CONVOY (TRADEMARKS) LTD v. CONVOY GLOBAL HOLDINGS LTD AND OTHERS

HCA 702/2018

[2025] HKCFI 5196

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NO. 702 OF 2018

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(by Original Action)

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(by Counterclaim)

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AND

HCMP 1350/2018

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

MISCELLANEOUS PROCEEDINGS NO. 1350 OF 2018

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(Heard together)

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J U D G M E N T

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1.  This is a trial concerning the ownership of the following trade marks:

(i)  the first group of marks consisting of the registered trademarks bearing registration numbers 300064449, 300064458, 300064467, 300064485 and 300534988;

(ii)  the second group of marks consisting of the registered trademarks bearing registration numbers 301674234, 302052945 and 302373868.

2.  All these marks relate to the “Convoy” brand.  The first group of marks were originally registered in the name of Convoy Financial Services Limited (“CFS”)  in 2003 and 2005 and were assigned to Convoy (Trademarks)  Limited (“CTL”)  in 2010.  The second group of marks, which were further marks derived from the “Convoy” brand, were registered by CTL from 2010 to 2012.  I will refer these two groups of marks as “the Marks” and “the Derivative Marks” respectively.

THE PARTIES

3.  These two cases involve two camps of parties. In this Judgment, I will refer the two camps as “the CTL Parties” and “the CFS Parties” respectively.

4.  The CTL Parties consist of the following:

(i)  CTL, the Plaintiff by way of original action and the 1^st Defendant by way of counterclaim in HCA 702/2018 (“the HC Action”)  and the 1^st Defendant in HCMP 1350/2018 (“the HCMP Action”);

(ii)  Wong Lee Man Quincy (“Quincy”), the 2^nd Defendant by way of counterclaim in the HC Action and the 2^nd Defendant in the HCMP Action;

(iii)  Mak Kwong Yiu Mark (“Mark”), the 3^rd Defendant by way of counterclaim in the HC Action and the 3^rd Defendant in the HCMP Action;

(iv)  Convoy Financial Group Limited (“CFGL”), the 4^th Defendant by way of counterclaim in the HC Action.

5.  The CFS Parties consist of the following:

(i)  Convoy Global Holdings Limited (“1019”[1]), the 1^st Defendant by way of original action and 2^nd Plaintiff by way of counterclaim in the HC Action;

(ii)  CFS, the 2^nd Defendant by way of original action and 1^st Plaintiff by way of counterclaim in the HC Action and the Plaintiff in the HCMP Action;

(iii)  Oneplatform Asset Management Limited formerly known as Convoy Asset Management Limited (“CAM”), the 3^rd Defendant by way of original action in the HC Action;

(iv)  Convoy Capital Hong Kong Limited (“Convoy Capital”), the 4^th Defendant by way of original action in the HC Action;

(v)  Oneplatform Securities Limited formerly known as CSL Securities Limited (“CSL”), the 5^th Defendant by way of original action in the HC Action;

(vi)  Convoy Collateral Limited (“CCL”), the 6^th Defendant by way of original action in the HC Action;

(vii)  Oneplatform International Property Limited formerly known as Convoy International Property Consulting Company Limited (“Convoy IPC”), the 7^th Defendant by way of original action in the HC Action;

(viii)  Fubon Convoy Asset Management (HK)  Limited (“Fubon Convoy”), the 8^th Defendant by way of original action in the HC Action.

THE BACKGROUND

6.  The Marks were originally registered in the name of CFS in August 2003 and 2005.  The Marks were transferred to CTL by way of an assignment (“The Assignment”).  The transfer application was made to the Trade Marks Registry on 20 November 2009, and the Marks were formally registered in CTL’s name on 1 December 2009.

7.  Originally, the Marks were used by CFS, together with other entities bearing the prefix “Convoy”, including, inter alia, CAM and CCL (both amongst the CFS Parties), in their ordinary course of business.

8.  Since 2009, steps were taken which led to the eventual listing of the business of CFS through 1019 as the listed entity. Such steps included: (i)  the transfer of the Marks from CFS to CTL; and (ii)  the reorganisation of the corporate structure of the then Convoy group of companies (“the Original Convoy Group”).

9.  In order to enable CFS to continue to use the Marks, CTL and 1019 entered into a licensing agreement under which 1019 and CFS were granted the right to use the Marks at a nominal consideration (“the Licensing Agreement”).  The Licensing Agreement contained a termination clause (“the Termination Clause”)[2] which provided for the automatic termination of the Licensing Agreement in the event that CFGL ceases to be a “controlling shareholder” (as defined in the Listing Rules of the Hong Kong Stock Exchange)  of 1019 (then still known as Convoy Financial Services Holdings Limited).

10.  After the listing of 1019, CTL continued to register various other marks that were derived from the “Convoy” brand and the Marks (i.e. the Derivative Marks).

11.  CFGL ceased to be a controlling shareholder of 1019 on or around 5 December 2013.  According to the case of the CTL Parties, this triggered the termination of the Licensing Agreement by reason of the Termination Clause.  However, the CFS Parties, or at least some of them, continued to use the Marks for their businesses.  By way of letter dated 26 February 2018, CTL wrote to the CFS Parties (except Convoy IPC and Fubon Convoy)  putting the latter on notice that the Licensing Agreement had been terminated and complaining about the alleged unauthorized use of the Marks.  The parties failed to resolve their dispute and consequentially CTL brought the HC Action against the CFS Parties for trade marks infringement.

12.  On the other hand, the CFS Parties contend that CFS, as the original registered holder of the Marks, is and was at all material times the true and sole beneficial owner of the Marks (and by extension, the Derivative Marks). The CFS Parties further contend that the Marks were wrongfully transferred to CTL at the procurement of, inter alia, Quincy, Mark and other de jure or de facto directors of CFS who approved the transfer.  The CFS Parties allege that the transfer was a “poison pill arrangement” putting the relevant directors in a position of conflict of interest.  In approving the said transfer, the relevant directors had acted in breach of duty or fiduciary duty owed to CFS, and the CFS Parties therefore seek to nullify the transfer and claim for equitable compensation against Quincy and Mark.

