BLACK BEAR ASSET MANAGEMENT PTY LTD AND ANOTHER v. LUXOTICO HK LTD AND ANOTHER

HCIP 37/2019

[2020] HKCFI 414

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

INTELLECTUAL PROPERTY PROCEEDINGS NO. 37 OF 2019

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D E C I S I O N

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1.  This is the Defendants’ application for:

(i) striking out the Writ and the Plaintiffs’ Statement of Claim on the ground that they disclose no reasonable cause of action, or are scandalous, frivolous or vexatious or constitute an abuse of the process of the court; alternatively

(ii) staying the proceedings on the ground of forum non conveniens or pending proceedings outside the jurisdiction.

2.  There is also an application by the 2^nd Defendant to set aside the leave for service of the Writ on him outside jurisdiction.

Background

3.  The Plaintiffs’ main claim against the Defendants is for conspiracy to injure in relation to applications for the trade mark “Glasshouse Fragrances” (“the Mark”) in the Mainland.  There is also an additional claim for disclosure and use of confidential business secrets.

4.  The Plaintiffs are the owners of the Mark in Australia.  The 2^nd Defendant was co-founder of the 2^nd Plaintiff and a founding shareholder of the 1^st Plaintiff.  He was the chief executive of the 2^nd Plaintiff and a director of both Plaintiffs until 2012.

5.  According to the Plaintiffs, the 2^nd Defendant was in charge of sourcing the Plaintiffs’ packaging from the Mainland and Hong Kong and regularly travelled to these places to do so.

6.  Following the 2^nd Defendant’s departure from the Plaintiffs, there was litigation between the parties which was eventually settled.  The 2^nd Defendant remained a shareholder of the Plaintiffs until 31 March 2014.

7.  The 1^st Defendant is a limited company incorporated in Hong Kong by the 2^nd Defendant.  The 1^st Defendant applied to register the Mark in the Mainland in 2017.

8.  Oppositions were filed by the Plaintiffs to these applications (“the Mainland Applications”) but were unsuccessful.

9.  In this action, the Plaintiffs are claiming for, inter alia: (i) a mandatory injunction requiring the 1^st Defendant to assign the Mark registered in the Mainland to them; and (ii) an injunction to restrain the Defendants to register or use the Mark anywhere in the world.  The causes of action relied on by the Plaintiffs are: (i) conspiracy to injure the Plaintiffs; and (ii) breach of fiduciary duty based on the disclosure of confidential business secrets of the Plaintiffs by the 2^nd Defendant to the 1^st Defendant and the use of such information by the 1^st Defendant.  Apart from the injunctions sought, the Plaintiffs are also claiming for damages which include the legal costs incurred by them in opposing the Mainland Applications.

10.  It is clear from the outset that the main complaint in the present case relates to the Mainland Applications.  The Plaintiffs opposed the Mainland Applications apparently on the ground that they are the true owners of the Mark, but was not successful.  In parallel with the opposition proceedings, the Plaintiffs are suing the Defendants in the Hong Kong court compelling the Defendants to transfer the registration of the Mark in the Mainland to them.

11.  Intellectual property rights usually have territorial limitation, and cross-borders issues are not common in intellectual property litigations.  However, due to the close economic ties between the Mainland and Hong Kong, this court sees an increasing trend for cross-borders issues to be raised in intellectual property claims.  It is not uncommon to see such claims being commenced in the Hong Kong courts with the main purpose of stopping the infringing activities in the Mainland.

12.  The present case is one of the examples that cross-borders issues become the crux of the case.  I would say that this is yet another bold attempt by a plaintiff to stop a defendant from carrying out some alleged wrongful activities in the Mainland.  Unfortunately, the Plaintiffs’ case is misconceived.

13.  Lengthy submissions have been filed by both parties, in particular Mr Alder who is the counsel for the Defendants.  In my humble opinion, both counsel have missed the main points of the case.  The parties are also confused about two different concepts.

14.  The first one is whether the court has jurisdiction to hear a particular claim.  On this question, leave to serve the writ outside jurisdiction may be the main consideration, as the court has to determine whether it has jurisdiction to hear a particular claim against a foreign defendant.  O.11 r.1 of the Rules of the High Court (Cap 4A) would be the main provision governing this particular issue.

15.  The second concept is that, assuming the court has jurisdiction to hear a particular claim, conflict of law issues such as double actionability may arise, with the possible result that the plaintiff’s claim may be held not actionable in the Hong Kong courts.

16.  The convoluted way in which the parties have advanced their arguments shows that they lack a proper understanding about these two different concepts.  In my judgment, the application can be dealt with in a simpler way.

The setting aside of the leave to serve outside jurisdiction

17.  I first deal with the question as to whether the court should set aside the leave to serve the Writ on the 2^nd Defendant outside jurisdiction.  This is more a question as to whether this court has the jurisdiction to hear the claim against the 2^nd Defendant who is an overseas resident.

18.  The 1^st Defendant is a limited company incorporated in Hong Kong and so the Plaintiffs can serve the Writ on it as of right.  On the other hand, since the 2^nd Defendant is an overseas resident, leave to serve the Writ outside jurisdiction is required.

