WU SHUN KWAN t/a MERCI FASHION WHOLESALE v. LAM KOON WAN AND ANOTHER

DCCJ5400/2004

IN THE DISTRICT COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

CIVIL ACTION NO. 5400 OF 2004

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BETWEEN

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DECISION

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Introduction

1.  The Plaintiff (“P”) carried on business in the name of Merci Fashion Wholesale as a designer, manufacturer, wholesaler, distributor and trader of ladies’ fashions throughout the world, in particular to the Federal Republic of Nigeria, the Republic of Kenya, the Republic of Uganda and the United Republic of Tanzania (“African Countries”).

2.  The Defendants (“Ds”) traded under the name of Hing Wan Hong (“HWH”) as trader and wholesaler of clothes.

3.  Ms Hui, counsel for D, confirmed that for the purpose of the applications before me Ds did not dispute that P was/is the proprietor of the trade mark “Merci Collection” registered in Hong Kong on 23^rd May 2002 as Trade Mark No.200206256 in class 25 in respect of “clothing, shoes, footwear, headgear” (“Registered Mark”).

4.  P commenced the present proceedings in the Court of First Instance on 11^th February 2004. In her Amended Statement of Claim, P claimed inter alia for :

(a) an injunction to retrain Ds from passing off or attempting to pass off, causing, enabling and/or assisting others to pass off in Hong Kong, African countries or elsewhere products not of P’s manufacture or merchandise as and for products of P;

(b) an injunction to retrain Ds from infringing and/or causing, enabling or assisting others to infringe P’s Registered Mark (“Registered Mark Injunction”);

(c) an order for delivery up or destruction upon oath of all items, tools, plates and other articles or materials for the making or printing thereof in Ds’ possession, custody, power and/or control the continued retention or use of and/or dealing in or with which by Ds would offend against the foregoing injunctions or either of them (“Delivery Up Order”);

(d) damages or an inquiry as to damages or, at P’s option, an account of profits in respect of either of Ds’ wrongful acts (“Inquiry or Account”);

(e) an order for payment by Ds of all sums found due to P upon taking such inquiry and/or account together with interest thereon;

(f) an order for discovery on oath of all matters relating to the foregoing (“Discovery Order”).

5.  On 5^th March 2004, Ds filed their Defence which consisted of nothing more than non-admissions and denials.

6.  By the Order of Master Lung dated 9^th October 2004, the present proceedings were transferred to the District Court. On 17^th January 2005, P issued a summons for summary judgment seeking “final judgment in this action against [Ds] in respect of [Ds’] infringement of [Registered Mark] of [P] with costs” (“P’s Summons”).

7.  Ms Ng, counsel for P, clarified that for the purpose of P’s Summons, P only :

(a) sought (i) interlocutory judgment on liability against Ds in respect of infringement of Registered Mark and (ii) the reliefs of Registered Mark Injunction, Delivery Up Order, Inquiry or Account and Discovery Order (vis-à-vis Registered Mark);

(b) relied on her claim in respect of Registered Mark and not “Trade Marks” as defined in the Amended Statement of Claim (“Trade Marks”);

(c) relied on her claim for infringement of Registered Mark and not on her cause of action based on passing-off.

Ms Ng conceded that Delivery Up Order and Discovery Order were dependent on whether P could successfully seek Registered Mark Injunction.

8.  P filed her affirmation on 17^th January 2005 in support of P’s Summons. The 2^nd-named Defendant (“D2”) filed his affirmation in opposition on 3^rd February 2005.

9.  On 2^nd February 2005, Ds applied by summons pursuant to Order 18 rule 19(1)(a) of the Rules of the District Court to strike out paragraphs 3, 5(a), 5(c) and 6-10 of the Amended Statement of Claim (“Passages”) on the ground that they disclosed no reasonable cause of action (“D’s Summons”).

10.  By my directions dated 14^th March 2005 after the hearing on 8^th March 2005, I invited counsel for both parties to make further written addresses. Ds declined to make further submissions. Further written submissions were received from Ms Ng on 18^th March 2005.

P’s case on P’s Summons

11.  P designed, manufactured, marketed and sold throughout the world and in particular to African countries a wide range of ladies’ fashion by reference to Trade Marks (including Registered Mark). P’s products were well known to the public and in particular amongst African Countries by reference to Trade Marks.

12.  P used Registered Mark on various ladies’ fashions since its creation. Ladies’ fashions bearing Registered Mark were/are displayed and sold at P’s shop at Cheung Sha Wan Road.

13.  P instructed, authorised and granted licences to some PRC manufacturers (“Manufacturers”) for production of ladies’ fashions bearing Registered Mark. P disclosed 2 Chinese written agreements dated 3^rd August 2002 between P and 2 Manufacturers whereby Manufacturers acknowledged they would not sell production goods or give confidential information/Registered Mark to third parties or (save as permitted) reproduce Registered Mark. P also produced a declaration dated 3^rd August 2003 signed by P and such Manufacturers to the effect that except for any express authorisation, P had not authorised any third party to produce, manufacture or sell Registered Mark or labels. Registered Marks or labels should be sent directly to Manufacturers and they should deliver production goods on completion to P and not to any third parties (such as HWH). P gave no explanation why HWH was mentioned in the declaration.

