Pei Zheng Middle School and Another v. China Pui Ching Educational and Others

HCA946/2003

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NO. 946 OF 2003

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BETWEEN

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Coram : Deputy High Court Judge L Chan in Chambers

Date of Hearing : 21 and 22 July 2005

Date of Delivery of Judgment : 5 August 2005

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J U D G M E N T

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Background

1.This is a passing-off action.  The 1st plaintiff is a Middle School in Guangzhou and is a legal entity incorporated in the Mainland.  The 2nd plaintiff is a Hong Kong entity and was incorporated in 1951.

2.The plaintiffs are seeking to enjoin the defendants from passing off as institutions of or associated with the plaintiffs by using the name “培正” or the red and blue insignia of “培正”.  The action has reached the stage where the parties are about to exchange their witness statements and expert reports.

3.The 1st, 2nd and 4th defendants (“the defendants”) have, however, issued a summons seeking to stay all further proceedings of the 1st plaintiff’s claim.  The application is made on the ground that the courts in Hong Kong are not the proper forum for adjudication of the disputes between the 1st plaintiff and the defendants, and that the defendants are willing to submit the disputes with the 1st plaintiff to a court of law in the Mainland, which is the proper forum.

4.There is a further summons requiring the plaintiffs’ solicitors to prove authority to sue on behalf of the 1st plaintiff.

History of “培正” (Pui Ching or Pei Zheng)

5.I briefly recount below the history of a few well-known schools which have the words “培正” (Pui Ching or Pei Zheng) as part of their names. 

6.The Chinese Baptist Academy of Canton (“培正書院”) (“the School”) was founded in Guangzhou by five Chinese Christians in 1889.  The school moved to its premises in Dongshan of Guangzhou (“the Dongshan Premises”) in 1908 and remained there until it was nationalised in 1953.  Also in 1908, the Guangdong and Guangxi Baptist Association (“兩廣浸信總會”) became the owner of the School.

7.In 1928, the School changed its name to Guangzhou Pei Zheng Private Middle School (“私立廣州培正中學校”) in accordance with the then legal requirement.  In 1933, the School established a branch in Hong Kong called Guangzhou Pei Zheng Private Middle School Hong Kong Branch (“私立廣州培正中學香港分校”).  In 1938, the School established a branch in Macau called Guangzhou Pei Zheng Private Middle School Macau Branch (“私立廣州培正中學澳門分校”)

8.In 1950, the two branch schools changed their names to Hong Kong Pui Ching Middle School (“香港培正中學”) and Macau Pui Ching Middle School (“澳門培正中學”) respectively, and were managed by their respective school boards.  In 1953, the School in the Dongshan Premises with its assets was nationalised and changed its name to the 7th Middle School of Guangzhou Municipality (“廣州市第七中學”).  By this time, the Guangdong and Guangxi Baptist Association with its assets had also been nationalised.

9.In 1958, the 2nd plaintiff took over the administration of the Hong Kong Pui Ching Middle School and Macau Pui Ching Middle School from their school boards.  Also in 1958, the 7th Middle School of the Guangzhou Municipality moved out of the Dongshan premises and merged with another middle school.  A new education institute called the Teachers Training College of Guangzhou Municipality, (“廣州師範學院”) started operating at the Dongshan Premises.

10.In 1962, this Teachers Training College merged with the Guangdong Teachers Training College and vacated from part of the Dongshan Premises.  A middle school called Guangzhou Kiu Kwong Middle School (“廣州僑光中學”) then moved into the vacant part of the Dongshan premises.  Kiu Kwong Middle School was, in fact, founded in 1957 by the Working Committee of the Guangzhou Municipality of the Returned Overseas Chinese Union (“中國致公黨廣州市工作委員會”).  Apparently, Kiu Kwong Middle School had nothing to do with the School or the Guangdong and Guangxi Baptist Association.

11.In 1968, Kiu Kwong Middle School was nationalised and changed its name to the People’s No. 1 Middle School of Guangzhou Municipality (“廣州市人民一中”).  In 1969, it changed its name to the 57th Middle School of Guangzhou Municipality (“廣州市第五十七中學”).

Resumption of name

12.In the late 1970s to early 1980s, the alumni and people associated with the School strove for the resumption or revival of the name of the School, but their quest initially was unsuccessful.  The Education Bureau of Guangzhou Municipality, in a letter dated 20 August 1981 to the Cultural and Education Office of the Municipality and the Revolutionary Committee of the Municipality, said this:

