INTERACTIVE MEDIA NETWORK (CHINA) HOLDINGS LTD v. JUST MEDIA GROUP LTD AND OTHERS

HCA 2291/2017

[2018] HKCFI 1114

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NO 2291 OF 2017

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D E C I S I O N

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1.  On 4 October 2017, the plaintiff took out an inter partes summons seeking an interlocutory injunction to restrain the defendants from publishing house racing journals and newspapers under and by reference to the names and marks of “Jockey Daily News” and “Super Winner”. The hearing took place on 13 February 2018, during which I directed that the parties should put in their agreed chronology and proposed directions for speedy trial. They were submitted on 21 February 2018. I have considered the evidence, the authorities cited to me and counsel’s submissions. I have decided to dismiss the application and order a speedy trial. This is my decision.

THE PARTIES

2.  The plaintiff is a private company incorporated in Hong Kong on 5 September 2014.  Mr Markie Cheung (“Markie Cheung”) is its sole director and shareholder.

3.  The 1^st and 2^nd defendants are both Hong Kong private companies.  They were incorporated respectively on 28 August and 27 August 2017.  Their sole director and shareholder is Mr Tse Man Hin (“Tse MH”).  He is the son of Mr Tse Chung Yam (“Tse CY”).

4.  The 3^rd defendant is a partnership jointly owned by Tse CY and a company called Sun May King (Holdings) Limited (“SMK Holdings”).  SMK (Holdings) wholly owned another company by the name of Sun May King Publishing Company Limited (“SMK Publishing”).  The two companies have a substantial paid-up capital of HK$16.5 million and HK$8 million respectively.  Tse CY has at all times been a director of SMK Publishing.

THE RELEVANT FACTS

Undisputed background

5.  Material facts can be traced back to about 1972.  Tse CY had by then been working as a newspaper reporter for several years.  He spotted a market in Hong Kong for horse racing newspapers and journals.  He started May King Publishing Company in around 1972 and set up his own printing and publishing business to publish horse racing journals under the name and mark of “Super Winner” (“大勝馬經”) (the “Super Winner Mark”, the “Super Winner Business”). 

6.  In about 1991, SMK Publishing succeeded the business of May King Publishing Company, and continued with the Super Winner Business. 

7.  In 1997, SMK Publishing acquired the “Jockey Daily” (“騎師日報”) name and mark ((the “Jockey Daily Mark”), and started to publish racing newspapers under that name and mark of Jockey Daily News (the “Jockey Daily Business”).

8.  The publication by SMK Publishing of Super Winner and Jockey Daily News (collectively the “Newspapers”) continued until about August 2017 when the defendants, in circumstances which I will explain, started to publish instead in the names and marks of “Great Winner” (“今日大勝馬簿”) and “Jockey Racing News” (“今日騎師馬報”) (collectively the “Disputed Names/Marks”, “Disputed Newspapers”).

9.  According to Tse CY, “[for] more than 40 years since 1972, May King Publishing Company and SMK [Publishing] have generated substantial revenue from the sale and publication of horse racing journals under and by reference to the Super Winner Trade Name and Super Winner Mark, and acquired substantial goodwill and reputation as the proprietor and publisher of publication of horse racing journals under and by reference to [the same].” 

10.  That SMK Publishing had acquired, owned and further built up the reputation and goodwill in the names of “Super Winner” (大勝馬經) and “Jockey Daily News” (騎師日報) is not disputed by the plaintiff.  Indeed, it is the plaintiff’s case that “… prior to the sale to the Plaintiff (as will be set out below…) SMK [Publishing] had built up and owned a valuable goodwill in the names ‘Jockey Daily News’ (騎師日報) and ‘Super Winner’ (大勝馬經) and/or the Trademarks when used in relation to publishing horse racing newspapers in Hong Kong.  Accordingly, whenever members of the public see horsing racing newspapers sold or promoted under or by reference to the names ‘Jockey Daily News’ (騎師日報) and ‘Super Winner’ (大勝馬經) and/or the Trademarks, and/or anything colourably similar thereto, they take the same to be the racing newspapers once published by SMK [Publishing] and none other.” [1]

11.  On 29 June 2016, the plaintiff entered into a non-binding letter of intention with Tse CY and SMK Publishing (the “Letter of Intention”) for the sale and purchase of, inter alia, Super Winner and Jockey Daily News.  It is common ground that this Letter of Intention was not legal binding, and that the intended sale and purchase ultimately did not materialize.  The parties’ respective cases however diverge from here.

