Sapphire Group Pty Ltd v Luxotico HK Ltd

[2021] NSWSC 589

Supreme Court

New South Wales

Medium Neutral Citation:

Sapphire Group Pty Ltd v Luxotico HK Ltd [2021] NSWSC 589

Hearing dates:

13 April 2021

Date of orders:

25 May 2021

Decision date:

25 May 2021

Jurisdiction:

Equity - Commercial List

Before:

Rees J

Decision:

Dismiss motion to set aside service and challenge jurisdiction

Catchwords:

CIVIL PROCEDURE – service outside Australia –plaintiffs sue on tort of intentional infliction of economic harm using unlawful means – unlawful means said to be registering trademarks in China contrary to Trademark Law of China – individual defendant resident in NSW and personally served –whether leave required to serve originating process on Hong Kong company – damage sustained in Australia – Hong Kong company a proper party – leave not required.

PRIVATE INTERNATIONAL LAW – whether clearly inappropriate forum – trademark litigation on foot in China – territorial nature of intellectual property rights – separate proceedings will need to be commenced in China to recover compensation – lay witnesses in NSW – damage in NSW – foreign law – proceedings in China do not include all parties – whether insufficient prospects of success in Australia – whether abuse of process given earlier Hong Kong proceedings – proceedings temporarily stayed pending finalisation of trademark determination in China.

Legislation Cited:

Civil Procedure Act 2005 (NSW) s 67

Foreign Judgments Act 1991 (Cth) Pt 2, ss 3, 5, 6

Foreign Judgments Regulations 1992 (Cth) reg 3

Trademark Act 1995 (Cth) Pt 5, ss 55, 56, 195,

Uniform Civil Procedure Rules 2005 (NSW) rr 11.4, 11.5, 11.6, 11.7, 12.11, sch 6

Cases Cited:

Agar v Hyde (2000) 201 CLR 552; [2000] HCA 41

Apple Computer Inc v Apple Corps [1990] 2 NZLR 598

Bagsfirst Global Pty Ltd v Global Brands (Football) Pte Ltd [2010] NSWSC 988

Barach v University of New South Wales [2011] NSWSC 431

Barach v University of New South Wales at [81]; Benson v Rational Entertainment Enterprises Ltd [2015] NSWSC 906

Batistatos v Roads and Traffic Authority of New South Wales (2006) 226 CLR 256; [2006] HCA 27

BEST Australia Ltd v Aquagas Marketing Pty Ltd (1988) 83 ALR 217

Black Bear Asset Management Pty Ltd v Luxotico HK Ltd [2020] HKCFI 414

British South Africa Co v Companhia de Mocambique [1892] 2 QB 358

Clyne v New South Wales Bar Association (1960) 104 CLR 186; [1960] HCA 40

Colosseum Investment Holdings Pty Ltd v Vanguard Logistics Services Pty Ltd [2005] NSWSC 803

CSR Ltd v Cigna Insurance Australia Ltd (1997) 189 CLR 345; [1997] HCA 33

Darrell Lea Chocolate Shops Pty Ltd v Spanish-Polish Shipping Co Incorporated (1990) 25 NSWLR 568

Distillers Co (Biochemicals) Ltd v Thompson [1971] AC 458

Dow Jones & Co Inc v Gutnick (2002) 210 CLR 575; [2002] HCA 56

Garsec Pty Ltd v His Majesty Sultan of Brunei [2008] NSWCA 211; (2008) 250 ALR 682

Gongli v Keshun (Zhejiang High Court 2018 Zhemingzhong 37)

Gosper v Sawyer (1985) 160 CLR 548 at 564-5; [1985] HCA 19

Hardie Finance Corporation Pty Ltd v Ahern (No 3) [2010] WASC 403

Henry v Henry (1996) 185 CLR 571; [1996] HCA 51

Ho v Akia Pty Ltd (In Liq) (2006) 247 FCR 205; [2006] FCAFC 159

International Management Group of America Pty Ltd v Media Niugini Ltd t/as EMTV [2020] NSWSC 559

Jago v District Court of New South Wales (1989) 168 CLR 23; [1989] HCA 46

James Hardie Industries Pty Ltd v Grigor (1998) 45 NSWLR 20

John Pfeiffer Pty Ltd v Rogerson (2000) 203 CLR 503; [2000] HCA 36

JT International SA v Commonwealth of Australia (2012) 250 CLR 1; [2012] HCA 43

Kent v Kent [2017] FamCAFC 157

Kinahan v Kinahan (1890) 45 Ch D 78

Lan v Hao [2017] FamCAFC 175

Laurie v Carroll (1958) 98 CLR 310; [1958] HCA 4

Lin v Wu [2019] NSWSC 1666

Maclaine Watson & Co Private Ltd v Bing Chen [1983] 1 NSWLR 163

Marshall v Marshall (1888) 38 Ch D 330

McGregor v Potts (2005) 68 NSWLR 109; [2005] NSWSC 1098

New South Wales v Plaintiff A [2012] NSWCA 248

OBG Ltd v Allan [2008] 1 AC 1

Oceanic Sun Line Special Shipping Co Inc v Fay (1988) 165 CLR 197; [1988] HCA 32

PCH Offshore Pty Ltd v Dunn (No 2) [2010] FCA 897; (2010) 273 ALR 167

Potter v Broken Hill Pty Co Ltd (1906) 3 CLR 479; [1906] HCA 88

Puttick v Tenon Ltd (2008) 238 CLR 265; [2008] HCA 54

Re Nash (No 2) (2017) 263 CLR 443; [2017] HCA 52

Regie National des Usines Renault SA v Zhang (2002) 210 CLR 491; [2002] HCA 10

Studorp Ltd v Robinson [2012] NSWCA 382

Tomlinson v Ramsey Food Processing Pty Ltd (2015) 256 CLR 507; [2015] HCA 28

Tritech Technology Pty Ltd v Gordon [2000] FCA 75; (2000) 48 IPR 52

TS Production LLC v Drew Pictures Pty Ltd (2008) 172 FCR 433; [2008] FCAFC 194

Wigmans v AMP Ltd [2021] HCA 7; (2021) 388 ALR 272

Young v Facebook Pty Ltd [2015] FCA 1440

Texts Cited:

M Davies, A Bell, P L G Brereton and M Douglas, Nygh’s Conflict of Laws in Australia (10th ed, 2019, LexisNexis)

R P Austin and I M Ramsay, Ford, Austin & Ramsay’s Principles of Corporations Law (LexisNexis, May 2021)

Richie’s Uniform Civil Procedure NSW

Category:

Procedural rulings

Parties:

Sapphire Group Pty Limited (First Plaintiff)
Black Bear Asset Management Pty Limited (Second Plaintiff)
Luxotico HK Limited (First Defendant)
John Staples (Second Defendant)

Representation:

Counsel:
Mr E Cox SC / Mr QM Noakhtar (Plaintiffs)
Mr Hall SC / Ms S Stewart (Defendants)

Solicitors:
Silbertstein & Associates (Plaintiffs)
Pearce IP (Defendants)

File Number(s):

2020/283077

Judgment

1. HER HONOUR: In September 2020, the plaintiffs, Sapphire Group Pty Ltd and Black Bear Asset Management Pty Ltd, commenced these proceedings seeking orders that the defendants, Luxotico HK Ltd and John Staples, be restrained from exploiting trademarks registered in the People’s Republic of China (China) or, alternatively, damages. The defendants have filed a motion seeking orders pursuant to rule 11.6 or, alternatively, rule 12.11 of the Uniform Civil Procedure Rules 2005 (NSW) such that service be set aside or the proceedings be dismissed for want of jurisdiction.

2. The plaintiffs hold the registered trademark for “Glasshouse Fragrances” in Australia. Luxotico has since registered the “Glasshouse Fragrances” trademark in China and is presently engaged in trademark litigation there with Black Bear, which proceedings are at appellate stage, with further appeal rights available. Mr Staples is the sole director and shareholder of Luxotico and was formerly a director of Sapphire Group and Black Bear. He is an Australian resident and was personally served in New South Wales. Luxotico is incorporated in the Hong Kong Special Administrative Region of the People's Republic of China (Hong Kong). Luxotico has yet to be served, although this Court issued a request for service abroad of judicial documents to the Chief Secretary for Administration, Hong Kong.

3. For the reasons which follow, I consider that the plaintiffs are entitled to serve the originating process on Luxotico outside of Australia without leave. This Court has jurisdiction and is not a clearly inappropriate forum. In particular, the plaintiffs would have to commence separate proceedings in China in any event to obtain the remedies now sought. Other discretionary factors relied on by the defendants have not persuaded me that this Court should decline to exercise jurisdiction. However, with respect and deference to the China National Intellectual Property Administration (CNIPA), these proceedings should be stayed temporarily to permit the trademark litigation in China to be finalised before determining the plaintiffs’ remaining claims, if any.

TRADEMARK LAW OF THE PEOPLE’S REPUBLIC OF CHINA

4. Before turning to the facts, it may assist to outline the procedures in China to register a trademark, to challenge that registration, and the remedies available if the trademark should not have been registered in the first place. Of great assistance, the plaintiffs and defendants each relied on expert evidence in respect of Chinese law: the plaintiffs relied on Liu Zhan, a partner of Anchorite & Sage Law Office in Beijing; the defendants relied on Xianjie Ding, a partner of King & Wood Mallesons, Shanghai.

