. 6.18.

51. Subject to the above, CGL's counsel accepted the concepts of "imperfect recollection" and "idea of the mark". The above quoted passage was of course made in the context of the law of passing-off. The question of "confusion" (or "deception") in passing-off must be determined by looking at various factors which may be beyond any marks or labels associated with the goods (or businesses) in issue. In trade mark law, however, this question is to be determined by considering the trade marks in issue: see also the other matters set out in Kerly's Law of Trade Marks and Trade Names (9186) 12th Ed., Ch. 17, especially, para. 17-07 to 17-23. I do not understand CGL's counsel to dispute this. The quoted passage must therefore be applied bearing in mind that the subject matter in issue are trade marks.

52. The more substantial difference between Lacoste and CGL lies in whether the trade mark law in England since the introduction of the Trade Mark Act 1994 should apply. Lacoste argued that it is irrelevant whereas CGL took the opposite view. Both parties apparently accept that the post-1994 trade mark law since 1994 differs from the pre-1994 one.

53. The ultimate issue in this action is not whether there was trade mark infringement. This action is rather one involving a dispute of whether the Settlement Agreement was breached by CGL. Trade mark law only becomes relevant because I concluded the phrase "confusingly similar" in Clause 6(5) of the Settlement Agreement bears the same meaning of that phrase in trade mark law. That being the case, I consider the phrase should be given its meaning at the time of making the contract. As it was said in Lewison, at para. 4.13:-

"DATE FOR APPLICATION OF MEANING

Since a contract must be interpreted as at the date when it was made, words must be given the meaning which they bore at that date, and where the meaning has changed, evidence is admissible to prove the original meaning" (underline supplied).

Thus, I agree with Lacoste's argument that the relevant principles are the pre-1994 ones.

Circumstances Relevant to the Use of the Marks

54. CGL invited me to bear in mind the following characteristics and circumstances of the use of the marks when deciding the question of "confusingly similar":-

(a) the items sold are clothing, perfume, watches and sun glasses and the like which are not cheap items. The buyers of such items can be expected to be reasonably discriminating in their purchase;

(b) the goods are likely to be sold in a well-lit shop with plenty of opportunity for examination by the customers;

(c) the Subject Applications (that is, CGL's Mark) are left facing whereas the Emblem Mark is right facing.

55. On the other hand, Lacoste drew my attention to the following:-

(a) the idea of the two marks is one of a crocodile;

(b) the respective directions which the 2 crocodiles face and whether one looks fatter or happier than the other only go to the differences in the two marks when compared side by side;

(c) the parties deal in similar products.

56. I have borne in mind the above matters when comparing the respective marks to see if one is "confusingly similar" to the other.

Other Circumstances Relevant to Comparing the Marks

57. Lacoste argued that the following circumstances are relevant to whether there is "confusing similarity" in the 2 marks:-

(a) various crocodile marks have been associated by the Registrar of Trade Marks in Hong Kong;

(b) CGL has registered a number of associated marks (including the Emblem Mark);

(c) CGL did not dispute the association of the various marks by the Registrar of the Trade Marks;

(d) CGL accepted that the applications to register in mainland China constituted a "minor contravention of the [Settlement Agreement]" (see the letter dated 29 September, 1981 from CGL);

(e) CGL saw the need to negotiate with Lacoste regarding its trade mark in Macau, Australia and Korea, the U.K. and Denmark and mainland China;

(f) CGL enlisted Lacoste's assistance in combating counterfeit goods in mainland China bearing CGL's mark;

(g) CGL withdrew its application to register its device marks in Kuwait and the Philippines after executing the Settlement Agreement.

58. CGL contended that the following circumstances are relevant to this exercise:-

(a) evidence of confusion outside the jurisdiction;

(b) regard should be had to the Hong Kong market;

(c) the ruling by the Trade Marks Office in mainland China.

59. Lacoste argued that the ruling by the mainland Trade Marks Office is irrelevant and CGL took the same stance as regards the association of the trade marks in Hong Kong.

60. As counsel for CGL accepted in their closing submissions, the determination on "confusing similarity" is at heart a factual inquiry: see para. 15 thereof. As I understand from Mr. Scott for CGL, the circumstances relied upon by CGL under this sub-heading are only to be taken into consideration if I feel unable to conclude on my own as to whether the 2 marks are confusingly similar to each other. I agree with this approach and consider that this applies to the circumstances relied upon by both parties (set out above).

