PRINGLE OF SCOTLAND LTD v. FUNG YUN FONG, GLORIA

HCA236/2005

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NO. 236 OF 2005

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D E C I S I O N

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1. This is the plaintiff’s application for an interim injunction against the defendant passing off the business which she operates under the name “Scott” or any other business as being allied or connected or associated or approved or authorised by the plaintiff, and there is also the application which was added at the beginning of this hearing for a similar injunction against the defendant passing off the defendant’s goods which are defective samples or off-season items as and for the plaintiff’s in season regular and normal goods.  There is also an application for an injunction against the defendant infringing certain specified registered trade marks owned by the plaintiff and the plaintiff also seeks ancillary and resulting orders which are set out in the summons.

2. The principles for interlocutory injunctions are set out in the case of American Cyanamid v. Ethicon (1975) AC 396.  The plaintiff must show that there is a serious question to be tried and the court then assesses where the balance of convenience lies.  Of course, before the court looks at the question of balance of convenience, it has to 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 the actions which are sought to be enjoined between the time of the application and the time of the trial.

3. So, in this case, my primary consideration must be whether there is a serious question to be tried, both on passing off and on infringement of trade marks; secondly, the question of damages and thirdly, the question of balance of convenience.

4. The background is quite simply this, and I do not think that the facts are in dispute.  The plaintiff is Pringle of Scotland Limited which is a very well-known clothing company that has been selling knitwear originally in Scotland and subsequently worldwide since some time in the relatively early part of the 19^th century.  More recently the company was taken over by a Hong Kong company and, it is claimed that since that was done, the image of the goods which the plaintiff sells has been rejuvenated and aimed at a target market of fashionable people and celebrities.  There seems to be no dispute that the plaintiff has a quite substantial reputation throughout the world and in Hong Kong as a manufacturer of high quality and luxury knitwear.  Like many other garment companies, the plaintiff sells off goods with minor defects and samples and out-dated models or models which are out of season through warehouse outlets and in particular the plaintiff sells such goods through warehouse outlets in the United Kingdom.  There is no dispute that the defendant is a parallel importer of Pringle goods.  She bought them in warehouse outlets in the United Kingdom and brought them back to Hong Kong where she was found selling them from a small shop on the 7^th floor of a building in Carnarvon Road, Tsimshatsui.

5. It is said that the plaintiff used a business card which bore the plaintiff’s logo.  She put out a press release and there are before me articles published in various newspapers and magazines such as the “Sudden Weekly” and the “Apple Daily” describing the goods and their prices and including in that, in particular, is an advertisement placed by the defendant in the Apple Daily to which counsel has recently, just at the last part of the hearing in his reply, has been directing my attention.

6. The theme of the articles and the advertisements is that the defendant is selling goods equivalent to those sold by the plaintiff through department stores in Hong Kong such as Lane Crawford but at a discount of about 80%.  In the advertisement dated 29 December 2004 and placed in the Apple Daily, for instance, there appeared the words “it only costs $480 to purchase the same product which is sold at $1,900 in department stores”.  There are also references to famous persons such as David Beckham and Madonna.  In effect, the burden or theme of what is said is that Scott in Tsimshatsui has imported large quantities of Pringle knitwear; it is being sold cheap; and it is the same as what is being sold in the department stores and worn by famous and fashionable people.

7. The plaintiff’s complaint is first that the defendant is passing herself off as having a connection to the plaintiff when she has not, and then that she is passing off the goods that she sells as of equivalent quality to those sold by the plaintiff in the expensive shops and department stores when they are not of that quality.  The plaintiff also says that this is inherently dishonest and because of that inherent dishonesty, the defendant is infringing the trade marks by virtue of the provisions of section 21 of the Trade Marks Ordinance, Cap. 559.

8. One cannot but feel some sympathy for the defendant.  The target market for the plaintiff’s goods is the fashion-conscious rich.  The fashion-conscious poor simply will not pay the plaintiff’s prices.  The fashion-conscious sandwich class, if I can call it that, will, however, no doubt happily buy the plaintiff’s goods if it can get them cheap, even if that means buying out-of-season or defective or sample goods.  But, of course people who are buying need to know that what they are getting is out-of-season samples or defective goods rather than the latest and up-to-the-minute goods put out by the plaintiff.

9. I am obliged to Mr Xavier for the plaintiff for his lengthy and full written submissions and it is clear from what he has told me and from the cases that he has cited that the essential ingredients of passing off as set out in the case of Reckitt & Colman Products Ltd v. Borden Inc. and Others [1990] 1 WLR 491 are :

(1) that the plaintiff has acquired a reputation in his products or service;

(2) that the defendant misrepresents (whether intentionally or not) that the product or service offered by him is that of the plaintiff so as to deceive; and

(3) that causes damage to the plaintiff.

10. For the purposes of this passing off, of course, fraud is not a necessary element.  The plaintiff does not need to prove any kind of dishonesty but what the plaintiff does have to prove is that the defendant misrepresents that the product or service offered by him is that of the plaintiff or, alternatively, he can misrepresent that, and that is what is alleged here, the product which he is selling, although it is that of the plaintiff, is of the same quality as the product sold by the plaintiff itself when that quality is not the same.