The plaintiff’s case

12.  According to the plaintiff, in around August 2016, Tse CY told Markie Cheung that SMK Publishing experienced financial difficulty.  On 25 August 2016, by an oral agreement, the plaintiff agreed to purchase, and SMK Publishing agreed to sell, Super Winner at a sum of HK$500,000 (the “1^st Oral Agreement”). 

13.  On 25 August 2016, pursuant to the 1^st Oral Agreement, SMK Publishing confirmed in writing to the Deputy Registrar of Newspapers that it had assigned Super Winner to the plaintiff.  The plaintiff was as a result formally registered as the proprietor and publisher of Super Winner in the particulars of Office for Film, Newspaper and Article Administration.  On the same day, the plaintiff pay Tse CY a sum of HK$500,000.

14.  Subsequently, Tse CY told Markie Cheung that SMK Publishing was still in financial difficulty.  On 2 September 2016, the plaintiff agreed to purchase, and SMK Publishing agreed to sell, Jockey Daily News at a sum of HK$500,000 (the “2^nd Oral Agreement”).

15.  On 28 September 2016, pursuant to the 2^nd Oral Agreement, SMKPublishing confirmed in writing to the Deputy Registrar of Newspapers that ithad assigned Jockey Daily News to the plaintiff. The plaintiff was as a result formally registered as the proprietor and publisher of Jockey Daily News in the particulars of Office for Film, Newspaper and Article Administration.  On 2 September and 27 September 2016, the plaintiff transferred to Tse CY respectively the sums of HK$200,000 and HK$300,000.

16.  Between 25 October 2016 and 4 January 2017, Markie Cheung advanced loans in the total sum of HK$900,000 to Tse CY for the smooth transition of the Newspapers. 

17.  On 20 December 2016, the plaintiff signed a distributing agreement with Hung To Circulation Limited (“Hung To”) for distributing the Newspapers from 1 January 2017 to 31 August 2019.

18.  In April 2017, it transpired that SMK Publishing had continued to publish the Newspapers without reference to the plaintiff as the proprietor or publisher.  This resulted in the plaintiff commencing a passing-off action HCA 1668/2017 against SMK Publishing, Tse CY and Hung To.  The plaintiff then engaged Great Smart Modern Printing Holding Limited (“GSM”) as the printer of the Newspapers.

19.  Since 10 July 2017, the plaintiff has been publishing the Newspapers, and the same have been exposed for sale in the market in Hong Kong by reference to the plaintiff’s names and marks.

20.  In about August 2017, Tse CY and SMK Publishing commenced a passing-off action in HCA 2004/2017 against inter alia the plaintiff.

21.  Since about 30 August 2017, the 1^st, 2^nd and 3^rd defendants herein, respectively identified as the publisher, the distributor and the printer, have caused the Disputed Newspapers to be put on sale in the market under and by reference to the Disputed Names/Marks.  This led to the present action.

22.  On 4 October 2017, the plaintiff took out the present summons seeking an interlocutory injunction to restrain the defendants from publishingthe Disputed Newspapers under and by reference to the Disputed Names/Marks.

The defendants’ case

23.  The defendants’ case is very different.  Tse CY denied the existence of the Oral Agreements.  He accepted that he met Markie Cheung several times between April and June 2016 to discuss the sale of inter alia the Super Winner and Jockey Daily News Businesses.  During those meetings, he indicated to Markie Cheung that the annual net profit for all those businesses was about HK$4 million, and that he was prepared to personally guarantee any shortfall. He pointed to the Letter of Intention which indeed contained a term encapsulating this guarantee.  He said he had also told Markie Cheung that the lowest price for which SMK Publishing might be prepared to sell all those businesses was HK$20 million.  He had never entered into the 1^st and 2^nd Oral Agreements.  He said that the parties all along intended to sign a formal agreement to implement the Letter of Intention.  He however demanded payment in the sum of HK$2 million as proposed deposit before any formal agreement would be signed.  He said that the total sum of HK$1.9 million which Markie Cheung had paid him was part payment of such proposed deposit, but not considerations under the Oral Agreements or any loans.  He issued the confirmation of assignment to the Deputy Registrar of Newspapers merely as a gesture of goodwill.Ultimately, Markie Cheung and the plaintiff could not raise the agreed consideration for the intended sale, and the transaction fell through.

