JUSIKHOESA LOCK & LOCK (LOCK & LOCK CO LTD) AND ANOTHER v. LOCK & LOCK INTERNATIONAL BRAND MANAGEMENT LTD (formerly known as LOCK & LOCK KOREA KABUSKIKIKAISHA (HONG KONG) HOLDINGS LTD)

HCA 2507/2015

ACTION NO 2507 of 2015

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REASONS FOR JUDGMENT

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1.  The plaintiffs applied for default judgment against the 1^st defendant pursuant to Order 19, rule 17, of the Rules of the High Court (“the RHC”). The plaintiffs sought various injunctions and related remedies for infringement of trade marks and passing off. All relevant documents have been served on the registered address of the 1^st defendant. The 1^st defendant did not appear at the hearing. At the hearing, I gave judgment to the plaintiffs. These are my reasons.

2.  This is yet another case concerning the creation and use of shadow companies, which has been the subject of concern in Hong Kong for some time as observed by Zevros J in Power Dekor (Hong Kong) Ltd v Power Dekor Group Co Ltd [2014] 1 HKLRD 845.  Such practice involves incorporating a company in Hong Kong with a name which is very similar to a well‑known brand name or trade mark and using its incorporation and company records in order to pass off as the real company in conducting business in mainland China.

3.  The material facts as pleaded in the statement of claim may be summarized as follows:

(a) The 1^st plaintiff is a company incorporated in the Republic of Korea.  The 2^nd plaintiff is a company incorporated in the People’s Republic of China.

(b) The plaintiffs have used “LOCK & LOCK, 樂扣 and/or 樂扣樂扣” as part of their corporate/trading names, both internationally and in Hong Kong, such that they have come to signify a close association with the plaintiffs.

(c) Further, the plaintiffs have registered a large number of trademarks, most of which include the words “LOCK & LOCK, 樂扣and/or 樂扣樂扣”, in Hong Kong, mainland China and many countries around the world (“the Trade Marks”).  Throughout the years, they have made substantive sales of products under the Trade Marks worldwide, including Hong Kong and mainland China.  The sales in Hong Kong and mainland China constitute a significant part of their profits.  They have also advertised and promoted their products and services throughout the world under and by reference to the Trade Marks.

(d) The plaintiffs have acquired a substantial, exclusive and valuable business goodwill and reputation in respect of the Trade Marks and for goods thereunder.

(e) The 1^st defendant is a company incorporated in Hong Kong.  The 2^nd defendant is the sole director and shareholder of the 1^st defendant; he appears to be residing in Shantou City, Guangdong Province in mainland China.

(f) The defendants have passed off the business of the 1^st defendant as that of the plaintiffs, and infringed the Trade Marks.  In particular, the 1^st defendant has adopted “LOCK & LOCK”, “樂扣” and “樂扣樂扣”, in its Chinese and English names.  By so doing, it had caused confusions among the mass media and members of the public that the 1^st defendant’s goods, in particular, cosmetic products, are those of or authorized by the plaintiffs; and that the 1^st defendant’s business is associated with the plaintiffs.

4.  On the facts as pleaded, I am satisfied that the plaintiffs are entitled to remedies to restrain the passing off and infringement of the Trade Marks.  At the hearing, subject to a few amendments, I granted to the plaintiffs remedies sought in the statement of claim (which I will not repeat here).  I intend to highlight one specific order sought by the plaintiffs, which I refused to give.

5.  In §(6) of the prayer for relief in the statement of claim, the plaintiffs sought:

“An order that, in the event the 1^st defendant should fail to comply with the orders under paragraphs (4) and (5) respectively, the plaintiffs’ solicitors shall be empowered to sign and file on behalf of the 1^st defendant such documents and forms anticipated under paragraph (4).”

6.  Put it shortly, in §(4) of the prayer for relief, the plaintiffs sought an order that the 1^st defendant shall remove from its name, words and phrases which are identical to the names of the plaintiffs; and in §(5), the plaintiffs sought an order that the 1^st defendant shall cause the 2^nd defendant to sign and file documents to effect such change.  In practice, it is most probable that the 1^st defendant will not comply with these orders.  This must be why the plaintiffs sought an order that their solicitors be empowered to sign and file the requisite documents.

