S.A. ANCIENNE FABRIQUE GEORGES PIAGET ET CIE v. LONGNEX LTD. AND OTHERS

1996, No.A5729

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

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J U D G M E N T

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THE APPLICATION

1. On 24th June 1997, Judgment was entered by Mr Justice Rogers against the 1st, 2nd and 3rd Defendants herein. This judgment was subsequent to an Order dated 6th June 1997 made by the learned judge upon the Plaintiff's application, dated 27th May 1997 and taken out under Order 19 rule 7, for the entry of final judgment on the basis of the failure of the Defendants to serve a Defence to the Plaintiff's Writ and Statement of Claim issued on 22nd May 1996.

2. The application presently before me is dated 23rd September 1997 and is on the part of the 1st Defendant only for an Order that the Judgment and Order of Rogers, J. as aforesaid be set aside, with costs to the 1st Defendant. This, then, is the judgment consequent upon that setting aside application.

THE FACTS IN OUTLINE

3. The Plaintiff is a Swiss corporation which distributes and markets goods worldwide, including the territories of Hong Kong and Macau, by reference to the mark "Piaget". The 1st Defendant, a Hong Kong company, carried on business as the proprietor of a hostess club under the name "Piaget Night Club (Deluxe)" situate at the Holiday Inn, Macau. The Statement of Claim in these proceedings alleges, inter alia, that the 1st Defendant, acting in concert with the 2nd and 3rd Defendants, has passed off its business as one connected with the Plaintiff; indeed, in addition to running the hostess club bearing the "Piaget" name, the claim recites the improper use of the "Piaget" name on neon signs and various types of objects and literature, including promotional leaflets distributed in Hong Kong and Macau, together with advertisements placed in Hong Kong and Macau newspapers, and in MTR stations in Hong Kong. It is further alleged that these acts were done intentionally and for the purpose of benefiting from the established reputation and goodwill of the Plaintiff, and the claim, inter alia, was for injunctive relief to prevent the Defendants passing off their business under the "Piaget" name.

4. Legal action was not, however, confined to Hong Kong. Legal proceedings, in the form of Action No.285 of 1996, were commenced in Macau on 28th March 1996, some two months before the institution of the Hong Kong action. These proceedings in Macau sought a non-specific injunction restraining the 1st Defendant from using the name "Piaget", and were in fact compromised between the parties, by what was in effect a Consent Order, on 31st May 1996.

5. But to return to the proceedings in Hong Kong. The Writ, with the Statement of Claim indorsed thereon was, as I have said, issued at the end of May 1996, and on 3rd June 1996 the 1st Defendant instructed its then solicitors, Messrs K.C. Man & Co., to give notice of intention to defend and also to start settlement negotiations with the Plaintiff's solicitors. This was understandable. The Macau proceedings had been settled, and the 1st Defendant clearly wished to achieve a similar result in Hong Kong. Pursuant to such settlement overtures, an exchange of correspondence took place in July 1996, which correspondence includes an offer by the 1st Defendant to submit to the injunction sought in terms of paragraph 1 of the Statement of Claim, together with payment of the relatively small sum of $10,000 in fixed costs. This met with a guardedly optimistic response from the Plaintiff, who indicated that it wished to delay finalising anything until the 1st Defendant could be seen to have put its house in order in terms of its wrongful use of the name "Piaget"; but in any event extensions of time were granted to the end of August 1996 for the purpose of filing the Defence.

6. Thereafter, and somewhat oddly, the situation was left, in effect, hanging in the air without any certainty of resolution. Possibly this was due, in part, to the fact that in early August, Messrs K.C. Man & Co., the 1st Defendant's solicitors, had ceased business. Perhaps too, it was partly because, by the end of August 1996, the 1st Defendant had changed the name of its Macau night club, and apparently no further instances of passing-off were taking place. In any event, the last act in the current story was the issue by the Plaintiff of its summons of 27th May 1997 asking for the entry of judgment in default of defence, and the formal entry of that judgment.

7. So much, therefore, for the broad background against which the present application to set aside has been mounted.

THE ARGUMENTS

8. Mr Kenneth Chan, Counsel on behalf of the 1st Defendant, sought to justify the relief sought on two bases, and I deal briefly with each in turn.

