PEI ZHENG MIDDLE SCHOOL AND ANOTHER v. CHINA PUI CHING EDUCATIONAL FOUNDATION LTD AND OTHERS

cacv 2/2007

in the high court of the

hong kong special administrative region

court of appeal

civil appeal no. 2 of 2007

(on appeal from HCA NO. 946 of 2003)

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REASONS FOR DECISION

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Hon Rogers VP:

1.  This was an appeal from a decision of Cheung J given on 13 December 2006.  The judge had before him three applications.  The first was by summons issued on 12 May 2006 seeking further and better particulars of the re-re-amended statement of claim; the second was an application made by summons issued on 12 July 2006 seeking to strike out the second plaintiff’s claim against the first, second and fourth defendants on the basis that it contravened Order 18 rule 19(1) of the Rules of the High Court.  Finally there was an application by the plaintiffs that the summons issued on 12 July 2006 be struck out.  The judge made no order for the provision of further and better particulars in respect of the summons issued on 12 May 2006 but he did order that there be no order as to costs.  In respect of the summons issued on 12 July 2006 the judge said in his judgment that the second plaintiff should file “a statement of the nature of its case on its acquisition of the relevant goodwill on which it relies”.   Although the judge said he did not intend to formulate the request the Order as drawn up was rather more specific.  The judge dismissed the second plaintiff’s summons issued on 17 July and ordered costs to be paid by the second plaintiff in respect of the summonses issued on both 12 and 17 July 2006.

2.  At the conclusion of the hearing this appeal this court allowed the plaintiffs’ appeal and made an order that the costs in this court and below in respect of all the summonses should be in favour of the plaintiffs.  This court also gave directions as to the filing of expert evidence, since that was the only matter which the parties said was outstanding before the matter could be set down for trial.  We now give our reasons.

The plaintiff’s case

3.  Before turning to the history of the matter it would be convenient to focus on the plaintiffs’ case since the crux of the applications before the judge was that on the pleadings the second plaintiff had no case.  I can do no better than citing paragraphs 2, 3, 5, 6 and 7 of the re--re--amended statement of claim.  They are as follows:

“	2.	(a)	The 1st Plaintiff was originally established in 1889 as a private tuition establishment under the name“培正書院”by several Chinese members of the“廣州浸信會”, including馮景謙，余德寬，廖德山，歐陽康and 李濟良.  The name by which the 1st Plaintiff is generally known today was adopted in or around 1928 to reflect its growth in stature and increase in student intake.
			…..
		(d)	In about the early 1950s, the school operating at the Dongshan Premises was nationalized by the PRC Government.  The quality education it had been providing and the reputation and goodwill thereby built up for over half a century as such a provider of quality education, in particular, at the Dongshan Premises became suspended.
		(e)	The residual reputation and goodwill annexed to the Dongshan Premises survived the said political interruption and was revived and succeeded to by the school operating at the Dongshan Premises in about 1984 through the efforts of the alumni of 培正, including the 2nd Defendant, by their application made to the Goungzhou (sic) Municipal People’s Government for the resumption of use of the name“廣州市培正中學”by the said school.  The approval for the resumption of use of the name was granted in about 1985 with the condition that the principle of separation of education and religion be upheld.
	3.	(a)	For over a century, not only has the 1st Plaintiff been in the service as a provider of quality education to numerous students, but the 1st Plaintiff has also, through the members of its school board and with the assistance of its alumni, established and/or advised, assisted and supervised in the establishment and/or administration of other primary and secondary schools under and by reference to the name“培正”and the red and blue insignia of“培正”throughout southern China, including Hong Kong and Macau.  The“培正”family (of) schools include:
				PARTICULARS
				Name	Address	Year of establishment/ use of name & insignia
			(i)	香港培正中學	香港九龍培正道20號	1933
			(ii)	香港培正小學	香港九龍窩打老道80號	1933
			(iii)	澳門培正中學	澳門高士德馬路7號	1938
			(iv)	澳門培正小學	澳門高士德馬路7號	1938
			(v)	廣州西關培正小學	廣州市恩寧路41號	1931
			(vi)	東山培正小學	廣州東山培正路5號之6	1923
			(vii)	梧州培正學校	廣西梧州市萬秀區阜民路培正里1號	1906
			(viii)	台山培正中學	台山台城橋苑新村大街	1994
		(b)	The Hong Kong branch school was established in 1933 under the name“私立廣州培正中學香港分校”and the Macau branch school was established in 1938 under the name“私立廣州培正中學澳門分校”.  The names of the branch schools in Hong Kong and Macau were changed respectively to their current names of“香港培正中學”and“澳門培正中學”in 1950.  Copies of the red and blue insignia of the Plaintiff and of the Hong Kong and Macau“培正”schools are annexed hereto under Schedule “A”.
	5.	The 2nd Plaintiff accepted the transfer of the administration of“香港培正中學”and“澳門培正中學”from the respective school boards of the 2 schools in 1958 and has faithfully continued to carry on the established service as a provider of quality education to numerous students through“香港培正中學”and“澳門培正中學”and their associated primary schools in Hong Kong and Macau.  Notwithstanding the transfer of the administration of“香港培正中學”and“澳門培正中學”, it has always been recognised by the 2nd Plaintiff and the students and alumni of“香港培正中學”and“澳門培正中學”that both schools were and still are inextricably associated with the 1st Plaintiff and that the 1st Plaintiff is the “mother school”of“香港培正中學”and“澳門培正中學”.
	6.	In the Plaintiffs’ 114 years of history, a substantial number of students have graduated from the Plaintiffs’ and its schools and their associated primary and secondary schools.
	7.	By reason of the foregoing matters, the Plaintiffs have acquired and shared a substantial reputation and goodwill in the name “培正” and the red and blue insignia of “培正”in the PRC, Hong Kong and Macau and schools and other institutions bearing the name“培正”and/or the red and blue insignia of“培正”have come to be recognised by the public in the PRC, Hong Kong and Macau as associated with the Plaintiffs and none other.”