“	廣州培正中學於一八八九年冬，由美國南方浸信會友李濟樑、馮景謙、廖德山等人為解決教會子弟入學創辦，初定名為“培正書院”，設於城內德正街。  期後屢遷校址。至一九○八年，培正交由兩廣浸信會管辦，並在東山現址購地新建校舍。學校經費來源主要是學費收入和向中外教友校友募捐。
	……  培正中學為人民政府接辦後改名為廣州市第七中學。  以後又先後改為僑光中學、廣州師私院和第五十七中學。
	綜上所述，原廣州培正中學是一所辦學歷史悠久的教會學校，解放後與培英、真光、真中、興華等一大批教會或接受外國津貼的私立學校一起為我人民政府接辦，被接辦的還有其他私立的中、小學。
	近年來，原廣州培正中學部分校友多次提出要求恢復“廣州培正中學”校名。我們認為這個問題牽涉面較廣，也較複雜。恢復校名，會有利於團結教育海外和港澳校友，增取他們為祖國“四化”建設服務，有利於學校的建設和發展。同時也利於原廣州培正中學“存款”的解凍。  ……
	……  權衡利弊，我們認為，以不恢復校名為宜。  為保護和發揚華僑、港澳同胞的愛國熱情，應鼓勵原培正中學校友以五十七中學作為原廣州培正中學的母校，歡迎他們關心支持祖國“四化”建設，關心母校的建設和發展。事實上，廣州培正同學會亦以五十七中為基地，開展料一些活動。”

This can be translated as follows:

“	Guangzhou Pei Zheng Middle School was established in the winter of 1889.  It was established by Messrs. Lee Chai Leung, Fung King Him, Liu Tak Shan and others who were fellow Baptists of the Southern Part of the United States of America.  The school was established to solve the problem of education for the children of fellow Christians.  Initially, it was called the Chinese Baptist Academy of Canton (培正書院) and located at Tak Ching Street within the city.  There subsequent changes of address.  In 1908, the school was handed over to the Guangdong and Guangxi Baptist Association to manage.  It also purchased land at the present address in Dongshan to build new school premises.  The funding for the school’s expenditure mainly came from school fees and donations from Chinese and foreign fellow Christians and alumni.
	……  Pei Zheng Middle School, after having been taken over by the People’s Government, changed its name to the 7th Middle School of Guangzhou Municipality.  Later it changed to Kiu Kwong Middle School, Guangzhou Teachers Training College and the 57th Middle School.
	To summarize the above, Guangzhou Pei Zheng Middle School was a school run by a religious body with a long history in providing education.  After the liberation, a large number of schools run by religious bodies or private schools which received foreign allowances together with Pei Yin, True Light, Zhen Zhong, Xing Hua and others were nationalized by our People’s Government.  There were also other Middle and Primary schools that were nationalized.
	In recent years, some alumni of the former Guangzhou Pei Zheng Middle School have on a number of times requested for resumption of the name of “Guangzhou Pei Zheng Middle School”, we are of the view that this question has fairly wide repercussion and is fairly complicated.  To resume the name of the school would be beneficial for uniting the overseas and Hong Kong and Macau alumni on education, for wining them over to serve the Mother Country’s Four Modernizations, and beneficial to the construction and development of the school.  At the same time, it would be beneficial to “unfreezing” the “deposit money” of the former Guangzhou Pei Zheng Middle School.  ……
	……  After balancing the pros and cons, we consider it better not to resume the name of the school.  In order to protect and develop the patriotic zeal of overseas Chinese and the compatriots in Hong Kong and Macau, we should encourage the alumni of the former Pei Zheng Middle School to take the 57th Middle School as the alma mater for the former Guangzhou Pei Zheng Middle School, welcome their concern and support for the construction of the Mother Country’s Four Modernizations, welcome their concern for the construction and development of the alma mater.  In fact, the Guangzhou Alumni Association of Pei Zheng has already taken the 57th Middle School as the base and launched some activities.”

13.The quest of the alumni and friends of“培正”eventually succeeded.  The Office of the People’s Government of Guangzhou Municipality, by a letter to the Education Bureau of the Municipality dated 22 December 1984, stated as follows:

“	關於培中學復名的報告已悉，經市政府領導同志同意，答覆如下：
	一.	為了爭取華僑、港澳同胞支持我市教育事業的發展，同意將廣州市第五十七中學復名為廣州市培正中學。
	二.	要教育學校的幹部和師生員工，在對外交往中堅持教育與宗教分離的原則。”

This can be translated as follows:

“	The report on the resumption of name by Pei Zheng Middle School has been considered, with the agreement of the comrades in the leadership of the municipal government, (we) reply as follows:
	1.	In order to strive for the support of overseas Chinese and the compatriots in Hong Kong and Macau to the development of education in our municipality, (we) agree to use the 57th Middle School of Guangzhou Municipality for resumption of name as Guangzhou Pei Zheng Middle School.
	2.	It is necessary to educate the comrades, teachers, pupils and staff of the school that in their external relations, (they) must adhere to the principle of separating education and religion.”

14.After the approval for “復名” or resumption or revival of name, the 57th Middle School of Guangzhou Municipality at the Dongshan Premises became known as Pei Zheng Middle School (“廣州市培正中學”), which is the 1st plaintiff, from 1985 onwards.  The 1st plaintiff was also issued by the government with a certificate of registration as an institution on 11 October 2000.  The certificate stated that the business of the 1st plaintiff was to undertake and develop primary and secondary education.  It also stated that the 1st plaintiff was established on 1 December 1889, the date when the School was founded by the five Christians.