Irregularity

9. Mr Chan submits that the judgment obtained was irregular, and thus that the 1st Defendant was entitled ex debito justitiae to have it set aside. The primary basis for this submission was that the Plaintiff's inter partes summons dated 27th May 1996 requesting judgment in default of defence had not in fact been served on the 1st Defendant, and in this regard he relied on evidence from the 1st Defendant to the effect that the summons did not appear to have received at the 1st Defendant's registered office; to this end, reference was made to computerised records of mail received at those offices. As against this, the Plaintiff relied upon the affidavit of service of the summons of one Cheng Chi Shun reciting service of the summons on 31st May 1997, at Room 2908, 29th Floor, China Resources Building, Wan Chai, Hong Kong, the registered office of the 1st Defendant. This, said Mr Shipp for the Plaintiff, should be conclusive. Service had taken place at the registered office, and absent clear and cogent evidence that such service at the registered office had not occurred, the judgment should be considered regular. I agree with Mr Shipp. On the evidence before me, I do not accede to the irregularity submission. I note in passing that, although not relied upon by the Plaintiff, the summons itself also bears the chop of Josip Ma & Co., whom I understand to be the appointed agents of K.C. Man & Co. for the purposes of receipt of documents.

10. In my view, service has been adequately demonstrated, and accordingly, I proceed on the basis of the regularity of this judgment.

Merits

11. Mr Chan's second submission is that the 1st Defendant has a good defence on the merits to the Plaintiff's claim. His original written (and somewhat ambitious) contention was that the proper test to be applied in setting aside judgment was to demonstrate "a bona fide defence which raises a serious question to be tried"; however, consequent upon dialogue with the Bench, I think that Mr Chan now fairly accepts that the test is higher, and is that as laid down in Premier Fashion Wears Ltd. and Another v. Li Hing-chung and Another [1994] 1 HKLR 377 (CA), namely that it is not sufficient for a defendant merely to show an arguable defence, but, in the words of Godfrey, J.A., op.cit., at 383 :

"... A defendant who seeks to set aside a regular judgment must at least show that his case has a real prospect of success. To do so he must satisfy the court that his case, and the evidence he has adduced in support of it, carries some degree of conviction. It seems to me that unless potentially credible affidavit evidence from the defendant has demonstrated a real likelihood that he will succeed on fact, he cannot have shown that he has a real prospect of success."

12. Accordingly, on the basis of this burden, is the 1st Defendant able to show merits to the required benchmark?

13. Mr Chan stuck to his task gamely, notwithstanding a certain amount of judicial resistance, and in the course of a wide-ranging address he made, I think, the following principal points.

14. First, he placed great reliance upon the settlement of the Macau proceedings between the Plaintiff and the 1st Defendant. This compromise, he said, was to apply to Hong Kong as well, and that the parties intended this to be the case. I do not accept that I can or should receive evidence of intention; the agreement speaks for itself, and it does not bespeak anything but the compromise of the Macau proceedings. Nor do I think that it is entirely correct to say that the Plaintiff's Hong Kong action was based on the Defendants' activities in Macau only; the pleading in this case asserts an acting in concert with the 2nd and 3rd Defendants in Hong Kong, but even were that not to be the case, it does not follow, with respect, that the Macau agreement covered the Hong Kong proceedings as well. I reject that submission.

15. Second, Mr Chan suggested that even if the agreement covered only the Macau proceedings, those parts of the Judgment and Order referring to the 1st Defendant's activities in Macau should be struck out. I fail to see why. As Mr Shipp pointed out, there was no coincidence of causes of action in the two sets of proceedings; in Macau the proceedings were based upon the civil code and in particular the offence of unfair competition, whereas in Hong Kong the cause of action was the common law tort of passing off, and injunctive relief 'biting' on a Hong Kong based Defendant in this jurisdiction and founded on a different course of action seems to me to be perfectly proper. So I am against Mr Chan on this point as well.

16. The third main point taken was that, in all the circumstances, there was in this case no common field of activity, in terms of watches and night clubs, and therefore there was little or no possibility for misleading or deception of any member of the public by the use of the name "Piaget". Moreover, said Mr Chan, the Plaintiff did not have any established reputation in Macau.

17. As to this latter contention, the Plaintiff's objective evidence on the point speaks for itself when compared with the individual perception of one of the 1st Defendant's deponents. And on the broad issue of common field of activity, I do not consider the point was made, notwithstanding its enthusiastic delivery. In this connection, Mr Shipp drew my attention to the case of Nike Limited v. Network Management Limited [1994] 12 EIPR 319, a decision of Jacob, J. of 22nd July 1994, wherein the difference in question in that case was between sports clothes and goods on the one hand and toiletries on the other, the Defendants marketing Spanish-produced toiletries in the UK, the main branding indicated thereon being a prominent representation of the word "Nike". The Plaintiff sued for passing off, and applied for immediate interlocutory relief. Jacob, J. is reported as finding that distribution and sales of the defendants' product would amount to passing off, even though cosmetics were not part of the plaintiffs' business and there were no plans that they should be. He relied on Nike's widespread and longstanding reputation in its mark for sports goods, and on the fact that it was clear on the evidence that the marketing and sale of the defendants' products would lead to actual deception of the public, in concluding that there was no triable defence, and therefore no ground for opposition to the application.