5. The main repository of the rules and remedies is the Trademark Law of the People’s Republic of China; there may be an issue as to whether the relevant law is that applicable when the trademarks were registered in China, or the Trademark Law as it stands today. Mr Ding says the protections offered by the Trademark Law are comparable, if not more stringent, than those in other developed countries.

6. In addition, the Tort Liability Law of the People’s Republic of China and the General Principles of the Civil Law of the People’s Republic of China may apply. The parties also referred to the Contract Law of the People’s Republic of China, the Company Law of the People’s Republic of China and the Anti-Unfair Competition Law of the People’s Republic of China as potentially applicable. In terms of procedural matters, the Civil Procedure Law of the People’s Republic of China, the Administrative Procedure Law of the People’s Republic of China, the Interpretation of the Supreme People’s Court on the Application of Administrative Procedure Law of the People’s Republic of China, the Provisions of the Supreme People’s Court on Several Issues concerning the Trial of Administrative Cases involving Trademark Authorization and Confirmation and the Rules of the Supreme People’s Court on Guiding Cases were identified by the experts as relevant.

Registration of trademarks in China

7. According to Ms Zhan, with whom Mr Ding largely agrees, under the Trademark Law of China, trademarks are registered on a ‘first-to-file’ basis. Thus, a trademark application requires information about the applicant, the trademark and description of the designated goods or services, but does not require evidence of use. The application for registration is lodged with the Trademark Office, which is part of the CNIPA.

8. Ms Zhan explains that, under this system, trademark squatters or those who seek to profit from pre-emptive filing apply for trademarks that already have market value but, for various reasons, have not been registered as trademarks in China by their owners. This is referred to as ‘bad faith trademark filing’. When the true brand owner applies to register the trademark in China, the trademark squatter requests that the true brand owner pay a price in order to have the trademark transferred. This may result in a delay in product sales into China and may cause loss to the true brand owner. Ms Zhan says that, in the last five to ten years, increasing emphasis has been given, when applying the Trademark Law, to the rights of brand owners over trademark squatters.

9. To address this problem, brand owners can initiate procedures before the CNIPA, being:

1. opposition procedures to prevent the registration of the application by the Trademark Office, or

2. invalidation procedures to remove the registration from the registry (in Australia, this would be called an expungement action). Specifically, Article 35 of the Trademark Law provides that the opponent to approval of a trademark is entitled to request the Trademark Appeal Board to declare the trademark registration to be invalid.

10. When these procedures are initiated, brand owners may rely on provisions of the Trademark Law, including Article 32 (the trademark infringes an existing prior right), Article 13 (the brand owner is the holder of a trademark well known by the public), Article 15 (the applicant for registration of the trademark is the agent or representative of the brand owner) or Articles 4, 7 and 44 (the applicant is seeking registration in bad faith). In particular, Article 15, paragraph 2 of the Trademark Law provides:

Where an applicant for registration of a trademark identical with or similar to an unregistered trademark in prior use by another party or identical or similar goods has any contractual, business or other relationship … with the other party and knows the existence of the unregistered trademark, the trademark shall not be registered upon opposition from the other party.

11. Mr Ding says that some of these Articles would not apply, either because Luxotico applied to register the trademarks in April 2017 or given the facts he has been asked to assume. But as long as the registered trademark remains in force and has not been invalidated, the trademark registrant is recognised as the owner of the trademark and is entitled to exercise all rights given by the law.

Appeal process

12. Following a decision of the Trademark Appeal Board, either party may appeal to the Beijing Intellectual Property Court. Such an appeal should be determined in six to twelve months. Either party then has a further right of appeal to the Beijing Higher People’s Court, whose ruling is final. According to Mr Ding, any appeal to the Beijing Higher People’s Court would be concluded in four to six months.

13. Ms Zhan describes the review and appeal processes as administrative in nature, as the issue is whether the Trademark Appeal Board made its decision correctly. The Trademark Appeal Board is a party to any appeal. If, as a result of the appeal process, the decision of the Trademark Appeal Board is found wanting, then the decision is revoked and the board re-examines and decides the case.

14. In addition, in some circumstances, for example, where new evidence emerges that is sufficient to overturn the previous ruling, or a major defect in procedural or substantive legal grounds occurs, the parties can apply to the Supreme People’s Court for a retrial. That Court has full discretion to decide whether to accept the request for a retrial or not. According to Mr Ding, the chances of the Supreme People’s Court ordering a retrial of an intellectual property case are quite high and typically takes six to twelve months.

15. But ultimately, the CNIPA has exclusive jurisdiction over the validity of Chinese trademarks. Chinese courts can cancel or partially cancel the decision of the CNIPA and refer the case back to the CNIPA to make a new decision. According to Mr Ding, a judgment from a foreign court ordering a trademark owner to withdraw its trademark or assign it to another person is not enforceable with the CNIPA or Chinese courts.

Availability of damages in China

16. Ms Zhan says there is no basis for the successful party to seek monetary compensation in the administrative procedure described. In the event that Black Bear is ultimately successful in challenging Luxotico’s registration of trademarks in China, there is no legal basis for monetary compensation for Black Bear, and certainly not against the overseas assets of any party. The plaintiffs can seek monetary compensation through different causes of action such as civil torts. For civil torts, the recovery of monetary awards depends on local law or effective international treaties.

17. Mr Ding agreed that, within the administrative procedures described, a successful party, once all possibilities of appeal or re-trial are exhausted, has no opportunity to claim monetary compensation but can initiate separate civil litigation based on Article 47 of the Trademark Law, which provides:

[W]here the malice of the trademark registrant causes others to suffer losses, the trademark registrant shall make compensation.

18. In addition, a claim can be made under:

1. the Tort Liability Law (Article 6, paragraph 1: “The perpetrator shall bear the tort liability for infringement of other people’s rights and interests due to fault”); or

2. the General Principles (Article 106, paragraph 2: “[C]itizens and legal persons shall bear civil liability for infringement of state and collective property and infringement of other people’s property and persons due to fault”).

19. According to Mr Ding, malicious registration of a trademark is a kind of tort, requiring proof of subjective malice, breach, causation and damage. But this is not the only scenario that tort liability applies in intellectual property; as long as abuse of the trademark registration system causes damage to others, tort liability law applies: Gongli v Keshun (Zhejiang High Court 2018 Zhemingzhong 37).

20. The defendants observed that this was similar to Australian trademark law where trade mark opposition proceedings are brought under Part 5 of the Trademark Act 1995 (Cth) before the Registrar of Trade Marks. A decision under section 55 of the Trademark Act may be appealed to the Federal Court of Australia or the Federal Circuit Court (section 56), and, with leave, to the Full Federal Court and, with special leave, to the High Court of Australia: section 195, Trademark Act. Opposition proceedings are separate to proceedings commenced for trademark infringement, misleading and deceptive conduct under the Australian Consumer Law, passing off or for other torts, including obtaining injunctive or pecuniary relief.

FACTS

21. For the purpose of this application, the facts are of short compass. Precisely what happened will fall to be determined in proceedings in China or at a final hearing in these proceedings.

22. Dr Warwick Nettle is a plastic surgeon who came to work with Mr Staples and Nicole Eckles during the course of his medical practice. Dr Nettle was interested in exploring other business opportunities and, in time, these colleagues hit upon a scented candle business which Dr Nettle would fund and Mr Staples and Ms Eckles would run.

23. In June 2006, Sapphire Group was incorporated, then named Glass House Candle Company Pty Ltd. Dr Nettle was the sole director of the company. In time, brand names were formulated, being “Glasshouse” and “Glasshouse Fragrances”. Whether it was Ms Eckles or Mr Staples who came up with these names will be determined in due course (although authorship of the trademark is not the decisive fact in China). In November 2007, a shareholders agreement was executed, and varied, as a consequence of which Mr Staples became a director of Sapphire Group and his company, Retail Media Networks Pty Ltd as trustee for the Staples Investment Trust, became a shareholder. In December 2008, Sapphire Group applied to register the trademark “glasshouse” in Australia.

24. In 2009, Sapphire Group began to consider expanding business operations into China. (Mr Staples disputes Dr Nettles’ description of these plans.) A company, JAD International Ltd, was incorporated in Hong Kong to pay salaries. Sapphire Group was also restructured: Black Bear was incorporated to hold the assets of Sapphire Group, including its intellectual property. Dr Nettle and Mr Staples became directors of Black Bear and Retail Media Networks became a shareholder. In due course, Black Bear licensed its trademarks to Sapphire Group.

25. As part of the expansion of the plaintiffs’ business into China, from March 2010, Mr Staples based himself there. In China, Mr Staples liaised with suppliers, undertook quality control, sourced office and factory premises and established business operations. In April 2010, Glasshouse Fragrances Ltd was incorporated in Hong Kong (and later became Pristine Products Trading Co HK Ltd). Dr Nettle says the company was established so that an entity could be established in China to conduct trading activities. Pristine Products Shenzhen Trading Co Ltd was later registered in China.

26. In August 2011, Black Bear filed an application to register the trademark “Glasshouse Fragrances” in Australia. In August 2012, Black Bear registered that trademark and, later, licensed the trademark to Sapphire Group.

