Ten-ichi Co. Ltd v. Jancar Ltd. and Others

HCA002193/1989

Headnote

Tort - Passing off - whether action lies when no active business in Hong Kong - International reputation and goodwill - Damages whether recoverable if sustained outside the jurisdiction.

1989 No. A2193

IN THE SUPREME COURT OF HONG KONG

High Court

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BETWEEN

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Coram: The Honourable Mr. Justice Sears in Chambers

Date of Hearing: 11, 12, 13, 14, July 1989

Date of Delivery of Judgment (in Court): 19 July 1989

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J U D G M E N T

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1. The Plaintiffs are the owners and operators of some 45 restaurants in Japan, trading as 'Ten-ichi' or 'Tempura Ten-ichi' shown by certain characters; these are set out in an affidavit of Mr. Driver; the characters are the same in both Chinese and Japanese. The name in Japan is a household name. In 1988 the company spent approximately $9M on advertising and had a turnover of HK$850M

2. In 1987 in a programme called 'Lifestyles of the Rich and Famous' which is broadcast on American television and I think also shown on Hong Kong television, a well-known programme concerning gourmet living of rich and famous people, the Ten-ichi restaurant in Tokyo, Ginza, was chosen as one of the ten best restaurants in the world. The name has achieved an international reputation which can be seen from a variety of publications exhibited in the affidavit.

3. In the 1987 edition of 'Eating-out in Tokyo', the restaurant is featured and at that time the average price of a meal for one person was US$75. Although no doubt well-known in Asia, the Plaintiffs had no active business in Hong Kong.

4. In June 1989, the Plaintiff's solicitors had certain correspondence with a variety of well-known organisations with regard to the restaurant opening in Hong Kong, possibly in the new Carlton; the Mandarin and other hotels were also approached. Prior to that in about mid-January 1989, a Mr. Yaboki, who was the Managing Director of the Plaintiffs and the inventor of the name 'Ten-ichi' travelled to Hong Kong to examine sites for a Ten-ichi restaurant. He was staying at the Nikko hotel, a well-known Japanese hotel in Tsim Sha Tsui, when he saw in a magazine called 'Hong Kong & Guangchow Visitors' at page 59 in a section on restaurants, an advertisement for a Teri-ichi Japanese restaurant in Prat Avenue.

5. Not only was it his name, but the characters and the style of lettering were identical to his restaurant. It must have given him a shock to see what appeared to be one of his restaurants being advertised, when he was in Hong Kong specifically to examine the location of one of his own restaurants here.

6. How did this happen? The Defendant company was incorporated in June 1988 - the directors are Hong Kong businessmen who had opened a Chinese restaurant in Central. They found a site in Prat Avenue and decided to open a Japanese restaurant which they did in October 1988. An affirmation has been sworn by Kwong Ying Chan, a Director of the defendant's company who explains how the restaurant now operates. It is a very large restaurant. It offers a full range of Japanese cuisine, including sashimi, teppanyaki and barbecue; it has 70 employees and the monthly sales are over HK$lM. It operates from 12 noon to 3 pm and from 6 pm to 6 am. This gentleman is a design consultant and he sets out how it was that the name of the plaintiff's restaurant was chosen. He said a number of names were considered and they thought Ten-ichi carried an auspicious Chinese meaning, the characters used meant it was the first or best in the world and they thought that was an appropriate name to use. A friend obtained from a Ten-ichi restaurant in Japan some placemats on which were shown the name and the characters and they deliberately chose to copy that name, the writing of the name and the characters.

7. The plaintiffs claim, in this action, damages for passing-off. What is before me at the moment is an application for an interlocutory injunction restraining the defendants from using the plaintiff's name. It is of obvious importance to both parties -the plaintiffs are an international group and they say their goodwill is being damaged and their exploitation of their business interest into the Hong Kong is similarly being damaged - the Defendants assert they are a successful restaurant and a change of name may cause them serious harm.

