Levi Strauss and Co. v. Maruichi Holdings (H.K.) Ltd. and Others

HCA009669/1991

1991 No. A9669

IN THE SUPREME COURT OF HONG KONG

HIGH COURT

____________

Coram: Before Anthony Neoh QC, Deputy Judge of the High Court

Dates of hearing: 20, 21, 29 February, 3 and 28 March 1992

______________

J U D G M E N T

______________

1. Levi Strauss & Co., the Plaintiff in these proceedings, has since about 1860 been in the business of manufacturing indigo-dyed denim fabric. For the sake of brevity I shall refer to the Plaintiff as "Levi Strauss". In 1873, Levis Strauss was granted a patent for the process of placing metal rivets on pocket corners. Subsequently, as a result of market experience, rivets are no longer used on all pocket corners. In the course of time, the products of Levi Strauss gained international recognition. "Levi Strauss & Co.", "Levi Strauss" or "Levi" became names which, through the worldwide extension of the Plaintiff's business and the sale of their products, were and remain widely known. As part of its cosmopolitan culture, Hong Kong has been a significant market of the Levi Strauss products, particularly, trousers, popularly known as ''jeans''. For this reason, Levi Strauss have expended large sums in promoting their products in Hong Kong. For the years 1988, 1989, 1990, advertising and promotional expenses of Levi Strauss products in Hong Kong were US$586,000, 573,000 and 636,000 respectively.

2. In relation to jeans, apart from the names "Levi Strauss & Co.", "Levi Strauss" and "Levi", a distinctive feature since 1873 except for the years when World War II was in progress has been a special pattern, which the Plaintiff calls an "arcuate pattern'', stitched to the back pockets. Even during these war years, the arcuate pattern was painted rather than stitched into the back pockets.

Other distinctive features consisted of:

(a)     A leather patch featuring a "Two Horse Logo" which is stitched to the waist band of each pair of jeans.

(b)     A red tab sewed to the left hand seam of the back pocket of each pair of jeans.

(c)     Buttons which bear the words or legend "^*LEVI STRAUSS & CO.* SF CAL*".

3. Levi Strauss has since the 1890's produced a particular type of jeans which they call "501" jeans. These were jeans made to a particular design. In addition to all the above distinctive features, they had button as opposed to zipper flies and the rivets used on them had the markings "-L.S. & Co.-S.F.". Furthermore, each pair of "501 jeans" have sewed onto the inside seams, a washing label, a size label, and a guarantee label, and attached to them are a hang-tag bearing the words "LEVIS STONE WASHED DENIM" and a label with the words "LEVIS ORIGINAL 501 PRESHRUNK JEANS". All these features served to identify to a purchaser that the jeans he bought was unmistakably that of the Plaintiff's, and may be satisfied that the jeans had the quality imputable to the reputation the Plaintiff had built up for its products since 1873.

4. "501" jeans were, and are, amongst the most successful and well known of Levi Strauss products. Domestic sales within the United States were US$582.9 million in 1988, decreasing somewhat to $571 million in 1990 but international sales outside of the United States increased from US$229.2 million in 1989 to $467.2 million in 1990. The Hong Kong market accounted for US$24.6 million in 1988 which increased to US$28.2 million in 1990.

5. For the protection of the goodwill in its business and products, Levis Strauss has registered a large number of trade marks worldwide. In Hong Kong, they hold the valid trade marks set out in paragraphs 3 and 4 of the Statement of Claim served in this action. Sections 27 and 28 of the Trade Marks Ordinance, Chapter 43, Laws of Hong Kong, deem a validly registered mark to be infringed by any person who, not being the proprietor of the trade mark or a registered user thereof using by way of permitted use, uses a mark identical to it or so nearly resembling it as to be likely to deceive or cause confusion, in the course of trade, in relation to any goods in respect of which it is registered, and in such manner as to render the use of the mark likely to be taken either as being use as a trade mark, or in a case which the use is upon the goods or in physical relation thereto or in an advertising circular or other advertisement issued to the public as importing a reference to some person having the right either as proprietor or as registered user to use the trade mark or to goods with which such a person is connected in the course of trade.

6. The further legal protection that this jurisdiction affords Levi Strauss is the law relating to passing off derived from the Common Law. The basic underlying principle of the law of passing off was stated in 1842 by Lord Langdale,M.R. in Perry v. Truefilt (1842) 6 Beav. 66,73 to be: "A man is not to sell his own goods under the pretence that they are the goods of another man .....". A modern restatement of this principle may be found in the speech of Lord Jauncey in Reckitt & Colman Ltd. v. Borden Inc. [1990] 1 WLR 491, at p.510-511.

7. It is a common phenomenon in developing countries that unscrupulous persons intent on making quick but dishonest profits would target for counterfeiting consumer goods which have acquired wide commercial acclaim. The garment industry has been a particularly popular target in view of the labour intensive nature of garment making. In developping countries labour cost is low and this attracts counterfeiters. Hong Kong with full employment does not by itself provide the low cost labour but its proximity to a vast and low cost labour market in the People's Republic of China ("PRC"), its position as an entrepot, and its efficient communications make it a useful base for counterfeiters. This case arose from exactly this conjunction of circumstances.

8. Levis Strauss first came across undoubted proof of counterfeiting of its jeans in the PRC when following a report, the Shenzhen . Administrative Authority for Industry and Commerce ("AIC") raided a factory and seized 850 dozens of counterfeit "Levi 501" jeans. Action in a number of major PRC cities resulted not only in the seizure of a large number of "Levi's 501" jeans in the PRC but the discovery of the part played by various Hong Kong parties in the process of counterfeiting.

The case against the Defendants comes to light

9. This case involves four connected Hong Kong parties who are said to have been involved in the process of counterfeiting and are thus joined as Defendants in this action. The relief which Levi Strauss seeks against each of the Defendants are set out in this Statement of Claim. In essence such relief boil down to:

(1)     An injunction against the defendants restraining them or their servants and agents from infringing the registered trade marks of Levi Strauss;

(2)     An injunction against the defendants restraining them or their servants and agents from passing off, causing, enabling or assisting others to pass off, whether in Hong Kong or elsewhere, goods not of the Plaintiff's manufacture or merchandise as that of the Plaintiff's.

(3)     An order for delivery upon destruction upon oath of all infringing goods in the possession, custody, power or control of the defendants;

(4)     An enquiry as to damages, alternatively, an account of profits;

(5)     Exemplary damages, alternatively, aggravated damages.