Work of the 2nd plaintiff

15.Before the resumption of name in Guangzhou, the Hong Kong Pui Ching Middle School and the Macau Pui Ching Middle School, as administered by the 2nd plaintiff, continued to provide quality education and produced very fine graduates.  These graduates include Professor Yau Shing-tung (邱成桐), who is the only Chinese who has been awarded the Field’s Medal (費爾茲獎) in mathematics, and Professor Daniel C Tsui (崔琦) who shared the Nobel Prize in physics with Professor Horst Stormer in 1998.  There are also many other graduates who have made tremendous contributions in different aspects to our community.  There is, therefore, no doubt that there is goodwill in the name Pui Ching, and the defendants do not dispute this.

16.After the resumption of name, the 1st plaintiff has improved its school buildings and facilities and enhanced the quality of its education.  All these were made possible by the efforts of the staff and students and the contributions and support from the alumni and friends of Pui Ching.  The 2nd defendant is also an alumnus of a primary school of Pui Ching and he has made tremendous contribution to the resumption of name and subsequent development and improvement of the 1st plaintiff. 

17.After the resumption of name, the 2nd plaintiff recognised the 1st plaintiff as the mother school of Hong Kong Pui Ching Middle School and Macau Pui Ching Middle School, and as the fountain of the goodwill of “培正”.

The plea of goodwill and passing off

18.In this action, the 1st and 2nd plaintiffs claim in their re-re-amended statement of claim that:

“	2(a)	The 1st Plaintiff was originally established in 1889 as a private tuition establishment under the name “培正書院” by several Chinese members of the “廣州浸信會”, including 馮景謙，余德歡，廖德山，歐陽康 and 李濟樑.  The name by which the 1st Plaintiff is generally known today was adopted in or around 1928 to reflect its growth in stature and increase in student intake.
	(d)	In about the early 1950s, the school operating at the Dongshan Premises was nationalised by the PRC Government.  The quality education it had been providing and the reputation and goodwill thereby built up for over half a century as such a provider of quality education, in particular, at the Dongshan Premises became suspended.
	(e)	The residual reputation and goodwill annexed to the Dongshan Premises survived the said political interruption and was revived and succeeded to by the school operating at the Dongshan Premises in about 1984 through the efforts of the alumni of 培正, including the 2nd defendant, by their application made to the Guangzhou Municipal People’s Government for the resumption of use of the name “廣州市培正中學” by the said school.  The approval for the resumption of use of the name was granted in about 1985 with the condition that the principle of separation of education and religion be upheld.
	3(a)	For over a century, not only has the 1st Plaintiff been in the service as a provider of quality education to numerous students, but the 1st Plaintiff has also, through the members of its school board and with the assistance of its alumni, established and/or advised, assisted and supervised in the establishment and/or administration of other primary and secondary schools under and by reference to the name “培正” and the red and blue insignia of “培正” throughout southern China, including Hong Kong and Macau.  The “培正” family of schools include: (the names of a number of schools including the Hong Kong Pui Ching Middle School and Macau Pui Ching Middle School are listed under the particulars of this paragraph).
	5.	The 2nd Plaintiff accepted the transfer of the administration of “香港培正中學” and “澳門培正中學” from the respective school boards of the 2 schools in 1958 and has faithfully continued to carry on the established service as a provider of quality education to numerous students through “香港培正中學” and “澳門培正中學” and their associated primary schools in Hong Kong and Macau.  Notwithstanding the transfer of the administration of “香港培正中學” and “澳門培正中學”, it has always been recognised by the 2nd Plaintiff and the students and alumni of “香港培正中學” and “澳門培正中學” that both schools were and still are inextricably associated with the 1st Plaintiff and that the 1st Plaintiff is the “mother school” of “香港培正中學” and “澳門培正中學”.
	7.	By reason of the foregoing matters, the Plaintiffs have acquired and shared a substantial reputation and goodwill in the name “培正” and the red and blue insignia of “培正” in the PRC, Hong Kong and Macau and schools and other institutions bearing the name “培正” and/or the red and blue insignia of “培正” have come to be recognised by the public in the PRC, Hong Kong and Macau as associated with the Plaintiffs and none other.”

19.The plaintiffs then pleaded that the defendants have passed off the 1st, 3rd and 4th defendants as establishments associated with or in some way connected with the plaintiffs.  They further pleaded that the 1st and 2nd defendants have authorised other schools in the Mainland to pass off as schools of or in some way approved or endorsed by the plaintiffs.  The particulars of this pleading say that the 2nd defendant had, without knowledge or consent of the plaintiffs, procured one Pui Ching Commercial College in Guangzhou to apply for registration in Beijing the Chinese and English name and red and blue insignia of “培正” as a trade/service mark in November 1999.

20.The 2nd defendant then caused this trade name to be transferred to the 1st defendant.  The 1st and 2nd defendants then allowed a primary school in a Guangzhou property development owned by a Mainland subsidiary of the Hong Kong listed Henderson Land Development Company Limited to be called “保華培正小學”. 

21.The plaintiffs also pleaded that the 1st defendant had published an advertisement in a newspaper which could mislead the public to think that the 1st defendant was associated with the plaintiffs.  Furthermore, the 2nd defendant has incorporated the 3rd and 4th defendants using the name of “培正”, Pui Ching and Pei Zheng.