27. In 2011, a dispute arose between the plaintiffs and Mr Staples. Events crystallised at a board meeting on 31 January 2012, when the service arrangements between Sapphire Group, JAD International, Pristine Products Trading Co and Mr Staples were terminated with immediate effect. Dr Nettle says that, following Mr Staples’ termination, he unilaterally closed the China factory, dismissed its staff, and destroyed its equipment and stock or moved it to an unknown location.

28. In April 2012, Mr Staples, Retail Media Networks (and others) commenced proceedings in the Corporations List of this Court against Sapphire Group, Black Bear and others. A cross claim was issued by Sapphire Group against Mr Staples. The subject matter of the claim and cross-claim is not known. In October 2012, Mr Staples ceased to be a director of Sapphire Group and Black Bear. In December 2013, after three days of hearing, the Corporations List proceedings were settled. By consent, judgment was entered in favour of Retail Media Networks for $1.2 million, with the company to transfer its shares in Sapphire Group and Black Bear to others, and each party to pay their own costs of the proceedings.

21. Mr Staples embarked on a different business venture with Shane McGrath and Kurt Schweighoffer of Lotus Glassware HK Ltd, which manufactures goods for Mr McGrath’s company, Eroma Wholesale Pty Ltd, a supplier of raw materials to candlemakers. To that end, in March 2013, Luxotico was incorporated in Hong Kong and, in June 2013, Luxotico Shenzhen Arts & Crafts Company Ltd was incorporated in China. Luxotico Shenzhen Arts & Crafts supplied goods to both Luxotico and Lotus Glassware, whilst Luxotico issued invoices for goods made in China by Luxotico Shenzhen Arts & Crafts. Luxotico also held the intellectual property for the business. In 2014, a dispute arose between Mr McGrath, Mr Schweighoffer and Mr Staples and they also parted ways.

22. Mr Staples continues to compete with the plaintiffs through other companies and brands, in particular, the Burchgrove Group which markets and sells the “Peppermint Grove” brand of candles, described by Dr Nettle as a direct competitor of the plaintiffs’ brands in at least Australia and the United Kingdom.

Luxotico applies to register trademarks in China

31. In April 2017, Luxotico filed four applications to register the trademark “Glasshouse Fragrances” in China, being for Class 3 (Cosmetics etc), Class 4 (Candles etc), Class 21 (Glass bottles etc) and Class 35 (Online sales etc). The plaintiffs say the font and character layout of the trademarks are identical to the plaintiffs’ Australian trademark and, further, the classes covered by Luxotico’s trademark applications cover the goods and services offered by the plaintiffs. The plaintiffs were unaware that the applications had been filed.

32. In late 2017 or early 2018, the plaintiffs engaged attorneys to register the “Glasshouse Fragrances” trademarks in China and thereby became aware of Luxotico’s applications. In July 2018, the plaintiffs sent a letter of demand to Mr Staples, demanding that he arrange for Luxotico to assign its trademark applications to Black Bear. Mr Staples disputed infringement of the plaintiffs’ rights and refused to assign the trademark applications. Black Bear filed oppositions to the registration of the trademarks by Luxotico by reason of alleged prior use and bad faith, being the procedure described at [9(a)].

Hong Kong proceedings

33. In July 2019, the plaintiffs commenced proceedings against the defendants in the High Court of Hong Kong. The Writ of Summons is not in evidence but it appears that the plaintiffs sued the defendants for conspiracy with intent to injure and/or unlawful interference with their business. The plaintiffs also sued Mr Staples for his breach of fiduciary duties and/or duty of fidelity as a former director of the plaintiffs and chief executive officer of Sapphire Group to keep confidential the plaintiffs’ business secrets and not to disclose these to Luxotico for his personal gain and/or the gain of Luxotico and/or to allow Luxotico to harm the plaintiffs.

34. As Mr Staples resided in Australia, the plaintiffs sought leave to issue the Writ of Summons and serve it on Mr Staples out of the jurisdiction, such leave being required under the Rules of the High Court. In support of the application for leave, Ms Eckles made an affirmation, including:

Forum Conveniens

I am advised by the Intended Plaintiffs’ legal advisors and believe that Hong Kong is the natural and appropriate forum for the trial of this action. The Chinese Trademarks were applied for by Luxotico which is a Hong Kong registered company. Also, the Hong Kong system of law has the closest and most real connections with the parties, thus the interests of justice are best served by proceedings in Hong Kong.

35. Leave to issue the Writ of Summons was granted on 15 March 2019. At about this time, according to Mr McGrath, he received a telephone call from Mr Staples, who was looking to rent some space in China to set up a factory to make candles. During the conversation, Mr Staples is reported to have said:

Oh, mate, let me tell you this: I’ve got my revenge on Glasshouse. I’ve registered their trade marks in China. Mate, this is really going to fuck them over. I’m going to restrict them going into China and it’s going to tie them up for years in courts and cost them money. I might eventually have to hand the marks over, but I’ll just let them waste their money for years. It’ll just make it really hard for them and let me get Peppermint Grove going in China before them.

Mr McGrath discouraged Mr Staples from this course, to which Mr Staples responded, “Oh fuck them”. Mr Staples denies the conversation and says his business relationship with Mr McGrath ended in acrimony and Mr McGrath’s remarks are motivated by personal animus.

36. Mr Staples sought a stay of the Hong Kong proceedings for “forum non conveniens”, to set aside leave to serve Mr Staples out of the jurisdiction and to strike out certain paragraphs of the Statement of Claim. As I understand from Dr Nettles’ affidavit filed in the Hong Kong proceedings, Mr Staples swore an affidavit to the effect that:

1. Mr Staples would be the sole factual witness for the defendants; the plaintiffs’ witnesses would likely be from Australia as well; and he was based in Australia and occasionally travelled overseas. (It may be inferred that an appropriate forum from Mr Staples’ point of view may have been Australia, at least by reference to the location of witnesses).

2. There was nothing wrong with the defendants applying for the trademarks in China as China had a ‘first to file’ trademark system. The defendants were perfectly entitled to apply for the trademarks as the plaintiffs had no trademark rights outside Australia and none in China.

3. The plaintiffs had suffered no damage in Hong Kong as, although they may have exported to Hong Kong in the past, they had no current sales there.

4. If the plaintiffs lost in the Trademark Office in China, there would be no actionable right in Hong Kong.

37. Dr Nettle made an affirmation in the Hong Kong proceedings, opposing Mr Staples’ application for a stay and pointing to various reasons why the case should be allowed to proceed in Hong Kong. In particular, the plaintiffs sought damages against Luxotico, which had assets in Hong Kong. The plaintiffs also sought injunctive relief and the Hong Kong courts would not enforce an injunction granted by a foreign court. As for the location of witnesses, Dr Nettle and Ms Eckles were prepared to travel to Hong Kong to give evidence. The production of documents would also be sought, by discovery and subpoena, from Hong Kong entities. All of the witnesses spoke English, which was the language in which the proceedings would be conducted in Hong Kong. “From the perspective of the witnesses to be called, Hong Kong is clearly a preferable forum than any forum in China”. Even if damages were available by way of civil action in China, Dr Nettle understood that the plaintiffs would not have the same opportunity to enforce such a judgment directly in Hong Kong or Australia.

38. In September and October 2019, the Trademark Office held that Luxotico was entitled to register the “Glasshouse Fragrances” trademark in China for all four classes. Black Bear filed invalidation proceedings against registration of the trademarks due to alleged prior use, bad faith and infringement of its copyright, being the procedure described at [9(b)].

39. Meanwhile, in Hong Kong, the defendants’ application was heard by Lok J on 27 November 2019, and judgment was reserved. On 12 March 2020, his Honour gave judgment, setting aside leave for service outside the jurisdiction, striking out the statement of claim and dismissing the claim against Luxotico, with costs: Black Bear Asset Management Pty Ltd v Luxotico HK Ltd [2020] HKCFI 414. It was unnecessary for his Honour to consider forum non conveniens. His Honour noted that the plaintiffs’ main complaint in the Hong Kong proceedings related to Luxotico’s application to register trademarks in China, which the plaintiffs had unsuccessfully opposed. At [11]-[12]:

11   Intellectual property rights usually have territorial limitation, and cross-borders issues are not common in intellectual property litigations. However, due to the close economic ties between the Mainland and Hong Kong, this court sees an increasing trend for cross-borders issues to be raised in intellectual property claims. It is not uncommon to see such claims being commenced in the Hong Kong courts with the main purpose of stopping the infringing activities in the Mainland.

12   The present case is one of the examples that cross-borders issues become the crux of the case. I would say that this is yet another bold attempt by a plaintiff to stop a defendant from carrying out some alleged wrongful activities in the Mainland. Unfortunately, the Plaintiffs’ case is misconceived.

40. Lok J concluded that there was only a limited nexus between the plaintiffs’ claim and Hong Kong, being that Luxotico was a Hong Kong company and the applicant in the trademark applications. But there was no evidence that Luxotico carried on business in Hong Kong and any damages suffered by the plaintiffs would occur in Mainland China. There was no evidence that the defendants had committed any wrongful act “or even any act” in Hong Kong: at [22].