8. In view of the urgency, I give this oral Judgment and as some matters of importance are raised, I consider it right to give judgment in open court. Might I say how grateful I am to counsel for their very clear and powerful submissions and taking me gently through a branch of the law where my feet have seldom strayed. I have had about 20 authorities cited and I hope I will be forgiven if I do not deal with all the various points raised, but at the end of the day the real issues before me are factual ones.

Legal Principles

9. The basic legal principles are : first, "It is an action able wrong for the defendant to represent for trading purposes that his goods are those or that his business is that of the plaintiff and it makes no difference whether the representation is affected by direct statements, or by using some of the badges by which the goods of the plaintiff are known to be his .....". ".... The question whether the use of particular words or badges is calculated the pass-off the defendant's goods as those of the plaintiff is one often of the difficulty, but it is in substance a question of fact". (Kerly on Trade Marks at p.344) Secondly, This is an interlocutory injunction and I must therefore apply the principles found in American Cynamid Co. v. Ethicon Limited (1975) AC396.

10. The case before me today highlights a problem which has been touched on in number of authorities. Will the Hong Kong courts protect a foreign trader whose name is being used, without his consent, by a competing business, when he himself has no active business here? This, in view of the proximity of Hong Kong to other such major international centres as Singapore, Tokyo, Bangkck and Kuala Lumpur raises a matter of some importance.

11. It appears clear that this is an evolving field of law, and that a Court must respond to the changes which have occurred in international communications. The large number of tourists crossing and re-crossing national boundaries; the speed and efficiency of modern technology cause business reputation to be more widely spread and recognised than in the past. Courts in other jurisdictions have responded to the change - see for example Orkin Exterminating Co. Inc. v. Pestco of Canada (1985) 19 DLR 90 and Dominion Rent A Car Ltd. v. Budget Rent A Car Systems (1987) 2 NZLR 395.

12. I have also been assisted by a decision of Hunter J in Hong Kong, where in a trademark dispute Hong Kong Caterers Ltd. v. Maxims Ltd. (1983) HKLR 287 the learned Judge in his usual clear manner posed the issue between two apparently conflicting lines of authority in the United Kingdom and between the United Kingdom and the Antipodes "In essence the issue is whether the existence of a trading reputation within the jurisdiction of the relevant court is a pure question of fact; or whether the law has regard only to a relevant reputation, namely one which exists in fact and is manifested locally by an actual commercial presence or actual customers. Another way of phrasing the issue is to ask at what point in its development will the courts of Hong Kong recognise an existing or developing international reputation." Since that decision in 1983, courts in other jurisdiction have recognised international reputation (See e. g . Dominion Rent A Car (Supra) New Zealand Court of Appeal of five Judges and Orkin (supra) Ontarie Court of Appeal).

13. Hunter J. reviews a number of the authorities cited to me and although dealing with a trade mark dispute the learned Judge at p.296 concluded :

"It therefore seems to me right in Hong Kong to treat the existence of a trading reputation, for both trace mark and passing off purposes, as a question of pure fact to be determined on the evidence as a whole".

14. I would respectfully adopt the same approach. I must look at the evidence so far disclosed to discover whether the plaintiffs have established a 'prima facie' case that they have an international goodwill which should be protected in Hong Kong. Goodwill, as Lord Macnaghten said in Inland Revenue v. Muller's Margarine (1901) AC 217 at 223, "....is a thing very easy to describe, very difficult to define. It is the benefit and advantage of the good name, reputation and connection of a business. It is the attractive force which brings in custom."

15. Mr. Tse, who has said everything possible on behalf of the Defendants and who has kindly provided a very extensive written skeleton of submissions, submits primarily that although the plaintiffs have a reputation here they have no goodwill which could be damaged and they have suffered no damage. It is no part of my duty at this stage to try to resolve conflicts of evidence between the parties, but the following facts appear clear from the many affidavits and exhibits:

1.     The defendants have deliberately used the Plaintiff's name for their restaurant in a manner which is calculated to cause confusion to the public into making them think this is the plaintiff's restaurant which they are using.

2.     The location of the defendant's restaurant in Tsim Sha Tsui is in the heart of the entertainment and tourist belt.