14.  D had never been authorised, instructed and/or licensed by P to produce, display, offer for sale, sell and/or supply different types of ladies’ fashions bearing one or more of Trade Marks (including Registered Mark).

15.  On/about 24^th September 2002, officers of the Customs and Excise Department (“CED”) attended Ds’ shop at Cheung Sha Wan Road (“Ds’ Shop”) and seized 23 sets of ladies’ suits bearing purported Registered Mark (“Ladies’ Suits”). P subsequently confirmed Ladies’ Suits to be infringing products bearing forged Registered Mark (“Purported Mark”). D2 was charged with the offence of “possession for sale or for any purpose of trade or manufacture goods to which a forged trade mark was applied” (“Offence”) under section 9 of the Trade Description Ordinance Cap.362 (“TDO”). D2 was convicted on his own plea at North Kowloon Magistracy (“Conviction”) and the infringing Ladies’ Suits were confiscated.

16.  P pleaded in the Amended Statement of Claim (as verified by her affirmation) that despite Conviction, Ds continued and are still continuing the display, offer for sale, sale and/or supply of ladies’ fashions bearing Trade Marks and Registered Mark. However, she did not depose to any specific incident in relation to such complaint.

17.  P claimed that unless retrained by the court, Ds intended to and would continue to infringe and to cause/enable/assist others to infringe Registered Mark. By reason of Ds’ said infringement, P suffered loss and damage. P did not depose to any particulars in respect of the loss and damages suffered.

D’s case on P’s Summons

18.  D2 in his affirmation stated that sometime in early September 2002, he was approached by an African male (“Male”) at Ds’ Shop. Male claimed to be a fashions supplier. He told D2 his name was “Wejoor West” but did not give D2 any company or name card. Male said he would leave D2 some samples of ladies’ suits for inspection and arranged for further discussion later. Male then left 23 sets of various styles of ladies’ suits (ie Ladies’ Suits) and told D2 he would come to see D2 later. Ds did not pay any money to Male.

19.  Ladies’ Suits bore Purported Mark but D2 did not know and had no reason to believe that it was a registered trade mark. Ladies’ Suits were placed at Ds’ Shop but they were not displayed for sale. Ds’ firm had no intention to sell Ladies’ Suits at all material times.

20.  D2 pleaded guilty to Offence and was convicted. He pleaded guilty because he mistakenly believed it was sufficient for Ds’ firm to be in actual possession of Ladies’ Suits with Purported Mark. But D2 denied Ds’ firm had any intention to sell or manufacture Ladies’ Suits and further denied P suffered any loss or damages due to the alleged infringement of Registered Mark. The wholesale price of each set of Ladies’ Suit would only have been HK$60.00.

21.  After Conviction, Ds’ firm had never infringed Registered Mark or at all. Ds’ firm was surprised to receive the writ of summons in the present proceedings. P failed to adduce any evidence that Ds’ firm continued with any infringement of Registered Mark as alleged or at all. Consequently, even if Ds’ firm had infringed Registered Mark, P would only be entitled to claim damages of no more than HK$1,500.00, which was outside the jurisdiction of the District Court. Ds should be granted unconditional leave to defend P’s claim.

P’s Summons : undisputed matters

22.  The new Trade Marks Ordinance Cap.559 came into effect on 4^th April 2003 and replaced the old Trade Marks Ordinance Cap.43 (“TMO”). However, TMO still applies in relation to the infringement of an existing registered mark committed on or before the commencement date of the new Trade Marks Ordinance Cap.559. The seizure of Ladies’ Suits by CED came under the old law.

23.  Under section 27(1) of TMO, the right given by registration “shall be deemed to be infringed by any person who, not being the proprietor of the trade mark or a registered user thereof using by way of permitted use, uses in the course of trade a mark identical with or nearly resembling it, in relation to any goods in respect of which it is registered, or in relation to goods of the same description where such use would result in a likelihood of confusion, and in such manner as to render the use of the mark likely to be taken either – (a) as being use as a trade mark relating to goods or (b) in a case in which the use is use upon the goods or in physical relation thereto or in an advertising circular or other advertisement issued to the public, as importing a reference to some person having the right either as proprietor or as registered user to use the trade mark or to good with which such a person as aforesaid is connected in the course of trade.”

24.  Ms Hui confirmed that Ds would not dispute the following facts or matters for the purpose of P’s Summons :

(a) Ds or either of them were/are not the proprietor or registered user of Registered Mark.

(b) Ladies’ Suits were found in Ds’ Shop. Ds were in possession of Ladies’ Suits on/about 24^th September 2002.

(c) Purported Mark was found on Ladies’ Suits.