41. Further, where the cause of action relied upon was conspiracy to injure, it was necessary for the plaintiffs to establish that the conspiracy was formed in Hong Kong, or acts done pursuant to the conspiracy were committed in Hong Kong, but there was no evidence of either. Mr Staples was an Australian resident, and the alleged conspiracy could have been made anywhere in the world: at [25]. In addition, the lex loci deliciti for the tort of conspiracy was the law of China and there was no tort of conspiracy to injure under the law of China. The principle of double actionability required that, for a tort to be sued upon in Hong Kong, the tort must be actionable both under Hong Kong law and the law of the place where the tort was allegedly committed, being Mainland China. As a consequence, the plaintiffs’ claim against the defendants was bound to fail: at [35], [42]. Further, at [37]:

In my judgment, no matter which principle is to be applied, it is clear that the locus of the commission of the tort is the Mainland. As trade mark would not have extra-territorial effect, the harm resulting from the registration of the Mark would occur only in the Mainland. It is also clear Mainland was the place where the Defendants did all or at least the most significant tortious act, which was the lodging of the Mainland Applications there. As to the place where the cause of action “in substance” arises, it is also beyond doubt that Mainland is the answer. …

42. In April 2020, the plaintiffs filed an appeal with the Court of Appeal in the Hong Kong. Evidence was also compiled in support of the invalidation proceedings in China. In August 2020, the Trademark Appeal Board upheld Luxotico’s registration in respect of Class 21 and Class 35. The Sapphire Group lodged an appeal to the Beijing Intellectual Property Court, following the appeal process described at [12].

These proceedings

43. On 30 September 2020, the plaintiffs commenced these proceedings seeking the following relief:

1.   an order:

a.   that the defendants be restrained from exploiting the Defendants’ CN Marks and take steps to remove the Defendants’ CN Marks or assign them to the plaintiffs; or

b. alternatively, for damages pursuant to s 68 of the Supreme Court Act 1970 (NSW);

2.   damages;

3. interest pursuant to s 100 of the Civil Procedure Act 2005 (NSW); and

4.   costs.

44. Whilst I will return to the pleaded case at [58], it is sufficient to note that this is a tortious claim, being the intentional infliction of economic harm using unlawful means, as explained in OBG Ltd v Allan [2008] 1 AC 1 at [47]-[51] per Lord Hoffman; Hardie Finance Corporation Pty Ltd v Ahern (No 3) [2010] WASC 403 at [685]-[698] per Pritchard J. The injunction sought in prayer 1 is to prevent further tortious acts. The tort of conspiracy, pursued in Hong Kong, is not pleaded here.

45. Following commencement of these proceedings, on 9 October 2020, the plaintiffs’ Hong Kong appeal was dismissed with costs, by consent. It would thus appear that the plaintiffs had abandoned their efforts to injunct the defendants’ conduct in that forum and, instead, to pursue their claims here. Mr Silberstein says as much: the plaintiffs had then retained new solicitors, being his firm, and a decision was made by the plaintiffs’ directors to withdraw the appeal, including with a view to pursuing these proceedings.

46. In February 2021, Black Bear was successful in its appeal to the Trademark Appeal Board in respect of the Class 3 and Class 4 trademark. Luxotico has appealed. Mr Silberstein says the appeals are “currently very much in their infancy”. As earlier mentioned, the appeal to the Beijing Intellectual Property Court is expected to take six to 12 months, with either party having a further right of appeal to the Beijing Higher People’s Court (which would be concluded in four to six months) and potentially a retrial ordered by the Supreme People’s Court.

47. Dr Nettle says that the defendants’ actions have blocked the plaintiffs from making sales in China under their brands as, to do so, would infringe the Chinese trademark registrations in name of Luxotico. The Chinese market for these products is large and Chinese consumers have an appetite for international brands which may be perceived as high quality. Mr Staples disputes that the plaintiffs made any sales of their products in China before April 2017, and any ‘block’ on the plaintiffs’ ability to do so is legitimate as Luxotico is the owner of the trademarks in China.

Service

48. On 2 November 2020, on the plaintiffs’ application, this Court issued a request for service abroad of judicial documents to the Chief Secretary for Administration, Hong Kong, to serve Luxotico. Mr Staples was personally served in New South Wales. On 26 November 2020, the motion presently before the Court was filed, being before this Court’s request for service abroad had been effected on Luxotico. The defendants accepted, however, that service on Luxotico will occur in due course.

Location of witnesses

49. Mr Silberstein says that all of the plaintiffs’ potential witnesses in these proceedings reside in Australia, save for experts in Chinese law. The defendants’ solicitor, Naomi Pearce, anticipates that the defendants will also wish to rely in two China-based expert witnesses, but does not suggest they would call any lay witnesses outside Australia.

THE RULES

50. Service of process outside Australia must be authorised under the rules of this Court. Rule 11.4(1) of the Uniform Civil Procedure Rules provides that an originating process may be served outside of Australia without leave in the circumstances referred to in Schedule 6. In any proceeding when service is not allowed under Schedule 6, an originating process may be served outside of Australia with leave: rule 11.5, Uniform Civil Procedure Rules. The Court may grant such leave if satisfied that the claim has a real and substantial connection with Australia, Australia is an appropriate forum for the trial and, in all the circumstances, the Court should assume jurisdiction: rule 11.5(5).

51. A person served outside of Australia must also be served with a notice in the approved form informing them of the scope of the Court’s jurisdiction in respect of claims against persons served outside of Australia, and their right to challenge service of the originating process or the jurisdiction of the Court: rule 11.7. Assuming all of this has been attended to, rule 11.6 provides:

Court’s discretion whether to assume jurisdiction

(1)   On application by a person on whom an originating process has been served outside of Australia, the court may dismiss or stay the proceeding or set aside service of the originating process.

(2)   Without limiting subrule (1), the court may make an order under this rule if satisfied—

(a)   that service of the originating process is not authorised by these rules, or

(b)   that the court is an inappropriate forum for the trial of the proceeding, or

(c)   that the claim has insufficient prospects of success to warrant putting the person served outside Australia to the time, expense and trouble of defending the claim.

52. A plaintiff bears the onus of showing that service of the originating process was authorised by the rules, that is, addressing rule 11.6(2)(a). If that is established, the defendant bears the onus of establishing the matters in rules 11.6(2)(b) or (c): International Management Group of America Pty Ltd v Media Niugini Ltd t/as EMTV [2020] NSWSC 559 at [7]-[8] per Stevenson J; Barach v University of New South Wales [2011] NSWSC 431 at [70] per Garling J.

53. The defendants sought to engage each limb of sub-rule (2), notwithstanding that Luxotico has yet to be served and Mr Staples was served in New South Wales. To that extent, the defendants’ motion may be partially misconceived. Indeed, filing a motion seeking an order under rule 11.6 without having first being served outside of Australia may be regarded as submitting to the jurisdiction of the Court (noting that rule 12.11(4) only applies to an application under rule 12.11(1)). The plaintiffs did not, however, take this point. Nor does it much matter as similar considerations arise under rule 11.6 and rule 12.11, and both parties relied on the same arguments in respect of both rules.

54. Rule 12.11(1) of the Uniform Civil Procedure Rules also provides:

Setting aside originating process etc

(1)   In any proceedings, the court may make any of the following orders on the application of a defendant—

(a)   an order setting aside the originating process,

(b)   an order setting aside the service of the originating process on the defendant,

(c)   an order declaring that the originating process has not been duly served on the defendant,

…

(g)   an order declaring that the court has no jurisdiction over the defendant in respect of the subject-matter of the proceedings,

(h)   an order declining to exercise jurisdiction in the proceedings,

(i)   an order granting such other relief as the court thinks appropriate.

Making an application for an order under rule 12.11(1) does not constitute submission to the jurisdiction of the Court: rule 12.11(4).

55. Under each of these rules, the Court’s exercise of its ‘extended’ or ‘long arm’ jurisdiction lies in the discretion of the Court: M Davies, A Bell, P L G Brereton and M Douglas, Nygh’s Conflict of Laws in Australia (10th ed, 2019, LexisNexis) at [3.37]. Similar considerations arise in each of the pathways described: does this Court have jurisdiction in respect of the subject matter of these proceedings; is this Court an inappropriate forum to determine the dispute; do other discretionary factors have the consequence that the Court should decline to entertain these proceedings.

JURISDICTION

56. Mr Staples was personally served in New South Sales. The Court has jurisdiction in respect of the plaintiffs’ claim against him. Where the defendant is present in the jurisdiction at the time of service of the originating process, it is not necessary to show any other connection with the jurisdiction: John Pfeiffer Pty Ltd v Rogerson (2000) 203 CLR 503; [2000] HCA 36 at [13], citing Laurie v Carroll (1958) 98 CLR 310; [1958] HCA 4, Gosper v Sawyer (1985) 160 CLR 548 at 564-5; [1985] HCA 19.

57. The same cannot be said for Luxotico, which has yet to be served at all. The starting point for consideration of the Court’s jurisdiction in respect of Luxotico is the Summons and Commercial List Statement.

The pleading

58. The nature of the dispute, as described in the Commercial List Statement, concerns whether the defendants’ registration of the “Glasshouse Fragrances” trademarks in China “was intentionally done to harm the interests of the plaintiffs, and … amounted to unlawful acts under Chinese law”; whether the defendants should be restrained from utilising the trademarks in China; and whether the plaintiffs had suffered loss and damage as a consequence.

58. After setting out the history of Mr Staples’ involvement in the Sapphire Group, his departure from their employ, his continuing competition with the plaintiffs through other companies and brands, and the defendants’ applications to register the “Glasshouse Fragrances” trademark in China, the plaintiffs plead:

Filing and assessment of the applications for registration of the [Chinese trademarks] are governed by the laws of China.