61. Having looked at the 2 marks in question in this action, I find that they are confusingly similar. I reached this conclusion without the need to revert to the circumstances referred to by the parties (set out above under this sub-heading). Further, I would have reached the same conclusion even if I had to take them into account.

Other Matters

62. One matter I should mention is that at para. 37(i) and (ii) of CGL's closing submissions a point was made that the Subject Applications are all "composite" marks comprising both symbols and words (the words "Crocodile Twin") and "Lacoste" was not used. Lacoste objected to this argument being put forward. Not only was this point not made in the pleadings, there was an express admission made in the Defence that the marks in the Subject Applications are identical to CGL's Mark (that is, registration no. 19/1954). Further, in both the Opening and Closing submissions of CGL, that admission was referred to and relied upon by CGL: see para. 7 of CGL's opening submissions and para. 6 of CGL's closing submissions. I agree with the objection and do not consider that CGL should be allowed to:-

(a) depart from its pleading;

(b) shift back and forth,

over this point.

63. CGL also criticized Lacoste for its failure to adduce direct evidence of confusion. As has been pointed out in Kerly, "The question whether one mark so nearly resembles another as to be likely to deceive is a question for the tribunal and is not a matter for the witness" (para. 17-25 thereof). Further, evidence of actual deception is unnecessary, provided the tribunal concludes that the mark is likely to deceive: see Kerly, para. 17-29. I find that this action falls within the aforesaid observations in Kerly. In fact, because this is a case involving the question of whether there was a breach of the Settlement Agreement, and not trade mark infringement, I agree with Lacoste's argument that while Hong Kong law should apply, it is inappropriate to consider the market circumstances in Hong Kong. Hence, it would have been inappropriate to adduce evidence of actual confusion in the Hong Kong market.

Relevance of the Market Survey Evidence Relating to Hong Kong

64. CGL adduced market survey evidence relating to whether there was confusing similarity in Hong Kong through Mr. Bottomley. Lacoste agreed the introduction of such evidence on a de bene esse basis while objecting to its relevance (and therefore admissibility).

65. When CGL appealed to the Court of Appeal regarding its application to stay on the ground of forum non conveniens, the Court said:-

"... I am of the opinion that, on the true construction of clause 6(5) of [the Settlement] agreement ... , the parties must be taken to have intended the question of confusing similarity to be decided objectively by the Hong Kong court. ... " (per Godfrey, J.A. at p. 7 of the transcript).

I entirely agree with this analysis. The issue in this action is to be decided by considering Hong Kong trade mark law, not the circumstances of the Hong Kong market. It is obvious from the report and testimony of Mr. Bottomley that there was a uniqueness in the Hong Kong market, that is, because of CGL's long presence in Hong Kong, it enjoys a high degree of recognition. I therefore also agree with Lacoste's argument that this piece of evidence is irrelevant to the issue before me and is inadmissible.

66. Since I have rejected the market survey evidence adduced by CGL, there is no need to deal with whether it actually supports Lacoste's case that there was confusion in the Hong Kong market, or whether the methodology adopted by the surveyor was proper.

Relevance of the Market Survey Article Relating to PRC

67. In the course of its closing submissions, CGL produced an article from the "Fortune" magazine. This article referred to a survey conducted by Gallup. I agree with Lacoste's argument that no weight should be given to this article because:-

(a) it dealt with the question of how well known some of the brands are in mainland China. The issue in this action, on the other hand, is confusing similarity between the 2 trade marks in question;

(b) many important matters relating to the survey are unknown, for example, the methodology used.

Estoppel/Variation

68. I am able to decide in Lacoste's favour on liability based on the conclusions reached in relation to the construction of the relevant clauses in the Settlement Agreement and the question of confusing similarity between the Emblem Mark and CGL's Mark. It is strictly irrelevant whether Lacoste has established its case regarding estoppel and/or variation of the Settlement Agreement. However, for completeness' sake, I shall do so under this heading.

