La Chemise Lacoste S.A. v. Crocodile Garments Ltd.

HCA002401A/1995

HCA2401/95

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

HIGH COURT ACTION NO. 2401 OF 1995

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Coram : Hon. Mr. Justice Chung in Chambers

Date of Hearing : 16 July 1999

Date of Handing Down Decision : 30 July 1999

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D E C I S I O N

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Introduction

1. There was an earlier action between the Plaintiff and the Defendant herein. The earlier action was settled and the parties entered into a "Settlement Agreement" and a "Licence Agreement" both dated 1 May 1980. They also entered into a "Distribution Agreement" dated 1 July 1980 (collectively "the 3 Agreements in 1980").

2. The Plaintiff brought the present action alleging that the Defendant had breached the "Settlement Agreement" in applying for the registration in mainland China ("the mainland") of marks which are confusingly similar to the Plaintiff's mark (called the "Emblem Mark" in the Statement of Claim). While the Defendant does not dispute having made the said application, it denies that there was any breach and contends inter alia that:-

(a) upon a true construction of clause 6(9) of the Settlement Agreement, the Plaintiff has irrevocably acknowledged that the marks involved in the applications for registration in the mainland do not cause nor are capable of causing confusion and they are not confusingly similar to the Plaintiff's mark and therefore there was an estoppel by convention to such effect: paragraph 7 of the Amended Defence;

(b) in any event, the Defendant's marks are not confusingly similar with the Plaintiff's marks: paragraph 7(d) of the Amended Defence;

(c) upon a true construction of clause 6(5) of the Settlement Agreement (which relates to the registration of marks outside Hong Kong), the marks referred to therein did not refer to the Defendant's mark depicted in the Defendant's registration mark number 19/1954 (in Hong Kong): paragraph 7(f) of the Amended Defence.

3. In its Re-Amended Reply, the Plaintiff contends inter alia that clause 6(9) of the Settlement Agreement relates specifically and only to the use by the Defendant of trade marks in Hong Kong but that clause is irrelevant to such use in countries or territories other than Hong Kong. Paragraph 7 of the Re-Amended Reply ("the subject plea"), which is the subject matter of complaint in the Defendant's summons, reads as follows:-

"Further or in the alternative, the Plaintiff further avers that at all material times since the Plaintiff and the Defendant entered into the Settlement Agreement, the Distribution Agreement and the Licence Agreement, the Plaintiff and the Defendant have accepted and have acted on the basis that any device mark consisting of a representation of a crocodile, in particular, a device mark consisting of the representation of a crocodile in the 19/1954 Mark or a device mark of the types the subject matter of the Subject Applications [that is, the Defendant's applications in the mainland the subject matter of the action herein], is confusingly similar to the Emblem Mark. In the premises, the Defendant is estopped by convention from alleging or pleading otherwise. Further or in the alternative:-

(a) The Defendant has represented to the Plaintiff that any device mark consisting of a representation of a crocodile as aforesaid would be confusingly similar to the Emblem Mark. The Plaintiff has relied on such representation to its detriment. Accordingly, the Defendant is estopped from alleging or pleading otherwise.

(b) In so far as may be necessary and if, which is denied, the true construction of the Settlement Agreement, the Licence Agreement or the Distribution Agreement, are as alleged in paragraphs 7(c) and (f) of the Re-Amended Defence, the Plaintiff alleges that the said Agreements have been varied by the conduct of the parties as particularized hereunder to the effect it was agreed that any device mark consisting of a representation of a crocodile as aforesaid would be deemed to be confusingly similar to the Emblem Mark." (italics and bold type supplied).

Particulars were given under the subject plea. This paragraph can be divided into 3 parts: (1) the plea of estoppel by convention ("the estoppel by convention point"), (2) the plea of estoppel by representation ("the estoppel by representation point") and (3) the plea of variation("the variation point").

4. The Defendant took out a summons asking for the subject plea to be struck out; alternatively, further and better particulars to be given for this paragraph.

The Striking Out Application

5. According to paragraph 1 of the summons, this part of the application was brought on 2 grounds, namely, the subject plea:-

(a) discloses no reasonable cause of action;

(b) may prejudice, embarrass or delay the fair trial of the action.