(d) Purported Mark was identical with or nearly resembling Registered Mark.

(e) Ladies’ Suits were goods in respect of which Registered Mark was registered or goods of the same description where use would result in a likelihood of confusion.

(f) D2 was convicted of Conviction on his own plea of guilty.

(g) Since Registered Mark was registered, P’s reputation attached to the distinctive feature of Registered Mark could be presumed.

(h) Innocence on the part of an infringer is no defence to a claim for infringement of trade mark (Gillette v Edenwest [1994] RPC 279).

25.  Ms Ng confirmed that apart from the seizure of Ladies’ Suits with Purported Mark, P did not adduce any other positive evidence of infringement of Registered Mark or of any other actual threat of continued infringement by Ds after 24^th September 2002.

26.  Both Ms Ng and Ms Hui agreed that the key issue for P’s Summons was whether Ds “used” Ladies’ Suits with Purported Mark “in the course of trade”.

P’s Summons : the law

27.  “Summary judgment under O.14 may be had for infringement of trade mark and passing off where there is no triable issue ……” (Hong Kong Civil Procedure 2004 Vol.1 para.100/3/13 at p.1169). The test in an Order 14 application is whether the defence is credible. If yes, the defendant must be given leave to defend; if not, the plaintiff is entitled to judgment (Ng Shou Chun v Hung Chun San [1994] 1 HKC 155).

28.  Ms Ng referred me to Tandy/Rank Video & anor v Yee Hing Cassette Factory Ltd [1991] 1 HKC 136 on the test for summary judgment in relation to an infringement of trade mark. However, in Hugo Boss AG and anor v Y & Fung Garment Company Limited trading as Westwood HCA608/2000, Deputy High Court Judge Muttrie (unreported, 21^st June 2001), the learned judge pointed out that the court in Tandy/Rank Video’s case (supra) relied largely on the earlier decision of Murjani v Bank of India [1990] 1 HKLR 586. The learned judge chose to follow the principles in Ng Shou Chun’s case (supra) referred to above. I adopt his approach.

P’s Summons : analysis

(a) D2’s explanation of possession of Ladies’ Suits

29.  Ms Hui submitted that P failed to satisfy the requirement that D “uses [Purported Mark] in the course of trade”. Neither Ms Hui nor Ms Ng cited any legal authority on the interpretation of this requirement, but urged me to consider the plain and obvious meaning of the words used.

30.  Relying on D2’s explanation of how Ds came to be in possession of Ladies’ Suits as described in paragraph 18 above (“Possession Explanation”), Ms Hui submitted that Ladies’ Suits were never put on sale. But is Possession Explanation credible or believable?

31.  I agree with Ms Ng that Possession Explanation is nothing more than a bare assertion unsupported by any other evidence or documents. I note that although Ds presented a positive argument by Possession Explanation that Ladies’ Suits had never been put on sale, the material facts in relation to Possession Explanation have not been pleaded in Ds’ Defence.

32.  Briefly, Possession Explanation is that Male came to Ds’ Shop presumably to solicit business/orders for Ladies’ Suits and left 23 Ladies’ Suits with D2 for his consideration. I bear in mind that Male was said to be a fashions supplier. But apart from the name of “Wejoor West”, D2 has not disclosed any information at all about Male.

33.  Given that Male was said to be a fashions supplier and was presumably soliciting business/orders at D’s Shop, I find it strange that he did not leave any name card, company card, contact details or even his directions. D2 did not descend to explain what he meant by “arranged for further discussion later” (my emphasis) and whether any such further discussion with Male took place at all.

34.  There is a complete paucity of evidence as to why Male chose to approach Ds’ Shop and as to any preliminary discussions between Male and D2. It is improbable that Male left 23 Ladies’ Suits (some were two-piece suits and some were three-piece suits) with D2 without any preliminary marketing exchange on the garments, eg garment materials, manufacturing origin, proposed price, etc. More importantly, there is no evidence that Male returned to Ds’ Shop in the several weeks up to seizure of Ladies’ Suits by CED (ie from early September up to 24^th September 2002) to see D2 for “discussion” as he said he would. There is also no evidence that Male enquired or came to Ds’ Shop any time thereafter for “discussion” and no explanation why he did not do so. There is no or no sensible commercial reason why Male would abandon 23 Ladies’ Suits or leave them with D2 indefinitely when, according to Ds’ case, he said he would return to discuss business. Interestingly, D2 did not express any surprise or concern in this respect.

35.  Further, D’s case is made more difficult to believe because the quantity of “samples” Male left with D2, ie 23 Ladies’ Suits, is not small. There is no credible explanation as to why close to 2 dozen samples were left with D. Although D2 claimed they were of various styles, the Record of Preliminary Examination at p.46 of the hearing bundle only separated Ladies’ Suits into 6 three-piece suits and 17 two-piece suits. I also note there is no suggestion of any receipt or acknowledgment given by D2 for taking possession of Ladies’ Suits. Ds did not produce any internal record of having taken possession of 23 Ladies’ Suits as samples as distinct from their own inventory stock.