19.  The Plaintiffs are mainly relying on O.11 r.1(1)(f) to justify the service of the Writ outside jurisdiction, which provides that such service is permissible if “the claim is founded on a tort and the damage was sustained, or resulted from an act committed, within the jurisdiction”.

20.  From the affidavits filed by the parties, it is clear that there is only limited nexus between Hong Kong and the Plaintiffs’ claim.  The only nexus is that the 1^st Defendant is a Hong Kong limited company and it was the applicant in the Mainland Applications.  There is no evidence to substantiate the allegation that, whether in Hong Kong or elsewhere, the 2^nd Defendant has disclosed any business secrets to the 1^st Defendant or the 1^st Defendant has used any business secrets of the Plaintiffs.  In fact, there is no evidence that the 1^st Defendant has carried on any kinds of business in Hong Kong.

21.  The Plaintiffs claim that there was a conspiracy involving both Defendants to injure the Plaintiffs’ interest which resulted in the lodging of the Mainland Applications.  Even according to the Plaintiffs’ case, the damages suffered by them as a result of such conspiracy would occur in the Mainland.  In such case, in order to justify the service of the Writ outside jurisdiction, the Plaintiffs have to establish at least an arguable case that such damages resulted from an act committed in Hong Kong.

22.  In my judgment, the Plaintiffs have failed to establish such an arguable case.  As mentioned above, apart from setting up the 1^st Defendant in Hong Kong, the Defendants have not committed any wrongful act, or even any act, in Hong Kong.  In fact, there is no evidence that the 1^st Defendant has carried on any business in Hong Kong.

23.  It would be too far-fetched to say that the damages suffered by the Plaintiffs in the Mainland was sustained or resulted from the act of incorporating the 1^st Defendant in Hong Kong.  The act of incorporation, by itself, is neither here or there, in particular the 2^nd Defendant has not used the Mark as part of the name of the 1^st Defendant.

24.  As the cause of action relied upon is one of conspiracy to injure, the Plaintiffs have to establish, at least, either the conspiracy or the agreement was made in Hong Kong or some of the acts done pursuant to such conspiracy were committed in Hong Kong.

25.  The Plaintiffs are not able to establish either.  There was simply no act committed in Hong Kong pursuant to any conspiracy made by the Defendants.  As to the locus of the making of the alleged conspiracy or agreement, there is no evidence to show that it was made in Hong Kong.  The 2^nd Defendant is an Australian resident, and the alleged conspiracy could have been made anywhere in the world.  One cannot assume that the conspiracy was made in Hong Kong simply because the 1^st Defendant is and was a Hong Kong company.

26.  As I see it, the Plaintiffs’ claim raises a more fundamental question as to whether there can be a conspiracy made between a “one-man” company and its sole controller.  In criminal law, it was held that it is not possible to find such an agreement between two minds.[1]

27.  Mr Clark, counsel for the Plaintiffs, submits that it is possible for such conspiracy to be made in a civil law context, citing in support the case of Apple Inc v Proview International Holdings Ltd[2].

28.  However, one has to approach the judgment with some caution.  Poon J (as he then was) relied on Belmont Finance Corporation v Williams Furniture Ltd (No 2)[3]in support of the proposition that “[a] company, being a separate legal person, can conspire with its directors”.  But in Belmont Finance, the controller of the “one-man” company was guilty of some wrongful misconduct, and he had also used the corporate machinery in what was alleged to be a conspiracy to damage the claimant.  In such case, there is ample justification to use the conspiracy as a cause of action to “extend” the liability against both the controller and the company he controlled.[4]

29.  The present case is very different.  There is no evidence that either of the Defendants, whether by himself or itself, had committed any wrongful conduct against the Plaintiffs in Hong Kong, and yet the Plaintiffs are relying on an alleged conspiracy to injure in order to justify an actionable claim against the Defendants in Hong Kong.  The justification for finding liability in Belmont Finance against the controller and the company he controls is not present here.[5] Hence, I have grave reservation whether the controller of a “one-man” company can always make a conspiracy with the company he controls.  Conceptually, there may be problem in finding an agreement made between the same person.

30.  For the above reasons, the Plaintiffs have not established an arguable case for service outside jurisdiction based on the tort of conspiracy to injure.  For the other cause of action relied on by the Plaintiffs, which is disclosure and use of business secrets, there is simply no evidence to substantiate the commission of such tort.

31.  In a desperate attempt to salvage the Plaintiffs’ case, Mr Clark also seeks to rely on “instrument of deception”, which is a cause of action based on passing-off, to substantiate their claim against the Defendants.

32.  Such argument is not open to the Plaintiffs, as they have not relied on such cause of action to support the application for leave to serve the Writ outside jurisdiction.  In §15 of the Affirmation of Nicole Jeannie Eckels dated 25 January 2019, the Plaintiffs have made it clear that they were only relying on the conspiracy to injure and breach of fiduciary duty based on the disclosure and use of business secrets to support the O.11 r.1 application.  Hence, the Plaintiffs cannot now add a new cause of action to justify the application for service outside jurisdiction.  More importantly, there is simply no basis to support such cause of action.  As the 2^nd Defendant has not used the Mark as part of the name of the 1^st Defendant, the 1^st Defendant itself is not an instrument of deception.  There are also no other instruments of deception which have been used by the Defendants to deceive the public.