10. This case first came to light when a report was received by Levi Strauss in about July 1991 that about 10,000 paris of counterfeit "Levis' 501" jeans were en route from the port of Nagoya in Japan to Hong Kong on board the vessel, "Norasia Sun". Hong Kong Customs authorities informed Levi Strauss that the container containing this shipment had actually been in Hong Kong earlier, in fact in May 1991, but was shipped from Hong Kong to Japan, but when the Japanese customs authorities found that they were counterfeit goods, the goods were returned to Hong Kong. They arrived back in Hong Kong in about July 1991 and were then shipped to Rotterdam in another container on board the "Norasia Sun". The shipper named was the 4th Defendant. This shipment was seized in Rotterdam. Seizures in Antwerp and Zurich of other counterfeit "Levis 501" jeans produced documents which link the seized consignments to the 4th Defendant. This prompted a specific investigation of the 4th Defendant by Info-Research Company Limited acting on instructions of Levi Strauss. For the sake of brevity, I shall refer to this investigating company as, "Info-Research".

The investigations by Info-Research

11. On 21 August 1991, an investigator of Info-Research visited the offices of the 4th Defendant at Unit 2, 13th Floor, Tower 1, Harbour Centre, 1 Hok Cheng Street, Hunghom, Kowloon (again, for brevity, I shall refer to this address "the Premises"). The investigator met a Mr. Watanabe who presented a business card in which all 4 Defendants were named. Mr. Watanabe said that the 4 Defendants belonged to the same group of companies. All 4 defendants used the Premises as their common office address. On being asked about denim products, the investigator was told that he should contact Mr. Enokida who was not then away on business in the PRC. A few days later the investigator was able to contact Mr. Enokida on the telephone and managed to meet Mr. Enokida at the Premises on 2nd September 1991. Mr. Enokida's business card was in the same form as that of Mr. Watanabe, showing the 4 Defendants with one business address, that being the Premises. The investigator asked specifically about "Levi's 501" jeans made in the PRC and was promised a sample in about 10 days' time. On 11th September 1991, another investigator of Info-Research, by arrangement with Mr. Enokida, collected two pairs of counterfeit "Levis 501" jeans from a person at the Premises identifying herself as "Wandy" and who promised that a quotation for the counterfeit jeans would be sent by facsimile as soon as possible. These two pairs of jeans were produced to this Court as exhibit "LWML-4'' in an affidavit sworn by Mr. Louis Lam and filed on behalf of the Plaintiff in these proceedings on 17th December 1991. These two pairs of jeans were identified as counterfeit by Mr. Ku Kwok Keung, Finance and Administration Manager of Levi Strauss Far East Limited, which is a company associated with the Plaintiff. In paragraph 38 of his affirmation filed on behalf of the Plaintiff on 17th December 1991, he confirms that he had examined one of the two pairs of counterfeit jeans and although the pair of jeans he examined bore a hangtag, labels, a red tab, buttons and rivets which were almost identical to those found on genuine "Levi's 501" jeans, it was in fact counterfeit because:

(1)     No genuine "Levi 501" jeans are made in the PRC.

(2)     The leather patch did not appear to have been attached to the jeans before the stone-washing process, as opposed to the genuine jeans (which were also produced to this Court as Exhibit "KKKP-1" to Mr. Ku's said affirmation) which was faded and had a washed-look, as the patch in the genuine jeans is affixed before stonewashing.

(3)     The hang-tags and labels when examined closely, showed minor differences in colour to the genuine tags and labels.

(4)     The counterfeit jeans were of a poor quality and finish..

I should add that the other counterfeit pair was forwarded by Mr. Louis Lam to a member of the staff of the Plaintiff (See, para. 14 of Mr. Louis Lam's affidavit of 17 December 1991).

12. On 19 September 1991, Info-Research, by one its front companies, received a quotation from Mr. Enokida by facsimile. The quotation, which was signed by the "Enokida", was given on paper with the letters "MARUICHI'' in capital bold type above the names of the four Defendants. There is a box to the left of each name and a "x" appears in the box against the name of the third defendant. The address was given as that of the Premises. This design coincides within the business cards earlier given to Info-Research's investigators by Mr. Watanabe and Mr. Enokida. This quotation bears repeating:

"Dear Mr. Lam,

QUOTATION FOR JEAN

(1)     501 Type Stonewashed 14.50 oz Men's Jeans, Made In China, Fully Tagged, 5 Pockets, 100% Cotton.

(2)     F.O.B. Shanghai USD 6.50 per pair.

(3)     Delivery and Quantity - First 3 months, 4 containers per month (20160 x 4 containers)

After first 3 months period, we can increase the quantity which can be discuss later to you, first delivery will be 60 days after receive your L/C.

Best Regards,

K ENOKIDA"

13. Although the grammar was deficient, the intent was clear. In the circumstances it was given, there can be no doubt that the quotation was for counterfeit "Levi 501" jeans. It should be noted also that the quotation indicated that a substantial quantity (indeed 88,000 pairs/month) of 501 type jeans could be sold and delivered at the price of US$6.50 per pair F.O.B. Shanghai, and even this substantial quantity may be increased after the first three months. Bearing in mind that genuine "Levi 501" jeans are supplied by the Plaintiff to Levi Strauss (Far East) at US$14.50 per pair (the exfactory price being $12.30 per pair) (See, paragraph 15 of Mr. Yeh Chi Hsiang's affidavit filed on behalf of the Plaintiff on 19 February 1992), it is possible to imagine how such a large shipment of counterfeit jeans at the much lower price of US$6.50 can hurt the Plaintiff.

The Interim Injunction and Anton-Piller Orders

14. Armed with the results of investigations between July and December 1991, the Plaintiff applied ex parte to Mr. Justice Bewley and obtained an interim injunction restraining the 4 defendants in this action from manufacturing, printing, causing to be manufactured or printed, or ordering, and exporting or otherwise supplying jeans of the type provided to Info-Research's investigator and bearing the labels, hang-tags, patches, buttons and rivets and tabs attached to the same jeans, or bearing the trade marks registered by the Plaintiff, or bearing the distinctive features set out in the Order. Mr. Justice Bewley also granted an order in the now wellknown, Anton-Piller form, ordering the Defendants, inter alia:

(1)     to permit the Plaintiff's solicitors to enter the Premises and search for offending articles (defined as "the Relevant Goods") and removing for the purpose of copying all invoices, bills and other documents relating to the Relevant Goods (defined as "Relevant documents"),

(2)     to deliver all Relevant Goods and Relevant documents to the Plaintiff within 7 days of the service of the order, and

(3)     to make and file an affirmation within 7 days of the Order verifying that all Relevant Goods and Relevant Documents required to be delivered up have been delivered up.

15. Miss Grace Chu, Solicitor, executed the Anton-Piller Order and made and filed an affirmation on 10th January 1992 setting out the circumstances and results of the execution. In Miss Chu's affirmation, it was recorded that the Order was served on one Mr. Norio Watanabe who presented a name card in exactly the same form as that given to InfoResearch's investigator. Mr. Watanabe, on hearing Miss Chu's explanation of the Order, handed over a bundle of documents and said to Miss Chu that those were the only relevant documents. This bundle consisted only of the following documents (exhibited as "CHWG-5" of Miss Chu's said affirmation):

(1)     A writ consisting of 30 pages in the Dutch language;

(2) A letter dated 23 September 1991 to "All Souls Company Limited" ("All Souls"), a company in Japan, referring to the service of a Writ by Levi Strauss and Levi Strauss Nederland the said Company showing the time of the first hearing as 4 October 1991, 10 a.m.