24.  The defendants’ case is therefore that the Super Winner and Jockey Daily News Businesses have never been sold. The defendants were entitled tocontinue with the publication of the Newspapers.  The reasons why they need to publish under the Disputed Names/Marks since August 2017 were these.  Throughout the years, SMK Publishing had been relying on horse racing data provided by the Hong Kong Jockey Club (“HKJC”) to produce the contents of the Newspapers.  In about August 2017, HKJC became aware of the dispute over Super Winner and Jockey Daily News Businesses between the plaintiff and SMK Publishing.  HKJC then informed SMK Publishing that due to the dispute, it would stop providing racing data to SMK Publishing.  In the circumstances, and for the sake of facilitating the receipt of data from HKJC, SMK Publishing and Tse CY authorized Tse MH to set up the 1^st and 2^nd defendants for the purpose of taking over the Newspapers.  Since the commencement of 2017/2018 horse racing seasons, the Disputed Newspapers under the Disputed Names/Marks has been in publication.

WHETHER SERIOUS ISSUES TO BE TRIED

25.  Despite the stance originally taken in his written submissions, Mr Yu, counsel for the defendants, accepts that there are serious issues to be tried as to whether the parties have entered into 1^st and 2^nd Oral Agreements.  If they have, the plaintiff will have acquired SMK Publishing’s goodwill in the Super Winner and Jockey Daily News Businesses, which acquisition will in turn give the plaintiff a claim in passing-off.  On the other hand, Mr Wongalso fairly accepts that this case does not fall into the type of cases where the relative strength of the plaintiff’s case is such that it can be taken into account when it comes to the issue of balance of convenience—see American Cyanamid v Ethicon Ltd [1975] AC 396, per Lord Diplock at 409A–C.

26.  Mr Yu however submits that the plaintiff fails on the other two grounds: adequacy of damages and balance of convenience.

RELEVANT LEGAL PRINCIPLES

27.  In Music Advance Ltd v Incorporated Owners of Argyle Centre Phase I [2010] 2 HKLRD 1041, Ma J (as he then was) observed at 1046 that:

“ (d) At the interlocutory injunction stage, the principal concern of the court is that it might make a wrong decision in the sense that after trial, the party to whom an interlocutory injunction has been granted may lose or the party who has been refused one, may win. The Court will therefore take whichever course appears to carry the lower risk of injustice if it should turn out that it is wrong. This ‘fundamental’ principle is the source of the guidelines that have evolved for the determination of interlocutory injunctions (included are, of course, the American Cyanamid guidelines) and therefore, in the application of any guidelines, sight must not be lost of this principle. …

(e) Two common guidelines are of course the consideration of the merits of the plaintiffs’ claim and the balance of convenience.  Here, it is of course easy to see at once how they are linked to the fundamental principle: there must be a risk of injustice if the plaintiff cannot even establish a serious question to be tried or that one or the other party will be put to substantial inconvenience or prejudice if an interlocutory injunction were or were not granted.”

28.  The following guiding principles explained by Lord Diplock at page 408 of American Cyanamid are also relevant:

“ … So unless the material available to the court at the hearing of the application for an interlocutory injunction fails to disclose that the plaintiff has any real prospect of succeeding in his claim for a permanent injunction at the trial, the court should go on to consider whether the balance of convenience lies in favour of granting or refusing the interlocutory relief that is sought.

 As to that, the governing principle is that the court should first consider whether, if the plaintiff were to succeed at the trial in establishing his right to a permanent injunction, he would be adequately compensated by an award of damages for the loss he would have sustained as a result of the defendant’s continuing to dowhat was sought to be enjoined between the time of the applicationand the time of the trial. If damages in the measure recoverable at common law would be adequate remedy and the defendant would be in a financial position to pay them, no interlocutory injunction should normally be granted, however strong the plaintiff’s claim appeared to be at that stage. If, on the other hand, damages would not provide an adequate remedy for the plaintiff in the event of his succeeding at the trial, the court should then consider whether, on the contrary hypothesis that the defendant were to succeed at the trial in establishing his right to do that which was sought to beenjoined, he would be adequately compensated under the plaintiff’s undertaking as to damages for the loss he would have sustained bybeing prevented from doing so between the time of the application and the time of the trial. If damages in the measure recoverable under such an undertaking would be an adequate remedy and the plaintiff would be in a financial position to pay them, there would be no reason upon this ground to refuse an interlocutory injunction.