Relevant provisions of the General Provisions, the Trademark Law, the Tort Liability Law, the Contract Law and the Company Law are then particularised, in particular, Article 15, paragraph 2 of the Trademark Law (see [10]) and Article 6, paragraph 1 of the Tort Liability Law (see [18(a)]).

60. It is then alleged that the defendants’ Chinese trademarks are in classes for similar goods to the plaintiffs’ Australian trademarks; are identical to the plaintiffs’ logo in appearance, font and character; and amount to an actual, threatened or suspected infringement of the plaintiffs’ trademarks or passing off (paragraphs 15(f) and 41, Commercial List Statement). When the defendants applied for registration of the trademarks in China in April 2017, it is said that they knew, or ought to have known, these matters and knew of the goodwill and reputation enjoyed by the plaintiffs’ Glasshouse and Glasshouse Fragrances brands. Despite this, Mr Staples is said to have caused Luxotico to file the trademark applications in China and, in doing so, the defendants are said to have:

(a)   acted in bad faith contrary to the … Trademark Law in applying to register trade marks which they knew, or ought to have known, to be identical or similar to those used by the plaintiffs;

(b)   violated article 15 of the … Trademark Law; and

(c)   violation of article 15 of the ... Trademark Law amounted to infringement of the civil rights and interests of the plaintiffs under article 6 of the … Tort Liability Law.

61. Alternatively, it is said that, by causing Luxotico to file the trademark applications in China, Mr Staples breached his ongoing obligations to the plaintiffs under Article 147 of the Company Law which, according to the description in the Commercial List Statement, provides:

(a)   Directors, supervisors and senior officers shall abide by laws, administrative regulations and the company’s articles of association, and have a fiduciary obligation and obligation of diligence to the company (art 147 paragraph 1);

(b)   Directors, supervisors and senior officers may not take advantage of their positions and powers to collect or accept bribes or other illegal income, and may not encroach upon the property of the company (art 147 paragraph 2); and

(c)   obligations under article 147 of the … Company Law shall be performed during the term of office and subject to the company constitution, continue when the term of office ends pursuant to article 92 of the … Contract Law.

62. These violations and breaches are said to constitute civil wrongs, unlawful means or a breach of regulatory statutes by the defendants. By filing the trademark applications in China, the defendants are said to have intended to cause harm to the plaintiffs or, alternatively, intended to enrich themselves by pursuing a course of conduct which they knew would be injurious to the plaintiffs such that the defendants’ gains and the plaintiffs’ losses were inseparably linked.

Tortious claim

63. The plaintiffs say that the originating process may be served on Luxotico in Hong Kong without leave as it falls within the circumstances described in paragraph (a) of Schedule 6, being:

An originating process may be served outside of Australia without leave in the following cases:

(a)   when the claim is founded on a tortious act or omission—

(i)   which was done or which occurred wholly or partly in Australia, or

(ii)   in respect of which the damage was sustained wholly or partly in Australia,

…

64. As to paragraph (a)(i), the question is whether the defendant’s act which gives rise to the cause of action occurred within the jurisdiction, such question to be determined according to the law of the forum: Nygh's Conflict of Laws at [3.74]. As the test is often expressed, “The right approach is, when the tort is complete, to look back over the series of events constituting it and ask the question, where in substance did this cause of action arise?”: Distillers Co (Biochemicals) Ltd v Thompson [1971] AC 458 at 468. For intentional torts, where some quality of the defendant’s conduct is critical, it will usually be important to look to where the defendant acted: Dow Jones & Co Inc v Gutnick (2002) 210 CLR 575; [2002] HCA 56 at [43] per Gleeson CJ, McHugh, Gummow and Hayne JJ.

65. Here, the tortious claim is the intentional infliction of economic harm using unlawful means. Whilst the elements of this tort remain the subject of judicial controversy and refinement, the key elements of the tort are that the defendant intends to cause harm to the plaintiff, and that the interference with, or damage to, the plaintiff’s business is brought about by wrongful or unlawful means on the part of the defendant: Hardie Finance v Ahern (No 3) at [685]. Whilst the courts have recognised certain kinds of conduct as “unlawful means”, the category otherwise appears unsettled: Hardie Finance v Ahern (No 3) at [691]-[698] and [709]. In relation to intention, the plaintiff must prove that the defendant actually intended to cause loss, that is, causing loss was an end in itself; or, the defendant sought to advance its own business by pursuing a course of conduct which it knew would, in the very nature of things, necessarily be injurious to the plaintiff so that the plaintiff’s loss and the defendant’s gain can be considered different sides of the same coin: Hardie Finance v Ahern (No 3) at [723].

66. The plaintiffs submitted that it is presently unclear whether Mr Staples’ instruction or conduct in lodging the trademark applications occurred in Australia or elsewhere. Thus, the place of registration of the trademark is not necessarily the lex loci delicti; an instruction from Australia to a Chinese agent is equally open.

67. Certainly, at this interlocutory stage, little or nothing is known about precisely how the trademark applications came to be lodged. The evidence is not sufficient to enable this Court to resolve where the tort occurred: Puttick v Tenon Ltd (2008) 238 CLR 265; [2008] HCA 54 at [32] (French CJ, Gummow, Hayne and Kiefel JJ). Mr Staples in the sole director and shareholder of Luxotico. A corporation itself is inanimate and cannot act except through the intermediation of human beings: R P Austin and I M Ramsay, Ford, Austin & Ramsay’s Principles of Corporations Law (LexisNexis, May 2021) at [7.070]. Likely, Mr Staples made the key decisions and issued the necessary instructions. Mr Staples lives in New South Wales and may well have issued instructions for steps to be taken by Luxotico in China, or may himself have taken steps for Luxotico in New South Wales.

68. However, the onus in this regard is on the plaintiffs. Noting that the plaintiffs sue Luxotico for an intentional tort, the tortious act appears more likely to have been done in China where Luxotico filed the trademark applications, pursued those applications over Black Bear’s opposition, maintained the trademark registrations in the face of Black Bear’s invalidation proceedings and continues through the appeal process. Addressing the questions posed in Distillers Co (Biochemicals) Ltd v Thompson and Dow Jones & Co Inc v Gutnick, looking back over the series of events said to constitute the alleged tort, in substance the cause of action arose in China where Luxotico acted: Black Bear at [37] per Lok J.

69. However, as the learned authors of Nygh's Conflict of Laws observe, “The practical significance of the inquiry into where the tort was committed has been considerably diminished” by permitting service where damage is suffered wholly or partly in the jurisdiction and, further, (at [3.73], footnotes omitted):

Service outside Australia is permitted under this provision when the plaintiff has suffered or continues to suffer within the forum any compensable damage caused by the tort, including economic loss. … In this context, the word ‘damage’ comprehends the widest range of loss and harm that may fairly be contemplated as being compensable in an action in tort.

70. The phrase “wholly or partly” in Schedule 6(a) means that only part of the damage which has occurred needs to take place in New South Wales: Barach v University of New South Wales at [41]. As Palmer J observed in Colosseum Investment Holdings Pty Ltd v Vanguard Logistics Services Pty Ltd [2005] NSWSC 803 at [49]:

In my opinion, a company which is incorporated in New South Wales and has its principal place of business in New South Wales is located in New South Wales and if it suffers economic loss by reason of a tort it suffers damage in New South Wales for the purpose of Pt 10 r.1A(1)(e) regardless of where the tort was committed. It is, therefore, not necessary for the company to allege expressly in its pleading that it has suffered economic loss in New South Wales; such an allegation is implicit in its allegation that it has suffered economic loss.

71. Dr Nettle’s evidence indicates that, wherever the tort was committed, its effects are felt here, where the plaintiffs run their business. As Carruthers J described it, the plaintiffs carry on business in New South Wales; it is here that their expenses are incurred, their records maintained and their profits are made and, by reason of what is said to have occurred, their assets have been depleted: Darrell Lea Chocolate Shops Pty Ltd v Spanish-Polish Shipping Co Incorporated (1990) 25 NSWLR 568 at 577. Thus, I am satisfied that the plaintiffs are entitled to serve an originating process without leave under paragraph (a)(ii) of Schedule 6.

Necessary and proper party

72. It is thus not strictly necessary to consider the plaintiffs’ alternate contention that the originating process falls within the circumstances described in paragraph (h) of Schedule 6, being:

An originating process may be served outside of Australia without leave in the following cases:

…

(h)   when any person outside of Australia is—

(i)   a necessary or proper party to a proceeding properly brought against another person served or to be served (whether within Australia or outside Australia) under any other provision of these rules, …

73. Where Mr Staples has been properly joined, the question is whether the proposed foreign party, Luxotico, would have been a proper party to the proceedings if it had been within the jurisdiction, in respect of which the rules regarding joinder may provide a good guide: Colosseum Investment Holdings Pty Ltd v Vanguard Logistics Services Pty Ltd at [53]. In Nygh's Conflict of Laws, the position was explained at [3.88]: (footnotes omitted)

The plaintiff is not entitled to sue someone within the jurisdiction who clearly is not liable for the injury suffered by the plaintiff merely in order to bring an absent party, who may be liable, into the jurisdiction, but if there is an arguable cause of action, the fact that the decision to sue the local defendant is predominantly due to a desire to reach a better funded foreign defendant is no objection. Proceedings are properly brought against the local defendant so long as they are not doomed to failure and the claim is genuine, in the sense that it is brought with the intention that it be prosecuted to finality, whether or not the defendant might be unable to satisfy any ultimate judgment. The liability of the parties need not be joint; it is enough if they arise out of the same transaction or series of transactions.