(3)     A copy of an Invoice No.91075 dated April 30 1991 issued by the 4th Defendant to All Souls for 10,080 pairs of jeans, of 14.5 oz, stonewashed, at US$7.00/pair, from "Rongqi via Hong Kong By Zhu Mut No.4".

(4)     An undated copy bill of lading No.OSO7-12-91 issued by Cargo Container Co. Ltd., naming All Souls as the shipper, the consignee to order, and the 4th defendant as the "notify" party. The port of loading was shown as "Nagoya", the port of discharge, Hong Kong, and the vessel, the "Norasia Sun". The cargo was shown as "10,080 pcs Stonewashed jeans MADE IN HONG KONG (RETURN CARGO)".

(5)     An All Souls packing list dated 15 July 1991, in respect of 10,080 pcs of men's jeans.

(6)     An invoice issued by All Souls to the 4th Defendant for the 10,080 pcs, stonewashed jeans, at US$15 per piece F.O.B. Nagoya.

16. But a search made by Miss chu and her articled clerks, between 4 and 8 p.m. on 17th October 1991, unearthed a far more extensive array of Relevant Goods and Relevant Documents, namely the following:

(1)     A bundle of papers consisting of some 660 pages, exhibited as "CHWG-7, and inventoried in exhibit "CHWG-6".

(2)     36 pairs of counterfeit "Levi 501" jeans which were exhibited and produced to this Court as Exhibits "CHWG-8A B C , D, and E."

(3)     The following articles (exhibited and produced to this Court as Exhibit "CHWG-9"):

(a)     A Chinese letter on "Lee Wah Trading Co." Letterhead from Shen Da to the 4th Defendant containing 4 leather patches bearing the mark "Levi Strauss & Co" and the Levi "Two Horse"logo, referring to the effect of Stonewashing on the leather patches.

(b)     A bundle of new "Levi Strauss & Co." leather patches.

(c)     A bundle of paper labels with the bar codes 0521 7779 (various number in 4 digits)". The first two set of digits refer to the bar code for "Levi 501" jeans (see, paragraph 14 of Mr. Yeh Chia Hsiang's affidavit of 19 February 1992).

(d)     A bundle of yellow paper labels with the Levi "Two Horse" logo and the message "This is a pair of Levis".

(e)     A blue paper tag with the words "Levi's Stonewashed Denim".

(f)     A bundle of paper red tags with various Levi logos and trade marks, in particular, the mark, "Levi's^®Original 501^®".

(4)     A number of rolls of wash labels with "Levi'' and size printed on them, exhibited as "CHWG-10".

17. On 10th January 1992, Mr. Enokida made and filed an affirmation on behalf of the defendants pursuant to Mr. Justice Bewley's order. In this affirmation, Mr. Enokida confirmed that apart from the goods and documents already seized by the Plaintiffs, he has not discovered any other documents in the defendants' possession, which are required to be delivered.

18. The inter partes hearing which resulted from the ex parte order of Mr. Justice Bewley came on for hearing on 24 December 1991. This was adjourned subject to the continuation of the injunction to enable the defendants to file evidence within 28 days and for the Plaintiff to reply within 28 days thereafter. The matter came before Mr. Deputy Judge Sharwood on 14th February when a consent order was made. This order was not, however, perfected until 5 March 1992. In purported compliance of this Orders Mr. Enokida made and filed two affirmations on behalf of the defendants on 18 and 27 March 1992 respectively.

19. The evidence contained in Mr. Enokida's affirmations of 18 and 27 March 1992, it will be later seen, served to place in perfect perspective the machinations of the Defendants, in particular, the 4th Defendant, as revealed by the investigation of Info-Research and the articles and documents seized through the execution of the Anton-Piller Order. I shall return to this evidence later.

The Application for summary Judgment

Taking stock of the position so far, the evidence showed that:

(1)    The Defendants were all operating under one roof, with common managers in the form of Mr. Watanabe and Mr. Enokida.

(2)    Not only did the Defendants provide, as samples, two pairs of counterfeit "Levi 501" jeans, but as many as 36 pairs of counterfeit jeans were found in the Premises.

(3)    The Defendants had offered to sell large quantities of counterfeit "Levi 501" jeans as per the samples provided to the investigators of Info-Research.

(4)    The appearance of the Plaintiff's trade marks in the counterfeit samples already involved their use as trade marks in the course of trade. The provision of the samples therefore irrefutably amounted to an infringement of the Plaintiff's trade marks by virtue of the provisions of section 27 of the Trade Marks Ordinance (the Plaintiff's trade marks having been validly registered in Part A of the Hong Kong Trade Marks Register).

(5)    It is a nice question as to whether the provision of counterfeit sample jeans followed by a quotation as has happened in this case completes the tort of passing off. The basis of the tort lies in the invasion of a proprietary right. That right lies in the "property in the business or goodwill (which is) likely to be injured by the (Defendants') misrepresentation": per Lord Parker of Waddington in A.G. Spalding & Bros. V. A.W Gamage Ltd (1915) 32 RPC 273, at P. 284. The normal situation which completes a tort of passing off is the sale of counterfeit goods as goods of the Plaintiff, but that cannot exhaust the limits of the tort. The offering for sale of large quantities of counterfeit goods, as has happened in this case, would surely indicate to the prospective buyer that there exists a large alternative (but counterfeit) source of supply. This would clearly engender no confidence in the supply of the genuine article. In other words, the value of the genuine article is debased, and the goodwill of the Plaintiff thus suffers. In these circumstances, I have no doubt that the tort of passing off was complete when the quotation was received by Info-Research's investigators.

(6)    Thus under the rubric of trade marks infringement and passing off, the Defendants' activities were actionable. In the absence of a credible defence, there can be no doubt that the Defendants would be liable to a permanent injunction and an enquiry as to damages.

(7)    Further, the articles exhibited as "CHWG-9" in Miss Chu's affirmation of 10 January 1992, showed that the Defendants were in possession of paraphernalia which contained the Plaintiff's trade marks. One document in this exhibit links four of the leather patches containing the Levi " 2 Horse'' logo to an organisation that identified itself as "Shen Da". In fact, documents seized in the Premises showed Shen Da to be the Shanghai factory which produced jeans later found to be counterfeit "Levi 501" jeans and seized in Europe. In the light of the Defendants' quotation to Info-Research to supply counterfeit "Levi 501" jeans "FOB Shanghai", the balance of probabilities fall firmly in favour. of the inference that the Defendants were in possession of the articles exhibited in "CHWG-9" for the intended purpose of passing off counterfeit "Levi 501" jeans as the genuine article. Furthermore, the circumstances clearly indicates that the articles were intended to be used in the course of trade (the Defendants having provided counterfeit "Levi 501" jeans samples and having quoted for such jeans "FOB Shanghai") and they have never been authorised by the Plaintiff to use such marks. It goes without saying that such use would clearly have involved an infringement of section 27 of the Trade Marks Ordinance. The mere fact of possession, in these circumstances, would therefore have entitled the Plaintiff to a quia timet injunction to prevent the threatened sale, but the documents seized showed more than threatened sale or infringement.

