XCHRX C.K. HAIR INTERNATIONAL LTD. v. KAM YIN SHAN CHRISTINE AND ANOTHER

HCA 5309/2000

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NO. 5309 OF 2000

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REASONS FOR DECISION

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Introduction

1. On 2 September 2000, the plaintiff took out an application pursuant to RHC Ord. 14 r. 1 asking for final judgment against the defendants. After a hearing on 26 April 2001, I dismissed the application indicating that reasons for doing so would be handed down later. These are the reasons.

The Background Facts

2. The plaintiff commenced this action on 27 May 2000 alleging that the defendants passed off their hair beauty and weaving salon business as the plaintiff's. The plaintiff's case is that its goodwill and reputation rests in the name "C.K.".

3. Further, the plaintiff applied by inter partes summons for, and on 9 June 2000 was granted, an interim injunction (by way of the defendants' undertaking to court) restraining the defendants from using the name "C.K." or any trading name, mark or style incorporating the initials "C.K." or any colourable imitation thereof. The 9 June 2000 order was continued by an order dated 28 July 2000 until trial or further order.

4. The plaintiff's claim of business goodwill and reputation in the name "C.K." is as follows. According to the affirmation of Chao Chen Kuo (hence the initial "C.K."):-

(1) from 1964 to 1970, the wig and mannequin business of his family (founded by his mother) was operated under the name "Artistic Hair Products Co.". The major markets were Europe, U.S., Japan and South East Asia. It would appear from the above that its main business was the export of products to overseas markets;

(2) from 1970 to 1989, that business was run by way of a limited company called "Artistic Hair Products Co. Ltd.";

(3) that name was changed to "C.K. Hair International Ltd." (using the initials of Mr. Chao) in 1989;

(4) from 1989 to 1999, the export of wigs and mannequins continued. During this period, advertisements were placed in promotional materials. According to Mr. Chao, these were regularly distributed to customers and potential customers throughout the world at trade fairs and by mail;

(5) Mr. Chao also deposed that C.K. Hair International Ltd. has earned a high reputation both in Hong Kong and abroad;

(6) from 1986 to mid-1996, a company called "C.K. Beauty Products Ltd." (later called "C.K. Hair & Beauty Products") was set up. Its business was the manufacture, sale and distribution of hair beauty products and accessories, such as shampoos, hair conditioners and perm lotions in Hong Kong;

(7) promotional leaflets of his company were regularly distributed to hair salons and professional hair stylists in Hong Kong;

(8) in mid-1996, the said business was taken over by "C.K. Hair International Ltd.";

(9) from 1988 to August 1994, Mr. Chao branched out to the Hong Kong retail market. A company called "C.K. Hair Centre Ltd." was set up. Its business was the sale of wigs and after-sales service such as repairs, cleaning and reconditioning. This (persumably) ceased in August 1994;

(10) from August 1994 to July 1996, that business was operated under the name "Wig Palace". This was closed down in July 1996;

(11) from January 1994 to September 1997, a retail outlet was set up in Tsimshatsui using the name "C.K. Hair Centre". It was closed down in September 1997;

(12) from October 1997 to the present, a new outlet "C.K. hair Shop" was set up in Tung Ying Building, Tsimshatsui.

The Issues in this Application

5. By reason of the above matters, the plaintiff says that it has acquired a goodwill in the "C.K." name/brand over the years.

6. The lines of defence according to the "home-made" Defence of the defendants filed on 4 August 2000 can be summarised as follows. The 1st-named defendant Ms. Kam ("Kam") and the 2nd-named defendant Mr. Law ("Law") are wife and husband. Kam used to work in the hair weaving business as a hair stylist. Kam's first name is "Christine" and her colleagues and clients called her "C.K.". After Kam left her employer in May 1998, and in order to take care of her mentally retarded son, she started her own hair salon in September. This business was operated in the Aberdeen Centre (in one of the upper floors) which is close to her home. The clientele was the customers of her former employment as well as people living near Aberdeen. She has no intention to imitate the plaintiff. Further, Kam says this in her defence:-

"... 原告人雖然聲稱自己公司很出名，可是我們從不知有此間公司存在。更甚者是近這十年全部都流行戴織髮，假髮已很少人佩戴，二十年前或許較流行。若果現在有人問C.K.是甚麼公司？人們大多数會答是否CALVIN KLEIN？"

This part of the defence is in short that the defendants were unaware of the existence of the plaintiff, that wigs might have been popular in the past (but may no longer be so nowadays) and that if anyone was asked what "C.K." stands for, he would most likely answer that it stands for "Calvin Klein". Kam also asserts that the defendants have not benefited from using the name "C.K.".

7. Although plaintiff's counsel disputes this, I find that the part of the Defence quoted above puts in issue whether the plaintiff enjoys any goodwill or reputation in the name "C.K.".

8. In the skeleton submissions of plaintiff's counsel, the plaintiff contends in brief that the defendants have no valid defence as a matter of law: see, for example, para. 7 to 9 thereof. As can be seen from the paragraphs below, the plaintiff has in effect departed from that position during the hearing.

9. One of the points raised in plaintiff's skeleton submissions is that the use of a person's initials is not a valid defence to a claim in passing-off, relying on Wadlow: The Law of Passing-Off (1995) 2nd Ed., para. 7.10. The plaintiff also argued in its skeleton submissions that the lack of an intention to pass off is irrelevant: Wadlow, para. 4.20. Defence counsel indicated at the hearing that no counter argument would be raised regarding these. For this reason, I assumed that no objection to the Ord. 14 application was raised relating to the above. The decision made on 26 April was not based on these issues.