13.  Alternatively, the CFS Parties claim that they are not liable for the trade marks infringement claim on the ground of estoppel and acquiescence, as CTL had taken no action to stop the CFS Parties from using the Marks or to inform the CFS Parties about the termination of the Licensing Agreement after CFGL ceased to be a controlling shareholder of 1019 on or around 5 December 2013.  In any event, the CFS Parties claim that Fubon Convoy has never used the Marks or the Derivative Marks in the course of its business.

14.  This forms the basis for the defence and counterclaim in the HC Action.  Further, CFS commenced separate proceedings, the HCMP Action, against CTL, Quincy and Mark seeking substantially the same relief.  On 3 November 2020, Master Dick Ho ordered that both the HC Action and the HCMP Action be tried together.  Further, Master Rita So on 20 July 2021 ordered that there be a split trial on liability and quantum.  This is the trial on liability of these proceedings.

15.  By the order of this court on 5 August 2024, the counterclaim in the HC Action and the claim in the HCMP Action were provisionally struck out.  The CFS Parties have since then taken out 2 summonses for the restoration of these claims.  The CTL Parties have no objection to such applications and the claims are therefore restored.

THE EVIDENCE AT THE TRIAL

(i)  The evidence of the CTL Parties

16.  At the trial, both Quincy and Mark testified in support of the case of the CTL Parties.  Most of their factual evidence is not challenged by the CFS Parties.

17.  The commencement of the Original Convoy Group traces back to 1993 with the incorporation of CFS (then known as Equitable Insurance Management Limited)  by its founder, Stanley Chan (“Stanley”).  The name “Convoy Financial Services Limited” was adopted in April 2002.

18.  Quincy, Denthur Lee (“Denthur”)  and Rosetta Fong (“Rosetta”)  joined CFS in 1999 as key management staff, and began subscribing to shares of CFS gradually since May 2000.

19.  At all material times, CFS was engaged in the insurance brokerage business in Hong Kong. CFS has been a member of the Professional Insurance Brokers Association (“PIBA”)  since 1995. In October 1998, CFS expanded its business into the selling of investment-linked assurance scheme (“ILAS”)  products, which were insurance policies with an investment element.  This became CFS’s core business.

20.  In November 1999, Stanley, Quincy, Denthur, Rosetta (i.e. then the key management of CFS), together with Ernest Chan (“Ernest”), set up CAM (then known as “Convoy NPL Asset Management Limited”)  to expand into the investment advisory services business. CAM formally commenced its business of provision of investment advisory services upon its registration as an investment adviser with the Securities and Futures Commission (“SFC”)  in July 2000.

21.  Since the commencement of their respective businesses, CAM and CFS became the two major operating arms of the Original Convoy Group.

22.  By around January 2001, the shareholdings of CFS and CAM were held by the following individuals (“the Founding Shareholders”):

(i)  Stanley, holding 23.125% in each of CFS and CAM;

(ii)  Quincy, holding 23.125% in each of CFS and CAM;

(ii)  Rosetta, holding 23.125% in each of CFS and CAM;

(iv)  Denthur, holding 23.125% in each of CFS and CAM; and

(v)  Ernest, holding 7.5% in each of CFS and CAM.

23.  In January 2001, the Founding Shareholders incorporated Convoy Inc. (BVI)  (“Convoy Inc”)  in the same shareholding proportion as listed above. The Founding Shareholders thereafter transferred their respective shareholdings in CFS to Convoy Inc, save that Stanley retained 0.000001% equity interest held on trust for Convoy Inc.

24.  From August 2001 to April 2002, Convoy Inc transferred approximately 23% of its equity interest in CFS to various staff of CFS as an incentive to the transferees (“the Staff Shareholders”).   Amongst the Staff Shareholders was Shin, one of the factual witnesses for the CFS Parties.  As a result of the various transfers, by April 2002, Convoy Inc held 76.77% of CFS, whereas Stanley and the Staff Shareholders held the remaining 23.23% of CFS.

25.  After the aforesaid transfers to the Staff Shareholders, the shareholdings of CFS and CAM respectively were as follows:

(i)  the shareholding of CAM remained unchanged from the position set out in §22 hereinabove;

(ii)  CFS was held by Convoy Inc (76.77%)  and Stanley and the Staff Shareholders (23.23%).

26.  In 2003, CFS and CAM remained the two major operating arms of the Original Convoy Group.  At the time, the Original Convoy Group and its businesses had grown significantly and occupied some 12,000 square feet of office space in Lippo Centre in Admiralty, Hong Kong, and had almost 200 consultants amongst its consultant force.  As described in the Submission Proof (“the 2004 Submission Proof”)  for the 2004 Planned Listing (defined and detailed below):

(i)  CFS was an insurance broker registered with PIBA, providing advisory services in connection with financial planning and insurance products (particularly the ILAS products);

(ii)  CAM was an investment adviser registered with the SFC to provide advisory services on securities which are type 4 regulated activities under the Securities and Future Ordinance (“SFO”).

27.  The Original Convoy Group wished to raise funds by way of an initial public offering on the Growth Enterprise Market board (“GEM”)  of the Hong Kong Stock Exchange to further expand its businesses (“the 2004 Planned Listing”).

28.  In preparation of the 2004 Planned Listing, the corporate structure of the Original Convoy Group experienced further changes as detailed below:

(i)  CFS and CAM became wholly-owned subsidiaries of CFGL, then known as “Advance All Enterprises Limited”.  CFGL was described as the intermediary holding company of CFS and CAM in the 2004 Submission Proof.

(ii)  CFGL was in turn a wholly-owned subsidiary of Convoy Financial Group Limited (“CFG Cayman”), the entity planned to be listed on the GEM board pursuant to the 2004 Planned Listing.

(iii)  The Original Shareholders and Staff Shareholders became indirect majority shareholders of CFG Cayman, CFGL, CFS and CAM through: (a)  Convoy Inc; and (b)  a newly-incorporated investment holding BVI-company known as Perfect Team Group Limited (“Perfect Team”). Prior to the 2004 Planned Listing, the shareholding of Perfect Team was held as follows:

(a)  80.27% by Convoy Inc, which in turn was still held in the same shareholding proportion as stated in §22 hereinabove; and;

(b)  19.73% by Stanley and the Staff Shareholders.