(8)    The small number of documents volunteered by Mr. Watanabe and the far more extensive collection which resulted from the search in execution of the Anton-Pillar Order showed the Defendants', and in particular, the 4th Defendant, were at the centre of an international conspiracy to manufacture counterfeit "Levi 501" jeans in the PRC and sell and deliver them to Europe through Hong Kong.

20. In these circumstances, the Plaintiff, not surprisingly, decided to apply for summary judgment, and, after serving a statement of Claim together with particulars of infringement on 14 January 1992, a summons to this effect was taken out on 21 January 1992.

21. As I have said earlier, the provision of sample counterfeit "Levi 501" jeans, and the quotation constituted of a breach of section 27 of the Trade Marks Ordinance and commission of the tort of passing off, and in the absence of a credible_. defence, would have entitled the Plaintiff to an injunction and an enquiry as to damages. Furthermore, the finding of paraphernalia in the Defendants' Premises, clearly pointed to irrefutable evidence of threatened passing off or infringement of the Plaintiff's trade marks, and the Plaintiff would on this evidence alone, have been entitled to a quia timet injunction. However, that is not the sole basis of the application for summary judgment. That application was made on the basis of documentary evidence obtained from the Defendants which showed actual passing off and infringement of the Plaintiff's trade marks on a wide and international scale.

22. As the evidence showed international counterfeiting operations and the laws of this jurisdiction apply only within the boundaries of this territory, it will be necessary to isolate the part played by the Defendants and see, if in the absence of a credible defence, such part attracts the application of our laws and, if so, whether the Plaintiff is entitled to the remedies it seeks.

23. The documentary evidence presented the following picture to this Court:

(1)    That the Defendants, whilst legally separate from one another, represented themselves as acting as a Group with common premises and managers, and although the documents show the principal involvement of the 4th Defendant in the international counterfeiting operations, it is impossible to assume that the 1st, 2nd and 3rd are unaware of the activities of the 4th Defendant, and at least to the extent of their having shared their premises, managers and stationery, they have facilitated the activities of the 4th Defendant and have therefore exposed themselves to the equitable jurisdiction of this Court.

(2)    That the Defendants, principally by the 4th Defendant, procured PRC factories (mainly one Shen Da Factory in Shanghai and another, Ling Chun Factory in Rongqi in the Pearl River Delta) to manufacture counterfeit "Levi 501" jeans. (It should be remembered that there was no authorised manufacture of "Levi 501" jeans in the PRC, so all such jeans are counterfeit, see, para. 38 of Mr. Ku Kwok Keung's affirmation of 17 December 1992).

(3)    That the leather patches, hang-tags, tabs, washing labels, and bar-code paper tags and all other paraphernalia which enable the counterfeit jeans to be passed off as genuine "Levi 501" jeans were printed in Hong Kong, and supplied by the 4th Defendant to the two PRC manufacturers for attachment to the counterfeit jeans.

(4)    That the 4th Defendant would generally sell such goods to an entity by the name of Barclay Trading Corporation with an address in Golders Green, London, and arrange for their delivery. In respect of the counterfeit goods made by the Ronqi factory, the goods are transported to Hong Kong by river boat and then loaded onto an ocean vessel for transport to a European port.

24. The documents seized from the Premises show that as early as 20 September 1990, Mr. Enokida was in receipt of a copy of an order sheet (PO No. CR/01) (see p. 918-919 of the Exhibit Bundle and hereafter I shall use page numbers in the Exhibit Bundle, unless otherwise indicated) from Hikariki International Inc. to Crown Faith Limited for the manufacture of 21,600 pairs "Levi Strauss Original MADE IN USA-501-0115 PREWASHED" by a Factory named as "LIN CHUN COMPANY LIMITED IN CHINA". The description of the jeans as "MADE IN USA" and their manufacture in China represent a contradiction in terms, and the order cannot be viewed as anything but a transparent disguise for" an order for counterfeit goods.

25. In a fax dated "Sep 12, 90" (see, p. 922-923, 925, 927 and 928) from Barclay acting by one named "Ben Phillipson" to Mr Enokida, an order for 21,600 pcs. was made for jeans to be shipped from "China to Embrach, Switzerland, on conference line vessel". No brand name was stipulated but strict instructions were given that tags, labels, leather patches, and the coloring on the patch should conform exactly to the samples given to Mr. Enokida. The telling sign were the bar codes stipulated by Barclay. The bar codes were stated to be "05217779 6163 (and other numbers)". As has earlier been stated (see paragraph 16 of Mr. Yeh Chia Hsiang's affidavit of 19 February 1992), they were the bar codes used by the Plaintiff for "Levi 501" jeans. The document goes on to state that a commercial letter of credit will be opened and telexed directly to "your (Mr Enokida's) bank in Hong Kong". The price of the goods was US$6.50 per pcs. C & F Embrach, and at 21,600 pcs, the total price was US$140,480. The fax stressed the following:

"Remember that the inside of the label (sic) should have "Made in USA" just as it appears on the jean I gave you."

"There must not be any Chinese (sic) writting (sic) on the cartons or jeans".

The letter ended by stating the shipping date should be Oct. 19, 1990 and that Mr. Phillipson "will be in Hong Kong on Oct 24-28. During which time I (Mr. Phillipson) would like to go with you (Mr. Enokida) to China and visit the factory. I hope that you will have started production by then !!". The punctilious attention to copying details and the bar code used suggest no other answer but that Barclay and Mr. Enokida were involved in the manufacturing and sale of counterfeit "Levi 501" jeans.

26. The documents seized from the Premises indicate that the counterfeiting activities between the 4th Defendant and Barclay began in earnest in 1991. In paragraph 2(e) of Mr. Enokida's affirmation of 18 March 1992 (filed on behalf of the Defendants) he deposed to a shipment by the 4th Defendant to Nagoya, Japan, for and on behalf of All souls Company Limited ("All souls") of 10,080 pairs of "Levi 501" jeans on about 30 April 1991, the 4th Defendant's invoice number being 91075. He further deposes to his belief that this consignment was seized in Rotterdam. Indeed, this consignment was seized sometime between August and December 1991 (see paragraphs 4 to 6 of Miss Chu's affirmation of 17 December 1991). A study of the documents disclosed by Mr. Enokida as Exhibit "KE-5" of his aforesaid affirmation and the documents seized in the Premises indicate a web of intrigue spanning Hong Kong, Japan, China, and London. These documents indicate the following sequence of events:

17 April 1991     All souls applied to Chuo Shinkin Bank for an irrevocable letter of credit. The beneficiary was named as the 4th Defendant. Under "other documents", the application required "CERTIFICATE OF ORIGIN (MADE IN USA)" covering Levis' Jeans 501-0115, stonewashed with "MADE IN USA" TAG. Shipment was stated to be from "CHINA OR H.K. PORT TO NAGOYA PORT". The credit number was handwritten as "008 - L/C - 115621", for US$151,200. (P. 363).