6. In the Defendant's written skeleton argument, the following grounds were relied upon:-

(a) the subject plea sets up an independent cause of action which (as explained by Mr Scott during the hearing) is further to the cause of action set out in the Statement of Claim;

(b) it contains a plea which should have been set out in the Writ and Statement of Claim (by way of obtaining leave to amend it rather than re-amending the Reply);

(c) it fails to plead properly an estoppel or variation which is known to law;

(d) it attempts to open an examination into negotiations which were "privileged" (alternatively, irrelevant/inadmissible) in nature.

During the hearing, Mr Scott also submitted that some of the particulars given under this paragraph are inconsistent with the body of this paragraph.

(1) Principles applicable

7. Unless otherwise indicated below, the following legal principles are not disputed by the parties.

8. It is only in plain and obvious cases that a pleading is struck out: The Supreme Court Practice 1999, para. 18/19/6, 18/19/10, 18/19/13 and 18/19/17. Thus,

(a) a question of law requiring serious discussion should not be dealt with by an application for striking out but under Ord. 14A or Ord. 33 r. 3;

(b) where a pleading discloses a cause of action with some chance of success, or raises some issue fit to be decided by a Judge, merely because it is weak or unlikely to succeed is not a ground for striking it out;

(c) the complaint that there is a lack of particulars is not a ground for striking out. The proper course is to ask for further and better particulars;

(d) the pleading of an alternative or inconsistent case is not embarrassing.

9. The doctrine of "estoppel by convention" was discussed in Chitty on Contracts (1994) 27th ed.:-

"Estoppel by convention resembles estoppel by representation in that it prevents a party from denying facts, and one would therefore expect estoppel by convention to operate only where its effect was defensive in substance. The question where estoppel by convention is so limited was discussed in the Amalgamated Investment & Property case [Amalgamated Investment & Property Co. Ltd. v. Texas Commerce International Bank Ltd. [1982] Q.B. 84] where, however, it was not necessary to decide this point. This action was brought because X bank had sought to apply money due from it to A Co. under another transaction in discharge of A Co.'s alleged liability under its guarantee of B Co.'s debt. Hence the effect of the estoppel was to provide X bank with a defence to A Co.'s claim for a declaration that it was not entitled to apply the money in that way. Everleigh L.J. said: 'I do not think that the bank could have succeeded in a claim on the guarantee itself.' Brandon L.J. seems to have taken the view that the bank could have sued on the guarantee, but to have based that view on the ground that the loan agreement between A Co. and X bank imposed an obligation on A Co. to give the guarantee: hence it was that agreement, not the estoppel per se, which would have given rise to X bank's cause of action, if it had sued on the guarantee. Lord Denning M.R. seems to have expressed the principle of estoppel by convention in such a way as to enable it to give rise to a cause of action but he was alone in stating the principle so broadly. In The Vistafjord [1988] 2 Ll. Rep. 343 the estoppel similarly operated defensively. ... It is indeed possible for estoppel by convention (as it is for promissory estoppel) to deprive the defendant of a defence, and so to enable the plaintiff to win an action which otherwise he would have lost; but even in such cases the estoppel does not create the cause of action, for the facts giving rise to the cause of action exist independently of the estoppel. No other authority squarely supports the view that estoppel by convention can, of itself, create a new cause of action ... ": see para. 3-083 of Chitty (referred to in the Defendant's List of Authorities).

10. The equitable doctrine of estoppel by promise or representation was described in Chitty as follows:-

"For the equitable doctrine to operate there must be a legal relationship giving rise to certain rights and duties between the parties; a promise or representation by one party that he will not enforce against the other his strict legal rights arising out of that relationship; an intention on the part of the former party that the latter will rely on the representation; and such reliance by the latter party." (para. 3-066).

The learned authors then dealt with the individual ingredients in detail in the subsequent paragraphs: see para. 3-068 To 3-076).