4.  In March 2005 the first, second and fourth defendants sought an order to stay the proceedings brought by the first plaintiff on the basis that Hong Kong was not the proper forum.  The summons was addressed to both plaintiffs.  The defendants offered to have the matter litigated in the Mainland.  That matter was heard before Deputy High Court Judge L Chan as long ago as July 2005.  At the hearing both plaintiffs were represented.  On 5 August 2005 the judge dismissed the application.  It was clear from his decision that on that occasion the defendants took the point that the second plaintiff had no cause of action.  That was recorded in paragraph 27 of the decision which were read:

“

Regarding the case of the 2nd plaintiff, the defendants plead that the 2nd plaintiff was only the operator of the Hong Kong and Macau Pui Ching Schools and had not obtained any right in the trade name and/or design insignia of the Guangzhou Pei Zheng Private Middle School Hong Kong Branch (“私立廣州培正中學香港分校”) or its successor, Hong Kong Pui Ching Middle School (“香港培正中學”).  Thus, they say the 2nd plaintiff has no locus standi to sue for infringement of the trade name Pei Zheng (“培正”) or its insignia.”

5.  He went on to say in paragraph 40:

“

Mr Neoh initially argued that the 1st plaintiff’s case is impossible to succeed as a matter of law.  He said the 1st plaintiff only came into being in 1985 and it had not acquired the goodwill of“培正”by assignment or transfer.  The School (or the Guangdong and Guangxi Baptist Association) which owned the goodwill had been nationalised in 1953.  He also submitted that the 2nd plaintiff’s case is also hopeless as it is and was merely the administrator of the Hong Kong and Macau Pui Ching Middle Schools.  He therefore said that both plaintiffs have no case and this action is a futile exercise.”

6.  The judge roundly rejected that.  He summarised the case as he saw it in paragraphs 48-50.  I cite them because I find what he said is entirely clear and I agree with it:

“	48.	I am of the view that the parts of the re-re-amended statement of claim, as quoted above, have stated a case that the goodwill of “培正” was created sometime in 1889 and had become annexed to the Dongshan Premises from 1908 onwards.  After the assets of the Guangdong and Guangxi Baptist Association and the School at the Dongshan Premises were nationalised and the School became the 7th Middle School of the Guangzhou Municipality, the school boards of the Hong Kong and Macau Pui Ching schools then carried the torch of “培正”.  They continued with the cultivation and development of its goodwill in Hong Kong and Macau.  This task and the torch of “培正” was then passed over to the 2nd plaintiff in 1958 and the 2nd plaintiff continued with this virtuous task.
	49.	The re-re-amended statement of claim also pleads that when the 1st plaintiff resumed the name of “培正” at the Dongshan Premises in 1985, it was not just a mere change of name from “僑光” to “培正” but a resumption of the operation of the School together with its goodwill as vested in it by the Mainland Government.  Furthermore, once the 1st plaintiff resumed the operation of the School at the Dongshan Premises, the 2nd plaintiff, as well as the alumni and students of the Pui Ching Middle Schools in Hong Kong and Macau, recognised the 1st plaintiff as the mother school of the Pui Ching schools in Hong Kong and Macau.  Hence, the goodwill in “培正”, and the associated insignia have been recognised by the public in the Mainland, Hong Kong and Macau as associated with the 1st and 2nd plaintiffs and they share this goodwill together.
	50.	Whether the plaintiffs can prove their case as pleaded is not for me to decide now, but I can surely say that their case of shared goodwill is not hopeless either on the pleadings or on the evidence….”