23 April 1991      Hikariki faxed what purports to be two Certificates of Origin naming one "Innovative Clothing Exchange" of Florida as the exporter and the foreign port of unloading to be both Hong Kong and Rongqi, China, for "364 CTN" and 13,104 pcs of "LEVIS STRAUSS 501-0190 100% COTTON DENIM JEANS''. (P.364, 365, in which I noted the fax date and time to be "Apr. 23, 1991 02:15 PM and 24.04.91 06:15 and 06:14").

30 April 1991     Invoice No. 91075 was issued by the 4th Defendant to All souls, shipment stated to be from "Rongqi Via Hong Kong by ZHU MUT NO. 4 to NAGOYA", JAPAN. The price was stated to be US$15/pc, total $151,200 drawn on documentary credit No. 008 LC 115621, (P. 368). An ocean bill of lading dated 30.4.91 was issued by Morrison Maritime Corporation, naming "Guangdon Provincial Textiles Imp. & Exp. Corporation "(Group)" as the exporter and All souls as the notifying party covering the goods for shipment to Nagoya. The bill stated: "T/C FM RONGQI, CHINA TO NAGOYA VIA HKG EX "GUANG BO YUN 30" ETA HKG 3/MAY 91" by WAN HA 205 N009. (P. 497)

15 July 1991     All souls issues invoice to 4th Defendant for sum of US$151,200, at US$15/pc. F.O.B. Nagoya, to Hong Kong. (P. 499)

24 July 1991     Through Bill of Lading No. 0507-12-91 issued by Cargo In Container Co. Ltd received by 4th Defendant (as evidenced by date chop on document) notifying 4th Defendant that the same goods were being shipped from Nagoya to Hong Kong on the Norasia sun, voyage no. 9112-3. The goods were characterised as "Return Cargo". (P. 498)

29 July 1991      Hikariki by one Hiroyuki Hojo signs an agreement for the sale of 13,104 pairs of "Levi's Jeans 501-0190" to Trans Meridian Trading Inc. Invoice 097 was issued contemporaneously with this agreement, stating the jeans to be "Levi's Jeans 510-0190, stone washed, made in China", quoting US$10/pc. (without US Certificate of Origin) and US$12/pc. (with US Certificate of Origin). The price was for CNF Rotterdam. (see P. 513-516). The interesting aspect of this set of documents is that at the top of P. 513, the handwritten words: "Ask Mr. (Kanji character, not reproduced here) keep this Fax at his hand not in the file", appear.

12 Sept. 1991      All souls confirms that they will release the same goods on the Norasia sun to Mr. Hojo of Hikariki International Inc., Rotterdam Office. (P. 669)

13 Sept. 1991     The 4th Defendant confirms release of the goods to Hikariki, Rotterdam. (P. 668)

27. These events show clearly that in order to collect on the letter of credit, the 4th Defendant must produce a "Certificate of Origin" certifying that the jeans it was shipping was "Made in the USA". As Mr. Enokida has admitted in his affirmation of 18 March 1992 that the jeans were supplied by Ling Chun at a price of US$7.00 C and F Nagoya per pair, they could not have been made in the USA. The "Certificates of Origin" faxed by Hikariki stating that the jeans were made in the USA cannot therefore be genuine. The sale to All souls would have netted the 4th Defendant a handsome profit of US$ 8.00 per pair, but for the discovery of Japanese customs that they were counterfeit. The documents showed that the goods were shipped through Hong Kong, and then returned to Hong Kong, and then re-shipped to Rotterdam. Whilst the goods were en route to Rotterdam, the 4th Defendant received documents from Hikariki that they were to be sold at prices which varied if they had a U.S. Certificate of Origin or not. It was apparent that this was a surreptitious deal in view of the handwritten notation at the top of the written agreement between Hikariki and Trans Meridian that the faxed agreement should be kept at hand and not in the file. The conclusion which the Court must reach on the basis of these documents and Mr. Enokida's admissions is that the 4th Defendant clearly knew, from the very beginning, that the jeans to be supplied by Ling Chun in China were counterfeit "Levi 501" jeans, but that in order to collect on the L/C, it had been ready to accept and tender what it must have known was a false Certificate of Origin. When the counterfeit jeans were discovered, it received back the goods and re-shipped the same to Hikariki, again, with the knowledge that Hikariki may well use the false Certificates of Origin.

28. As the documents show that Mr. Enokida and the 4th Defendant were at the centre of an international conspiracy to manufacture counterfeit "Levi 501" jeans in the PRC, and then to ship and sell them through Hong Kong to parties abroad, it is necessary for this Court to state the nexus which attract the application of the law of this jurisdiction. Lord Jauncey in Reckitt & Colman Ltd v. Borden Inc. (1990) 1 WLR 491, at P. 510, approved of the following statement of the laws by Lord Diplock in star Industrial Co. Ltd v. Yap Kwee Kor [1976] F.S.R. 256, at p. 269:

"A passing off action is a remedy for the invasion of a right of property not in the mark, name or get-up improperly used, but in the business or goodwill likely to be injured by the misrepresentation made by passing off one person's goods as the goods of another. Goodwill, as the subject of proprietary rights, is incapable of subsisting by itself. It has no independent existence apart from the business to which it is attached."

29. To attract the application of our laws, the Plaintiff will have to show that it has a goodwill within Hong Kong and that, such goodwill is likely to be injured by the misrepresentation made by the passing off. The Plaintiff clearly has a substantial goodwill in Hong Kong as its products, in particular, its "Levi 501" jeans are popular products in the Hong Kong market.

30. The issue of invoices and packing lists in Hong Kong, albeit of goods to be supplied from outside of Hong Kong, involves a misrepresentation on the part of the 4th Defendant to All souls that the goods the 4th Defendant was supplying in the course of trade were goods of the Plaintiff. Although there is some evidence, in view of the fact that it was All souls who applied for the letter of credit requiring a "Made in USA" Certificate of Origin for goods to be shipped from a "China or H.K. port", that All souls may be a co-conspirator and, therefore, could not have been deceived, the invoice and subsequently, shipment from Hong Kong of the counterfeit goods to All souls would have placed counterfeit goods in the hands of All souls which would have enabled it to deceive others. Equally, the subsequent shipment of the counterfeit goods from Hong Kong to Rotterdam would have placed the goods in the hands of Hikariki, which but for the seizure, would have enabled Hikariki to pass them off as goods of the Plaintiff. Counterfeit goods are instruments of deception and a Hong Kong party who contrives to place such goods in the hands of others, even if they are abroad, knowing that they would be passed off as the goods of the Plaintiff, takes the first step which will inevitably result in a misrepresentation. He therefore commits a misrepresentation in Hong Kong (see, John Walker & sons Ltd & Others v. Henry Ost & Co. Ltd & Another [1970] RPC 489). In the circumstances, the 4th Defendant clearly committed a misrepresentation in relation to the All souls consignment.