(iv)  Prior to the 2004 Planned Listing, Perfect Team held 76.75% equity interest in CFGL. The remaining 23.25% in CGFL was held by Winus Holdings Limited (“Winus”), an indirect subsidiary of the Lippo Group.

29.  According to Quincy and Mark, the 2004 Planned Listing sought the listing of the entire Original Convoy Group.  Both the businesses operated by CFS (i.e. the insurance brokerage business)  and CAM (i.e. the asset management business)  would be included within the proposed listed group with CFG Cayman as the listed entity, and this was made clear in the documents in preparation for the 2004 Planned Listing including the 2004 Submission Proof.  This led to the specific steps taken such that CFS and CAM became indirect wholly-owned subsidiaries of CFG Cayman through CFGL as the intermediary holding company.

30.  Apart from restructuring the corporate structure of the Original Convoy Group, another step taken in preparation of the 2004 Planned Listing was to register the Marks.  By that time, the Founding Shareholders decided to register the Marks for the benefit of the entire Original Convoy Group and not solely or exclusively for CFS.  It was intended that the CFS held the registration of the Marks as nominee for the benefit of the whole Original Convoy Group.  Indeed, various provisions in the 2004 Submission Proof support the case of the CTL Parties in this regard, including the provisions in: (i)  the sections under the headings “Statement of Business Objectives/Mission and Business Objectives”, “Brand Building” and “Provision of one-stop services”; (ii)  the section under the heading “Intellectual Property” in Appendix VI; and (iii)  the section under the heading “Trademark Valuation” prepared by Vigers Appraisal & Consulting Limited in Appendix III.

31.  The 2004 Planned Listing was unsuccessful. The Listing Committee had concerns as to the interrelationship between CFS and CAM and their consultants.  Upon the failed 2004 Planned Listing, CFG Cayman (which was meant to be the listed entity)  ceased to have any practical use. Due to the high cost of maintaining a Cayman company, the Founding Shareholders procured the striking-off of CFG Cayman. This resulted in CFGL becoming the ultimate holding company of the Original Convoy Group, including CFS, CAM and CCL amongst its wholly-owned subsidiaries.

32.  After the lapse of the 2004 Planned Listing, the Original Convoy Group (with CFGL as its ultimate holding company)  continued to expand its businesses, both through CFS and CAM, and also through newly-established subsidiaries.

33.  In February 2007, Convoy Investment Services Limited (“CIS”), then known as “Coview Investments Limited”, was established to carry on type 1, type 2 and type 4 regulated activities under the SFO.  CIS became a subsidiary of CFGL in February 2009.

34.  In November 2008, Convoy China Financial Services Limited (“CCFS”)  was incorporated and owned as to 72.83% by Convoy Inc, which was at the material time the controlling shareholder of the Original Convoy Group. CCFS was established with a view to engaging in insurance brokerage business in the Mainland but never began operations.  CFGL also incorporated another wholly-owned subsidiary in the Mainland known as “Convoy Wealth Investment Consultation (Beijing)  Company Limited” in August 2005.

35.  In January 2007 and January 2008 respectively, two further wholly-owned subsidiaries known as Convoy Investment Holdings Limited and Convoy Management Services Limited (“CMSL”)  were incorporated. Along with CFS and CAM, each of the abovementioned companies with the prefix “Convoy” formed part of the Original Convoy Group and made use of one or more of the Marks.

36.  In 2009, the Original Convoy Group decided to carve out the business of CFS for listing on the main board of the Hong Kong Stock Exchange.  By this stage, the business of CFS (as with other entities within the Original Convoy Group)  had developed substantially as compared to the time of the 2004 Planned Listing.  To avoid similar concerns as to the interrelationship between CFS and CAM which led to the failure of the Planned 2004 Listing, the Original Convoy Group decided to proceed to list the business of CFS and not the Original Convoy Group as a whole.  According to the CTL Parties, this was a significant distinction between the Planned 2004 Listing and the 2010 listing of 1019 (“the 2010 Listing”), and the plan to list only the business of CFS was made clear in the section titled “Background of the Controlling Shareholders” in the prospectus for the 2010 Listing of 1019 (“the 2010 Prospectus”).

37.  In preparation of the 2010 Listing of 1019, the Original Convoy Group was restructured such that:

(i)  In March 2010, a new intermediary holding company was incorporated in the BVI known as “Convoy (BVI)  Limited” (“Convoy BVI”).  Convoy BVI was wholly-owned by CFGL.

(ii)  At around the same time, CFGL also became the sole shareholder of 1019, a company incorporated in the Cayman Islands and intended to become the entity to be listed on the Hong Kong Stock Exchange.

(iii)  CFGL, as the sole shareholder of CFS, transferred the entire share capital of CFS to Convoy BVI, and CFS thereafter became a wholly-owned subsidiary of Convoy BVI.

(iii)  1019 then acquired the entire issued share capital of Convoy BVI from CFGL.

38.  As only part of the business of the Original Convoy Group was listed in the 2010 Listing, there was an issue about the registration and the use of the Marks.  Having obtained legal advice, the board of directors of CFGL, as the sole shareholder of CFS, decided that the Marks registered in the name of CFS would be assigned to and held by a new BVI company wholly-owned by CFGL.  This decision was communicated to Mark who was then a director of CFS and CAM.

39.  At a management meeting of CFS and CAM which took place on 28 September 2009 (“the September 2009 Meeting”), various issues concerning the businesses and affairs of CFS and CAM were discussed, amongst which included the proposed assignment of the Marks.

40.  In light of: (i)  the decision of CFGL to assign the Marks from CFS to a BVI company; and (ii)  the unanimous decision of the attendees of the September 2009 Meeting to implement the proposed assignment, steps were then taken to incorporate the BVI company (i.e. CTL), and upon the incorporation of CTL as a wholly-owned subsidiary, for the assignment of the Marks from CFS to CTL.

41.  The application to register the Assignment for the transfer was made on 20 November 2009, and such application was eventually approved on 1 December 2009.