74. Where the actions of the foreign defendant are “the medium” by which the wrongdoing was effected, or the foreign defendants “are right at the heart of the initial wrongdoing and part and parcel of the means by which the initial wrongdoing was carried into effect for the benefit of all the defendants”, then the foreign defendant “falls squarely” within this rule: Maclaine Watson & Co Private Ltd v Bing Chen [1983] 1 NSWLR 163 at 166 per Helsham CJ in Eq.

75. I do not think it can be said that Mr Staples’ presence in these proceedings as a defendant lacks bona fides. It is his prior relationship with the plaintiffs and his current relationship with Luxotico that is a critical element in his suggested tortious liability and, to a lesser extent, Luxotico’s tortious liability. Further, Mr Staples having been properly joined, Luxotico is a proper party to the proceedings as it is said that Luxotico is the vehicle used by Mr Staples in his tortious acts, and also said to itself have committed an intentional tort. In addition, the relief sought by the plaintiffs affects Luxotico as the trademark registrant and, as such, I consider that Luxotico is a proper party and the plaintiffs are also entitled to serve the originating process outside of Australia without leave under paragraph (h) of Schedule 6.

76. This, however, is but the starting point of the Court’s enquiry as to whether it is appropriate, in the circumstances of this case, to entertain the proceedings notwithstanding that the Court has jurisdiction.

CLEARLY INAPPROPRIATE FORUM

77. Whilst the language used in rule 11.6 is “an inappropriate forum” and “clearly inappropriate forum” is the test to stay the proceedings under rule 12.11, the formulations are not obviously different and it will be rare for anything to turn on the distinction: Studorp Ltd v Robinson [2012] NSWCA 382 at [5] and [62]. Either way, the onus to establish this is on the defendants.

78. In Wigmans v AMP Ltd [2021] HCA 7; (2021) 388 ALR 272, Gageler, Gordon and Edelman JJ observed that the Court’s power to stay proceedings on the grounds of forum non conveniens is an aspect of the Court’s inherent power “to prevent its own processes being used to bring about injustice”, citing CSR Ltd v Cigna Insurance Australia Ltd (1997) 189 CLR 345 at 391; [1997] HCA 33. Further, at [96], their Honours continued to adopt the test expounded by Deane J in Oceanic Sun Line Special Shipping Co Inc v Fay (1988) 165 CLR 197 at 247-248; [1988] HCA 32, being: (emphasis added)

[The] power [to dismiss or stay proceedings within jurisdiction on inappropriate forum grounds] is a discretionary one in the sense that its exercise involves a subjective balancing process in which the relevant factors will vary and in which both the question of the comparative weight to be given to particular factors in the circumstances of a particular case and the decision whether the power should be exercised are matters for individual judgment and, to a significant extent, matters of impression. The power should only be exercised in a clear case and the onus lies upon the defendant to satisfy the local court in which the particular proceedings have been instituted that it is so inappropriate a forum for their determination that their continuation would be oppressive and vexatious to him.

79. As Deane J also observed in Oceanic, “A party who has regularly invoked the jurisdiction of a competent court has a prima facie right to insist upon its exercise and to have his claim heard and determined”: at 241. Further, the “inappropriate forum” test is not a “more appropriate forum” test; “the mere fact that a tribunal in some other country would be a more appropriate forum for the particular proceeding does not mean that the local court is a clearly inappropriate one”: at 248.

80. A helpful review of factors relevant to the exercise of the Court’s discretion to stay proceedings on the grounds of forum non conveniens was collated by Palmer J in Colosseum at [69]:

i)   a consideration of the true nature and full extent of the issues involved in proceedings in the local court and in the foreign court;

ii)   whether, in the light of that consideration, the foreign court has jurisdiction to deal with the same subject matter as is before the local court;

iii)   the degree of connection which both proceedings share with the law of the foreign court and the law of the local court;

iv)   where the relevant acts or omissions occurred;

v)   where the parties reside and carry on business;

vi)   whether local professional or other standards of care have a bearing on the legal quality of the relevant acts or transactions or the liability of the parties;

vii)   where and how the damage was suffered;

viii)   where the relevant evidence in the action is to be found;

ix)   whether the application to the local court for a stay or dismissal has been made with reasonable promptness;

x)   the stage which proceedings in the foreign court have reached in comparison with the stage of proceedings in the local court;

xi)   the order in which the two sets of proceedings were instituted and the costs which have been incurred in each;

xii)   whether each court recognises the orders and decrees of the other;

xiii)   which court can provide more effectively for the complete resolution of the whole of the controversy between the parties;

xiv)   that a party properly invoking the jurisdiction of the local court has a prima facie right to insist upon the exercise of that jurisdiction, so long as that prima facie right is not given undue emphasis;

xv)   that considerations of comity and restraint should be taken into account where a defendant carries on business in a foreign country and the jurisdiction of the courts of that country would be recognised under local conflict rules;

xvi)   the undesirability of allowing two independent actions involving the same question of liability to proceed contemporaneously in the courts of different countries;

xvii)   whether the dominant purpose of a party in commencing proceedings in one jurisdiction or another is to prevent another party from pursuing remedies available in the courts of another country having jurisdiction …

81. Six considerations were raised by the parties as to whether this Court is a clearly inappropriate forum for the trial of the proceedings.

Intellectual property rights

82. First, the plaintiffs sue in tort for the intentional infliction of economic harm using unlawful means. Of central importance to the alleged “unlawful means” is whether the defendants filed trademark applications contrary to the Trademark Law of China. Rights associated with registered trademarks are created by statute: JT International SA v Commonwealth of Australia (2012) 250 CLR 1; [2012] HCA 43 at [35], per French CJ. In this case, the statute is the Trademark Law of China. As the defendants submitted, intellectual property rights are creations of local law in the place of registration and owe their existence and validity to administrative action by local state agencies, in this case, the CNIPA.

83. As noted in TS Production LLC v Drew Pictures Pty Ltd (2008) 172 FCR 433; [2008] FCAFC 194 per Finkelstein, Stone and Gordon JJ, “The application of the ‘clearly inappropriate forum’ test to intellectual property cases is not without its difficulties”: at [14]. Traditionally, a Court will not exercise jurisdiction to determine rights in respect of foreign property, including intellectual property rights. As Griffiths CJ stated in Potter v Broken Hill Pty Co Ltd (1906) 3 CLR 479 at 497-8; [1906] HCA 88, in the context of foreign patents, the principles in British South Africa Co v Companhia de Mocambique [1892] 2 QB 358 (for a Court not to assume jurisdiction in matters occurring beyond their territory):

… are equally applicable when the Courts of one country are called upon to inquire into the validity of the exercise of the powers of government of another country in the creation of a right of property which can only be enjoyed within the territory of the latter country.

(I note that the High Court has reserved the standing of Potter v Broken Hill for further consideration in an appropriate case: Regie National des Usines Renault SA v Zhang (2002) 210 CLR 491; [2002] HCA 10 at [76].)

84. Likewise, in Apple Computer Inc v Apple Corps [1990] 2 NZLR 598, Henry J of the High Court of New Zealand observed that no foreign court could order the removal of trademarks from the New Zealand register: at 600. In BEST Australia Ltd v Aquagas Marketing Pty Ltd (1988) 83 ALR 217, Wilcox J noted that New Zealand proceedings could not determine whether an Australian patent had been infringed: at 223-4.

85. There are also limits on this approach, as Finkelstein J explained in Tritech Technology Pty Ltd v Gordon [2000] FCA 75; (2000) 48 IPR 52 at [28]:

But, as I have said, there are exceptions to the principle. Courts of equity have jurisdiction to enforce in personam claims against a party within the jurisdiction notwithstanding that the in personam action arises out of the ownership of a foreign immovable. Accordingly it is accepted that jurisdiction may be exercised in respect of a claim against a trustee although the trust estate is land outside the jurisdiction: Penn v Lord Baltimore (1750) 1 Ves Sen 444; Hesperides Hotels Ltd v Muftizade [1979] AC 508. In such an action, if the existence of the trust is disputed, it is within the power of the court to determine whether there is a trust: Couzens v Negri [1981] VR 824.

86. In that case, the applicants held a patent in China in respect of a life raft, whilst the respondents claimed to hold a patent in respect of the same invention in the United States. The applicants sought to injunct the respondents from suggesting that the applicants were infringing the respondents’ patent and to inform the manufacturers of the life raft accordingly. His Honour held that, although the applicants claims related to a foreign patent, their claims were personal claims justiciable in a court of competent jurisdiction in this country. Tritech Technology has some application here, where the plaintiffs are not seeking to cavil with the CNIPA’s determination of Luxotico’s trademark registrations but, on the basis that the CNIPA ultimately finds that those registrations cannot be maintained, relies on Luxotico’s actions is registering the trademarks in the first place as “unlawful actions” under the Trademark Law of China.