Paragraph 3-067 of Chitty said:-

"It has, indeed, been suggested that the doctrine can apply where, before the making of the promise or representation, there is no legal relationship giving rise to rights and duties between the parties, or where there is only a putative contract between them. ... But it is submitted that these suggestions mistake the nature of the doctrine, which is to restrict the enforcement by the promisor of previously existing rights against the promisee. Such rights can only arise out of a legal relationship existing between these parties before the making of the promise or representation. To apply doctrine where there was no such relationship would contravene the rule (to be discussed in para. 3-075 below) that the doctrine creates no new rights."

11. The suggestion referred to in Chitty above was not accepted by Mr Scott. He insisted that the promise or representation must have been made subsequent to an existing legal relationship.

12. In Amalgamated Investment & Property, Lord Denning discussed the potential use which could be put to the course of dealings of the contracting parties subsequent to the contract. He said:-

"... it is often convincing evidence of a course of dealing after it [the contract]. There are many cases to show that a course of dealing may give rise to legal obligations. It may be used to complete a contract which would otherwise be incomplete ... It may be used so as to introduce terms and conditions into a contract which not otherwise be there ... If it can be used to introduce terms which were not already there, it must also be available to add to, or vary, terms which are there already, or to interpret them. ... " (at p. 121A-D) (italics and bold type supplied).

While Mr Scott did not argue that this passage is or has been shown to be wrong, he argued it was only made by Lord Denning in that case, and was not supported by any of the other two members of the Court of Appeal, or by any other case.

(2) Does the paragraph plead an independent cause of action?

13. Mr Scott argued that the subject plea goes beyond the cause of action advanced in the Statement of Claim. In the subject plea, the Plaintiff stated inter alia that:-

"the Plaintiff and the Defendant have accepted and have acted on the basis that any device mark consisting of a representation of a crocodile, in particular, a device mark consisting of the representation of a crocodile in the 19/1954 Mark or a device mark of the types the subject matter of the Subject Applications ... " (italics and bold type supplied).

He argued that this plea is wider than the alleged breach of the Settlement Agreement claimed in the Statement of Claim because that cause of action was only built on an alleged infringement of the Plaintiff's mark (or the Emblem Mark).

14. I do not agree. This plea of "any device mark consisting of a representation of a crocodile" in the subject plea has to be understood in context. I consider that the purpose of the subject plea is that if the construction of the Settlement Agreement (advanced in the Statement of Claim) contended for by the Plaintiff is rejected by the Court, the Plaintiff will argue that the Defendant is estopped from denying such a construction. I do not consider the Plaintiff is seeking to widen its claim against the Defendant by the subject plea.

15. This is confirmed by the averments in paragraph 6 of the Re-Amended Reply:-

"The Plaintiff avers that in entering into the Settlement Agreement, the Distribution Agreement and the Licence Agreement, the Plaintiff and the Defendant accepted that any device mark consisting of a representation of a crocodile, in particular, a device mark consisting of the representation of a crocodile in the 19/1954 Mark or a device mark of the types the subject matter of the Subject Applications ... " (italics and bold type supplied).

This plea is in essence a repetition of the averments in the Statement of Claim (although there is a reference therein to (a) not only on the Settlement Agreement but also the other 2 agreements in 1980, and (b) not only the Emblem Mark but also "any device mark ... "). The part of paragraph 6 in italics and bold type is exactly the same as the part of the subject plea in italics and bold type. The Defendant raised no complaint that paragraph 6 is wider than the claim in the Statement of Claim, or that the Defendant had been embarrassed by this paragraph: see para. 9(iii) of Mr Scott's skeleton submissions. No application to striking out paragraph 6 has been made by the Defendant, whether on the ground that it constitutes a new cause of action because a wider case has been advanced, or on other grounds.

(3) Should the paragraph have been pleaded in the Statement of Claim?

16. I do not agree with Mr Scott's argument over this point. First, as he accepted, if I decide against the Defendant on the "new cause of action" argument (see the earlier heading), this point falls together with the said argument.