36.  The overall picture which D2 attempted to present was that Ladies’ Suits had been kept at Ds’ Shop for several weeks with nothing done about them. I find Possession Explanation wholly incredible. It is useful to refer to Hong Kong Civil Procedure 2004 (supra at para.14/4/3 at p.160) as follows :

“A desire to investigate alleged obscurities and a hope that something will turn up on the investigation cannot, separately or together, amount to sufficient reason for rfusing to enter judgment for the plaintiff. You do not get leave to defend by putting forward a case that is all surmise and Micawberism” (per Megarry V.-C. in Lady Anne Tennant v. Associated Newspapers Group Ltd [1979] F.S.R. 298).”

(b) Conviction

37.  Ms Hui suggested that Conviction did not assist P’s case. She submitted that since the criminal law protected the trade mark owner before he suffered any damage, Conviction could not aid P in establishing any act of infringement. By this I presume Ms Hui meant that CED’s seizure of Ladies’ Suits prevented any possible sale, so there could not have been any “use in the course of trade” that constituted an infringement. This can be surmised from Ms Hui’s further argument that Offence was for possession of “the goods with the intention of trading them. The offence does not require there to have been any actual offering for sale or misrepresentation”.

38.  The charge against D2 was under section 9(2) of TDO which provides inter alia as follows :

“Subject to the provisions of this Ordinance, any person who sells or exposes or has in his possession for sale or for any purpose of trade or manufacture …… commits an offence.”

I accept the aforesaid provision draws a distinction between (a) actual sale and (b) possession for sale or for the purpose of trade or manufacture. But, as explained below, the requirement of “use in the course of trade” in section 27 of TMO does not necessarily require an actual sale.

39.  In my view, Conviction is admissible evidence for the purpose of proving that D2 committed Offence of being in possession of Ladies’ Suits for sale or for any purpose of trade or manufacture. Normally, the usual effect if a conviction is to shift the burden of proof to the person convicted although at the end of the day the trial judge need to evaluate the probative force of the conviction (see section 62 of the Evidence Ordinance Cap.8 and Stupple v Royal Insurance Co Ltd [1971] 1 QB 50)).

40.  As Ms Hui conceded, Conviction is quite a persuasive piece of evidence in support of P’s contentions. Although I agree that Conviction alone will not establish all the requirements under section 27 of TMO, if D2 had in his possession Ladies’ Suits “for sale” or “for any purpose of trade or manufacture” (as evidenced by Offence for which D2 was convicted), it certainly goes a long way in establishing the requirement that Ds used Purported Mark in the course of trade.

41.  Are Ds able to raise an arguable or triable explanation for Conviction? Again, D2’s explanation in respect of Conviction outlined in paragraph 20 above (“Conviction Explanation”) is nothing more than a bare assertion. D2 did not say what steps he took to appreciate and understand Offence with which he was charged. At the very least since 25^th February 2004 (when the acknowledgment of service was filed in the present proceedings) Ds have had the benefit of legal advice. Ms Ng complained that D2 had taken no step in trying to reverse plea/appeal. I note that even on an alternative basis there is no evidence before me that D2 or Ds informed P or P’s solicitors about Conviction Explanation prior to D2’s affirmation filed in opposition of P’s Summons. The material facts of Conviction Explanation have also not been pleaded in Ds’ Defence.

42.  I am not persuaded that Conviction Explanation proffered is believable or credible, particularly as I have found D2’s evidence on Possession Explanation improbable. Indeed, Ms Hui puts her case no higher than Conviction “does not exclude the possibility of there being an issue which can only be resolved by hearing from the witnesses and forming a view as to their credibility; in other words a triable issue” (my emphasis). But the court is not concerned with excluding possibilities. Rather, it is incumbent on Ds to raise an arguable defence or triable issue from Conviction Explanation that justifies having the issue resolved at trial.

43.  Ms Ng tried to argue that if D2 had been mistaken about Conviction as claimed, he could easily have applied to reverse his plea because section 9(3A)(b) of TDO permits a defence on the ground that the trade mark or mark was not used by him in the course of any trade or business as a trade mark in relation to goods. However, such provision relates to the deeming provision in section 9(3) which in turn refers to the offences in section 9(1)(a) and (b). Thus, section 9(3A)(b) of TDO is irrelevant to the offence under section 9(2) on which Conviction was based.

(c) “Use in the course of trade”

44.  Several undisputed matters are of note : (a) Ds carried on business as trader and wholesaler of clothes at Ds’ Shop, (b) Ladies’ Suits were of the same category of merchandise (ie clothes) sold at Ds’ Shop, and (c) Ladies’ Suits were seized by CED during the day at 11:50 am. Having rejected Possession and Conviction Explanations, is there sufficient evidence of the requirement of “use in the course of trade”?