33.  For these reasons, I set aside the leave to serve the Writ on the 2^nd Defendant outside jurisdiction.

The issue of double actionability

34.  Apart from the issue of service outside jurisdiction, the Plaintiffs’ claim has a more fundamental problem.  It is clear that they cannot bring an actionable claim for conspiracy to injure in Hong Kong against any of the Defendants by reason of the principle of double actionability.

35.  The principle of double actionability is trite. For tort cases, in order for a claim to be actionable in a Hong Kong court, the tort must be actionable both under Hong Kong law and under the law of the place where the tort was allegedly committed.[6] The issue in the present case is, therefore, whether the tort of conspiracy to injure was committed in Hong Kong or the Mainland.  Unfortunately, this particular issue has not been thoroughly considered by counsel in their submissions.

36.  The governing principle in determining the locus of the commission of a tort is: where “in substance” did the cause of action arise?[7] As suggested by the authors of The Conflict of Law in Hong Kong[8],  there are two major alternatives in determining the locus: one is to treat the relevant place as that where the defendant did all of the (or the significant) tortious acts; the other is to consider the relevant place to be that in which the resultant harm was felt (or most significantly) by the plaintiff.

37.  In my judgment, no matter which principle is to be applied, it is clear that the locus of the commission of the tort is the Mainland.  As trade mark would not have extra-territorial effect, the harm resulting from the registration of the Mark would occur only in the Mainland. It is also clear Mainland was the place where the Defendants did all or at least the most significant tortious act, which was the lodging of the Mainland Applications there. As to the place where the cause of action “in substance” arises, it is also beyond doubt that Mainland is the answer.  As I have mentioned above, the alleged conspiracy was to injure the Plaintiffs’ interest by making the Mainland Applications.  Apart from the fact that the 1^st Defendant was a company incorporated in Hong Kong, there is simply no nexus between the conspiracy claim and Hong Kong.

38.  Mr Clark concedes that there is no tort of conspiracy to injure under Mainland law.  However, he submits that this is a non-issue because the tort of conspiracy to injure was committed in Hong Kong.

39.  Unfortunately, there is nothing to substantiate such allegation.  The Plaintiffs cannot produce any evidence to show that the alleged conspiracy or agreement was made in Hong Kong.  As mentioned above, even assuming that the 2^nd Defendant could have made an agreement with his own company, such agreement could have been made anywhere in the world.  The Plaintiffs cannot just say that the conspiracy was made in Hong Kong because one of the parties was a Hong Kong company.  There is also no evidence that the Defendants have done anything pursuant to the alleged conspiracy in Hong Kong.

40.  In dealing with the question of double actionability, Mr Clark has kept on referring me to O.11 r.1.  As mentioned above, Mr Clark is only confusing the two issues.  It is one thing to consider whether the court has jurisdiction to hear a particular claim against a foreign defendant under O.11, r.1, it is another as to whether a plaintiff can bring an actionable claim against a defendant for a tort committed outside jurisdiction.

41.  In order to avoid the injustice which may sometimes be caused by the application of the double actionability rule, the landmark case of Red Sea Inc Co Ltd v Bouygues[9] has provided for some exceptions, for example, by recognizing that a particular issue between the parties to litigation may be governed by the law of the country which, with respect to that issue, has the most significant relationship with the occurrence and with the parties.[10]  However as there is practically no nexus between Hong Kong and the conspiracy claim and such claim is brought mainly for the purpose of disturbing the decision made by the competent authority in the Mainland Applications, there is simply no room for the exception to apply in this case.

42.  As the lex loci deliciti is Mainland law and there is no tort of conspiracy to injure under Mainland law, the Plaintiffs’ claim against both Defendants is bound to fail.

43.  It is not necessary for me to consider the other two causes of action relied on by the Plaintiffs.  For the claim for breach of fiduciary duty based on disclosure and use of business secrets, there is simply no evidence to substantiate such claim.  For the claim based on “instrument of deception”, I take the view that such cause of action has not been expressly pleaded in the Statement of Claim.  In any event, there is no evidence to show that the Defendants have used any “instrument of deception” with a view to mislead the public.  Hence even if the court has jurisdiction to entertain the Plaintiffs’ claim, which I do not find it to be the case for the claim against the 2^nd Defendant, the Plaintiffs’ claim cannot succeed.

44.  For the reasons above, I set aside the leave for service of the Writ against the 2^nd Defendant outside jurisdiction. I also strike out the Plaintiff’s Statement of Claim and dismiss the action against the 1^st Defendant.  In light of such order, it is not necessary for me to consider the question of forum non conveniens.

45.  I also make a costs order nisi that the costs of the action, including the costs of this application, be paid by the Plaintiffs to the Defendants to be taxed if not agreed.  Such order nisi shall be made absolute 14 days after the handing down of this Decision.