17. In any event, I find this argument to be inconsistent with paragraph 15 of the Defendant's written skeleton argument which referred to the Hong Kong case of Chang Ka Pio v. Niceson Investment [1993] 2 H.K.C. 393. The holding in that case referred to by the Defendant was that the plaintiff there did not employ the estoppel as supportive of his cause of action, but as a shield to defeat the attacks made by the Defendant on his cause of action. Since the Defendant refers to this case, I consider that the Defendant must have accepted it to have been correctly decided. That being the case, there is nothing wrong for the subject plea to be made in the Re-Amended Reply rather than the Statement of Claim.

18. Further, the observations in para. 3-083 of Chitty (relying on the view of Everleigh L.J. in the Amalgamated Investment case and the decision in The Vistafjord) support the Plaintiff's argument that the subject plea should properly be made in the Re-Amended Reply and not the Statement of Claim.

(4) Does the paragraph contain a defective plea?

19. In relation to the estoppel by convention point, there are two ways in which Mr Scott advanced this part of his arguments. First, the subject plea omits to include the relevant ingredients needed for making a proper plea of estoppel by convention. Secondly, the particulars given thereunder are insufficient to support the subject plea.

20. Mr Scott referred to the ingredients of estoppel by convention set out in Yuen Ching Yuen v. Union Insurance [1998] 2 HKC 294 (at pp. 304-05). Further, he referred to Form 892 of Bullen & Leake & Jacob's Precedents of Pleadings (1990) 13th ed., p.1150 which reads:-

"The plaintiff is estopped from denying ... Both the plaintiff and the defendant mistakenly assumed that the defendant would be ... which both parties mistakenly believed ...

Pursuant to this common mistaken assumption the defendant took the following action ...

It would not be just to allow the plaintiff to deny the mistaken common assumption made by the parties as pleaded above ... " (italics and bold type supplied).

21. Based on the above, Mr Scott argued that the subject plea is defective in form. I do not agree. There is nothing in the Rules of the High Court which expressly requires an estoppel to be pleaded in any specific manner. As regards the ingredients set out in the Yuen Ching Yuen case, they may be matters which the Plaintiff will need to establish at trial, but it does not follow that all the ingredients need to be set out in the pleading. The plea can be validly raised provided it is specifically referred to and all the relevant facts in support have been set out: see R.H.C. Ord. 18 r. 8(1) and also Ord. 18 r. 7(1). This is supported by the footnotes in Bullen & Leake & Jacob under the heading "Pleading" (relating to "Estoppel by convention"):-

"Every estoppel must be specifically pleaded ... It is not, however, necessary to plead estoppel in any special form so long as the matter constituting the estoppel is stated in such a manner as to show that the party pleading relies upon it as a defence or answer ... " (at p. 1148).

22. I therefore consider that Form 892 of Bullen & Leake & Jacob is only an example of such a plea, and does not lay down a specific format.

23. The particulars given under the subject plea refer to (1) the particulars given under paragraph 6 of the Re-Amended Reply, (2) the application and registration of a number of trade marks by the Defendant, and (3) negotiations and correspondence between the Plaintiff and the Defendant pertaining inter alia to the use, registration and licensing in other countries or territories of the Emblem Mark and crocodile device marks between 1988 and 1994. The particulars given under paragraph 6 of the Re-Amended Reply take up about one page of the pleading. Further to the above, the Plaintiff has given further particulars in the "Answer to Request for Further and Better Particulars" dated 29 June 1999 ("the Answer dated 29 June"). This last document consists of some ten pages. Without going into the details, it refers to correspondence and meetings, negotiations and discussions, the granting of licence and payment of royalties, acknowledgment by the Defendant of ownership of the mark, and oppositions to and registration of various marks by the Defendant.

24. Mr Scott argued that when each of the particulars was considered, it is either irrelevant or neutral. The first difficulty with this approach is that no evidence has been filed by either side to show what was the exact content of the matters particularized. Secondly, I do not consider that this is plainly and obviously a case where the particulars should be considered individually and not collectively. In the end, I agree with Mr Ma's submissions that they are matters more appropriate to be considered at trial, rather than in this kind of application. I therefore also do not agree that the particulars given are plainly and obviously insufficient to support the subject plea.