45.  In my view, there is sufficient evidence of “use” since Purported Mark was actually used on Ladies’ Suits (see also section 2(2)(b) of TMO). I reject Ms Hui’s contention that “use in the course of trade” is restricted to actual sale. Activities in the course of trade can be wide-ranging (see the judgment of Rogers J (as he then was) in Stichting Greenpeace Council v Income Team Limited trading as Green Peace and ors [1996] 1 HKLR 269). It can include communications, for example by way of orders and invoices, with suppliers and trade customers (Kerly’s Law of Trade Marks and Trade Names 13^th ed (2001) para.13-11 at p.350). In Hermes Trade Mark [1982] RPC 425, Falconer J held that “in the course of trade” must be wide enough to embrace the steps necessary for the production of the goods as well as actually placing them on the market. It is not confined to use involving a sale of the goods in question and includes use of the trade mark in the course of acquiring the goods for future sale (Emerson Radio Corporation v The Commissioner of Inland Revenue Inland Revenue Appeal No.2/1997, Mr Recorder Ribeiro SC (as he then was) (unreported, 30^th June 1998) at para.55).

46.  “Use in the course of trade” may therefore take a variety of forms during the manufacture, marketing and actual sale of the goods. Hence, when Possession and Conviction Explanations have been rejected and with the support of Conviction, Ds’ possession of Ladies’ Suits for sale or for the purpose of trade or manufacture in Ds’ Shop (where Ds traded as trader/wholesaler of clothing) is in my view sufficient to satisfy the requirement of “use in the course of trade”.

(d) Loss and damage

47.  Ms Hui submitted that P had not been able to demonstrate any loss or damages in that (a) since Ladies’ Suits had never been put on sale, it was unlikely that P’s reputation suffered any loss, and (b) the wholesale cost of Ladies’ Suits could not have exceeded HK$1,500.00 which was outside the jurisdiction of the District Court.

48.  Ms Hui fairly accepted that if I find (which I did above) Possession Explanation incredible or unbelievable, (a) in the above paragraph cannot be supported. I am, however, prepared to deal with Ms Hui’s argument that, irrespective of whether Ladies’ Suits had been put on sale or not, P failed to establish any loss of reputation and that without establishing the essential requirement of damages, P failed to establish any infringement of Registered Mark.

49.  On the other hand, Ms Ng argued that P’s damages included loss of reputation/ goodwill, loss arising from diversion of customers and loss of profits. She further submitted that since Inquiry or Account would normally be dealt with after the summary judgment application or trial on liability (Hong Kong Civil Procedure 2004 (supra) para.100/3/1 at p.1164), the relevant evidence would be adduced at that second stage.

50.  By my directions dated 14^th March 2005 after the hearing, I referred counsel to the following passage from Kerly’s (supra) paras.18-140 at p.694 :

“It was long ago decided at common law that the mere proof of an infringement entitles the claimant to damages. Consequently, no allegation of special damage is a necessary part of his case. The natural consequence of an infringement, even though it be made in complete ignorance of the claimant’s rights, is that the infringer must pay at least nominal damages, and the costs of action: ……”

The above succinct summary provides the answer to Ms Hui’s contention that the cause of action on infringement of trade mark is incomplete without evidence of substantial loss/damages.

51.  However, that still leaves open the question as to whether P has shown that she may be able to recover substantial damages as opposed nominal damages. This is a matter that I will deal with below.

(e) Inquiry or Account

52.  I therefore find P is successful in seeking judgment on liability for infringement of Registered Mark under P’s Summons. The issue is what reliefs P is entitled. P did not lead any affidavit evidence on substantial loss and damages. Ms Ng’s argument is that such evidence should be left to the second stage of Inquiry or Account.

53.  I have referred the parties to Kerly’s (supra) para.18-141 at pp.694-695 which reads as follows :

“In order to obtain an order for an account of profits or an inquiry as to damages, the claimant need in general only show that he may be able to recover substantial damages. This is not a high hurdle at all, and in general the attitude of the court is that the defendant can be protected against the costs of an inquiry or account which results in no, or only a very small award, by making a payment into court and thus letting the claimant bear the risk of the costs of the proceeding. Hence an inquiry should be ordered even if the court feels serious doubt about the claimant’s ability to recover any substantial amount. ……

However, where the claimant fails to clear this low threshold, the court may award nominal damages or fix a sum without ordering an account or an inquiry as to damages. In exceptional circumstances, that course may be followed if the evidence of damage is not sufficient to justify the costs of an inquiry.”

54.  In footnote 97 on p.694 of Kerly’s (supra), it is said as follows :

“If the claimant is successful on an application for summary judgment but has not led evidence of loss and damage, the court may allow him a further opportunity to submit evidence in support of an order for an inquiry or account. See Prince plc v. Prince Sports Group Inc. [1998] F.S.R. 21; Beautimatic v. Mitchell [2000] F.S.R. 267.”