 It is where there is doubt as to the adequacy of the respective remedies in damages available to either party or to both, that the question of balance of convenience arises. It would be unwise to attempt even to list all the various matters which may need to be taken into consideration in deciding where the balance lies, let alone to suggest the relative weight to be attached to them. These will vary from case to case.

 Where other factors appear to be evenly balanced it is a counselof prudence to take such measures as are calculated to preserve the status quo.  If the defendant is enjoined temporarily from doing something that he has not done before, the only effect of the interlocutory injunction in the event of his succeeding at the trial isto postpone the date at which he is able to embark upon a course ofaction which he has not previously found it necessary to undertake;whereas to interrupt him in the conduct of an established enterprise would cause much greater inconvenience to him since he would have to start again to establish it in the event of his succeeding at the trial.”

29.  In exercising its discretion on whether an interlocutory injunction should be granted, the court can take into account the position of third parties or the public who may be affected by the injunction—see SmithKline Beecham plc v Apotex Europe Ltd [2007] Ch 71, at para 27, and Gee on Commercial Injunctions (6^th ed, 2016) at para 21-075.  The passage at page 490 of Spry, Equitable Remedies (9^th ed, 2014) is also enlightening, that:

“ Similar principles apply where the hardship that would be caused by the grant of relief would be caused to a third person, or to members of the public, rather than to the defendant, especially where that hardship is direct and not speculative. This consideration also is taken into account by the court in determining whether it is just that an interlocutory injunction should issue.”

30.  On the issue of adequacy of damages in the context of copyright and passing-off claims, loss can for example take the form of damage to the goodwill caused to a plaintiff occupying the upper end of the market by a defendant who was occupying a lower end of the market and trying to intrude into the plaintiff’s market with goods of inferior quality.  Loss may also take the form of erosion of the exclusivity and distinctiveness of the marks.  There may also be loss of custom.  Losses of such nature are difficult to quantify, and can rarely be adequately compensated by damages—see Timex Corporation v Time Processor Holding Ltd (unreported, HCA 536/1984, 15 March 1984, at paras 34, 39 – 43), Guccio Gucci SpA v Cosimo Ludolf Gucci & Ors[2009] 5 HKLRD 28, at para 142, Guardian Media Group Plc & Ors v Associated Newspapers Limited (unreported, 20 January 2000; [2000] EWHC 461 (Ch), CA), and Nerum Biotechnology Inc v Nerium International LLC (unreported, HCA 1188/2016, 24 November 2016, at para 91).  The position is best summarized by Laddie J in Irvine v Talksport Ltd [2002] 1 WLR 2355, at paragraph 38, that:

“ In my view these cases illustrate that the law of passing off now is of greater width than as applied by Wynn-Parry J in McCulloch v Lewis A May (Produce Distributors) Ltd [1947] 2 All ER 845. If someone acquires a valuable reputation or goodwill, the law of passing off will protect it from unlicensed use by other parties. Such use will frequently be damaging in the direct sense that it will involve selling inferior goods or services under the guise that they are from the claimant. But the action is not restricted to protectingagainst that sort of damage. The law will vindicate the claimant’s exclusive right to the reputation or goodwill. It will not allow others to so use goodwill as to reduce, blur or diminish its exclusivity. It follows that it is not necessary to show that the claimant and the defendant share a common field of activity or that sales of products or services will be diminished either substantially or directly, at least in the short term. Of course there is still a need to demonstrate a misrepresentation because it is that misrepresentation which enables the defendant to make use or take advantage of the claimant’s reputation.”