3.     In 1988, there were approximately 1.2M Japanese tourists who visited Hong Kong and of course there were many Hong Kong tourists who visited Japan.

4.      There is a resident population of approximately 11,000 odd Japanese persons here.

5.      Hong Kong is a major international centre with a cross-play of trading and commerce with Japan.

6.     The Plaintiffs wish to open a restaurant here.

16. The reality of the matter, at this stage of the action, appears to be that the defendants quite deliberately took a commercial risk in using the name of the plaintiffs, as they must have realised that, as the plaintiffs were so well-known and of such high international reputation, copying and therefore exploiting their name would lead to financial benefit,

17. That in itself, in my judgment, demonstrates the Plaintiff did have goodwill here. Further, by virtue of Japanese people in Hong Kong, either as tourists or as residents they have actual or potential customers. The intention to come into Hong Kong is also important. The Plaintiffs are losing the opportunity to control and develop the impact of their reputation here and thus lose potential customers. I am satisfied that there is a serious question to be tried and that the Plaintiffs have established a goodwill here. Has damage been caused to that goodwill? Mr. Tse submits that none has, but even if it has he submits it has occurred outside the jurisdiction of Hong Kong and therefore is not recoverable. He cites Star Industrial Co. Ltd. v. Yap Kwee Kor (1976) FSLR 256 in support of that submission. At page 269, Lord Diplock says "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. It is local in character and divisible; if the business is carried on in several countries a separate goodwill attaches to it in each. So when the business is abandoned in one country in which it has acquired a goodwill the goodwill in that country perishes with it although the business may continue to be carried on in other countries. (See: Inland Revenue Commissioners v. Mullet & Co.'s Margarine Ltd. [1901] A. C. 217, per Lord Macnaghten at p. 224, per Lord Lindley at p. 235) Once the Hong Kong Company had abandoned that part of its former business that consisted in manufacturing toothbrushes for export to and sale in Singapore it ceased to have any proprietary right in Singapore which was entitled to protection in any action for passing-off brought in the courts of that country."

18. I do not read that opinion as supporting Mr. Tse's submission. In my judgment, if a foreign corporation suffered damage to its Hong Kong goodwill and some of that damage would be reflected by perhaps a diminution in trade within its national boundaries, that local damage could still be recoverable as part of its overall damages, if litigates in the Hong Kong jurisdiction. It has been shown to my satisfaction on the evidence before me that damage to the Plaintiffs may well have been caused to their goodwill - further they are being prevented from opening a restaurant in Hong Kong because of the presence of the defendants here. Some of the damage may have been suffered in Hong Kong and some of it in Japan and in my judgment both are legally recoverable.

19. I turn then to the well-known principles which have been set out in 'American Cynamid'. Having regard to the matters I have set out above, I am satisfied that there are serious questions to be tried. As to the "balance of convenience", (or "balance of justice" as Lord Donaldson recently said it should be called) Mr. Garland submits that damages are not an adequate remedy and that they are difficult to quantity. The Plaintiffs, he says, are being prevented from exploiting the Hong Kong market and the longer the Defendants utilise their names, the more serious the harm.

20. These are, in my judgment, on the evidence before me justifiable submissions.

21. The Defendants would not be stopped from operating a restaurant, but from using the plaintiff's name. Further their damages, such as changing the name-sign, alteration of advertisements and other material are quantifiable.