55.  Neuberger J was the learned judge in both Prince plc’s case (supra) and Beautimatic International Limited’s case (supra). In the former case he said as follows :

“In these circumstances, my conclusions are as follows:

1. I am prepared to grant a declaration and an injunction pursuant to section 21(2);

2. I am not prepared to direct an inquiry as to damages under section 21(2), but I will do so if the plaintiff can put in evidence to show a prima facie case for establishing that it has suffered some damage as a result of the receipt of the principal letter; however, I will only accord the plaintiff that opportunity if it is prepared to accept that, if after it has had the opportunity to file such further evidence, the court does not think it right to order an inquiry as to damages, the plaintiff will then abandon its claim for damages; ……”

56.  Neuberger J in Beautimatic International Limited’s case (supra) stated that :

“Where a court accepts that the claimant has established a breach of an intellectual property right and does not go on to assess damages, it is often thought that the claimant is entitled, virtually as of right, to an inquiry as to damages. In many cases, that is true: either it will have been clear to the court during the hearing that it is very likely that the claimant has suffered damage, or commercial commonsense suggests, in light of the particular facts, that the claimant is very likely to have suffered damage. However, particularly in light of the Civil Procedure Rules, it does not seem to me that such a course is justified in a case such as this, where there is no evidence of Beautimatic having suffered damage, and it is by no means obvious on the facts as established that Beautimatic will have suffered damage. I do not think that on the present state of the evidence, it would be right for me to order an inquiry for damages, with all the potential court time and costs which it would involve. On the other hand, it seems to me that it would be wrong to let the claim for an inquiry as to damages go to trial or to dismiss it without giving Beautimatic the opportunity of persuading me that it has at least a real prospect of recovering some damages. The course I propose to take is to give Beautimatic the opportunity to put before the Court some evidence and/or argument to show that it has a real prospect of recovering damages, with a view either to ordering an inquiry if I am satisfied that there is such a real prospect, or to dismissing the claim for damages (or giving judgment for nominal damages) if I am not so satisfied.”

57.  Ms Ng in her further written submissions suggested that Prince plc’s case (supra) and Beautimatic International Limited’s case (supra) are distinguishable from the facts of the present case. It was submitted that Prince plc’s case was one on threats of proceedings for infringement where the damages suffered were often remote and difficult to substantiate as compared with an infringement action. Ms Ng argued that in Beautimatic International Limited’s case (supra), the plaintiff’s mark was used by the defendant on the packaging of infringing products which were not to be marketed or sold within the jurisdiction and on various invoices, so it would be difficult for the plaintiff to argue it suffered or would have suffered damages.

58.  In my view, the principles Neuberger J referred to above do not turn on the factual circumstances of the liability issue which Ms Ng alluded to above. The principles are concerned with whether an inquiry for damages ought to have been ordered at the summary judgment stage and the key consideration is whether, irrespective of the question of liability or of the nature/circumstances of the infringement that has been proved, the plaintiff has led any evidence on loss and damages that justifies the making of an order for inquiry.

59.  For this application, Ms Ng fairly conceded that there was no evidence showing actual loss and damages suffered as a result of Ds’ infringement. However, she invited the court to draw inferences from the surrounding circumstances. Ms Ng argued that because (a) Ladies’ Suits were found inside Ds’ Shop, (b) Ladies’ Suits were capable of being of being marketed and sold in Hong Kong, and (c) Ds’ Shop and P’s shop were in close proximity in the same area, commercial commonsense suggested that “[P] would at least be suffering from loss of profit on such sales by [Ds] she would have made otherwise”.

60.  The short answer to these grounds is that on the present evidence Ladies’ Suits have been confiscated and therefore not capable of being marketed or sold. There is, as Ms Ng frankly admitted, no evidence before me of other potentially infringing products. In respect of the matter of damages, there is also no evidence before me that P’s sales have been diminished during the relevant period and no evidence of injury to P’s trade reputation (let alone whether any such diminishment or injury was caused by Ds’ infringement). In respect of the matter of loss of profits, an account of profits is confined to profits actually made, its purpose being to deprive the defendant of unjust enrichment rather than to punish him (Kerly’s (supra) para.18-156 at pp.698-699). But, as explained above, other than the confiscated and unsold Ladies’ Suits, there is at present no evidence of other infringing products. I also cannot see how the geographical location of P’s shop and Ds’ Shop necessarily gives rise to an inference of damages or loss of profit.

61.  In the circumstances, since P has not led any evidence of loss and damage arising from Ds’ infringement other than her mere assertion, I am initially minded, following Neuberger J’s approach, to give P a further opportunity to submit evidence in support of an order for Inquiry or Account. However, Ms Ng tried to further distinguish Prince plc’s case (supra) and Beautimatic International Limited’s case (supra) by suggesting that in the present case P sought Inquiry or Account as distinct from a mere inquiry of damages only. She submitted that P could not be put to election at this stage because discovery from Ds would be necessary to enable P to make an informed decision as to whether to seek Inquiry or Account (see Kerly’s (supra) paras. 18-157 – 18-158 at pp.699-700). Hence, Ms Ng said it would be premature for P at this stage to provide evidence showing that she might be able to recover substantial damages or loss of profits.