22.After the issue of this writ, the 1st defendant has reassigned the trademark back to the Pui Ching Commercial College. 

23.The plaintiffs therefore seek an injunction against the defendants from using the name “培正” and the red and blue insignia.  There is also a claim against the 2nd defendant for damages for breach of fiduciary duty as the 2nd defendant has been, since 1988, the chairman of the 1st plaintiff’s school board and had declined a request by the principal of the 1st plaintiff to register “培正” and its red and blue insignia as a trademark for the 1st plaintiff.  The plaintiffs further rely on the acts above mentioned as committed by the 2nd defendant in support of this claim.

The defence

24.As I have said above, the defendants do not dispute that the name “培正” carries with it goodwill.  Mr Neoh, SC, says that “培正” is a famous name throughout the world, but the defendants’ case as against the 1st plaintiff is that the 1st plaintiff is not the original “培正” and has not succeeded to its goodwill.  They say that the 1st plaintiff is only “培正” in name, but Kiu Kwong (“僑光”) in fact.

25.Paragraphs 28, 29, 32 and 35 of the defendants’ re-re-amended defence plead as follows:

“	28.	Between 1962 and 1985, the‘廣州僑光中學 (Guangzhou Kiu Kwong Middle School)’ went through the following changes of name: -
		(a)	in or about 1968 it was nationalised by the Chinese Government and became a public middle school and it changed its name to ‘廣州市人民一中 (Guangzhou Municipal People’s No. 1 Middle School)’;
		(b)	in 1969, it changed its name to ‘廣州市第五十七中學 (Guangzhou Municipal No. 57 Middle School)’; and
		(c)	in 1985 it changed its name to ‘廣州市培正中學 (Guangzhou Municipal Pei Zheng Middle School)’,  (i.e. the 1st Plaintiff).  Despite that, it remains a public middle school owned, operated and run by the Chinese Government.
	29.	The change of name referred to in paragraph 28(c) above was made and effected for the express purpose of attracting donation and support from persons connected with the former: -
		(a)	‘兩廣浸信會總會 (The Guangdong and Guangxi Baptist Association)’; and/or
		(b)	‘培正書院” (The Chinese Baptist Academy of Canton)’ of 1889; and/or
		(c)	‘私立廣州培正中學校 (Guangzhou Pei Zheng Private Middle School)’ of 1928.
	32.	By reason of the matters referred to in paragraphs 14-31 above, the 1st Plaintiff is not and has never been the successor of, nor connected either directly or indirectly with: -
		(a)	‘兩廣浸信會總會 (The Guangdong and Guangxi Baptist Association)’; and/or
		(b)	‘培正書院 (The Chinese Baptist Academy of Canton)’ of 1889; and/or
		(c)	‘私立廣州培正中學校 (Guangzhou Pei Zheng Private Middle School)’ of 1928.
	35.	Further, or in the alternative, since its nationalisation in 1949, all the rights and interests of ‘兩廣浸信總會 (The Guangdong and Guangxi Baptist Association)’ vested in the Chinese Government.  Under Chinese law, the 1st Plaintiff has no locus standi to sue for infringement of the rights of and in the trade name ‘Pei Zheng’ (培正) and/or any of the insignia set out in the Schedule A of the re-re-amended statement of claim and/or the said Trade Mark.”

26.If these averments in the defence are true, I do not know how the alumni and friends of Pui Ching would feel, as they might have thought that they had made donations to and supported the School and were not aware that they had only supported a school that is “培正” in name but Kiu Kwong (“僑光”) in fact.  But it is not a matter that I have to decide in this application.

27.Regarding the case of the 2nd plaintiff, the defendants plead that the 2nd plaintiff was only the operator of the Hong Kong and Macau Pui Ching Schools and had not obtained any right in the trade name and/or design insignia of the Guangzhou Pei Zheng Private Middle School Hong Kong Branch (“私立廣州培正中學香港分校”) or its successor, Hong Kong Pui Ching Middle School (“香港培正中學”).  Thus, they say the 2nd plaintiff has no locus standi to sue for infringement of the trade name Pei Zheng (“培正”) or its insignia.

28.On the subsidiary issue of breach of fiduciary duty by the 2nd defendant, his case is that according to the law of the Mainland and Hong Kong he did not owe any such duty to the 1st plaintiff.

29.These are the main issues between the parties.  As I have said, this action has reached the stage for the parties to exchange their witness statements.  The defendants in fact have filed their only witness statement, which was made by the 2nd defendant, because the plaintiff did not want to exchange their witness statements with them pending the resolution of this summons.  The defendants are also ready to exchange their expert reports as well.

The application to stay the 1st plaintiff’s case

30.Despite the defendants’ readiness for the trial, they say that the case brought by the 1st plaintiff should be stayed in favour of the courts in the Mainland, which is the more appropriate forum.  On the law applicable for this application, both sides agree that I should follow the principle formulated in The Spiliada [1987] 1 AC 460 and summarised by Hunter J into a three-stage process in the Adhiguna Meranti [1987] HKLR 904.  The first stage is for the defendants to show that the courts in the Hong Kong SAR are not the appropriate forum and that the courts in the Mainland are clearly and distinctly more appropriate.