31. Having held that the misrepresentation took place in Hong Kong, this Court will have to consider whether the Plaintiff's goodwill in Hong Kong is likely to suffer as a result of such misrepresentation. It is a question of fact in all cases as to whether such injury was likely. In this case, the counterfeit goods would but for the discovery by the Japanese customs have been passed off as the Plaintiff's goods in Japan, and but for the seizure in Rotterdam, would have been passed off as the Plaintiff's goods in Europe. The Plaintiff's products have undoubtedly acquired an international goodwill. As the Hong Kong market is an open one, with no restrictions as to imports and exports, and in view of the ease with which the Plaintiff's products may be moved across national boundaries, I find it impossible to hold that knowledge of the discovery of counterfeit products passed off as that of the Plaintiff's would not affect the Plaintiff's goodwill in Hong Kong. The first question which I would ask myself when buying a pair of Levi jeans (assuming I could return to my jeans wearing days), if I had heard that counterfeit "Levi 501" jeans had been passed off in large quantities in Japan or Europe, would be : "Is this one likely to be a counterfeit ?".

32. The All souls consignment came through Hong Kong on two occasions when they came within the control and legal possession of the 4th Defendant. The goods, now admitted to be counterfeit, bore the Plaintiff's trade marks which are validly registered in the Hong Kong Trade Marks Registry. As these were goods sold by the 4th Defendant, the goods and thus the trade marks on them cannot but have been used by the 4th Defendant in the course of trade as trade marks, thus making them guilty of an act of infringement within the jurisdiction of section 27 of the Trade Marks Ordinance. My attention was drawn to a patent case where it has been held that possession for the purpose of trade albeit for a short time within the jurisdiction amounted to an infringement, see: Morton-Norwich Products Inc. v. Intercen Limited (1976] F.S.R. 513, at p. 528-529. I draw comfort from this decision but base my decision on the finding that, in the present circumstances, the 4th Defendant's sale of the counterfeit goods and their being brought within the jurisdiction for onward sale abroad, represent an unauthorised use in the course of trade within the terms of section 27 of the Trade Marks Ordinance, and thus an infringement of the Plaintiff's trade marks.

33. I now return to the articles exhibited as Exhibits "CHWG-9" and "CHWG-10" in Miss Grace Chu's affirmation of 10 January 1992. 1 had earlier said that I would have been prepared to grant the Plaintiff a quia timet injunction based on the fact that such articles were found in the Premises and thus, in the possession of the Defendants. That was based on the inference that the circumstances in which they were found pointed to the threatened commission of a tort of passing off and a threatened infringement of the Plaintiff's trade marks. A study of the documents seized from the Defendants and Mr. Enokida's affirmations of 18 and 27 March 1992, now show that there have in fact been the commission of the tort of passing off and infringement of the Plaintiff's trade marks.

34. Numerous documents seized from the Defendants (p. 457-463, 489-492, 783-796, 813-814, 823, 834, 837) showed that the 4th Defendant was ordering and paying for large quantities of tags, labels, and bar-code labels of the kind exhibited in Exhibits "CHWG-9" and "CHWG-10". These are tags and labels which represent that the jeans they are attached to are "Levi 501" jeans. These documents also showed that the 4th Defendant was liaising with Shen Da of Shanghai and suggested that the articles (tags, labels, etc.) were to be attached to "Levi 501" jeans made by Shen Da. Mr Enokida now states in his affirmations of 18 and 27 March 1992 that the articles were ordered from Sony Printing Company Limited and one Mr Lai Tien Te for Barclay and Ling Chun respectively. He also states that the articles were sent to Shen Da and Ling Chun. Bearing in mind that these articles clearly identify the jeans made by the Shen Da and Ling Chun factories in the PRC as "Levi 501" jeans made in the USA, they undoubtedly constitute instruments by which a deception can be perpetrated by Shen Da and Ling Chun and the persons who eventually offer such articles for sale abroad. Even assuming that Mr. Enokida's claim in his affirmations of 18 and 27 March 1992 that the 4th Defendant was merely acting as an agent for Barclay or Ling Chun .is correct (which other documents seized in the Premises, in fact, do not bear out, the 4th Defendant's part being far more than this), the. supply of the articles undoubtedly involved:

(a)     commission of the tort of passing off by the 4th Defendant, in that Mr. Enokida was aware that the labels and tags would be attached to counterfeit "Levi 501" jeans manufactured in the Shen Da and Ling Chun factories. Together with the jeans, the labels would enable a seller to pass off the counterfeit "Levi 501" jeans as the goods of the Plaintiff (see, John Walker Case, supra); and

(b)     using, in the course of trade, the trade marks contained in the articles as trade marks with the terms of section 27 of the Trade Marks Ordinance, and thus infringing the Plaintiff's trade marks.

35. The documents seized from the Defendants reveal a substantial number of other infringements which are set out in the particulars of infringements served with the statement of Claim. I do not intend to refer to all of them, suffice it to say that I am satisfied that the documents show a substantial case against the Defendants which, if unanswered, would certainly entitle the Plaintiff to an injunction and an enquiry as to damages.

The Defence Case

Order 14, Rule 3(1), states:

"3. - (1) Unless on the hearing of an application under rule 1 either the Court dismisses the application or the defendant satisfies the Court with respect to the claim, or the part of a claim, to which the application relates that there is an issue or question in dispute which ought to be tried or that there ought for some other reason to be a trial of that claim or part, the Court may give such judgment for the plaintiff against that defendant on that claim or part as may be just having regard to the nature of the remedy or relief claimed (emphasis added)."

36. The Court of Appeal has established the principle that in summary proceedings under Order 14, the onus is on the defendant to satisfy the court, on a balance of probabilities that there is a triable issue and the defendant's credibility will be tested on the affidavits filed against the conduct of the defendant and the contemporaneous documents: see, Bhagwandas Kewaleram Murjani and Others v. Bank of India [1989] HKLR 586.

37. The main substance of the defence evidence lies in the 2nd affirmation of Mr. Enokida filed on 17 February 1992.

38. Firstly, Mr. Enokida fails to deal at all with the provision of the counterfeit samples and the quotation to the investigators of InfoResearch. I am asked by Miss Anita Yip, for the Defendants, to disregard such evidence in view of the inherent unreliability of "trap orders" and I was referred to paragraph 30-32 of Clerk and Lindsell on Torts, 16th Edition, where it is stated that orders elicited in the manner practised by the investigators of Info-Research are "looked upon with suspicion, and has often been disregarded where the trap is not a fair one". The adversarial procedure of the Common Law frowns upon subterfuge but I cannot think that the circumstances described by Mr. Lam of Info-Research could be said to be unfair and, indeed, can be properly characterised as subterfuge. The Defendants were approached in the ordinary course of their business, and the samples and quotations were freely given in such course. Mr. Enokida makes no complaint of any untoward action by the investigators of InfoResearch. In the circumstances, I must hold that the evidence of the provision of the counterfeit samples and the quotations remain intact. As no defence is put forward, I must on this evidence alone give summary judgment to the Plaintiff for an injunction and an enquiry as to damages.