62.  Given that P is not prepared to avail itself of the opportunity that I am minded to give, I conclude that I am not satisfied that P is entitled to an order for Inquiry or Account at the Order 14 stage. The application for this relief has to proceed to trial.

(f) Injunction

63.  Ms Hui argued that since Ladies’ Suits were confiscated, there would be no risk of any further infringement of Registered Mark. Further, D2 had denied on affirmation any other infringement of Registered Mark. P was unable to prove any further threat of infringement that justified the granting of Registered Mark Injunction or Delivery Up Order.

64.  Ms Ng referred to the judgment of Deputy High Court Judge Fung in Creative Technology Limited v Videocom Technology Limited and anor HCA1434/2002 (unreported, 21^st February 2003) at paras. 47 and 48 as follows :

“47. Mr Yan also referred to the first instance decision of Laddie J in Coflexip, p.477, para.7 :

"(i) Is there a threat?

7. Damages or an account of profits look to the past and are designed to compensate the plaintiff for the harm inflicted on him or to deprive the defendant of the benefit obtained by the activities performed in breach of the plaintiff's right. The injunction looks to the future. Its purpose is to restrain threatened breaches of the plaintiff's right. Normally, when a defendant has infringed, the court will assume it is not a one-off activity and will grant an injunction to stop repetition. This course is not inevitable. In a few cases courts have concluded that even though infringement has occurred, no future threat exists. In such cases, injunctive relief has been refused."

48. I agree that injunction is a discretionary remedy and it will not be granted unless some threat, possibility or likelihood of future infringement is shown. I echo Laddie J in Coflexip that normally, when a defendant has infringed the plaintiff's goods, the court will assume it is not a one-off activity and will grant an injunction, unless persuaded otherwise. It is up to the defendant to show hardship and also to show steps to be taken to ensure or at least avoid no future infringement.”

65.  In Creative Technology Limited’s case (supra), the learned judge found against the innocence or lack of knowledge on the part of the defendants and granted an injunction on the basis of a common design to deal in counterfeit.

66.  In Microsoft Corporation v Plato Technology Limited [1999] FSR 834, it was held that the crucial distinction in this sort of case was between the honest trader and dishonest trader (ie a trader who deals in products knowing that they were counterfeit or recklessly indifferent as to whether or not they were). Only in relation to a dishonest trader could the court assume the likelihood that (a) he had in the past dealt extensively in infringing goods and (b) unless restrained by a far-reaching injunction he would continue to do so.

67.  In Microsoft Corporation’s case (supra), the defendant had evinced no intention to deal in counterfeit software. But a trader, however, honest, who purchased the plaintiff’s software otherwise from an authorised distributor owed the plaintiff a duty to take some steps to satisfy himself that the product was genuine – a fortiori once this had occurred, the plaintiff was entitled to an injunction restraining the defendant from dealing in software which he knew or ought upon reasonable enquiry to know was counterfeit.

68.  Here, even with my rejection of Possession Explanation, there is little to suggest knowledge or dishonesty or reckless indifference on Ds’ part. The grounds Ms Ng relied on were (a) P registered Registered Mark more than a year before September 2002, (b) P and Ds carried on business in the same trade, (c) P’s shop and Ds’ Shop were both at Cheung Sha Wan Road, (d) Ladies’ Suits were left at Ds’ Shops for a few weeks and (e) there was no evidence that Ds took any step to check whether Ladies’ Suits infringed any registered trade mark.

69.  I do not see how ground (a) is pertinent to Ds’ mental state, there being no suggestion or no basis was shown that Ds ought in the usual manner of trade to have checked or made attempts to find out that P was or has became the proprietor of Registered Mark. By her own pleadings, P revealed she herself as a single trader already owned numerous trade marks. There is no evidence of any common practice or trade custom/usage or any other basis to suggest that a trader is reasonably expected or required to know all of its competitors’ registered trade marks. Likewise, grounds (b) and (c) do not bring the matter further. Proximity in the nature of business or geographical location without more does not necessarily breed knowledge of another trader’s registered trade marks. Ground (d) at most shows knowledge of possession of Ladies’ Suit with Purported Mark, which is different from having awareness of or being recklessly indifferent that Purported Mark was an infringing mark.

70.  Ms Ng tried to argue by grounds (d) and (e) that Ds were recklessly indifferent. But there is no evidence that it is usual or expected for traders and wholesalers in clothes to check/verify the marks of clothing supplies from suppliers or to make enquiries with the suppliers or registered owners of such marks or to take any other steps to ascertain whether they were infringing marks. It is a different situation from Microsoft Corporation’s case (supra) where the plaintiff had a known authorised dealership system for selling its products.