87. The central importance of Luxotico’s right to register the “Glasshouse Fragrances” trademark in China, and to exploit that trademark in China, points towards this Court being a clearly inappropriate forum for the trial of the proceedings or, at least, before the trademark litigation in China is concluded. Whether Luxotico is entitled to maintain the trademark registration is a matter which only the CNIPA can determine. This Court would be most reluctant to consider such matters where the same matters are the subject of active consideration by the CNIPA. Whether the trademarks are validly registered in China, according to the Trademark Law, must be determined before it can be determined whether any wrongs have been committed under the Tort Liability Law or the General Principles or, as the plaintiffs contend, whether the defendants have used “unlawful means”.

88. If Black Bear is partly or wholly unsuccessful in the trademark litigation against Luxotico, that will have ramifications for the pleadings in the Summons and Commercial List Statement. But nor will it completely resolve the pleaded issues where:

1. the trademark litigation in China is between Black Bear and Luxotico, whilst the proceedings in this Court involve additional parties, being Sapphire Group and Mr Staples;

2. the unlawful means said to be pursued by the defendants is not limited to the Trademark Law of China but also the Tort Liability Law, the General Provisions, the Contract Law and the Company Law.

Foreign law

89. Second, each of the “unlawful acts under Chinese law” referred to in the Commercial List Statement, self-evidently, involve the law of China. This factor also points to this Court being a clearly inappropriate forum such that this Court may decline to accept jurisdiction: Nygh's Conflict of Laws at [3.1], citing Re Nash (No 2) (2017) 263 CLR 443; [2017] HCA 52 at [16] per Kiefel CJ, Bell, Gageler, Keane and Edelmann JJ; James Hardie Industries Pty Ltd v Grigor (1998) 45 NSWLR 20 at 37, 39-40 per Spigelman CJ. Against this, the foreign-law element of the proceedings is a relevant, but not determinative, consideration: Barach v University of New South Wales at [81]; Benson v Rational Entertainment Enterprises Ltd [2015] NSWSC 906; Young v Facebook Pty Ltd [2015] FCA 1440 at [42] per Griffiths J. As Gleeson CJ, Gaudron, McHugh, Gummow and Hayne JJ observed in Regie National des Usines Renault SA v Zhang at [81]:

An Australian court cannot be a clearly inappropriate forum merely by virtue of the circumstance that the choice of law rules which apply in the forum require its courts to apply foreign law as the lex causae. 

90. A Foreign Law Notice has been served by the plaintiffs in these proceedings, setting out the law of China applicable to the filing and assessment of applications for the registration of trademarks, together with relevant tort, contract and company law. A Notice of Dispute as to Foreign Law has been served by the defendants. It is sufficient to note that there are disputes as to the content and application of Chinese law, although the points of difference – as expounded upon by Ms Zhan and Mr Ding – do not appear vast. The content of foreign law will be treated as “a question of fact” at trial: Studorp Ltd v Robinson at [13] per Allsop P. The contents and application of foreign law is not unusual in this Court.

91. Australian law is also applicable where the law of China identifies the unlawful act as part of the tort of unlawful interference. Overall, this consideration points in favour of declining to entertain the proceedings, although less strongly when the Australian law component is also considered.

Multiple proceedings

92. Where the same parties are involved in related but different proceedings in a local and foreign Court on the ‘same sub-stratum of fact’, the approach to forum non conveniens is as stated in CSR Ltd v Cigna Insurance Australia Ltd at 395:

Neither principle nor authority supports the view that the institution of foreign proceedings is, of itself, vexation or oppression according to the principles of equity. Similarly, neither principle nor authority supports the view that foreign proceedings become vexatious or oppressive in accordance with those principles in the event that the party against whom they are brought later commences proceedings with respect to the same subject matter in this country.

93. In CSR, the Court noted earlier authorities where proceedings were considered to be vexatious or oppressive where there was already litigation “in which complete relief may be had” or there was “a complete correspondence” between the proceedings (at 393) or, in Henry v Henry (1996) 185 CLR 571; [1996] HCA 51, where “the identical issue or the same controversy” was being litigated in different countries: at 399. But the same correspondence of subject matter did not exist in CSR, at 400: (footnotes omitted)

In cases such as the present, where different issues are involved in the local and foreign proceedings, albeit that the different proceedings arise out of the same sub-stratum of fact, the question is not whether the Australian court is a clearly inappropriate forum for the litigation of the issues involved in the Australian proceedings. Rather, the question must be whether, having regard to the controversy as a whole, the Australian proceedings are vexatious or oppressive in the Voth sense of those terms, namely, that they are “productive of serious and unjustified trouble and harassment” or “seriously and unfairly burdensome, prejudicial or damaging”.

94. The plaintiffs submitted that the subject matter of these proceedings was different from the trademark litigation in China. Five grounds of invalidity are raised to the Chinese trademarks, or which only one has any cross over with the intentional conduct alleged against the defendants in these proceedings. In the most recent determination by the CNIPA, Mr Staples’ alleged absence of good faith was not determined and no issue estoppel between the parties arises. Further, the plaintiffs submitted that, whilst the trademarks provide an overlapping sub-stratum of fact, the factual and legal issues differ and the proceedings were not related in the requisite sense. For example, the Trademark Appeals Board held that the Class 3 and Class 4 trademarks were unmaintainable because Mr Staples, being Luxotico’s sole-director, knew of the plaintiffs’ similar trademarks when registering the trademarks in China. That determination did not decide whether the defendants lodged the marks intentionally to harm the plaintiffs’ business, as pleaded.

95. The defendants submitted that a Chinese court is seised of the matter and will itself determine the same questions between the same parties. However, that is not correct in two respects:

1. The parties to the proceedings are not identical.

2. The trademark litigation in China will determine some, but not all, of the issues sought to be agitated in these proceedings.

96. Whether these proceedings are allowed to continue, or whether Black Bear seeks compensation in China, multiple proceedings will occur in any event. Separate proceedings must be commenced in China to obtain compensation should it be found that Luxotico was not entitled to register the trademarks in China. Accepting that it is inconvenient for Black Bear and Luxotico to be engaged in trademark litigation in China and for those parties, together with Sapphire Group and Mr Staples, to be engaged in litigation in these proceedings, this does not, of itself, suggest that this Court is a clearly inappropriate forum where Mr Staples is resident here and likely already dealing with the inconvenience of conducting litigation abroad. Nor is there evidence that Luxotico and Mr Staples are unable to deal with multiple proceedings, beyond the inconvenience which multiple proceedings visits upon all litigants.

Remedies available in China

97. The defendants submitted that the relief claimed is available in China if Luxotico is not the proper owner of the trademarks registered there. The plaintiffs submitted that, whilst Chinese law recognises a claim in tort similar or analogous to intentionally lodging a trademark in bad faith to harm another business, there was no logical reason why that claim need be litigated in China between Australian parties. The disputes’ factual connection with Australia was said to be significant. The plaintiffs are entitled to select their forum and have elected to litigate their claims in this Court. That decision is understandable given the plaintiffs and Mr Staples are based here, do business here, communicate in English and have assets here. The plaintiffs suffered damage here.

98. As I understand Mr Ding's expert opinion, a claimant would likely need to establish malice in order to obtain compensation in China, “The plaintiffs would have to prove the malice of the [Luxotico], which is the core element for filing a litigation based on Tort Law”. Where a specific cause of action is provided under a law such as Tort Liability Law, it is possible but rare for the court to find that a person is liable under the General Principles. Mr Ding says, “I am not aware of a civil case in the field of Trademark Law that is decided only under General Principles”. That is, if a claimant cannot establish malice under the Trademark Law, it is possible but unlikely that the Tort Liability Law would result in compensation, and very unlikely that the General Principles would assist. Ms Zhan did not comment on these matters.

99. Malice, within the meaning of Article 47 of the Trademark Law, appears broadly analogous with the intentional component of the tort sought to be pursued in these proceedings (see [65]). There is no evidence as to whether the tort sued upon in these proceedings is actionable in China, albeit similar concepts are recognised in the Tort Liability Law and the General Principles. If the plaintiffs have an arguable cause of action under Australian law, then the plaintiffs are not obliged to forego their entitlements under local law to pursue remedies under the law of China, subject of course to whether this Court is, having regard to all relevant factors, a clearly inappropriate forum to prosecute such a claim.

Recognition of judgments

100. The defendants submitted that any result from these proceedings would not be recognised in China and, as such, these proceedings are likely to be futile and should not be permitted to continue: Garsec Pty Ltd v His Majesty Sultan of Brunei [2008] NSWCA 211; (2008) 250 ALR 682. I understood Mr Ding's opinion in this regard to be limited to an order that Luxotico transfer its Chinese trademarks to the plaintiffs, rather than in respect of damages.

101. I agree that, in light of Mr Ding’s expert opinion at [15], it may be that prayer 1(a) of the Summons is not maintainable, although Ms Zhan has not commented on Mr Ding’s view. If the plaintiffs are not entitled to such relief, damages may be their only remedy.

102. A relevant factor is, I think, that damages are also sought against Mr Staples. As I understand it, even assuming that Black Bear is ultimately successful in the trademark litigation in China, only Black Bear is entitled to seek compensation and then only against Luxotico.

103. Further, if successful, the plaintiffs’ ability to enforce that judgment in New South Wales and in Hong Kong, where the assets of the respective defendants are likely located, is greater given a local judgment, and the ability to register that judgment in Hong Kong. Section 6(1) of the Foreign Judgments Act 1991 (Cth) provides that a party in whose favour a judgment to which Part 2 applies may apply to the appropriate court to have the judgment registered in the Court. By section 6(2), the appropriate court is this Court. By regulation 3 of the Foreign Judgments Regulations 1992 (Cth) (made under section 5(1) of the Foreign Judgments Act), Part 2 of the Foreign Judgments Act applies to money judgments of the High Court of the Hong Kong Special Administrative Region. A “money judgment” is defined as “a judgment under which money is payable”: section 3.