The defendants’ grounds

31.The 2nd defendant has made an affirmation to support the application.  He purportedly identified a number of questions relating to his alleged breach of fiduciary duty and the granting of licence by the 1st defendant to the Guangzhou subsidiary of Henderson Land to use “培正” as part of the name of a primary school in Guangzhou.  As I have observed, the alleged breach of fiduciary duty is a relatively minor issue in this action, as the main thrust is the passing-off claim.  On the granting of the licence, the tort was completed upon the grant being made.  On the state of the pleadings and evidence before me, the reasonable inference I can draw is that the grant was made in Hong Kong.  I will further discuss this below.

32.The 2nd defendant further dealt with the history of the School and its nationalisation after 1949.  He identified the question of whether the 1st plaintiff is the School, and said that the resolution of this issue depended upon the contemporaneous documents concerning the School which are kept by the Mainland Government since 1889, the contemporaneous documents concerning the 1st plaintiff and direct oral testimony concerning the School and the 1st plaintiff, if any.  He however accepted that it is unlikely for direct oral evidence concerning the School to be available.  He also did not elaborate on what direct oral evidence concerning the 1st plaintiff he can adduce in the Mainland and why is such evidence relevant to the issues in this case.  He did not even identify or describe the witnesses who can give the evidence.

33.On the documents, he said he believed the Mainland Government is in possession of documents showing whether the 1st plaintiff is the School, but he did not say what sort of documents they are and where they are kept.  He also did not explain why the documents already produced by the parties, including those I have referred to above, are insufficient for resolving the issues in this case, or how these unknown documents can provide a better understanding.

34.He also said that there are some confidential and secret documents kept by the Mainland Government which relate to the nationalisation of schools formerly run by religious bodies.  He believed that without sight of these confidential or secret documents, the Hong Kong courts would not have a complete picture of what happened since the nationalisation of the School, which he said is central to the issue of fact on whether the 1st plaintiff had originated from the School or from Kiu Kwong (“僑光”).  He said if the 1st plaintiff’s case should be tried in the Mainland, the Mainland judge could have access to these documents.

35.This supposition is a little bit startling.  What the 2nd defendant has said tantamount to saying that the status of the 1st plaintiff can only be ascertained by perusing confidential documents kept by the Mainland Government and not by looking at the official documents and certificates issued by the Government to the 1st plaintiff and other relevant parties.  But he has not explained why the Mainland Government has seen it necessary to keep the status of the 1st plaintiff a confidential matter and not to state it in the open documents and certificates.  I find this assertion unconvincing.  This is particularly so when his description of these documents is very rough and general. 

36.He then referred to the central question of whether the 1st plaintiff could be considered as the School or its successor, and this issue has to be resolved by reference to the law of the Mainland.  Mr Pao, counsel for the plaintiffs, accepts that whether the official approval by the Mainland Government for the 1st plaintiff to resume or revive the use of the name “培正” had thereby bestowed the goodwill of “培正” upon the 1st plaintiff is a question of the law of the Mainland.  This is very similar to the question referred to by the 2nd defendant.  The 2nd defendant further said that there were already proceedings brought by the 1st plaintiff in the Mainland courts against Pui Ching Commercial College for removal of the registration of the trademark “培正” on the ground of irregular or illegal registration and three-year non-use, but these are not parallel proceedings as the parties and causes are different.

37.Finally, the 2nd defendant said that the defendants were willing to submit to the jurisdiction of the Mainland courts. 

The 1st plaintiff’s opposition

38.The plaintiffs’ solicitor Miss Hester Chan has made an affidavit in reply.  She pointed out that the 1st and 4th defendants (and also the 3rd defendant-though it has not taken part in this application) are companies domiciled in Hong Kong and the 2nd defendant is a resident of Hong Kong.  This action is based on passing-off, which is a common law cause of action.  If the action should be stayed in favour of the Mainland forum, this cause of action would not be available.  Miss Chan also said that even if some witnesses have to come from the Mainland, arrangements could be made for them to come easily.  Finally, she pointed out that this application merely sought to stay the part of the action brought by the 1st plaintiff and not the part brought by the 2nd plaintiff.  It is therefore not in the interests of justice to allow the application, as the case of the 2nd plaintiff will still have to continue in this forum.

39.The defendants replied to these matters by the 4th affidavit of their solicitor Mr Yeung, but Mr Yeung’s affidavit does not add anything more to the affirmation of the 2nd defendant.

The defendants’ attacks on the merits

40.Mr Neoh initially argued that the 1st plaintiff’s case is impossible to succeed as a matter of law.  He said the 1st plaintiff only came into being in 1985 and it had not acquired the goodwill of “培正” by assignment or transfer.  The School (or the Guangdong and Guangxi Baptist Association) which owned the goodwill had been nationalised in 1953.  He also submitted that the 2nd plaintiff’s case is also hopeless as it is and was merely the administrator of the Hong Kong and Macau Pui Ching Middle Schools.  He therefore said that both plaintiffs have no case and this action is a futile exercise.