ADEQUACY OF DAMAGES

31.  I consider first of all the plaintiff’s position.

32.  Mr Yu submits that the plaintiff has failed to adduce evidence to show irreparable damage on its part.  In particular he submits that there is no evidence to show that the Disputed Newspapers were of inferior quality.  He submits that the contrary is in fact true.  Tse CY has over 40 years of experience in the horse racing publication field.  The plaintiff has virtually none.  Tse CY has retained most of his trusted employees.  On the other hand, the plaintiff’s evidence is that none of SMK Publishing’s employees joined the plaintiff, and that the plaintiff had to purchase horse racing data from a company which Markie Cheung has chosen not to identify in his affirmations.  I find that Mr Yu’s submissions are supported by the evidence. 

33.  Mr Wong submits that as the plaintiff has no control over the quality of the contents in the Disputed Newspapers, there is a real risk that any inaccurate information and/or predictions contained therein would damage the goodwill of the Newspapers.  For my part, I do not see the logical link between any lack of control on the plaintiff’s part and the suggested risk of damage.  In my view, Mr Wong’s further submissions, basing upon the concept of possible erosion of exclusivity and distinctiveness of the Super Winner and Jockey Daily News Marks, and on the strength of the authorities which I have summarized above, are more convincing, which I accept.

34.  Having considered the evidence and the submissions, and even in the absence of any evidence to show inferior quality of the Disputed Newspapers, I am concerned and left in doubt as to whether, should I refuse to grant the interlocutory injunction being sought, any loss associated with any erosion of exclusivity and distinctiveness of the Super Winner and Jockey Daily News Marks which the plaintiff may suffer can be adequately compensated by damages.

35.  I proceed to consider the position of the defendants, Tse CY and SMK Publishing. 

36.  The first point taken by Mr Wong in this regard is that the defendants are merely licensees to use the Super Winner and Jockey Daily Marks but are not the owners of the same, and any loss that they may suffer by the imposition of any interlocutory injunction in terms of loss of expenses or sales can be adequately compensated by damages.  He submits that “It is wrong for Ds to conflate their alleged damage/loss with those allegedly suffered by SMK [Publishing] as the alleged proprietor of the goodwill.”

37.  I agree with Mr Yu’s submissions in this regard that the distinction is artificial.  In exercising the Court’s discretion, I am entitled to take into account the interest of Tse CY and SMK Publishing.  They will directly be affected by any interlocutory injunction which I may grant.  I take into account Tse CY’s evidence on the reasons for the establishment of the 1^st and the 2^nd defendants and the grant of a licence to the defendants to use the relevant Marks.  Those arrangements were put in so that racing data could continue to be received from the HKJC, who had refused to supply the same to SMK Publishing as a result of the dispute between Tse CY/SMK Publishing and Markie Cheung/the plaintiff.  I note also that in about August 2017, Tse CY and SMK Publishing commenced a passing action in HCA 2004/2017 against inter alia the plaintiff.

38.  In the circumstances, I deem it wrong and unfair if I were to leave the interests of Tse CY and SMK Publishing out of the equation.

39.  The issue then is, if I am to grant the injunction sought, and if I turn out to be wrong (in the sense that the Court after trial refuses to grant any permanent injunction as prayed for), whether any damage which the defendants, Tse CY and SMK Publishing may suffer as a result of the imposition of the interlocutory injunction can be adequately compensated by damages.

40.  Tse CY has been in the horse racing business for upwards of 40 years.  He established the Super Winner Business in 1972.  He acquired the Jockey Daily News Business in 1997.  He has built up the associated goodwill.  It is valuable.  On the other hand, Markie Cheung and the plaintiff have no proven track record in the field.  I repeat what I have observed and found in paragraph 32 above.  The plaintiff’s editing and publishing team was put together in relative haste.  Even the source of the racing data which the plaintiff has been using is unknown.  I cannot ignore the risk that the quality of the Newspapers may drop in the hands of the new team.  Any associated damage to the goodwill will be difficult to quantify.

41.  Erosion of the exclusivity and distinctiveness of the Marks concerned is equally a concern here.  If I am to grant the interlocutory injunction sought, the Disputed Newspapers will stop.  But the Newspapers will be, and will be seen by all customers, advertisers and the public to be, edited, printed, published and distributed by a team different from that of SMKPublishing.  Should the injunction turn out to have been wrongly granted, and when everything is reverted back to SMK Publishing and its team, the exclusivity and distinctiveness of the Marks would have been eroded by the effects of the interlocutory injunction and the changeover.