25. In relation to the variation point, Mr Scott argued that the Plaintiff fails to plead the consideration in support thereof. I consider that this is a plea based on the observations of Lord Denning in Amalgamated Investment & Property at p. 121A-D (set out under the sub-heading "Principles applicable") that "... [estoppel by convention] can be used to introduce terms which were not already there, it must also be available to add to, or vary, terms which are there already, or to interpret them ... ". Mr Ma also relied on Chitty, para. 3-061. I agree with him that the variation point in its present state is not so defective as to justify it to be struck out.

(5) Does the paragraph refer to "privileged" or irrelevant material, etc.?

26. I do not agree with Mr Scott over this point either. As stated above, no evidence was filed in this application. There is no evidential basis for me to conclude whether the matters set out in the particulars were "privileged" (I understand Mr Scott used this word to refer to "without prejudice" or "subject to contract" materials). The particulars themselves do not make it plain and obvious (whether expressly or by necessary implication) that they were "privileged".

27. In his skeleton submissions, Mr Scott submitted that "If it is not apparent from the pleading that they were privileged as being for the purpose of attempting to resolve disputes it is nevertheless clear they must be irrelevant and/or inadmissible" (paragraph 26 thereof). I do not see how the question of relevance and/or admissibility can properly be decided based purely on the pleadings (especially when the argument that the matters were "privileged" has already been rejected). In any event, having examined the particulars in question, I do not consider any of them are so plainly and obviously irrelevant and/or inadmissible that they ought to be struck out.

(6) Is the paragraph inconsistent with some of the particulars?

28. Mr Scott contended that some of the particulars refer to facts and matters prior to the dates of the three Agreements in 1980. Mr Ma fairly conceded that factually that is correct. Mr Scott submitted that those particulars are inconsistent with the part of the subject plea which stated "... at all material times since the Plaintiff and the Defendant entered into the Settlement Agreement ... " and ought to be struck out on this ground alone.

29. The part of the subject plea referred to by Mr Scott is related to the estoppel by convention point. There are however two other parts, namely, the estoppel by representation point and the variation point. An examination of the Answer dated 29 June shows that the Plaintiff relies on facts and matters subsequent to the dates of the three Agreements in 1980 in support of the estoppel by convention point and the facts and matters prior to 1980 were only relied on by the Plaintiff in relation to the estoppel by representation point. Thus, the apparent inconsistencies contended for in fact do not exist.

30. Mr Scott in his reply argued that the facts and matters set out in the particulars which occurred prior to 1980 ought to be struck out even if they were only given in support of the estoppel by representation point. This is because an estoppel can only arise out of a promise or representation made subsequent to the existence of a legal relationship giving rise to certain rights and duties: see Chitty, para. 3-066 (set out herein earlier). This argument is not strictly related to the "inconsistency" point, but is an argument that the particulars given are irrelevant to the estoppel by representation as a matter of law.

31. However, as stated in Chitty, para. 3-067 (also set out herein earlier), there have been "suggestions" in a number of cases that the doctrine can apply even when there is no legal relationship before the promise or representation. The English cases referred to in Chitty include Evenden v. Guildford City F.C. [1975] Q.B. 917, 924C-E (per Lord Denning) and Pacol v. Trade Lines Ltd. [1982] 1 Ll. Rep. 456, 466. Although the Evenden case was overruled in Secretary of State for Employment v. Globe Elastic Thread [1980] A.C. 506, the House of Lords expressly did not examine the validity or scope of the doctrine of promissory estoppel (see p. 518G-H per Lord Wilberforce). A similar "suggestion" was also made in Australia in Walton Stores v. Maher (1988) 164 C.L.R. 387.

32. The law relating to this aspect of the doctrine is therefore not so plain and obvious as Mr Scott contended.

The Application for Further and Better Particulars

33. Paragraph 2 of the Defendant's summons asks for further and better particulars as per the request annexed to the summons. That request was dated 2 March 1999 and has been served on the Plaintiff prior to the hearing on 29 March 1999. As stated earlier, the Answer dated 29 June was given by the Plaintiff to the request dated 2 March 1999. Based on the Answer dated 29 June, Mr Ma argued that this part of the summons is technically not before the court. I understand him to mean that particulars have already been given as requested, and if the Defendant should consider them to be inadequate, it should ask for further and better particulars of the particulars given in the Answer dated 29 June.

