Pei Zheng Middle School and Another v. China Pui Ching Education Foundation Ltd and Others

CACV 262/2005

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF APPEAL

CIVIL APPEAL NO. 262 OF 2005

(ON APPEAL FROM HIGH COURT ACTION NO. 946 OF 2003)

BETWEEN

Before : Hon Cheung JA and Yeung JA in Court

Date of Hearing : 7 February 2006

Date of Judgment :  21 February 2006

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J U D G M E N T

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Hon Cheung JA :

The schools

1.培正中學 (Pui Ching Middle School or otherwise translated as Pei Zheng Middle School) is a well-known school in Guangzhou, Hong Kong and Macau.  It began life in the Ching dynasty as the ‘培正書院’(The Chinese Baptist Academy of Canton).  It was established in 1889 by members of the Baptist Church in Guangzhou (then known as Canton).  The name ‘私立廣州培正中學校’(Guangzhou Pei Zheng Private Middle School) was adopted in 1928 about 20 years after it had moved to a permanent premises in Dongshan, Guangzhou.  In 1953 it was nationalised and its name was changed.

2.Before this event took place branches of the school were established in Hong Kong and Macau in the 1930’s.  They were initially known as the 私立廣州培正中學香港分校(Guangzhou Pei Zheng Private Middle School Hong Kong Branch) and the 私立廣州培正中學澳門分校 (Guangzhou Pei Zheng Private Middle School, Macau Branch).  In 1950, these names were changed to 香港培正中學 (Hong Kong Pui Ching Middle School) and 澳門培正中學 (Macau Pui Ching Middle School).  The 2^nd plaintiff has managed these two schools since 1958.

3.There were many attempts to restore the name of 廣州培正中學by its alumni and persons associated with the school.  Finally on 22 December 1984 the Guangzhou Government agreed to allow its name to be restored and the name was actually restored in 1985.  The 1^st plaintiff is the school in Guangzhou.

The defendants

4.The 1^st, 3^rd and 4^th defendants are Hong Kong companies.  The 2^nd defendant is a resident both of Guangzhou and Hong Kong.  He is a director of the 1^st and 4^th defendants and has personally directed the activities of the 1^st defendant.

The action

5.The plaintiffs jointly brought this action against the defendants.  They alleged that the 1^st, 3^rd and 4^th defendants have passed off as establishments associated or connected with the plaintiffs by adopting the name 培正as their names.

6.The 1^st and 2^nd defendants, have committed further acts of passing off in Hong Kong by providing, through a licence, the name ‘培正’and the insignia of 培正 to a property developer for use at a school to be established as part of a housing development.

7.The 2^nd defendant was a member of the board of the 1^st plaintiff.  He had in breach of his fiduciary duty towards the 1^st plaintiff, refused to register the name 培正 and its insignia as a trademark for the 1^st plaintiff.  Instead he had procured one 培正商學院 (Pei Zheng Commercial College) in Guangzhou to apply for registration the name of 培正 in Chinese and English and also its insignia as a trade/service mark in 1999.

8.The plaintiffs apply for an injunction against the defendants from using the name 培正 and its insignia.  There is a separate claim against the 2^nd defendant for damages for breach of fiduciary duty.

The applications

9.The 1^st, 2^nd and 4^th defendants unsuccessfully applied before Deputy High Court Judge L. Chan to stay the action by the 1^st plaintiff on the ground of forum non conveniens.  They now appeal against that decision.

10.They have also issued a summons requiring the plaintiffs’ solicitors to prove authority to sue on behalf of the 1^st plaintiff.  This application was also unsuccessful and is also the subject matter of the appeal.

Forum non conveniens

11.The House of Lords in Spiliada Maritime Corp v Cansulex Ltd, The Spiliada [1987] 1 A.C. 460 has set out the principles governing stay of proceedings by reason of forum non conveniens or forum conveniens (the terms are the same).  The principles are adopted in Hong Kong by this Court in The Adhiguna Meranti [1987] HKLR 904 (Yang VP (as he then was), Hunter JA and Nazareth J (as he then was)) and Louvet v Louvet and Another [1990] 1 HKLR 670 (Fuad VP, Hunter and Penlington JJA).

12.I have in the recent case of DGC and SLC nee C (CACV 37/2005) summarised the principles as follows :

1.  The single question to be decided is whether there is some other available forum, having competent jurisdiction, which is the appropriate forum for the trial of an action i.e. in which the action may be tried more suitably for the interests of all the parties and the ends of justice?

2.  In order to answer this question, the applicant for the stay has to establish that first, Hong Kong is not the natural or appropriate forum (‘appropriate’ in this context means the forum has the most real and substantial connection with the action) and second, there is another available forum which is clearly or distinctly more appropriate than Hong Kong.  Failure by the applicant to establish these two matters at this stage is fatal.

3.  If the applicant is able to establish both of these two matters, then the plaintiff in the Hong Kong proceeding has to show that he will be deprived of a legitimate personal or juridical advantage if the action is tried in a forum other than Hong Kong.