39. Secondly, Mr. Enokida makes passing reference only (see, paragraph 18 of his affirmation of 17 February 1992) to the articles exhibited as "CHWG-9" and "CHWG-10" in Miss Grace Chu's affirmation of 10 January 1992. He stated that he had been asked by Barclay to make enquiries about "Levi's" labels in or about late 1990 and since he thought Shen Da was an authorised dealer, he had assumed Barclay had obtained the approval of Shen Da.

40. At the centre of the Defendant's defence is the assertion that it was an innocent agent who believed that the manufacturers in China were authorised manufacturers. Mr. Enokida sets out the basis of this belief in paragraphs 4 to 9 of his 2nd affirmation. In summary, he said that he came to the conclusion that Ling Chun factory in Zhongshan was an authorised representative of Levi's after visiting the factory and having been shown agreements between the Ling Chun factory and Levi Strauss for the production of Levi products (the documents exhibited as "KE-3" showing that the orders were for "SILVER TAP BOYSWEAR 100% cotton denim jeans" and "Men's 100% cotton woven twill pants"). As for Shen Da, Mr. Enokida said Shen Da approached him and convinced him that they could search for authorised manufacturers of Levi in the PRC, and later, Shen Da came back to him and Barclay that they had located such an authorised manufacturer.

41. According to Mr. Enokida, he began to order "501" type jeans from Ling Chun when he was first approached by Hikariki, and "it did not occur to me that this was illegal as I was dealing in genuine "501" jeans of the Plaintiff's". I find this assertion incredible in the light of the order sheet (PO No. CR/01, at P. 918-919) when Hikariki was clearly ordering "Levi Strauss Original MADE IN USA-501-0115 PREWASHED'' jeans to be manufactured by the Ling Chun factory in China.

42. As for Shen Da, Barclay's fax of "Sept 12, 90" (at P. 922-923) must surely put pay to any pretence that it was producing or was able to produce, through an authorised representative genuine "501" Levi jeans. Barclay and Mr. Enokida, as may be seen from these documents alone, were clearly conspiring to produce counterfeit "Levi 501" jeans in China.

43. Mr Enokida protests (see, paragraph 19 of his 2nd affirmation) that:

"19.      It was only in or about May 1991 when I was informed by Barclay about the seizure of some of the Plaintiff's jeans in Switzerland and Zurich that I realised that the manufacturers were not authorised manufacturers."

This statement, too, is flatly contradicted by the Defendants' own documents. Certainly in late 1990, Mr. Enokida must have known that the two PRC factories could not be producing genuine "Levi 501" jeans.

44. The modus operandi of the 4th Defendant's dealings with Barclay were summarised in paragraph 14 of Mr. Enokida's 2nd affirmation, as follows:

"14.   (a)      The arrangement was that all the jeans would be produced by Zhongshan Ling Chun in P.R.C. including the affixing of all the labels, leather patches and buttons. The goods would then be loaded on to a vessel in the P.R.C. and shipped direct from a port of P.R.C. to whichever port that was named by Barclay.

(b)     The 4th Defendant was only responsible for facilitating communication between Ling Chun and Barclay, the arrangement of letters of credit and the preparation of shipping documents including the issuing of shipping invoices.

(c)     Further, the 4th Defendant was required as the people in P.R.C. could not handle the shipping arrangement, in particular, there was no freight forwarder in Guangdong.

(d)     By this arrangement, the 4th Defendant would receive from Barclay a commission of US$0.50 for each pair of jeans purchased by Barclay from Ling Chun.

(e)     In the premises, the 4th Defendant was only a middleman who was interposed between Barclay and Ling Chun for the purpose of carrying on some necessary ministerial functions."

45. These allegations, it can be discerned from arguments from Counsel for the Defendants, were designed to exonerate the defendants. The primary assertion is that the Defendants stand in the same position as that of innocent wharfingers or retailers who are unaware of the deception practised by other persons. The Defendants' own documents do not, however, show such innocence but instead, as I have earlier demonstrated, they show Mr. Enokida and the 4th Defendant conspiring with Hikariki, Barclay, and the two Chinese factories in the manufacture, shipment, and sale of counterfeit "Levi 501" jeans. Indeed, the Defendants have not provided a single shred of evidence displacing the inferences which can be clearly made, and have been so made by this Court, from the documents.

46. Documents disclosed by Mr. Enokida as "KE-3" in his affirmation of 18 March 1992 showed that counterfeit "Levi 501" jeans sold by the 4th Defendant to Tri-state by Invoice No. 91070 at US$6.20/pc FOB China, were bought from Shen Da at US$4.70/pc, netting the 4th Defendant a profit of US$1.50/pc. The All souls consignment showed that the 4th Defendant would have made a profit of US$8/pc. such profit margins do not square with the allegation of that the 4th Defendant was a mere commission agent at US$0.50/pc.

47. But what pushes the defence case to the absolute limits of incredibility is that despite Mr. Enokida's admission that he became aware of the fact that Ling Chun and Shen Da were not authorised manufacturers of the Plaintiff in May 1991, the documents clearly show that the 4th Defendant was, after this date, still arranging for and sending Levi tags and labels for "Levi 501" jeans to the two PRC factories and shipping and selling counterfeit "Levi 501" jeans. "KE-6" and "KE-9" exhibited to Mr. Enokida's affirmations of 18 and 27 March 1992 reveal that orders for Levi labels were given as late as July 1991. On June 10, 1991, the 4th Defendant invoiced Casual Wear Trading Limited for 20,160 pcs. of "stone washed jeans" (see P. 367). As late as November 1991, Mr. Enokida was writing to "Grand Yip Ind's Co. Ltd." (P. 447) suggesting that jeans could be made in Nanjing and Guangdong and that an L/C should be issued in favour of the 3rd Defendant and Ling Chun Co. Ltd. The telling sign in this document lies in the sentence: "Description of Goods must be men's stonewashed 14.5 oz denim jeans. Don't mention Levi's 501 made in USA on L/C". On August 19, 1991, Duplaix & Associates (P. 483) wrote to Mr. Enokida and the 3rd Defendant enclosing "a letter of intent for a shipment of 700,000 pairs of Levi's 501 stonewashed 14.5 oz jeans C & F Rotterdam at the price of US$16.00 per pair. I will advise the client that you require 45 days after receipt of L/C due to banking delay procedures in the PRC". The Duplaix letter went on later to ask: "Do you think that we will need to provide you with a Certificate of Origin from the US Customs as you suggested ? such a large order may attract attention. Please advise". This letter strongly suggests that the jeans would be made in China and that they were counterfeit. The 3rd Defendant by letter dated 17 July 1991 was telling Duplaix that samples were being sent from Nanjing (P. 491). In a letter to Shen Da dated 4 July 1991 (P. 522-524), in a paragraph headed "Levi jeans (Stonewashed)", specific packaging instructions were given to show the packages as "gifts", "due to strictness of U.S. Customs". On July 2, 1992, Mr. Watanabe was quoting to one Mr. Ralph Roads, for "Levi's 501" type FOB China/pair'' at 12 oz, 6.00 and 14.5 oz of 6.8 (P. 962).