7.  However, in Hitatchi Ltd v Hticahi Wei Chu (Hong Kong) Ltd [2007] 4 HKLRD 431, Suffiad J held that the court had no jurisdiction to make an order that the plaintiff’s solicitors be empowered to sign and file all documents and forms on the defendants’ behalf to change or facilitate the change of the defendant’s Chinese company name on the following grounds (see §§21‑37 at pp 435‑438):

(a)Order 45, rule 8 of the RHC provides, inter alia, that:

“If an order of … an injunction … is not complied with, … the court may direct that the act required to be done may, so far as practicable, be done by the party by whom the order or judgment was obtained or some other person appointed by the court …”

However, this rule did not enable a court to give authority to any person, including the Registrar of Companies or the plaintiff’s solicitors, to change the name of a company in a manner which did not comply with section 22 of the old Companies Ordinance, and that the court could not vary the requirement in that statutory provision for a special resolution to effect a change of name.  Suffiad J applied the English Court of Appeal’s judgment in Halifax Plc & others v Halifax Repossessions Ltd & others [2004] BCC 281.  In addition, by putting forward their own solicitors to be so appointed, there must be a conflict of interest for the plaintiff’s own solicitors to be acting on behalf of the defendant in having to choose a new name for the defendant company.

(b) Section 25A(1) of the High Court Ordinance (Cap 4) provides, inter alia, that:

“Where the Court of First Instance has given or made a judgment or order directing a person to execute any … document, … then, if that person‑

(a) neglects or refuses to comply with the judgment or order; or

(b) cannot after reasonable inquiry be found,

the Court of First Instance may, on such terms and conditions, if any, as may be just, order that the … document shall be executed … by such person as the Court may nominate for that purpose.”

This statutory provision could not assist the plaintiff because reliance thereon was based on the mistaken belief or misapprehension that all that was required was to sign and file certain documents to effect the change of the company name, without fully appreciating the statutory provisions of section 22 of the old Companies Ordinance whereby the change of name for a company had to be by special resolution of the company.

(See also Hong Kong Civil Procedure 2016, vol 1, §45/8/1 at pp 920‑921, and Hong Kong Civil Procedure 2016, vol 2, §E1/25A/2 at p 174.)

8.  Section 22 of the old Companies Ordinance has been replaced by section 107 of the new Companies Ordinance (Cap 622) (“the CO”).  Under section 107(1), a company may change a company name by special resolution.  Hence, the requirement of a special resolution of the company in question to change its name still exists.  In the circumstances, applying the said judgment of Suffiad J, I take the view that the court does not have the power and, if such power exists, should not exercise such power, to grant the said order sought by the plaintiffs.

9.  In Hitatchi Ltd v Hticahi Wei Chu (Hong Kong) Ltd [2007] 4 HKLRD 431 at §§38‑44, pp 438‑439, Suffiad J observed that there were other avenues open to the plaintiff, in particular, it may approach the Registrar of Companies and sought his assistance in the exercise of his power under section 22A of the old Companies Ordinance to direct the defendant to change its Chinese name.

10.  Under the CO, section 108(2) provides that:

“The Registrar may by notice in writing direct a company to change, within the period specified in the notice, a name by which the company is registered under this Ordinance or any former Companies Ordinance if, after the company is registered by the name—

(a) a court makes an order restraining the company from using the name or any part of the name; and

(b) an office copy of the order, and a notice in the specified form, are delivered to the Registrar for registration by a person in whose favour the order is made.”

Section 108(5) provides that, if a company fails to comply with a direction given under section 108(2) within the period specified in such a notice (or the period extended by the Registrar), the company and every responsible person of the company shall commit a criminal offence and is liable to a fine which will continue while the offence continues.  More importantly, section 110(2) provides that, if a company fails to comply with a direction made under section 108(2), the Registrar may change the name of the company in the manner as prescribed therein.

11.  In Biostime International Investment Ltd v France Heson Paper (Hong Kong) Co Ltd [2015] 2 HKLRD 658, the plaintiff sought an order directing the Registrar of Companies to change the defendant’s company name under section 108(2) of the CO.  In §16 at p 664, I held that:

“I do not think I have the jurisdiction to make a mandatory order against the Registrar of Companies in this action. It is, in any event, inappropriate and unnecessary for me to do so because the plaintiff may follow the procedure prescribed by the said statutory provision.”

12.  I wish to reiterate that, in these circumstances, it is both inappropriate and unnecessary to ask the court to (a) grant an order to authorize any person to effect a change of the company’s name if the defendant fails or refuses to do so pursuant to an injunctive order, or (b) compel the Registrar of Companies to make the change.  What the plaintiffs may and should do is to follow the procedure prescribed by section 108(2) of the CO.  In practice, what it needs to do is very simple: to complete and submit a Form NNC4 “Notice of Court Order Restraining Company from Use of Name” prescribed by the Registrar of Companies.