42.  By January 2010, the preparation for the 2010 Listing progressed to the stage where an all-party meeting was convened, attended by representatives of the relevant professional parties consisting of Ernest & Young (“EY”)  (the auditors and reporting accountants), Quam Capital Limited (“Quam”)  (the sponsor for the 2010 Listing), T&P (legal advisors of 1019 as to Hong Kong law)  and Messrs K&L Gates (“K&L”)  (legal advisors to Quam).

43.  Following the aforesaid all-party meeting, substantive work for the 2010 Listing began.  One of the tasks undertaken after the all-party meeting was the preparation of the Licensing Agreement. According to the case of the CTL Parties, the preparation of such agreement was done in an open and transparent manner:

(i)  The Licensing Agreement first appeared in 1019’s reply to the due diligence questionnaire (the “DD Questionnaire”)  sent out by a representative of Quam, Stanley Ng.  As early as in 22 January 2010, it was already disclosed by 1019 (through Mark’s comments to the DD Questionnaire), that a Licensing Agreement would be entered into between CTL and CFS such that CFS may use the Marks at a nominal fee.

(ii)  On around 27 January 2010, Ben Wang (“Ben”), the Director of Legal & Compliance of CFS, prepared a first draft of, inter alia, the Licensing Agreement based on a standard form obtained by one Kanas Chow.

(iii)  By 26 February 2010, Ben circulated a draft of the Licensing Agreement to Quam, K&L and T&P for comments on the terms of the draft.  The draft circulated by Ben contained a similar automatic termination clause if the shareholding of the controlling shareholders fell below a certain percentage, which eventually resulted in the execution of the final version of the Licensing Agreement on 21 June 2010 with no further concern expressed by the professional parties.

44.  By mid-June 2010, the drafting process of the 2010 Prospectus was completed and the preparatory steps for the 2010 Listing came to the final stage.

45.  On 21 June 2010, by which stage the professional parties, including Quam, K&L, EY and T&P, had no further comments or concerns as to the terms of the Licensing Agreement (as revised by the legal advisor), the Licensing Agreement was formally executed by Quincy in his capacity as a director of 1019 and by one C K Chan as authorised signatory of CMSL, a corporate director of CTL.

46.  On 23 June 2010, a board of directors meeting of 1019 (“the June 2010 Meeting”)  was convened for the purposes of approving, inter alia, the 2010 Listing, the 2010 Prospectus and other “Material Contracts” including the Licensing Agreement.  The relevant documents, including the Licensing Agreement, were circulated amongst the board of directors consisting of Quincy, Rosetta, Mark, Fu Kwong Wing Ting Francine (“Francine”), Ma Yiu Ho Peter (“Peter”)  and Wu Ka Chee Davy.

47.  As recorded in the minutes of the June 2010 Meeting, the board of 1019 unanimously approved, inter alia, the Licensing Agreement and ratified the same which had been executed two days earlier on 21 June 2010.

48.  Apart from approving the terms of the Licensing Agreement, the board of 1019 also approved the contents of the 2010 Prospectus, which contained disclosures as to: (i)  the relationship between CFS and the other companies in the Original Convoy Group (“the Other Companies”); and (ii)  the Licensing Agreement.  The 2010 Prospectus did refer to the Licensing Agreement for the use of the Marks with payment of nominal sum and that 1019 did not register any intellectual property rights in its own name.  However, there was no specific reference to the Termination Clause in the Licensing Agreement.

49.  CFS also held the registration of certain “Convoy” trade marks in the Mainland (“the Mainland Marks”).   The board of CFGL at one point decided that CFS should assign the Mainland Marks to CTL.  However, any assignment of the Mainland Marks would have to be approved by the Trademark Office of the Mainland State Administration for Industry and Commerce and that would take around one year to complete.  In the circumstances, Mark considered the possibility of having a written trust agreement over the Mainland Marks between CFS and CTL.  However, no trust document was executed in the end and the Mainland Marks have remained registered in the name of CFS.

50.  On 5 December 2013, CFGL’s shareholding in 1019 fell below 30%, though by then it remained the single largest shareholder of 1019.  According to the case of the CTL Parties, the Licensing Agreement was thereby terminated pursuant to the Termination Clause.

51.  By or about 12 September 2014, another listed company known as Town Health International Group Limited (Stock code: 3886)  (“Town Health”), which was controlled by Cho Kwai Che Roy (“Cho”), acquired about 25.07% of the shares in 1019.  At that time, CFGL still held about 26.78% of shares in 1019 and remained its largest shareholder of 1019.

52.  In about April 2015, Cho introduced Ng Wing Fai (“Ng”)  to the then top management of 1019 as a representative of the Tsai family (“the Tsai Family”)  who were interested in investing in 1019.   By around 9 July 2015, the Tsai Family acquired approximately 29.85% shares in 1019 and became the single largest shareholder of 1019.  On 15 September 2015, Ng was appointed an executive director and Group President of 1019.

53.  According to Quincy, he had informed 1019 and its related companies about the termination of the Licensing Agreement, and Ng and Cho at all material times knew that 1019 and CFS had to negotiate with CTL for the further use of the Marks.  Since the CFS Parties continued to use the Marks and the “Convoy” brand without obtaining any further licence from CTL, CTL commenced the HC Action against the CFS Parties.

(ii)  The evidence of the CFS Parties

54.  The CFS Parties have called two witnesses to testify on their behalf: Shin and Ng.

55.  Shin is now a director and the Chief Executive Officer of 1019. He joined CFS as a financial consultant in 1998 and became a member of the board of CFS on 1 July 2009.  According to Shin, CFS had all along been the main operating body of the Original Convoy Group.

56.  The second witness is Ng.  He has been appointed as an executor director of 1019 since 15 September 2015.  He is also the Group President of 1019. 1019 was officially delisted on 4 May 2021.  Prior to his appointment, Ng was not involved in the management of the Original Convoy Group or 1019 and its related group of companies including CFS (“the 1019 Group”).

57.  According to Ng, some time after his appointment, it came to his attention that there was a company known as “Convoy Investment Services Limited” (i.e. CIS, which changed its name to “CIS Securities Asset Management Ltd” on 29 December 2017).  CIS was not within the 1019 Group but provided financial and investment services in competition with 1019.  It was also discovered that CIS and CTL had entered into a confirmatory licence agreement dated 17 June 2014 (“the CIS Licence Agreement”), by which CTL purportedly licensed Original Trade Mark no. 300064485 for use by CIS.  Mark, who was a director of CIS from 8 March 2011 to 15 December 2017, signed the CIS Licence Agreement on behalf of CTL.

