EXXON MOBIL CORPORATION v. USA AISUO LUBRICANT OIL(CHINA)LTD

HCA 2508/2013

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NO 2508 OF 2013

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   HCA 2509/2013

   HCA 2510/2013

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1. The problem of shadow companies is getting worse and something really needs to be done about it. Applications of this type are frequently coming before the courts and highlight the seriousness of the problem. In this set of proceedings, the plaintiff applies for final judgment against each of the defendants for failure to file an intention to defend and a defence. There in fact has been no response whatsoever from each of the defendants to the proceedings the plaintiff has brought against them.

2. As stated by the plaintiff, in recent years certain unscrupulous individuals, primarily from the Peoples Republic of China (PRC), have incorporated a “shadow company” in Hong Kong for the purpose of passing off or trading on the trade name or trademark of another person or entity.  As highlighted by the plaintiff, a “shadow company” has one or more of the following features:

(a)  The key part of its name is identical or confusingly similar to the reputable name or mark of another person with whom it has no connection;

(b)  Its directors and shareholders are PRC individuals;

(c)  Its secretary is a Hong Kong secretarial company and usually involved in the incorporation of the shadow company;

(d)  Its registered office address is the same as that of its secretary or those providing secretarial services to it; and

(e)  It backs licenses or otherwise authorizes or permits its name to be used by one or more persons in the PRC, usually a business entity set up by its director/shareholder.

3. The object of the person or persons behind the defendant company is to use the Hong Kong company registration and records in the PRC to pass off on the plaintiff’s trade name and trademark.  I should add that a recent trend is to incorporate a company in Hong Kong with the name that is being passed off in Chinese.  I have discussed the issue and problem with shadow companies in Power Dekor (Hong Kong) Ltd v Power Dekor Group Co Ltd, HCA 1139/2013, unreported, 9 January 2014 where I concluded that greater scrutiny needs to be employed in the approval and registration process of companies in Hong Kong. Whilst the issue of shadow companies raises a number of concerns, the primary ones are that the registration of a company in these circumstances is in furtherance of a crime or fraud, and the victim is forced to seek redress from the courts to protect its trade name or trademark.  

4. Having considered the papers filed and the submissions for the plaintiff, I am satisfied in each case that service of the relevant papers have been properly effected and that the defendant has defaulted in filing a notice of intention to defend and a defence. Accordingly, I enter judgment for the plaintiff against each of the defendants and I order the relief sought by the plaintiff in the respective summons.