41.However, I am not asked to strike out this action on the ground of no reasonable cause action or on any other ground, and I do not think I should stay the case of the 1st plaintiff in favour of the Mainland forum simply because its case and/or the 2nd plaintiff’s case is weak or hopeless.  As I will point out below, I also do not think the case of the 1st plaintiff and the 2nd plaintiff is unsustainable.

42.Mr Neoh refined his arguments in the skeleton in reply.  He argued that the 1st plaintiff has not obtained the goodwill in the generic name “培正” and its insignia.  The goodwill in the School, as owned by the Guangdong and Guangxi Baptist Association, had been nationalised.  The Pui Ching schools in Hong Kong and Macau, as administered by the 2nd plaintiff, had severed their links with the Mainland in the early 1950s to avoid nationalisation.  So all the goodwill in the generic name of “培正” in the Mainland, Hong Kong and Macau had vested in the Mainland Government by virtue of the nationalisation.  Thus, any goodwill owned by the 2nd plaintiff must have been created since the 1950s and it must be goodwill localised in Hong Kong and Macau and not the goodwill attached to the generic name.

43.Regarding the 1st plaintiff, he submitted that there is no averment in the pleadings that the Mainland Government, in whom the goodwill of the School vested, had assigned or transferred it to the 1st plaintiff.  The goodwill of “培正” as owned by the 1st plaintiff must have started at the earliest in 1985 and is restricted to the locality of Dongshan.  He further submitted that there is no pleading that the 1st and 2nd plaintiffs share a goodwill that was obtained as a result of a pool of common nexus.  Mr Neoh thus argued that the goodwill of “培正” of the 1st plaintiff is different from that of the 2nd plaintiff both in terms of locality as well as date of germination.

44.In relation to the tort allegedly committed against the 1st plaintiff, he therefore argued that the 1st plaintiff has no goodwill in Hong Kong and thus no right to be infringed here.  Hence, the use of “培正” as corporate names in Hong Kong and the advertisement by the 1st defendant, which were acts done in Hong Kong, have nothing to do with the 1st plaintiff.

45.Regarding the grant of a licence for the primary school to use the name “培正” in Guangzhou, the defendants said that it was an act done in the Mainland.  For an act done in the Mainland, it is only actionable in Hong Kong if it is a tort according to the law of the Mainland as well as a tort in Hong Kong.  This is the double actionability principle in Phillips v Eyre [1870] LR 6 QB1 at 28 to 30.  Since the 1st plaintiff’s goodwill only exists in the Mainland and not in Hong Kong, the alleged infringement of the 1st plaintiff’s goodwill by this grant can only be actionable in the Mainland and not in Hong Kong.  Thus, Mr Neoh argued, the 1st plaintiff has no cause of action in Hong Kong in relation to this grant.  He therefore further argued that since the rights of the 1st and 2nd plaintiffs are completely different, and the 1st plaintiff’s claim has no connection with Hong Kong, the court should stay the 1st plaintiff’s claim in favour of the Mainland courts.

46.Mr Neoh further submitted that even if it under the Mainland’s law, the 1st plaintiff has goodwill in Hong Kong, the question of whether the 1st plaintiff has a claim against the granting of licence, which was done in the Mainland, and what remedies are available for the grant, are matters for the law of the Mainland.  He thus suggested that the 1st plaintiff can firstly have its rights determined in the Mainland and then come back to Hong Kong to deal with the names of the 1st, 3rd and 4th defendants.  He further buttressed his case by relying on the assertions by the 2nd defendant that the oral evidence and documents are only available in the Mainland.

47.The plaintiffs disagree that they have goodwill in different localities and hence different rights.  They maintain that there is just one goodwill in the name “培正” which exists in the Mainland, Hong Kong and Macau, and this goodwill is shared by the 1st and 2nd plaintiffs.

The plaintiffs have a case

48.I am of the view that the parts of the re-re-amended statement of claim, as quoted above, have stated a case that the goodwill of “培正” was created sometime in 1889 and had become annexed to the Dongshan Premises from 1908 onwards.  After the assets of the Guangdong and Guangxi Baptist Association and the School at the Dongshan Premises were nationalised and the School became the 7th Middle School of the Guangzhou Municipality, the school boards of the Hong Kong and Macau Pui Ching schools then carried the torch of “培正”.  They continued with the cultivation and development of its goodwill in Hong Kong and Macau.  This task and the torch of “培正” was then passed over to the 2nd plaintiff in 1958 and the 2nd plaintiff continued with this virtuous task.

49.The re-re-amended statement of claim also pleads that when the 1st plaintiff resumed the name of “培正” at the Dongshan Premises in 1985, it was not just a mere change of name from “僑光” to “培正” but a resumption of the operation of the School together with its goodwill as vested in it by the Mainland Government.  Furthermore, once the 1st plaintiff resumed the operation of the School at the Dongshan Premises, the 2nd plaintiff, as well as the alumni and students of the Pui Ching Middle Schools in Hong Kong and Macau, recognised the 1st plaintiff as the mother school of the Pui Ching schools in Hong Kong and Macau.  Hence, the goodwill in “培正”, and the associated insignia have been recognised by the public in the Mainland, Hong Kong and Macau as associated with the 1st and 2nd plaintiffs and they share this goodwill together.