4.  If the plaintiff is able to establish this, the court will have to balance the advantages of the alternative forum with the disadvantages that the plaintiff may suffer.  Deprivation of one or more personal advantages will not necessarily be fatal to the applicant for the stay if he is able to establish to the court’s satisfaction that substantial justice will be done in the available appropriate forum.

The sustainability of the action

13.At the forefront of his submissions, Mr. Neoh S.C. laid great emphasis on the sustainability of the 1^st plaintiff’s passing off action against the defendants.  Goodwill is an essential element of this cause of action.  It is said that since the original school was nationalised in 1953, its goodwill was vested with the relevant Government in the Mainland and not with the 1^st plaintiff who had operated a school by a different name until the name of the original school was restored in 1985.

14.Mr. Neoh further challenged the idea of common goodwill between the 1^st and 2^nd plaintiffs and whether the torts were committed in Hong Kong.

15.These are substantial issues involving both facts and law.  Factual issues were in respect of events that took place in the Mainland.  Mainland law is also required to deal with the question of whether the 1^st plaintiff is in fact the school that was established in 1889 and whether the resumption of the name 培正 conferred the goodwill on the 1^st plaintiff.  At the same time Hong Kong law is required to deal with the legal issues of a passing off action.

16.I am of the view that it is not appropriate at this stage to make a definitive finding on whether the 1^st plaintiff was bound to fail in this action because the application before this Court and below is not one of striking out of the action for want of reasonable cause of action but a stay application by reason of forum non conveniens.  At this stage it is sufficient to mention that when the Mainland authority issued the 1^st plaintiff with a certificate of registration on 11 October 2000 it expressly stated that the 1^st plaintiff was established in 1889.  This certainly lends some support to the 1^st plaintiff’s case that it is the same school that was established in 1889 and that the 1^st plaintiff has the goodwill of that school.     

17.As to the question whether the torts were committed in Hong Kong or Mainland, in relation to the granting of the licence, this is again a substantial matter which can only be resolved by hearing evidence at the trial.  In so far as the defendants who used the name 培正 as their names, I do not see any controversy as to the location of the commission of the tort.

The crucial question

18.The question whether the 1^st plaintiff has a sustainable cause of action is an issue that has to be tried.  This point is accepted by Mr. Neoh.  For present purpose, the crucial matter is whether that question together with the other issues in the present action could be tried more suitably in Hong Kong for the interests of all the parties and the ends of justice.  This in turn depends on whether Hong Kong has the most real and substantial connection with the action.

Action as of right

19.The starting point in this inquiry is that the plaintiffs founded this action as of right against the defendants who are either Hong Kong companies or an individual who also resides in Hong Kong.  The plaintiffs do not need permission of the court to serve the writ on these defendants.  The 1^st plaintiff is of course a foreign plaintiff, but apart from the fact that it may be required to pay security for costs of the action, there is no restriction on it suing in Hong Kong.  The 2^nd plaintiff is a Hong Kong entity.  The plaintiffs claim that they shared a common goodwill. Where an action is founded as of right in a forum which is being challenged, the authorities indicated that this is a relevant factor to refuse to grant a stay : see Spilida at page 477 and Nan Tung Bank Ltd, Zhu Hai v. Wangfoong Transportation Ltd [1999] 2 HKC 606 and Yap Lup Man v. Good First Investment Ltd [1998] 1 HKC 726.

Factual and legal issues with a Mainland element

20.Because of its nature, this case may involve hearing evidence on the nationalisation policy of the Mainland, the policy on religion and education and expert evidence on Mainland law on the succession of goodwill.  But hearing factual and legal issues with a Mainland element are matters that the Hong Kong courts regularly deal with in adjudication.  More so after the resumption of sovereignty in 1997.  One is only stating the obvious to say that Hong Kong has a highly competent and efficient legal system which enables it to handle these matters without difficulties.  An example that comes readily to mind is the case of Guangdong Foodstuffs Import & Export (Group) Corp & Another v. Tung Fook Chinese Wine (1982) Co. Ltd & Another [1999] 3 HKLRD 545 in which two Mainland municipal trading entities were staking claims in our courts to the goodwill of a trade name.  Substantial factual issues concerning the policy of the planned economy and the effect of the open door economic policy were canvassed in that case.

Witnesses and documents

21.The judge has also considered the question of availability of witnesses and documents in the Mainland.  He held :

‘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 1^st 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 1^st plaintiff’s ownership of the goodwill.’

22.I agree with his view.  The defendants have also argued that the courts in the Mainland under their inquisitorial jurisdiction can gain access to documents that were kept in the national archive.  Again they have not indicated the relevance of these documents.  While it is common knowledge that the Mainland courts are operating an inquisitorial system, at the moment there is only a bare assertion from the 2^nd defendant that the Mainland courts can gain access to these confidential government papers.  While he might be a vice-mayor of Guangzhou at one time between 1980 and 1983 and a member of the Advisory Committee of the Chinese Government for 44 years, ultimately the extent of the power of the courts is not a matter that a non lawyer can authoritatively proffer an opinion.