42.  In support of the plaintiff’s application, Mr Wong relies on Guardian Media Group Plc & Ors v Associated Newspapers Limited and submits that “Specifically in the present case, the likelihood of deception or confusion is great.  Many of the salespersons assumed that D’s infringing Newspapers were newer versions of the Newspapers, or that they were originally one entity … The greater this likelihood of confusion, the more unquantifiable damage that P is likely to suffer.”  The same considerations are applicable when one is considering the position of the defendants, Tse CY and SMK Publishing.

43.  Having considered the law, the evidence and parties’ submissions, I find that the damage which the defendants, Tse CY and SMK Publishing (and in particular SMK Publishing) may suffer as a result of a wrongly granted interlocutory injunction would also not be adequately compensated by damages.

BALANCE OF CONVENIENCE

44.  On the issue of balance of convenience, I apply the principle set out in Music Advance, that:

“ The court will therefore take whichever course appears to carry the lower risk of injustice if it should turn out that it is wrong.”

I also take the counsel of prudence given by Lord Diplock in American Cyanamid, which is worthy of repeating, that:

“ Where other factors appear to be evenly balanced it is a counselof prudence to take such measures as are calculated to preserve the status quo. If the defendant is enjoined temporarily from doing something that he has not done before, the only effect of the interlocutory injunction in the event of his succeeding at the trial isto postpone the date at which he is able to embark upon a course ofaction which he has not previously found it necessary to undertake;whereas to interrupt him in the conduct of an established enterprise would cause much greater inconvenience to him since he would have to start again to establish it in the event of his succeeding at the trial.”

45.  In the present case, Tse CY and SMK Publishing have been doingwhat they are seeking to continue to do for a long time.  Their decision to utilize the defendants as the printer, publisher and distributor was, on the evidence, not one which they would have made but for the dispute between them and the plaintiff.  It would be in my view artificial to look at the defendants in isolation and say that they are new to the horse racing publication field, or to view the status quo in that light.  In my view, refusing the interlocutory injunction, but ordering a speedy trial, carry the lower risk of injustice in the circumstances of this case.  Having considered the evidence and counsel’s submissions, and in exercise of my discretion, I am not prepared to interrupt the defendants, Tse CY and SMK Publishing in the conduct of what is in effect “an established enterprise.”

DISPOSAL

46.  For the reasons set out above, I refuse the plaintiff’s application for an interlocutory injunction.  I on the other hand is prepared to order a speedy trial of all three actions that are on foot between the parties.

47.  In the course of the hearing, I invited parties to submit for my consideration a set of agreed directions for speedy trial which the Court may make should I decide to dismiss the application.  I thank parties for having done that.  I have considered the same.  I give the following directions:

(a)  there be a speedy trial of the actions and counterclaim in HCA 1668/2017, HCA 2004/2017 and HCA 2291/2017, to be heard together by the same judge;

(b)  the plaintiff shall within 7 days from the date of this Order take out application for leave to file and serve the Reply in HCA 2291/2017;

(c)  the parties do file and serve their respective lists of documents within 28 days after the plaintiff files and serves the Reply in HCA 2291/2017, and there be mutual inspection of documents within 7 days thereafter;

(d)  the parties do file and serve their signed witness statements as tofacts within 42 days thereafter, and save where otherwise directed by the trial judge, they shall stand as their makers’ respective evidence-in-chief at trial;

(e)  the parties shall set down the case for a speedy trial within 7 days thereafter, with an estimate of 5 days (which shall be confirmed in writing by the parties’ counsel at the time of setting down), and convenience of counsel shall not be considered in fixing dates;

(f)  the trial shall not commence earlier than one month after setting down and there shall be a pre-trial review before the trial judge (if possible) not later than 21 days before the commencement of trial;

(g)  the parties must inform each other and the court forthwith if theyor any of them should become aware of any matter or developmentthat may affect the above estimate or trial or the holding of the speedy trial on the dates fixed;

(h)  time shall run during the summer vacation; and

(i)  the parties shall within 5 days from the date of this order approach the listing clerk of the court to pencil-mark the available trial dates, which shall be formally confirmed upon setting down as provided in (e) above.

COSTS

48.  I make a cost order nisi that the costs of and occasioned by this application be the defendants’ costs in the cause, to be taxed if not agreed.