50.Whether the plaintiffs can prove their case as pleaded is not for me to decide now, but I can surely say that their case of shared goodwill is not hopeless either on the pleadings or on the evidence.  It is the defendants’ case that the goodwill of “培正” had become nationalised and vested in the Mainland Government.  If that is right, the Mainland Government might well have vested the goodwill in the 1st plaintiff.  This is in line with paragraph 2(e) of the re-re-amended statement of claim, which pleads that the Mainland Government has granted the approval for the resumption of use of the name by the 1st plaintiff.  The certificate of registration issued by the government dated 11 October 2000 also stated that the 1st plaintiff had been established on 1 December 1889.  It appears that the Mainland Government intended the 1st plaintiff to be the continuation of the School established on that date by the five Chinese Baptists.  The letter dated 20 August 1981, as quoted above, also shows the understanding of the Mainland Government on resumption of name.  It is not a new entity to be established, but resumption or revival of the previous entity which is to take over the assets owned by that entity but frozen upon nationalisation.

Should the 1st plaintiff’s case be stayed?

51.Since I take the view that the plaintiffs share a common cause in this action, I should dismiss this application, as the staying of the 1st plaintiff’s action will produce no saving in time or resources.  The 2nd plaintiff’s claim, which relies on the same goodwill coming from the same source, still has to be disposed of in Hong Kong.  Furthermore, there is no authority that suggests that the court can just stay part of an action in favour of another forum and allow the remaining part to go on.  However, in deference to counsel’s thorough arguments, I will deal with the other arguments as well.

52.On whether the 1st plaintiff has succeeded to the goodwill of the School, there is no dispute that it is a matter for the law of the Mainland.  However, that does not mean that this matter is not appropriate for the Hong Kong courts.  Deputy Judge Lam (as he then was) has said in First Laser Ltd. v Fujian Enterprises (Holdings) Co. Ltd. v Anor HCA4414/2001:

“

35.

After all, evidence as to foreign law can be adduced if the court shall eventually conclude, after proper arguments on the matter, that a particular issue is to be decided by reference to foreign law.  It has not been suggested before me that there are complicated issues of PRC law which this court will find it too difficult to grapple with.”

53.The defendants herein have not suggested that the question of whether the 1st plaintiff has succeeded to the goodwill of the School is a very difficult question of law of the Mainland. 

54.On the availability of witnesses and documents in the Mainland, the defendants have not intimated who are these witnesses, what can they testify to and why is it difficult for them to come here to give evidence.  I note that the through-train takes less than 3 hours to come from Guangzhou to Hong Kong.  The travel formalities which used to be a cause of inconvenience have become much simplified since the relaxation of the ban for Mainland residents to frequent Hong Kong as tourists.  On the documents, save an allegation that they are confidential or secret, there is no clue as to what and where they are.  I also repeat my query of why the Mainland Government should state the status of the 1st plaintiff only in confidential or secret documents rather than in the documents and certificates that have been issued openly.  I am not convinced that there is any need to hear evidence from any unknown witness residing in the Mainland, or to peruse any unknown documents kept somewhere in the Mainland so as to resolve the issue of the 1st plaintiff’s ownership of the goodwill.

55.The other matter which merits consideration is the grant of licence.  The plaintiffs say that it was granted in Hong Kong.  The 1st defendant is domiciled in Hong Kong.  Though the plaintiffs have not expressly pleaded that the licence was granted in Hong Kong, I can infer that to be so by reason of the 1st defendant’s domicile.  I also note that the defendants have not pleaded in their re-re-amended defence that the licence was granted in the Mainland.

56.Though the 2nd defendant has said in paragraph 28 of his affirmation that all alleged acts of conversion and breach of duty occurred in China and all are subject to findings of Chinese law, he did not specifically refer to the grant of the licence.  If the grant was indeed made in the Mainland, he would have no difficulty in particularising the date, place and circumstances of the grant.  The defendants’ solicitor, Mr Yeung, in paragraph 17 of his 4th affidavit said that the material act took place in the Mainland.  He said so from his own personal knowledge as he had not indicated otherwise, but he gave no clue as to how he had acquired such knowledge.  There is therefore insufficient evidence to show that the licence was granted in the Mainland rather than in Hong Kong.  I therefore accept Mr Pao’s submission that once the grant, which was an instrument of deception, was made in Hong Kong, the tort was also completed in Hong Kong. 

57.Even if I should be wrong on this and that the grant was indeed made in the Mainland, that would simply mean that there is the question of whether the grant of licence amounted to a tort under the law of the Mainland.  The principle of double actionability will apply.  If the plaintiffs cannot prove the grant as an actionable tort in the Mainland, they will fail in this part of their claims, but it still does not mean that this extra question under the Mainland’s law can turn the tide.  The defendants have not suggested that this is a difficult question under the law of the Mainland.  This court is accustomed to resolving issues of foreign law with the help of experts.