Enforcement of judgment

23.As to the enforcement of the Hong Kong judgment the defendants are either Hong Kong companies or a resident of Hong Kong and the judgment clearly can be enforced against them.  While the orders may require them to perform acts outside Hong Kong, it does not mean these orders are empty orders.  In any event, under the current law in Hong Kong, Mainland judgments may not satisfy the ‘final and conclusive’ requirement as to be enforceable in Hong Kong.

Parallel proceedings

24.In 2002 the 1^st plaintiff has commenced proceedings against the 1^st defendant in the Trade Mark Review and Adjudication Board in the Mainland and in 2004 it has commenced proceedings in the Trade Mark Office of the Mainland against 培正商學院 (Pei Zheng Commercial College) for the cancellation of the trade mark.

25.These are not strictly speaking parallel proceedings because 培正商學院 is not a party to this action and the proceedings against the 1^st defendant is not carried out in the courts.  But even if these are to be treated as parallel proceedings, this factor will not be sufficient to stay the Hong Kong proceedings if Hong Kong is in fact the appropriate forum : see The Abidin Daver [1984] 1 A.C. 398 and DGC.

Discretion properly exercised

26.In my view the judge has clearly considered all the relevant factors when he exercised his discretion against the granting of the stay.  There is no room for inference by this Court. 

27.In my view he was correct when he held that the defendants have failed to demonstrate that Hong Kong is not the appropriate forum.  This is sufficient to dispose of the application to stay and it is not necessary to consider the second limb of the principles, namely, the plaintiffs may lose the juridical advantage of having their case tried in Hong Kong if the present action is stayed because ‘passing off’ is not a known cause of action in the Mainland.  I will refrain from discussing the principle of ‘double actionability’ referred to in Mr. Neoh’s written submission.

Authority to sue

28.Objection has been taken by Mr. Pao, counsel for the 1^st plaintiff, on the appeal by the defendants on the dismissal of their other summons on the solicitor’s authority to sue on behalf of the 1^st plaintiff.  When the notice of appeal was lodged, it only appealed against the judgment dismissing the stay application.  While there is only one sealed judgment dealing with the dismissal of two summonses, clearly there are two discreet orders involved.  The supplemental notice of appeal which deals exclusively with the second order was served way beyond the time limit for appeal.  However, even if this Court is to grant an extension of time to the defendants to appeal against the second order, my view is that this appeal should still be dismissed.

29.Under the law in Mainland an organisation like the 1^st plaintiff has to be represented by an authorised representative who may instruct lawyers in legal proceedings.  The authorisation of the lawyer has to be produced to the courts in proceedings in the Mainland. 

30.The 1^st plaintiff certainly has an authorised representative who has appointed its present solicitors.  There is, however, no additional requirement under Mainland law that the authorisation must be produced in proceedings outside the Mainland.  The fact that the 1^st plaintiff has not produced any written authorisation in Hong Kong is irrelevant to the issue.

31.Mr. Neoh referred to Hood v. Philips 6 Beav. 176 in which Lord Langdale stated that,

‘ Before filing a bill, it is the duty of a solicitor to obtain distinct authority; the general rule is that he ought to have it in writing, but though this is the proper course, still it is not necessary, if it be proved that the Plaintiff has afterwards acquiesced in the proceedings, and that the circumstances are such that the Court can infer an authority.’

32.This statement is in my view based on sound commonsense.  If a solicitor acts without authority, he is liable to be personally responsible for any costs order that may be made against his purported client.  However, under this principle there is no requirement that the solicitor must at the time when the action is lodged or whenever called upon to do so, produce evidence that he has the authority to act.  In order to call into question the lack of authority of a solicitor, there must be some evidence showing that this is the case.  In the present case there is simply no evidence that may cast doubt on the authority of the 1^st plaintiff’s solicitors. 

33.Under the Mainland law, there is express provision that an organisation like the 1^st plaintiff enjoys civil rights.  This must include the right to sue for a wrong done to it.  There are, of course, express statutory restrictions on certain activities that may be engaged by the 1^st plaintiff such as acting as guarantors or mortgaging its property.  But there is no restriction on engaging in a litigation.  There is also not the slightest evidence that the decision to sue has not been approved by the management of the 1^st plaintiff. 

34.All in all there is simply no ground to call into question the authority of the solicitors.  The second summons was also rightly dismissed.

Conclusion

35.The appeal is accordingly dismissed with an order nisi that the costs of appeal of the 1^st plaintiff is to be paid by the 1^st, 2^nd and 4^th defendants.

Hon Yeung JA :

36.I agree with the judgment of Cheung JA and the order he proposes as set out in paragraph 35 hereof.

Mr. Felix H. Pao, instructed by Messrs Johnson, Stokes & Master, for the 1^st Plaintiff

Mr. Anthony Neoh, S.C. and Mr. K. M. Chong, instructed by Messrs Peter Mo & Co. for the 1^st, 2^nd and 4^th Defendants