34. Mr Scott contend that in law there is no place for further and better particulars of further and better particulars. I do not agree.

35. First, particulars of a pleading served subsequently under a request or order become part of the pleading: The Supreme Court Practice 1993 (not found in the 1999 ed.), para.18/12/40. Further, the party whose pleading was accused of having offended rules of pleading or lacking in particulars should be entitled to know the basis of the accusation. Such a requirement accords with the general procedural requirements in our civil litigation system that litigants should not be taken by surprise. It also helps to avoid litigation because the accused party can decide whether the accusation is validly made against the pleading and respond accordingly. This may be the underlying policy regarding Ord. 18 r. 12(6) [application for particulars by letter before summons]. It may also be the policy for requiring:-

"The request ... for further and better particulars of a pleading should identify the paragraph ... by its number or letter ... as set out in the pleading in question, and should specify, clearly and precisely, the further and better particulars under each such number or letter, which are being requested ... ": The Supreme Court Practice 1991 (not found in the 1999 ed.), para. 18/12/40.

36. There is no justification why a different policy or set of rules should apply to further and better particulars given for a pleading than that applicable to the original pleading (or the original particulars given in a pleading). In fact, there is good reason for applying the same policy or set of rules regarding further and better particulars.

37. Thirdly, the learned authors of The Supreme Court Practice 1991, Vol. 1 seem to recognise the existence of "further and better particulars of further and better particulars" when they stated "This form of the further and better particulars applies to further and better particulars of further and better particulars of a pleading, as well as to voluntary particulars": para. 18/12/40 [under the heading "Form of particulars"].

38. One exception to the above observations appears to be where contumelious conduct was involved, for example, a party has given an answer to interrogatories "so palpably insufficient as to show want of bona fides": see Kennedy v. Lyell [1882] W.N. 137, or was in contumelious default in complying with an order for particulars: Grand Metropolitan Nominee v. Evans [1992] 1 W.L.R. 1191.

39. As stated earlier, the Answer dated 29 June spans over some ten pages. I do not find them to be "so palpably insufficient as to show want of bona fides". For the reasons set out above under this heading, I consider that the Defendant should (if it is considered appropriate) ask for further and better particulars of the Answer dated 29 June, instead of proceeding with this part of the application.

40. It is therefore unnecessary for me to consider whether the Answer dated 29 June is sufficient. If it had been necessary to do so, I agree with Mr Ma's submissions that the complaint of inadequacies relates to matters that are either trivial or pedantic.

Delay

41. Further to what have been said herein regarding the part of the summons asking for further and better particulars, I consider that my discretion should be exercised to refuse this part of the summons because the application was made at a late stage: see, for example, The Supreme Court Practice 1999, Vol. 1, para. 18/12/56 citing Astrovlanis v. Linard [1972] 2 Q.B. 611. This action was commenced in March 1995 and the Re-Amended Reply was filed on 22 January 1999. The summons for directions was heard by the Listing Judge on 1 April, 4 November and 14 December 1998 and the case has been set down in the fixture list for a 7-day trial in October 1999. Directions for trial, including the filing and service of witness statements, have already been given on 1 April and 4 November 1998. According to the directions, witnesses statements were to be filed and served by 13 November 1998. Whatever detailed information the Defendant wants or needs to know about the Plaintiff's case should be set out in the witness statements which, if not served already, would be served very shortly.

Conclusion

42. For the above reasons, the Defendant's summons is dismissed.

Costs Order Nisi

43. There is no apparent reason why a costs order nisi should not be made pursuant to Ord. 42 r. 5B(6) or why costs should not follow the event. The application is therefore dismissed with costs to the Plaintiff in any event.

Representation:

Mr G. Ma, S.C., inst'd by M/s Johnson Stokes & Master, for the Plaintiff

Mr J. Scott, S.C. leading Mr P. Carolan, inst'd by M/s Baker & McKenzie, for the Defendant