58.  Ng claimed that CFS was the main operating arm of the Original Convoy Group.  As CFS was the original registrant of the Marks, it was against the interest of CFS for the assignment of the Marks from CFS to CTL.  According to him, CFS would suffer tremendous losses if it is not allowed to use the Marks or the “Convoy” brand which would be unreasonable and unfair to CFS.

(iii)  Assessment of the evidence

59.  There is no serious dispute about the history of the development of the Original Convoy Group and the background of the 2004 Planned Listing and the 2010 Listing.  It is also common ground that only part of the businesses of the Original Convoy Group was listed in the 2010 Listing.

60.  Quincy had been cross-examined extensively about the underlying commercial rationale of the Assignment. The CFS Parties sought to demonstrate that the Marks were at all material times owned solely by CFS, and so the Assignment had the net effect of depriving CFS of valuable assets and was thus detrimental to its interests.   Quincy disagreed with this suggestion and explained that the Marks had all along been registered for and used by the entire Original Convoy Group, a matter which is supported by various contemporaneous and objective documentary evidence.

61.  I accept Quincy’s evidence in this regard.  As pointed out by Mr Tang, counsel for the CTL Parties, the services covered by the registration of the Marks include not only the insurance brokerage limb of the Original Convoy Group’s business (which was conducted by CFS), but also expressly covered: (i)  the asset management limb (conducted by CAM)  and (ii)  the money lending limb (conducted by CCL).  This shows that the Marks were never intended to be used or owned by CFS alone.  Further, under cross-examination, Quincy explained in clear terms the circumstances under which the Marks were registered in preparation for the 2004 Planned Listing, which is fully consistent with the disclosure of the Marks in the 2004 Submission Proof.  Upon the failure of the 2004 Planned Listing, there was no imminent need to transfer the Marks to another entity as the entire Original Convoy Group remained unified and under the leadership and ownership of the Founding Shareholders.  The issue of the Marks only re-emerged in 2009 when the Original Convoy Group decided to carve out the business of CFS for listing on the Main Board of the Hong Kong Stock Exchange through 1019 as the listed entity.

62.  I also accept the evidence of Mark as the truth.  He had been extensively cross-examined on: (i)  the preparation of the Licensing Agreement; and (ii)  the disclosures in the 2010 Prospectus concerning the Marks and the Licensing Agreement.  He answered all the questions in a straightforward and direct manner, and his evidence has remained unshaken after the extensive cross-examination.

63.  It is true that there had been extensive criminal investigation centred around Cho relating to the conduct of the business of 1019.  As a result of such investigation, Mark was charged for the alleged commission of certain criminal offences.  He was eventually acquitted of these charges.  Despite such background, in the absence of any details of the charges in the criminal proceedings, I agree with Mr Tang that the court should not draw any adverse inference against Mark or indeed Quincy by reference to the criminal investigations conducted against them in their conduct of the affairs relating to 1019 or the whole 1019 Group.

64.  I now turn to the evidence of the CFS Parties.

65.  As admitted by Shin in his witness statement, he has no independent recollection of the September 2009 Meeting nor was he ever involved in any matters relating to the dealings of the Marks.  Under cross-examination, Shin confirmed this to be the case and he was therefore unable to give any meaningful evidence on the disputed issues.  His evidence is of limited assistance in this case.   

66.  I also have great reservation about the credibility of Ng’s testimony.

67.  First, Ng was not involved in the management of the Original Convoy Group at the time when the Assignment and the Licensing Agreement were made.  Most of his evidence is, therefore, based not on his personal knowledge but entirely on speculation or his personal opinion.  There is no factual basis in support of his serious accusations of wrongdoing against Quincy, Mark and other directors of CFS and 1019.  All he could say is that it was somewhat unfair for 1019 for not able to use the “Convoy” brand and the Marks.  However, he could not provide any meaningful challenge to the evidence of the CTL Parties about the commercial background surrounding the listing of only part of the business of the Original Convoy Group in the 2010 Listing and the disclosure of the Assignment and the Licensing Agreement in the 2010 Listing.

68.  Neither could he provide any reply to the fact that the “Convoy” brand and the Marks had been used by all members of the Original Convoy Group prior to the 2010 Listing.  Based on these undisputed facts, it cannot be said that the Marks were wholly owned by CFS at the time of registration.  As the Marks were owned by the whole Original Convoy Group and there were other entities which would continue to use the “Convoy” brand and the Marks after the 2010 Listing, there were sound commercial reasons for the Original Convoy Group to have made the Assignment and the Licensing Agreement in the way it did.

69.  Second, there is serious inconsistency in Ng’s evidence as to when he first discovered that 1019 or CFS did not hold the registration of the Marks.  In his witness statement, he stated that he only knew about this several months after he became a director of 1019 in September 2015.  He also elaborated in length about his purported investigations and discoveries after knowing that the Marks were registered to CTL.

70.  Yet, under cross-examination, Ng revealed for the first time that he was personally involved in the due diligence conducted by the Tsai Family of the Fubon Financial Group prior to its $1.5 billion investment in 1019 preceding Ng’s appointment to the board of 1019.   Ng further disclosed that in the course of the due diligence exercise, he had considered the 2010 Prospectus and, after several evasive and incomprehensible answers, confirmed that he knew the Marks were not registered to CFS or 1019 but to CTL.

71.  Furthermore, as described in §§58-59 of Ng 1^st witness statement, Ng was apparently prompted to investigate the issue concerning the Marks after he found out a company known as CIS, which Ng claimed he had never heard of until months after he became a director of 1019, had been using the Marks. However, this cannot be true.