22. The balance, in my judgment, comes down in favour of granting the interlocutory relief sought.

23. I have considered, however, in the exercise of my general discretion three other matters. First, the motive of the defendants; their action appears to have been quite deliberately conceived in order to utilise the reputation and goodwill of the plaintiffs. They chose to use a well-known name and utilise form of wording which clearly, as I have said before would deceive members of the public into thinking that they were entering the plaintiff's restaurant. Further, Madoka Kutsunai, who is a Japanese citizen affirms that on January 21st she went into the Defendants' restaurant and took away with her a number of matters shown in exhibit 'NK1', the namecards of the captain and one of the executive directors show 'Ten-ichi' written in the same style and same characters; a brochure was also taken which sets out a number of the items served. I should indicate that the plaintiffs deal solely in Tempura. In this brochure are found these words "We are the expert of the traditional Tempura. Two major important factors of producing a good Tempura are our special recipe batter and fresh ingredients ...." That claim appears to be, in my judgment, a deliberate attempt to deceive members of the public into thinking that the tempura which is provided by the Ten-ichi group, which is world famous, is indeed being provided by this restaurant. It is a clear indication, of the motive behind the defendant's action in seeking to trade on the plaintiff's name. The whole object of this tort is not to protect the name, but the goodwill of a trader and the actions of the defendants, in my judgment, have been aimed at one thing and one thing only, namely to benefit themselves commercially by trading on the defendants' goodwill.

24. Secondly, the defendants went into this with their eyes wide open. They did not obtain the consent of the plaintiffs. They appear to have made no enquiry whatsoever of the plaintiff's company other than deliberately copying their names and characters from placemats taken from Tokyo. The affidavit of Kwong Ying Chan at paragraph 5 sets out, as I have said before, the method by which they say that they came to choose the name. It is not possible on affidavits to try the factual disputes between the panties-that is a matter for trial and detailed evidence and cross-examination - but I note in paragraph 5 that Mr. Kwong asserts there had never been any restaurant in Hong Kong under that name and it was believes that the name was not known to the vast majority of Hong Kong residents; but he then goes on to say more importantly that it was also thought the Ten-ichi restaurant in Japan had no business interest in Hong Kong whatsoever. That sentence in my judgemnt appears to demonstrate that the decision to utilise the name was predicated by the fact that there was no Ten-ichi restaurant actually trading in Hong Kong. It may be an inference that can be drawn at this stage that Mr. Kwong and his directors knew that they were walking a commercial tightrope, thinking that perhaps they were protected if it were shown that there was no Ten-ichi restaurant actually trading. They do not appear, however, to have considered the more basic matter whether the Tenichi restaurant had any goodwill at all in Hong Kong.

25. The third matter is than the plaintiffs wish to come into Hong Kong. Mr. Tse said this is still a speculative matter, but there is evidence before me at this stage which indicates there is a genuine intention. What then would be the position? If they were to come in and open, there will be two Ten-ichi restaurants both with the same name, both with the same deseriptions and characters. Members of the public will clearly be confused, but the defendants go further. They indicate, in the course' of argument, that they would seek to block the plaintiffs coming in. That in my judgment is a very startling proposition. All the Plaintiffs wish to do is to exploit their legitimate business interests which have been accumulated over the years and which have achieved a high standard of international reputation. They therefore would be prevented from opening a restaurant here apparently on the basis that the defendants have quite deliberately stolen their name and their description; in my judgment, it defies common sense for me to say that the genuine interests of the plaintiff should be prejudiced in that way. These are matters which I am entitled at this stage to take into account in exercising my discretion, because I bear my mind that the grant of an injunction will clearly cause the defendants' business interests to be disrupted.

26. The plaintiffs do appear, in my judgment, to have a strong case - they say the defendants have pirated their names for improper reasons and in order to benefit themselves commercially. I have considered all the evidence which has been placed before me and the submissions so ably made as to the exercise of my discretion.

27. The Plaintiffs are a company of substance; nevertheless they are a foreign corporation and I consider it would be appropriate at this stage for the undertaking as to damages to be fortified. Mr. Garland has offered a sum of $250,000 as fortification for that undertaking. I consider that would be an appropriate amount. On an undertaking therefore to fortify the undertaking as to damages in the sum of HK$250,000 to be provided in an manner satisfactory to the defendants' solicitors, alternatively by the court, I grant an injunction restraining the defendants utilising the name of Ten-ichi. As to the precise wording of the injunction and any ancillary matters, I will hear counsel.

Representation:

Mr. Peter Garland, instructed by Messrs. Alsop Wilkinson Drivers for the Plaintiff

Mr. Paul Tse, instructed by Messrs. Wilkinson and Grist for the defendants