11. For the purposes of this hearing, of course, what the plaintiff has to do is to show a serious question to be tried.  It does not have, at this stage, to prove its case.

12. Dealing first with the question of misrepresentation as to the defendant being associated or connected with the plaintiff, the basis of this is an article which appeared in the Sudden Weekly magazine which stated in effect that the defendant company, Scott, had formed an alliance with Pringle, the plaintiff.  In her affirmation, the defendant says that she did not have any input into that article.  She did tell the author what to write.  What the author has written is wrong and it has nothing to do with her.  But the fact is that there is evidence, and it is not denied in argument, that this article, having been written was exposed at the shop front of the defendant and there certainly is a serious question to be tried as to whether that is affirmation or adoption by the defendant of what is said in the article.  If she puts it up outside her front door for all to read, then it does suggest that she intends people to think that it is correct.  If that is so, then of course, there is a serious question to be tried on passing off the alliance or the identity of the defendant as being connected with the identity of the plaintiff.

13. The second point, of course, is the passing off of the quality of the goods.  The cases on this really began with Spalding & Bros v. Gamage [1915] 32 RPC 273 which was a case where one company having decided to get rid of its defective footballs, sold them in for scrap but another company bought them and resold them as footballs, passing them off as an improved version of the original sold by the plaintiff.  In that case, Lord Parker at page 284 said :

“… My Lords, the proposition that no one has a right to represent his goods as the goods of somebody else must, I think, as has been assumed in this case, involve as a corollary the further proposition, that no one, who has in his hands the goods of another of a particular class or quality, has a right to represent these goods to be the goods of that other of a different quality or belonging to a different class …”

14. Another case which has been cited to me is the case of Colgate-Palmolive Limited and another v. Markwell Finance Limited and another (1986) RPC 497 which was a Court of Appeal case in England relating to toothpaste.  The Court of Appeal held that there was passing off of inferior quality of genuine “Colgate” toothpaste parallel-imported from Brazil.  It was being sold as if it were the same thing made in Britain or elsewhere but it actually had inferior ingredients in it.

15. In the present case, of course, there is evidence and as I have indicated it does not seem to be really denied that the defendant was selling goods which came from Pringle which were in some cases at any rate defective or samples or they were out-of-season goods and, as I have indicated from what I have read from the translation of the advertisement, it does appear that the tenor of the advertisement and the other documents before me is that people were supposed to think that these were the same goods that one can get at a much higher price in department stores such as Lane Crawford in Hong Kong.  That would, I think, amount to the necessary misrepresentation for passing off.

16. There is, therefore, quite clearly on passing off a serious question to be tried.  The next question is whether the plaintiff could be compensated by damages rather than by an injunction.  Quite clearly this is a company with a reputation to maintain and if people do not realise that what they are getting is not what Pringle are selling in the department stores, then there clearly may be a detriment to the reputation of Pringle.  The plaintiff could not be compensated adequately for loss of reputation by an award of damages.

17. The next question that arises is the balance of convenience, and I am persuaded that the balance of convenience is in favour of an injunction on the ground of the passing off or an injunction against the passing off, both as to identity and as to the quality of the goods.

18. As I have indicated, the plaintiff is also seeking an injunction against the infringement of the trade marks.  This is perhaps a little more difficult.  The defendant strongly denies any dishonest intent.  But the simple fact is that actions must have been intentional and deliberate.  The basis of this claim is, I think, section 21 of the Trade Marks Ordinance.  This allows the use of another’s trade mark in advertising and primarily it is aimed, it appears, at comparative advertising where an advertiser advertises its own goods in comparison to those of the rival.  But that is not necessarily so, as counsel has pointed out by reference to the textbook Kerly’s Law of Trade Marks and Trade Nameswhere it is made clear that although this is the primary aim of the section, it is not necessarily the only aim.  The point about the section is that any use of the trade mark which is otherwise than in accordance with honest practices in industry or commercial matters shall be treated as infringing the registered trade mark.  In sub-section (2) of the section are set out factors to which the court may have to regard in considering the question of dishonesty, in particular whether the use takes unfair advantage of the trade mark; whether it is detrimental to the distinctive character or repute of the trade mark; or whether the use is such as to deceive the public.

19. I think that there is, under this head, a serious question to be tried although, as I have indicated, it is perhaps not quite as strong as that on the question of passing off.  The same factors as in passing off also apply in the consideration of any injunction, namely, the question of whether costs would be appropriate rather than an injunction and the balance of convenience.  I have, I think, already dealt with both the costs and the balance of convenience but I should perhaps say again that if this goes on, the plaintiff is likely to suffer serious and irreparable damage to its reputation.  It is unlikely that the defendant would be able to compensate the plaintiff for such damage.  On the other hand, the defendant will not suffer any irreparable damage by the granting of the injunction sought although obviously she is going to suffer a monetary loss and probably quite a serious one.

20. I think that the balance of convenience is in favour of the plaintiff and, for these reasons, I am going to make an order in terms of that which is sought, namely in terms of paragraph 1 as amended; paragraph 2 of the inter partes summons;paragraph 4 which is delivery up of the offending goods; paragraphs 5 and 6, and that the costs be costs in the cause.