72.  It had been clearly stated in the 2010 Prospectus that: (i)  CIS was one of the “Other Companies” within the private Convoy Group; and (ii)  CIS was the “Joint Lead Manager” for the initial public offering as prominently shown on the cover page of the 2010 Prospectus.  When he was asked about such disclosure in the 2010 Prospectus, Ng feigned ignorance and tried to dodge the question by suggesting that the disclosures concerning CIS were “misleading”and that no layman reading the 2010 Prospectus would be aware that CIS was part of the private Convoy Group.  However, as proudly elaborated by Ng himself, he is not, at least on his own perception, any regular layman.  He repeatedly emphasized that he is a graduate of the University of Cambridge and Harvard University, and he tried to boost himself as a highly educated and knowledgeable financial expert.  Unless he had not performed his duty of conducting due diligence properly, it would be quite absurd to suggest that he was not aware of such important disclosures in the 2010 Prospectus.

73.  Further, as pointed out by Mr Tang, Ng failed to explain the circumstances under which he, several months after becoming a director of 1019, suddenly became aware of CIS’s use of the Marks.  As suggested to Ng during cross-examination, the likely and probable reason why Ng directed his attention to CIS’s use of the Marks was due to the request made by the CTL Parties at the material time (i.e. in 2016)  to CSL (then known as “Convoy Securities Limited”)  to cease using the Marks and the “Convoy” brand name.  As explained by Mark under cross-examination, this request was made because CSL was also engaged in the securities brokerage business which competed with the business of CIS.  This request resulted in the change of name of CSL from “Convoy Securities Limited” to “CSL Securities Limited” in August 2016, which corroborates Mark’s version of events.

74.  For these reasons, I reject Ng’s evidence.

75.  It is clear that Shin and Ng were not involved in the arrangement relating to the Assignment and the Licensing Agreement.  On the other hand, two independent non-executive directors (“INEDs”)  of 1019, Francine and Peter, were amongst the directors approving the arrangement relating to the licensing of the Marks in the June 2010 Meeting.  They were still the INEDs of 1019 when the HC Action was commenced in 2018.  Yet, they did not come forward to tell the court anything about the said arrangement.  More surprisingly, as pointed out by Mr Tang, 1019 saw it fit to allow Francine and Peter to remain in the board after it “discovered” the “unfair” Termination Clause in the Licensing Agreement in 2015 or 2016, as they would be equally “culpable”  with Quincy and Ma for approving the arrangement in the June 2010 Meeting.  Due to the absence of evidence to challenge the case of the CTL Parties on the making of the said arrangement, I accept their case as the truth.

76.  On the factual issues, I therefore find that CFS was not sole owner of the “Convoy” brand or the Marks.  At most, it was only one of the users.  At all material times, it was intended by the relevant parties that the “Convoy” brand and the Marks were beneficially owned by the entire Original Convoy Group.

77.  The CFS Parties also seek to challenge the Assignment by relying on the absence of documentary record of: (i)  the legal advice which apparently endorsed the arrangement concerning the Assignment and the Licensing Agreement; and (ii)  the meeting of CFGL’s board in which the proposed Assignment was approved.  However, I do not understand how the absence of these documents can advance the case of the CFS Parties.  As mentioned above, the CFS Parties cannot put forward anything which may cast doubt on the evidence of the CTL Parties relating to the history of the development of the Original Convoy Group and the execution of the Assignment and the Licensing Agreement.

78.  In any event, the result of this case does not turn on the determination of these factual issues.  As further elaborated below, the claim of the CFS Parties is flawed in one fundamental aspect, and so the case of the CFS Parties must fail even if they succeed in persuading the court to accept their evidence on the factual issues.

THE FLAW IN THE CFS PARTIES’ CASE

79.  In any listing exercise, the controlling shareholders of the original business can decide what assets to be included in the corporate vehicle to be listed.  Hence, there was nothing wrong for the then controlling shareholders of the Original Convoy Group (“the Controlling Shareholders”)  to decide that they should retain the ownership of the “Convoy” brand and the Marks after the 2010 Listing.  Indeed, there was practical commercial reason for the Controlling Shareholders to have done so, as there were other entities in the Original Convoy Group, which were not included in the listing exercise, that would continue to use the “Convoy” brand and the Marks after the 2010 Listing.  For such reason, the result of this case would be the same even if the court were to find that CFS was the sole beneficial owner of the “Convoy” brand and the Marks, which I do not accept it to be the case in any event.

80.  1019 was listed on the Main Board of the Stock Exchange on 13 July 2910.  Before that, the listed corporate vehicle was controlled by the Controlling Shareholders through CFGL.  Under such circumstances, there was no conflict of interest when the Quincy and Mark attended the September 2009 Meeting and June 2010 Meeting and voted in favour of the arrangement for the execution of the Assignment and the licensing of the Marks.  Since the proposed listed vehicle remained in the control of the Controlling Shareholders before the actual listing, there was no conflict of interest on the part of Quincy and Mark in implementing the listing arrangement approved by the Controlling Shareholders by that time.  At that particular point in time, Quincy and Mark owed the duty to act in the best interest of the Controlling Shareholders who by then still owned the listed vehicle through CFGL.  Further, as mentioned above, there was legitimate commercial reason as to why such kind of arrangement was made, as there were other businesses of the Original Convoy Group which need to carry on their businesses using the “Convoy” brand and the Marks.

81.  Having said that, it does not mean the directors or the Controlling Shareholders could do whatever they liked.  They owed a duty, under the listing rules or even under common law, to inform the public and the potential investors clearly the nature and details of the business and assets that were included in the listing exercise, so that the latter could make an informed decision as to whether to invest in the listed corporate vehicle.  However, one should not equate such duty with the duty owed by the directors to the listed corporate vehicle prior to the actual listing.

82.  In the present case, if it was made clear in the 2010 Prospectus that there was a Termination Clause in the Licensing Agreement, I do not think that there can be any complaint, as the potential investors should have known that 1019 did not enjoy the right to use the Marks or the “Convoy” brand in the event that the shareholding of CFGL fell below 30%.  There may also be doubt in the accuracy of the statement in the 2010 Prospectus that the whole licensing arrangement was reasonable in protecting the interest of the listed vehicle.  But even assuming that there were misstatements or inadequate disclosure in the 2010 Prospectus, any persons who has suffered loss as a result may have a cause of action against the persons responsible for the inaccurate or inadequate disclosure in the 2010 Prospectus.  This is not a claim that the court has to entertain in the present case, as the claim of the CFS Parties is one based on the breach of directors’ duty on the part of Quincy and Mark in voting in favour of the execution of the Assignment and the Licensing Agreement.