10. Plaintiff's counsel also argued at the hearing that even if the defendants had disputed whether the plaintiff enjoys goodwill and reputation in "C.K.", they have not discharged their burden in an Ord. 14 application to raise a triable issue over this point by adducing sufficient evidence. I do not agree.

11. A common way of proving (or disproving) passing-off is survey evidence showing that the public has been (or has not been) confused by the use of the name: Wadlow, para. 8.45 to 8.50. Plaintiff's counsel submitted that the defendants had not adduced any such evidence in this application. While that may be so, survey evidence is not required as a matter of law even at the time of trial. Whether this is the proper way to establish the claim (or the defence) depends on the circumstances of the case. Evidence can be by way of, for example, trade and retail evidence (Wadlow, para. 8.41) or consumer evidence (Wadlow, para. 8.44).

12. In the present case, apart from the "home-made" Defence, the defendants have filed an affirmation (deposed by a Mr. Lam Man Chiu) stating inter alia that the plaintiff does not enjoy a general reputation and it does not enjoy a huge reputation even in the wig trade. The affirmations from the defendants' customers (such as those from Ms. Wong Wai Chun, Mr. Yeung Yuen Shing and Mr. Cheung Chung Shan) state inter alia that they were Kam's long-standing customers and have used her services for a considerable period of time.

13. On the other hand, the following points in the plaintiff's evidence should be noted:-

(a) the plaintiff's main line of business (as disclosed in Mr. Chao's affirmation) appears to be in export;

(b) the plaintiff's products of wigs and mannequins were (mainly, if not solely) for export to overseas markets;

(c) it appears that the plaintiff's promotional materials were distributed (mainly, if not solely) to overseas buyers or potential buyers;

(d) the hair products (such as shampoos, conditioners and perm lotions) were sold to people in the hair business like hair salons. It is unclear whether this business continued after mid-1996;

(e) a number of the plaintiff's retail outlets were closed down after a period of operation. It is unknown what brought this about, for example, whether it was because of a lack of business or they were running at a loss;

(f) at present, the only retail outlet is "C.K. Hair Shop" in Tung Ying Building, Tsimshatsui. According to the defendants' affirmations, this shop appears to be one selling wigs. Its business turnover for 1997 was about $630,000.00 (about $52,000.00 per month).

14. In these circumstances, I find that whether the plaintiff enjoys goodwill or reputation in the name "C.K." is an issue which ought to be tried.

15. A number of decisions have been referred to by plaintiff's counsel. I conclude that they were distinguishable for the following reasons. Chelsea Man Menswear Ltd v. Chelsea Girl Ltd [1987] RPC 189 was a decision reached after trial and the trial judge therein made a finding that there was confusion despite the geographical distance. The same observation applies to Brestian v. Try [1958] RPC 161. Lego System Aktieselskab & another v. Lego M. Lemelstrich Ltd [1983] FSR 155, especially p. 187, was concerned with the form of relief rather than when a passing-off claim is established. In any event, Lego is a unique case because the Lego brand has in effect become a household word.

16. As stated above, the defendants state in their Defence that they did not benefit from the use of "C.K.". Passing-off is a cause of action which depends, among other things, on damages. Thus, Wadlow says:-

"The action for passing-off protects the right of property the plaintiff has in the goodwill of his business. Damages is the gist of the action, and if there is no damage to any business or goodwill then an action for passing-off cannot succeed ... " (p. 53);

"The action for passing-off protects the plaintiff's right of property in his business or goodwill. It is therefore essential that the defendant's misrepresentation should be such as to be really likely to cause substantial damage to that property. If there is no damage or prospect of damage to the plaintiff's business or goodwill then there can be no cause of action for passing-off ... " (p. 147).

On the other hand, Wadlow also states that:-

"The plaintiff does not have to prove actual damage in order to succeed in an action for passing-off. Likelihood of damage is sufficient ... " (p. 153);

"For many years passing-off actions were decided with little or no express consideration of whether the plaintiff would suffer actual damage, or in what form ... A misrepresentation that the defendant's goods or business are those of the plaintiff is intrinsically likely to damage the plaintiff if the fields of business of the plaintiff and defendant are reasonably close. The fact that virtually every successful passing-off action for half a century fell into this category meant that an inquiry as to damages could be granted as a matter of routine if the other elements of the tort were made out" (p. 155).

17. A bare assertion that the defendants have not benefited from the use of "C.K." or that the plaintiff has not suffered any damage is generally insufficient to raise a triable issue. However, taking into account the circumstances set out above, I find that whether damages have been caused by the defendants' use of these initials is also an issue which ought to be tried.

18. Furthermore, as the plaintiff states in the skeleton submissions, the defendants have already discontinued the use of "C.K." since May 2000: see para. 3 thereof. For this additional reason, no order will be made regarding the plaintiff's claim for a permanent injunction (which is no longer pursued: see para. 4 of the skeleton submissions).

19. The issues which I found ought to be tried should reasonably have been known to the plaintiff prior to the taking out of the Ord. 14 summons because the "home-made" Defence were filed and served in August 2000. For this reason, this application falls within Ord. 14 r. 7 and should be dismissed. For the same reason, the power to award costs under Ord. 14 r. 7 is also applicable to this application. By reason of the matters set out above, I find that the discretion ought to be exercised in awarding costs against the plaintiff forthwith.

20. A direction for speedy trial was made in this action on 28 July 2000. As I already decided in the defendants' favour, there is no need to deal with their argument that a direction for speedy trial is inconsistent with an Ord. 14 application: Pierre Fabre SA & another v. Ronco Teleproducts Inc. & another [1983] FSR 148. Insofar as it may be necessary to do so, I am inclined to agree with the observations in that decision.