71.  In the circumstances, I am not satisfied that the assumptions in support of Registered Mark Injunction can be drawn from all the circumstances and P is therefore not entitled to Registered Mark Injunction at the Order 14 stage. The application for this relief has to proceed to trial. Given the concession by Ms Ng that Delivery Up and Discovery Orders stand and fall with Registered Mark Injunction, they will also have to proceed to trial.

D’s Summons

72.  In support of D’s Summons, Ms Hui submitted that although P alleged in her pleadings that Ds’ firm had continued the wrongful infringements of Registered Mark and had passed off other goods as P’s merchandise, D2 in his affirmation denied Ds’ firm had in any way infringed Registered Mark after Conviction or at all and P was unable to produce any evidence of Ds’ continued infringement. Further, P would have difficulty in establishing any damage to its reputation. Therefore, there are serious “evidential omissions” in respect of P’s claims. For these reasons, D sought to strike out Passages.

73.  D’s Summons is hopeless from the start. The application is made under Order 18 rule 19(1)(a) of the Rules of the District Court. Order 18 rule 19(2) specifically provides that “no evidence shall be admissible on an application under paragraph 1(a)”. Hong Kong Civil Procedure 2004 (supra) at para.18/19/3 at p.315 summarises the law as follows :

“O.18, r.19(2) excludes evidence (whether by the applicant or the respondent) on an application under O.18, r.19(1)(a). The court is obliged to look at the indorsement on the writ or the pleading without extrinsic evidence and decide whether on the assumption that the facts as pleaded are true the indorsement or pleading discloses a cause of action or defence in law …… Affidavit evidence is equally inadmissible where the only ground on which the statement of claim can be said to disclose no reasonable cause of action is that the action is unlikely to succeed.”

74.  In the circumstances, I have no hesitation in concluding that I am not entitled to refer to any affidavit evidence in considering D’s Summons. Without such affidavit evidence and on the assumption that the facts pleaded in the Amended Statement of Claim are true, I cannot see any basis for saying that Passages are so obviously unsustainable or unarguably bad that ought to be struck out. The mere fact that a case is weak and not likely to succeed is no ground for striking it out.

75.  In face of such insurmountable difficulty, Ms Hui suggested that the Amended Statement of Claim lacked particulars to support Passages. However, she agreed that a striking out application should only be made in plain and obvious cases and cited Drummond-Jackson v British Medical Association [1970] 1 WLR 688 in support of such proposition. I endorse the views of the learned editors of Hong Kong Civil Procedure 2004 (supra) para.18/19/6 at p.317 as follows :

“Where a pleading is defective only in not containing particulars to which the other side is entitled, application should be made for particulars under r.12, and not for an order to strike out the pleading under this rule. Even a serious want of particularity in a pleading may not justify striking-out if (1) the defect can be remedied, and (2) the defect is not the result of a blatant disregard of court orders (British Airways Pension Trustees Ltd v. Sir Robert McAlpine 72 B.L.R. 26).”

Passages actually deal with the passing-off claim in respect of Trade Marks and the essential elements of such tort (Reckkitt Coleman v Borden Inc [1990] 1 All ER 873). Even if further particulars are required, I do not consider it a sufficient basis to say Passages are unsustainable or unarguably bad. I decline to strike out Passages.

Conclusion

76. In respect of P’s Summons, I find that P has established its claim on infringement of Registered Mark. However, I am unable to grant P the reliefs it sought. In the circumstances, I make the following orders :

(a) There be interlocutory judgment on liability in P’s favour against Ds in respect of P’s cause of action against Ds for infringement of Registered Mark.

(b) There be unconditional leave defend in respect of paragraphs (2), (3), (4) and (6) of the prayers of relief set out in the Amended Statement of Claim, namely, Registered Mark Injunction, Delivery Up Order, Inquiry or Account and Discovery Order.

77. In respect of costs, the practical reality is that P has succeeded on liability but failed to obtain the reliefs sought under P’s Summons. But it is significant to note that P has successfully established an invasion of her rights. I refer to Kerly’s(supra) at para.18-140 at p.694 referred to above where the learned authors opined that the natural consequence of an infringement is that the infringer “must pay at least nominal damages, and the costs of action” (my emphasis). However, since P only sought summary judgment for part of her case and since P failed to obtain the reliefs she sought at the Order 14 stage, I consider the appropriate costs order is as follows : save and except that (a) a third of the costs of the hearing time before me and (b) the costs of Ms Ng’s further written submissions be costs in the cause of the action, Ds do pay P costs of the Order 14 application (including all costs reserved in respect of P’s Summons, if any) to be taxed if not agreed with certificate for counsel. I make a costs order nisi to that effect.

78. D’s Summons is dismissed. I grant a costs order nisi that Ds do pay P costs of D’s Summons (including all costs reserved in respect of D’s Summons, if any) to be taxed if not agreed with certificate for counsel.

Publication of this decision

79. Pursuant to Practice Direction 25.1, I request the parties to make written representations on the release of this decision for publication within the next 7 days. If there is no objection or response within such time period, I propose to grant permission for this decision to be published.