83.  I also do not accept that there was any dishonesty or bad faith on the part of Quincy or Mark in voting in favour of the execution of the Assignment or the Licensing Agreement.  Apart from the fact that such serious allegation of dishonesty has not been properly pleaded, there was legitimate commercial reason as to why such kind of arrangement was made.  Even assuming that there might be insufficient or inaccurate disclosure in the 2010 Prospectus, a matter which has to be fully investigated on a different occasion, one cannot infer that there would be fraud on the part of Quincy or Mark in voting in favour of the execution of the Assignment or the Licensing Agreement. The Assignment and the Licensing Agreement cannot be said to have been made for any of the “improper purposes” as pleaded in the pleadings of the CFS Parties.

84.  For these reasons, I do not need to engage in the academic discussion between the parties as to whether the exception to the Duomatic principle is applicable here.  In any event, I see no basis to set aside the Assignment or the Licensing Agreement in the present case.

85.  Ng had kept on repeating that the Assignment and the Licensing Agreement were unfair to CFS and 1019, as they would not be allowed to continue to use the trade name “Convoy” for their businesses.  However, it is not up to the court to decide whether the deal was a fair one or not.  In particular, there were other entities in the Original Convoy Group which would continue to the trade name “Convoy” for their businesses.  The Original Convoy Group would also have a legitimate interest to protect its own goodwill.  As I have mentioned above, it would be up to the investors to decide whether to buy the shares of the listed company.  Hence, it is a matter concerning the disclosure in the prospectus and not breach of fiduciary duty on the part of the directors when they approved the arrangement.

86.  Mr Wong, counsel for the CFS Parties, argues that the “poison pill arrangement” was to enable the Controlling Shareholders or the Original Convoy Group to maintain control over 1019.  However, one must understand that, after the listing of 1019, 1019 and CFS were no longer part of the Original Convoy Group, but had become the 1019 Group with public investors.  The status of the 1019 Group as a listed entity means that CFGL could not unilaterally dictate its affairs.  As explained by Mark, in the event that CFGL is no longer a controlling shareholder of 1019 (as defined by the Listing Rules), its control or influence over the business and affairs of the 1019 Group would likewise be diminished.  For example, if the 1019 Group were to be taken over by new investors who subsequently change the business of the 1019 Group, this could have a significant impact towards: (i)the goodwill of the “Convoy” brand and the Marks; and (ii)the interests of the Other Companies also using the “Convoy” brand and the Marks.  Under such circumstances, CTL was fully entitled to renegotiate the terms of the licence in the event that the Licensing Agreement was terminated upon the triggering of the Termination Clause.  This was dictated by commercial considerations, and there was no dishonestly or bad faith involved.  Indeed, CTL placed itself under an obligation to continue permitting 1019 to use the Marks for a nominal fee for as long as CFGL was to hold over 30% of the shareholding of 1019.

87.  Neither can the CFS Parties rely on the fact that CFS is still the registered owner of the Mainland Marks.  As explained by Mark, the reason as to why the Mainland Marks were not transferred to CTL was because of the complicated procedures in getting approval for such transfer in the Mainland. The parties therefore did not follow up on the matter, but it does not affect the legitimacy of the Assignment or the Licensing Agreement.

88.  In his final submissions, Mr Wong takes a pleading point.  In their amended pleadings, the CTL Parties aver that the Marks had been held by CFS as nominee for the benefit of CFGL; whereas at the trial, the CTL Parties claim that CFS held the Marks for the benefit of the entire Original Convoy Group.  Mr Wong argues that the CTL Parties should not be allowed to run their new unpleaded case.

89.  I disagree.  The case of CTL Parties has been clear from the outset.  The claim is a simple one as CTL is the registered owner of the Marks.  In explaining why the Marks were initially held in the name of CFS, the CTL Parties trace the history of the development of the Original Convoy Group.   According to the CTL Parties’ case, it is clear that CFS cannot be the beneficial owner of the Marks, as the “Convoy” brand and the Marks had been used by all the members of the Original Convoy Group.  No matter what was the actual position of CFGL in the Original Convoy Group, there could not have been any mistake about the case of the CTL Parties.

90.  By reason of the aforesaid analysis, the result of this case does not depend on the finding as to whether CFS was the beneficial owner of the Marks when the Assignment was made in 2009.  Even assuming that CFS was the only beneficial owner of the Marks at the relevant time, there was nothing improper for the Controlling Shareholders not to include the goodwill and the marks associated with the “Convoy” brand in the listing exercise.

91.  Hence, the Original Convoy Group (through CFGL)  is the true beneficial owner of the Marks.  CTL is the corporate vehicle holding the registration of the Marks for the benefit of the Original Convoy Group.  As the Original Convoy Group has retained the goodwill associated with the “Convoy” brand, it is also the owner of the Derivative Marks.

THE DEFENCE OF ESTOPPEL AND ACQUIESCENCE

92.  The CFS Parties also seek to rely on the defence of estoppel and acquiescence.  According to them, CTL commenced the HC Action more than 4 years after the triggering of the Termination Clause in December 2013.  Prior to the pre-action letter dated 26 February 2018, CTL had never raised any complaint about the 1019 Group’s use of the Marks.  CTL had not informed the 1019 Group about the termination of the Licensing Agreement, and as a result the 1019 Group continued to expend resources in promoting the goodwill associated with the Marks.

93.  Mr Wong submits that the timing of the pre-action letter is significant.  Mark was an executive director of 1019 until 31 March 2016, and Quincy remained in a leadership position until the suspension of his duties in December 2017.  During their tenure, they did not procure the 1019 Group to cease using the “Convoy” brand or the Marks.  It was only when they ceased to be involved in the management of the 1019 Group that CTL raised a complaint about the use of the Marks by the 1019 Group.  In these circumstances, having caused CTL to lie on its alleged rights, it is unjust for Quincy and Mark now to, through CTL, deprive the 1019 Group of the use of the Marks, whilst insisting on reaping the benefits of the 1019 Group’s efforts and sacrifice.