58.I also mention that there is the question of alleged breach of fiduciary duty by the 2nd defendant.  Though this may be a question for the law of the Mainland, there is no suggestion that this is a difficult question of law and I also repeat that this is a subsidiary issue in this action.  I do not think that this issue, when added to the considerations discussed above, would persuade me to stay the claim of the 1st plaintiff.

59.The plaintiffs have a common cause of action of passing-off, and passing-off is a common law cause of action.  The 1st and 4th defendants are corporations domiciled in Hong Kong and the 2nd defendant is a resident of Hong Kong.  The plaintiffs share a common cause and the stay of the 1st plaintiff’s claim will not obviate the need to try the 2nd plaintiff’s claim in Hong Kong.  It will instead produce the need for more time and resources for the parties because they have to deal with an extra set of proceedings in another forum.  All in all, I find that the defendants have failed to prove that Hong Kong is not the natural or appropriate forum, or that the courts in the Mainland are clearly or distinctly more appropriate.

60.If I should be wrong on this, I should go on to the second stage of the consideration (The Adhiguna).  The plaintiffs have said that there is no passing-off action known to the law of the Mainland.  The defendants do not dispute this but say that this is a matter to be resolved according to the Mainland’s law.  In the light of my finding of a shared cause in the plaintiffs, they have a vested advantage to proceed in Hong Kong because they have a known cause of action in the common law and they can seek remedy here for passing-off against them.  There is no evidence that the passing-off cause of action is available in the Mainland.  The existence of such cause of action here amounts to a juridical advantage for the plaintiffs which they may lose upon a stay.  For this reason, I would also dismiss the application for stay.

Dismissal of summons to stay

61.I therefore dismiss the application by the defendants for stay of the 1st plaintiff’s case and I also make an order nisi that the defendants do pay the 1st plaintiff the costs of this application.

Summons to show authority to act

62.I now deal with the next application which is for production by the plaintiffs’ solicitors of proof of authority to conduct this action for the 1st plaintiff. 

63.There is evidence showing that the 1st plaintiff is a legal person and can carry on its business or undertaking legitimately.  Mr Neoh says that the 1st plaintiff is a Mainland Government school and its objects or purposes are in undertaking and developing education as stipulated in the certificate issued by the government.  Its funding is from the Mainland Government.  He therefore challenged the 1st plaintiff to produce evidence of approval by the Mainland Government for it to institute this action and also to disburse funds for it.  I do not think the 1st plaintiff needs to show such approval.  I think any lawful business or undertaking should have the power to institute legal action to protect its rights and interests.  On the use of funding, I think this is merely a question for the plaintiffs’ own lawyers.  They may wish to be assured that they will be paid their costs, but I do not think that the defendants can compel the 1st plaintiff to produce evidence of such approval.

64.I also note that the defendants have produced a Chinese legal opinion by a Mainland lawyer.  The opinion was on the establishment and conduct of entities like the 1st plaintiff.  The opinion has not said a word about the need for permission or approval from the Mainland Government for the 1st plaintiff to engage in litigation or to incur and pay legal costs.  If there should be such need, I am sure the Chinese lawyer would have said so in his opinion.  What he said was that the assets of the 1st plaintiff could not be seized by its creditors and the bankruptcy law of the Mainland did not apply to the 1st plaintiff.

65.I think the issues in the second summons eventually boiled down just to one matter, that is the production by the plaintiffs’ solicitors of the document of authority given to them by the 1st plaintiff authorising them to institute this action.  The defendants rely on Shanghai Land Holdings Limited (in receivership) v Chow Ching-ngai v Another [2004] 3HKC 573, where the solicitors for the 1st defendant, Mr Chow, were required to produce the authority to act.  In that case, Mr Chow was incarcerated in Shanghai pending investigation into his alleged criminal acts.  Only very few people could establish contact with him so that he was almost incommunicado.  The solicitors in Hong Kong were instructed to act for him through a Shanghai law firm.  That law firm was instructed by Mr Chow’s elder brother to assist him.  The letters of authorisation as produced by the Hong Kong solicitors, which were purportedly signed by Mr Chow, had signatures different from Mr Chow’s usual signatures as kept by Shanghai Land.

66.However, the facts in the present case are very much different from those in the Shanghai Land case.  The defendants here have proved nothing to cast doubt on the authority of the plaintiffs’ solicitors to act for the 1st plaintiff.  They have merely made a demand for production of proof of authority and the demand was rightly rejected.  The demand alone is not enough to create a prima facie case of doubt of authority.  The document of authority is a privileged document and the defendants have not shown any cause to warrant an order for its production. 

Dismissal of summons

67.In the premises, I also dismiss the second summons and make an order nisi that the defendants do pay the 1st plaintiff’s costs for this summons.

Mr Felix H Pao, instructed by Messrs Johnson, Stokes & Master, for the Plaintiff

Mr Anthony Neoh, SC, leading Mr K M Chong, instructed by Messrs Peter Mo & Co., for the Defendant