69. CGL argued that in relation to the case of "estoppel by convention", a shared assumption as to the parties' legal obligations is required. Lacoste emphasized on the contents of the letter dated 29 September, 1981 from Mr. Tom Chan of CGL as an acknowledgement that the registration of a crocodile device mark would amount to a "minor contravention of the agreement". CGL firstly contended that a fair reading of the whole letter shows that there was no acknowledgement. Further, in letters sent during June, 1982, September, 1983, January and April, 1987, August and October, 1992 and December, 1993, CGL did not share Lacoste's approach to Clause 6(5). In the cross-examination of Mr. Michel Lacoste, it was put to the witness (and he agreed) that after the receipt of the letter in January, 1987, Lacoste could not have continued to take the view that there was a common assumption that the registration of any crocodile device would constitute a contravention of Clause 6(5). A similar answer was given in the cross-examination of Mr. Bernard Lacoste.

70. Lacoste's response to this argument is that merely because CGL has retreated from the common assumption does not mean that there cannot be an estoppel by convention. For this Lacoste relies on the observations in Amalgamated Investment Property Co. Ltd. v. Texas Commerce International Bank Ltd. [1982] Q.B. 84, at 121C-E, 122A-D, 126A-B and 130G-131B.

71. Estoppel by convention depends on a shared assumption shown through a "course of dealing". Whether there was such a "course of dealing" as to trigger an estoppel is to be decided as a finding of fact. In the present case, if there was any shared assumption, that lasted from the date of the agreement (1980) to at most June, 1982. Even if I were to ignore the letter sent at that time and consider only the witnesses' testimony, the shared assumption must have ceased to exist by January, 1987, some 6 years after the agreement and 8 years before the commencement of this action. In these circumstances, I find that Lacoste has not been able to establish its case on estoppel by convention because there was an insufficient "course of dealing".

72. I also find that there is insufficient evidence of reliance to establish the case of estoppel by convention or estoppel by representation. The case on variation is also not established.

Conclusion on Liability

73. For the reasons stated above, I find in Lacoste's favour on liability.

Relief and Damages

74. The relief asked for by Lacoste in the Statement of Claim is in short and in effect the following:-

(a) an order that CGL do forthwith withdraw the Subject Applications;

(b) if the rules of procedure of the Trade Marks Office in mainland China preclude and/or disallow the withdrawal of the Subject Applications, CGL do forthwith concede to the oppositions filed and/or to be filed by Lacoste thereto;

(c) if the Subject Applications or any of them have matured or will in future mature to registration, an order that CGL do forthwith apply to the Trade Marks Office in mainland China to cancel and/or remove the registration, or at Lacoste's option, assign the same to Lacoste;

(d) an order that CGL do forthwith withdraw any other applications to register any mark which falls within Clause 6(5) of the Settlement Agreement;

(e) an injunction order to restrain CGL from making such applications;

(f) an order for the delivery up of copies of documents and correspondence relating to the above orders.

75. 3 grounds of objection were taken by CGL as regards the form of relief: it is too vague, too wide and/or in some respects has been overtaken by the rulings made the mainland Trade Marks Office.

76. Save as regards sub-para. (d) and (e) (and therefore part of sub-para. (f) related thereto), I do not agree that the relief asked for is either too vague or too wide. The registration applications intended to be covered by the various orders are set out in either the original pleading or the voluntary particulars given later. The orders set out in sub-para. (a) to (c) (and (f) insofar as it relates to (a) to (c)) above are intended to cover the matters falling within Clause 6(5) of the Settlement Agreement (no argument of uncertainty has been advanced against it) and should be granted. Insofar as the relief asked for has been overtaken by the rulings, I believe that the parties can sensibly agree to a suitably modified form of the order, and if agreement should fail, they can ask for further directions on this aspect.

77. Although the Statement of Claim also asked for damages and payment of sums found due, no evidence was adduced by Lacoste in the course of the trial regarding quantum. In its closing submissions, Lacoste asked for an order for damages to be assessed. I agree with CGL's argument that no good reason has been shown as to why this order should be made when there was no application made (or direction given) earlier for a split trial.

Costs Order Nisi

78. Because of the possibility that arguments regarding costs of the issue(s) may be raised by either or both parties, the parties have indicated that no costs order nisi should be made at this stage. I agree to this suggestion and therefore will not make such order.