7.  The defendants then took the matter on appeal.  In the notice of the appeal they clearly raised the attack that they had made on the second plaintiff’s case.  Indeed paragraph 1 of the grounds of the appeal read:

“	Upon the Respondent’s pleadings in the documentary evidence before him, the Deputy Judge erred in law in holding that:-
	(a)	The Respondent has an arguable case that it has a goodwill in the name “Pui Ching﹝培正﹞” tracing back to 1889.
	(b)	The 2nd Plaintiff has an arguable case that it shared the same goodwill in “Pui Ching﹝培正﹞” with the Respondent since 1958.”

8.  As already indicated the judge on this application dismissed the application to strike out the pleading of the second plaintiff but the Order as drawn up required the following particulars:

“

a) particulars on whether, in relation to each of the subject Hong Kong schools and Macau schools, it was established by the 1st Plaintiff, or was established by others with the advice, assistance and supervision of the 1st Plaintiff, and where the latter was the case, the identify of the person(s) or entity who/which established the school in question; b) a statement of the nature of its case on its acquisition of the relevant goodwill on which it relies, and save for the costs order made below, no order be made in respect of the 1st, 2nd and 4th Defendants’ summons filed on 12th July 2006;”

9.  In my view the second plaintiff’s case is abundantly clear.  It took over the running of the schools in 1958 and as administrator it was responsible for the quality of the schools.  Hence the reputation and goodwill arising as a result of running of the schools enured to the second plaintiff.  The first plaintiff has however been revived.  The second plaintiff has considered itself as inextricably associated with the first plaintiff in that the first plaintiff was the mother school.  As Deputy High Court Judge L Chan, I have no difficulty in understanding the plaintiffs’ case.  There is a shared reputation and both plaintiffs would appear on the pleadings to be proper parties.  Whether they succeed in this action is another matter but the pleadings are in no way defective or unclear.

10.  In paragraphs 21 to 26 of the judgment the judge endeavoured to explain how he considered that there were alternative bases upon which the plaintiffs’ case could be established.  I find it difficult to follow his reasoning in this regard; the arguments appear to me to be contrived.  In summary there was no need for any statement whether as referred to in the judgment or defined in the Order.

11.  As regards the second plaintiff’s case that the summons of 12 July 2006 should have been dismissed, I consider that the issuance of a summons was indeed an abuse.  There was, as Mr Liao SC on behalf of the plaintiffs readily submitted, no question of res judicata.  On the other hand the issue as to whether the second plaintiff had a viable case on the pleadings had clearly been argued before Deputy High Court Judge L Chan.  He had decided the matter and that matter was itself the first and other grounds of appeal to this court.  In my view taking out the application to strike out the second plaintiff’s case was no more than an unnecessary harassment.  It was an expensive exercise the only result of which would be to delay the trial of this action.

12.  This court’s attention was drawn to the case of Pocklington Foods Inc. v The Queen in right of Alberta (1995) 123 DLR 141 which was referred to by this court in Chu Hung Ching v & others [2001] 1 HKC 396.  It was said in the Canadian decision and approved in this court that if an issue has been distinctly raised and decided in one proceeding where both parties were represented, it would be unjust and unreasonable to permit the same issue to be litigated afresh between the same parties or persons claiming under them.  There would be exceptions for example if the matter had not been decided on merits or there was a change of circumstances or new evidence.  Those matters do not apply here.  In my view the criteria is satisfied in this case.

13.  I would add that had there been case management dealing with the subsequent conduct of the action as part of the Order following the decision on 5 August 2005, the defendants would not have been able to prolong the satellite litigation.  It is to be hoped that the Rules to be made as part of the Civil Justice Reform will cater for such a situation.

Hon Le Pichon JA:

14.  I agree.