48. Thus, at a time, when Mr. Enokida, by his own admission, knew that the Chinese factories were unauthorised representatives, the 3rd and 4th Defendants continued to order counterfeit Levi labels and thus put instruments of deception in the hands of others to enable them to pass off counterfeit goods as the goods of the Plaintiff. In addition, they continued to buy and sell the counterfeit goods. Although the delivery took place outside of Hong Kong, the 3rd and the 4th Defendants were clearly setting in motion in Hong Kong a chain of events which will inevitably result in the end user being deceived. This, in my view, clearly constitutes passing off.

49. Mr. Enokida says that the 1st Defendant has never dealt with any counterfeit Levi's jeans as alleged by the Plaintiff or at all (see paragraph 2(a) of his 2nd affirmation). However, he fails to explain why the 1st Defendant had by its former name invoiced Barclay for 21,600 pcs. of "men's stonewashed jeans" from "Rongqi China by Lighter via Hong Kong" (P. 742-743). The Ling Chun factory, it can be seen from numerous documents, shipped from Rongqi.

50. Mr. Enokida also said that the 2nd Defendant had not traded in counterfeit "Levi 501" jeans or at all. A document entitled "Final Work Report" (P. 968) headed with the name of the 2nd Defendant refers to Shen Da and the production of "501 type" and "LV-jeans - stonewashed". In the light of other documents showing the role of Shen Da, the 2nd Defendant was at least allowing its property to be used in the unlawful activity of counterfeiting the. Plaintiff's goods. Indeed, that is what Mr. Enokida says in his 2nd affirmation, where he states that "all the four Defendants do not separate their stocks of stationeries", and that he was certain that "the Final Work Report letterhead must have been borrowed by either the 3rd or 4th Defendant".

51. As I have earlier mentioned, the fact that the 1st and 2nd Defendants share premises and common managers, and their willingness to allow both their addresses and stationery to be used for the purposes of the 3rd and the 4th Defendants must make them amenable to the equitable jurisdiction of the Court. The fact is that counterfeit jeans and labels were found in their common premises. Even if they are innocent, an injunction would have been available as would an enquiry as to damages, see, Henry Heath Ld. v. Frederick Gorringe Ld [1924] RPC 457 and Upmann v. Elkan [1871] L.R.Ch. App. 130.

52. Finally, Miss Yip asks me to apply the decision in Miles v. Bull [1969] 1 QB 258 in which the last words of Order 14 Rule 3(l), i.e. "that there ought for some other reason to be a trial'', were construed as being very wide by Mr. Justice Megarry (as he then was) and that the words "have special significance where, as here, most or all of the relevant facts are under the control of the plaintiff, and the defendant would have to seek to elicit by discovery, interrogatories and cross-examination those which will aid her'' (see P. 265-266). Miss Yip puts her arguments on the basis that there is a great number of alleged instances of infringements which the Defendants will have to unravel and that it is unjust for the Defendant to have to deal with all the Plaintiff's allegations in an application for summary judgment. I cannot accept this argument, as for the purpose of granting an injunction and directing an enquiry as to damages, I need not find for the Plaintiff on all acts of infringements alleged. Indeed, I need only find one. However, I have found more than one in this case for which either no defence or no credible defence exists. Furthermore, in the enquiry, discovery would be available to all parties and the Defendants cannot in any way be disadvantaged.

53. In the circumstances, I shall grant the relief in the terms of paragraphs (1) to (6) of the summons dated 21 January 1992. As to relief (7), (8) and (9), I shall be prepared to hear further arguments. I shall also be prepared to hear arguments on the basis of taxation, if the Plaintiff should wish to make them. This case reveals an international conspiracy to injure the goodwill of the Plaintiff in a significant manner. As a conspiracy is indictable in Hong Kong where the acts in furtherance of the conspiracy are committed in Hong Kong (see: Archbold's Criminal Pleadings, Evidence and Practice, 1992 Edition, paragraph 33-34 and 35), I am minded, unless persuaded otherwise, to refer these papers to the Director of Public Prosecutions.

Submission on costs and residual matters

54. Upon hearing Counsel for the parties, I confirm and order that summary judgement be entered in favour of the plaintiff in the terms of paragraphs (1) to (9) of the summons of 21 January 1992, save as to the basis of taxation of costs as hereinbelow ordered.

55. Counsel for the Plaintiff submits that the defence case has not been bona fide conducted in that it was clear that Mr. Enokida from the time he filed his affirmation of 17 February 1992 had been disingenuous with the Court. Accordingly, costs on an indemnity basis should be ordered against them. Counsel for the Defendants submit that the Defendants were only exercising their constitutional right to defend the action and in any event, the 1st to 3rd Defendants are not as culpable as the 4th Defendant. The jurisdiction to order the payment of costs on an indemnity basis should generally only be exercised in a case where the Court's process has been abused, for example, where time had been wasted or where pleas which ought never have been made were made. In the present case, I have found that Mr. Enokida's assertions relating to the 3rd and the 4th Defendants are flatly contradicted by documents found in their possession, and the bulk of the arguments before me were directed to showing that this is so. Thus, I must come to the conclusion that although the 3rd and 4th Defendants were exercising their undoubted constitutional right to defend this action, their conduct must draw the odium of the Court in the form of an order that they do pay the costs of the action in the terms of paragraph (9) of the summons of 21 January 1992 on an indemnity basis as from 17 February 1992 when Mr. Enokida filed his second affirmation, the earlier period being taxed on a party to party basis. The position of the 1 st and 2nd Defendants is wholly different as they might possibly be innocent parties who have merely facilitated rather than deliberately assisted the 3rd and 4th Defendants. As to the 1st and 2nd Defendants, the usual party to party basis of taxation is applicable and I therefore order that they pay the costs of the Plaintiff in terms of paragraph (9) of the summons of 21 January 1992, such costs to be taxed on a party to party basis. For the avoidance of doubt, this order as to costs does not affect the costs of the enquiry as to damages which are reserved.

56. It remains for me to thank Counsel for both sides for their interesting and careful arguments and hope that they would not consider it a discourtesy if I did not refer to all the cases cited to me.

Representation:

Mr John Yan instructed by M/s. Fairbairn Catley Low & Kong for Plaintiff/Applicant.

Miss Anita Yip instructed by M/s. C.M. Li, Ho & Chow for Defendants.