18. I adopt a similar approach in this case. "Piaget" is a world renowned mark. Ultimately the question to be asked is "whether there is likely to be confusion in the minds of the public" - see here the dicta of Russell, L.J. in Annabel's (Berkeley Square) Ltd. v. G. Schock [1972] RPC 838 at 844, at lines 25-40 - and I have no hesitation in this case in answering this rhetorical question in the affirmative; indeed, the 1st Defendant seems itself to have specifically recognised this by moving in July 1997 to change the name of its night club from "Piaget" to "Mo Mo". But in this case Mr Shipp for the Plaintiff has embarrassment of riches, because somewhat unusually he has the luxury of an actual instance of confusion. Ironically, an advertisement for the 1st Defendant's night club appeared in the Chinese version of "Penthouse" in May 1996, and the invoice therefore was actually sent to the Plaintiff's agent Piaget (HK), thereby neatly (and doubtless irritatingly) demonstrating the point. So this argument does not get off the ground either.

19. Fourth, Mr Chan says that the Plaintiff is estopped from proceeding with the Hong Kong action. He puts the argument thus. Since the Plaintiff alleges a separate agreement governing these Hong Kong proceedings, such agreement being constituted by the exchange of correspondence, respectively dated 2nd July 1996 from K.C. Man & Co. (which I note is stated to be 'without prejudice') and 19th July in response from Messrs Baker & McKenzie, the cause of action available to the Plaintiff can no longer be the primary passing off complained of, but the Plaintiff was entitled only to sue upon the Hong Kong agreement; in this connection, Mr Chan places reliance upon the Hong Kong Case of Lam Fung Ying v. Ho Tung Sing [1993] 2 HKC 28. Mr Shipp had a number of answers to this - he suggested, inter alia, that by continuing to infringe up to August 1996 the 1st Defendant was in repudiatory breach of any such agreement, thereby permitting the Plaintiff to revert to its original cause of action - but at the end of the day, there is a distinct tendency, I think, to over-complicate this aspect of the case. In my view, on the material before me, there was no finalised agreement capable of sustaining Mr Chan's argument, and therefore no conceptual impediment to the Plaintiff entering judgment on the basis of its original claim. Nor, I might add, do I accept Mr Chan's additional argument, which seemed to me to emerge quite late in the case, that such agreement, when taken together with the wide scope of the injunctive relief obtained, namely "in Hong Kong or any other country", was by analogy with a judgment entered for too large a sum, sufficient to provide grounds for the setting aside of the judgment ex debito. With respect, this latter argument seems to me to be ambitious, if not hopeless; and in any event, as Mr Shipp pointed out, any settlement of the type proposed, that is, in terms of submitting to the injunction and the payment of an agreed sum in costs, would not have been in the form of a private agreement or compromise between the parties, but would have been subject to and contained in a Consent Order of the Court. So in my view that point fails too.

DECISION

20. At the end of the day, and on the basis of all that has been placed before me, I am bound to say that I am unable to find any respectable argument on the merits available to the 1st Defendant, much less a situation approaching the required Premier Fashions benchmark. Indeed, I find it difficult in the circumstances to understand what practical purpose has been served by this application. On its own case, the 1st Defendant has no intention of further using the "Piaget" mark in its business, and there is no evidence that it has done so or had purported to do so since, at the latest, August 1996, whether in terms of the name of the night club, or promotional material, or advertising. There is, it seems to me, nothing to go to trial, and indeed this is probably a classic instance of an intellectual property case which would have ended at the interlocutory stage if matters had progressed to a satisfactory settlement, as apparently anticipated by the inter partes correspondence of July 1996. Mr Chan, in this connection, complains that as a result of the situation which has arisen, there were and are "daggers at his client's neck" in terms of the orders for discovery, damages and costs which, as a result of these events, have now become embodied in a Court Order and Judgment. I note here that Mr Shipp tells me that since entry of judgment no attempt has been made by the Plaintiff to pursue any of these collateral matters, the Plaintiff being content with the injunctive relief, but in any event to put Mr Chan's mind at ease his client is willing to, and does, give undertakings not to pursue paragraphs 2, 3, 4 and 5 of the Judgment. These undertakings are noted and accepted, but in truth I do not think that they are of any great consequence in terms of this application, which in my view fails manifestly in itself absent any need for reliance on such undertakings.

21. It follows from the foregoing, therefore, that in my view the correct Order is that the 1st Defendant's application be dismissed. I further make an Order nisi that the costs of and occasioned by this application be to the Plaintiff, to be taxed if not agreed.

22. I thank both Counsel for their assistance.