94.  On the issue of estoppel and acquiescence, the following facts are relevant:

(i)  Quincy testified that that CTL or CIS had, prior to February 2018, communicated to the 1019 Group or any of them that they were no longer be allowed to use the Marks.  CTL engaged in negotiations with 1019 for the execution of a new licensing agreement. These negotiations did not bear fruit and were superseded by the complete fallout between the CTL Parties and the CFS Parties since December 2017.

(ii)  Under cross-examination, Ng admitted that after he found out about the Licensing Agreement and the Termination Clause, he was seriously concerned that 1019 could not continue to use the Marks.  He therefore approached Cho, whom he perceived as the “person-in-charge” of 1019 at the material time, and requested him to resolve the issue by negotiating with the CTL Parties for a new licence.

95.  As I accept Quincy to be a reliable witness, I accept his evidence about the communication as the truth.  Mr Wong complains that Quincy’s evidence in this regard is a fabrication because it was raised for the first time at trial.  I disagree.  In fact, Quincy’s evidence is supported by the admission made by Ng as stated in the last paragraph and the contents of the joint venture agreement as mentioned in §99 below.  The fact that Quincy was in the management of 1019 (thereby owing a duty to act in its best interest)  does not mean he had not made such communication, in particular it is quite clear from the evidence that the 1019 Group was in the de facto control of Cho by around 2015 and 2016.

96.  As for Ng, it is clear from his evidence that the “person-in-charge” of the 1019 Group at the relevant time was fully aware that the CTL Parties had the right to terminate the Licensing Agreement, and so it is not possible for the CFS Parties to say that it is now unfair for the CTL Parties to insist on their right under the Termination Clause or that they had acted upon the “acquiescence” on the part of the CTL Parties.

97.  In any event, the CTL Parties had not done any act which can be regarded as an acknowledgement that CTL would not exercise their right under the Termination Clause.  Though the shareholding of the Controlling Shareholders fell below 30% in 2013, it was clear that the Controlling Shareholders were, through the presence of Quincy and Mark in the management of the 1019 Group, still in control of the latter group.  The fact that CTL did not enforce its right immediately under such circumstances does not provide the Convoy Parties with a defence of estoppel or acquiescence.  In around 2015, new investors were brought in to invest in 1019.  Knowing the Termination Clause in the Licensing Agreement, the new investors knew full well that 1019 did not own the Marks and the goodwill associated with the “Convoy” brand.

98.  Neither is there any issue about the actual termination of the Licensing Agreement.  It seems that after the shareholding of CFGL fell below 30% in December 2013, CTL did not immediately inform 1019 or its Group about the termination of the Licensing Agreement.  The notification of the termination was given somewhat later in 2015 or 2016 (in any event not later than December 2017).  Even if notification was required for the termination of the Licensing Agreement, there is no issue that such notification was given before the commencement of the present proceedings.

99.  In their opening submissions, the CFS Parties rely on a joint venture agreement between CAM and a Taiwanese company (“the JV Agreement”)  as purported evidence in support of their acquiescence defence.  Under the JV Agreement, the parties intended to establish Fubon Convoy as the corporate vehicle to run their joint venture business.

100.  However, such agreement actually defeats the defence of the CFS Parties.  First, the JV Agreement expressly acknowledged CTL’s ownership of the Marks.  Second, the fact that CAM, as one of the parties to the JV, was required to procure CTL to enter into a licensing agreement with Fubon Convoy clearly shows that the CFS Parties also recognized and acknowledged CTL to be the true owner of the Marks.  Third, Clause 6.03(b)  of the JV Agreement provided for a termination mechanism of the licensing agreement to be entered into between CTL and Fubon Convoy similar to that under the Termination Clause.  In fact, the proposed term in the JV Agreement was even more draconian than the one in the Termination Clause (i.e. the threshold in the JV Agreement was set at 51% shareholding as compared to the 30% shareholding pursuant to the Termination Clause).  Under such circumstances, I agree with the observations of Mr Tang that it lies ill in the mouth for the CFS Parties: (i)  to challenge CTL’s ownership of the Marks; or (ii)  to say that the Termination Clause was unreasonable when they included a similar mechanism when contracting with the Taiwanese company to set up Fubon Convoy.

THE LIABILITY OF FUBON CONVOY AND THE RELIEF GRANTED IN THE PRESENT PROCEEDINGS

101.  I believe that I have answered all the questions in the Agreed List of Issues which are relevant in the determination of the claims in these proceedings.  I do not propose to list out the agreed issues in this Judgment or to provide specific answers to each agreed issues.

102.  According to the evidence produced by the CFS Parties, Fubon Convoy had not carried on any active business at least up to 31 December 2019.  Further, Ng confirmed that Fubon Convoy had not used the Marks or the Derivative Marks at any time prior to the commencement of the present proceedings, and he had not been cross-examined on this particular aspect of his evidence.  In the absence of any further evidence adduced by the CTL Parties about the use of the Marks or the Derivative Marks by Fubon Convoy, the trade marks infringement claim against Fubon Convoy cannot succeed.  I therefore dismiss the claim accordingly.

103.  The use of the Marks and the Derivative Marks or the threat of the use of such marks by the other entities of the CFS Parties is not disputed.   I therefore grant judgment in favour of CTL for trade marks infringement against the 1^st to 7^th Defendants in the HC Action.  Since the parties have not agreed the terms of the final order with other consequential relief, I direct the parties to submit the agreed final judgment to the court for approval within 21 days.  I also dismiss the counterclaim in the HC Action and the claim in the HCMP Action.

104.  For costs, I make an order nisi that: (i)  the costs of the main claim in the HC Action be paid by the 1^st to the 7^th Defendants to the Plaintiff; (ii)  the costs of the counterclaim of the HC Action be paid by the Plaintiffs in the counterclaim to the Defendants in the Counterclaim; (iii)  there be no order as to costs vis-à-vis the Plaintiff and the 8^th Defendant in respect of the main claim in the HC Action; and (iv)  costs of the HCMP Action be paid by the Plaintiff to the Defendants.  The costs order nisi shall be made absolute 21 days after the date of the handing down of this Judgment.