Practical considerations

104. Having regard to the factors collated in Colosseum, save for one matter, I am not satisfied that this Court is a clearly inappropriate forum. The relevant acts likely predominantly occurred in China, although some of the steps taken by Mr Staples to direct Luxotico to register trademarks in China and maintain those registrations may well have emanated from New South Wales. Both Chinese and Australian legal standards will have a bearing on legal quality of the acts giving rise to liability.

105. The plaintiffs are incorporated and based in Australia, with directors and shareholders also based in Australia: Bagsfirst Global Pty Ltd v Global Brands (Football) Pte Ltd [2010] NSWSC 988 at [32]-[34] per McDougall J; McGregor v Potts (2005) 68 NSWLR 109 at 120; [2005] NSWSC 1098 per Brereton J; PCH Offshore Pty Ltd v Dunn (No 2) [2010] FCA 897; (2010) 273 ALR 167 at 184, 188 per Siopis J. The defendants reside and carry on business in Australia, Hong Kong and China. The plaintiffs allege loss and damage suffered in Australia: Colosseum at [49]-[50]. Mr Staples is resident here. The key lay witnesses are in Australia. To the extent that expert law witnesses are in China, the Court can readily accommodate their evidence being taken. Much of the documentary material is in English and reception of foreign documents will not impede proceedings in this Court: Lin v Wu [2019] NSWSC 1666 at [44] per Ball J.

106. The plaintiffs have properly invoked the jurisdiction of this Court and have a prima facie right to insist upon the exercise of that jurisdiction. It may well be that the plaintiffs have commenced proceedings in this Court in order to ensure that the determination of compensation takes place here, rather than abroad. The application for a stay has been brought promptly.

107. Neither tribunal can completely resolve the controversy between the parties, albeit this Court is asked to resolve the controversies between all the parties whilst the trademark litigation in China and potential subsequent compensation claim appears likely to only involve Black Bear and Luxotico. Understandably, a judgment of this Court will not be recognised in China in respect of trademark rights. I cannot presently conceive why this Court would not accept the CNIPA’s final determination. The plaintiffs’ ability to sue both defendants, and to enforce any judgment here and in Hong Kong is likely greater than if Black Bear sought compensation against Luxotico alone in China.

108. The trademark litigation in China is advanced and will have to be finalised before claims for compensation can be prosecuted, either in China or in Australia. Considerations of comity and restraint are significant in ensuring that the CNIPA can finalise its determination of Luxotico’s right to register trademarks in China before this Court proceeds to determine other issues. Having regard to each of these matters, I am not satisfied that the defendants have established that this Court is a clearly inappropriate forum, at least as long as these proceedings are temporarily stayed to permit the CNIPA to conclude its processes.

OTHER DISCRETIONARY FACTORS

109. In addition, the defendants pointed to two discretionary factors which may warrant the Court exercising its residual discretion to refuse to entertain these proceedings.

Insufficient prospects of success

110. The defendants submitted that these proceedings have insufficient prospects of success as a live threshold question exists as to whether Luxotico or Black Bear is the owner in the trademarks in China. Only a Chinese tribunal can determine that question. Any judgment of this Court will have no effect in China. It was said there was thus no utility in these proceeding against Luxotico (Marshall v Marshall (1888) 38 Ch D 330; Kinahan v Kinahan (1890) 45 Ch D 78 at 84) and no proper basis for relief was said to have been identified against Mr Staples.

111. The test to be applied in determining whether a claim has insufficient prospects of success under rule 11.6(2)(c) is equivalent to the test for dismissing proceedings as disclosing no reasonable cause of action: International Management Group at [104]-[105], applying Agar v Hyde (2000) 201 CLR 552; [2000] HCA 41; Ho v Akia Pty Ltd (In Liq) (2006) 247 FCR 205; [2006] FCAFC 159 at [10]. Applying this test, I am not satisfied that the plaintiffs’ claim has insufficient prospects of success. Whilst I am not in a position to predict whether Black Bear will ultimately succeed or fail in challenging Luxotico’s trademark registrations, the fact that Black Bear has so far succeeded in two of four appeals suggests that its claims have some merit.

Abuse of process

112. The defendants submitted that each of the matters raised by the plaintiffs in these proceedings has been raised in the trademark litigation and dealt with in the reasons given by the tribunals, albeit that the tribunals were considering the issues raised with a view to determining who was entitled to the trademark rather than in respect of any compensation. These proceedings were also said to be an abuse of process, given the ongoing appeals in China and the plaintiffs' failed attempt to bring a similar claim in Hong Kong. These proceedings were said to be a third attempt to deal with the same subject matter and should not be entertained by the Court for similar reasons to those articulated by Lok J.

113. The plaintiffs submitted that these proceedings were not an abuse of process given the differing nature and relief sought in the trademark litigation in China. The Chinese trademark proceedings are administrative review proceedings and do not concern compensation. Separate proceedings would need to be commenced to seek compensation. It was said that the Hong Kong proceedings were irrelevant to this application.

112. The Court has power to stay proceedings, including to prevent abuse of its process: section 67, Civil Procedure Act 2005 (NSW); New South Wales v Plaintiff A [2012] NSWCA 248 at [15] (per Basten JA, Beazley JA and Hoeben JA agreeing); Jago v District Court of New South Wales (1989) 168 CLR 23; [1989] HCA 46; Clyne v New South Wales Bar Association (1960) 104 CLR 186 at 201; [1960] HCA 40; Batistatos v Roads and Traffic Authority of New South Wales (2006) 226 CLR 256; [2006] HCA 27 at [9]; Tomlinson v Ramsey Food Processing Pty Ltd (2015) 256 CLR 507; [2015] HCA 28 at [24] - [25].

113. A court’s decision whether to accept or decline jurisdiction turns upon the nature of the proceedings sought to be pursued in that court and the relevant factors applicable to the continuation of the proceedings in that court. The judgment of Lok J encapsulates the factors which were present on the application before his Honour. Those factors are not identical to those before the Court on this application. The cause of action sought to be pursued in the Hong Kong proceedings is not the same. A factor which troubled his Honour was Mr Staples’ residence in Australia. That factor favours this Court assuming jurisdiction. The fact that the plaintiffs have now sought to bring proceedings in this Court appears referable to receiving legal advice from new solicitors rather than an effort to bring multiple proceedings per se. The lack of connection between Luxotico and Hong Kong, which also troubled his Honour, is not relevant on this application. This discretionary factor does not dissuade me from the conclusion which I have reached that the plaintiffs should be permitted to pursue their claim in this jurisdiction, save for one matter.

TEMPORARY STAY

116. In some cases, it may be appropriate to grant a temporary stay of local proceedings to allow issues to be determined in the foreign jurisdiction: Henry v Henry at 590, 592 per Dawson, Gaudron, McHugh and Gummow JJ. Such a course has been adopted, particularly in the context of Family Court proceedings spanning multiple jurisdictions: Lan v Hao [2017] FamCAFC 175 at [47]-[51] and the authorities there cited; Kent v Kent [2017] FamCAFC 157 at [59]-[61].

117. I consider that these proceedings should be temporarily stayed pending completion of the trademark litigation in China to the conclusion of the current appeal process and any re-trial by the Supreme People’s Court, leading to a final determination by the CNIPA in respect of Luxotico’s trademark registrations.

118. As to whether Black Bear and Sapphire Group should be permitted to sue for tortious damages here before the CNIPA has completed its processes, where damages is the gist of the action in tort, and where the plaintiffs sought to register the “Glasshouse Fragrances” trademarks in China in late 2017 or early 2018, it is reasonable to presume that damages allegedly suffered as a consequence of the plaintiffs’ inability to register the trademark in China have been suffered, beyond nominal damages.

119. A temporary stay was suggested to the parties during the hearing of this application. Varying views were expressed as to whether a condition of the stay should be that the parties agree to be bound by the CNIPA’s final determination, and whether any procedural steps should be taken in the interim, such as serving evidence and providing discovery.

120. My preliminary view is that the CNIPA’s determination will likely establish whether “unlawful means” were effected by Luxotico under the Trademark Law of China and, as already mentioned, require amendment of the pleadings accordingly. But is also appears that the CNIPA, in its decisions thus far, has not necessarily opined on each aspect of Luxotico’s conduct identified by the plaintiffs in these proceedings and thus, on balance, I consider that this matter should be left open until the parties have the benefit of the CNIPA’s final determinations.

121. As to whether the parties should incur costs associated with preparing pleadings, evidence and undertaking discovery, I have some concerns. This expenditure may be wasted if the CNIPA should, for example, uphold all four of Luxotico’s trademark registrations in China such that the plaintiffs’ claims are not pursued in this Court. It may be that the plaintiffs are prepared to accept such a risk by agreeing to pay the defendants’ costs of such steps in that event.

122. I will give the parties an opportunity to confer and provide proposed Short Minutes of Order reflecting these matters. In addition, the defendants’ legal representatives did offer for arrangements to be made to effect service on Luxotico if the Court concluded that it should exercise jurisdiction. The Short Minutes of Order should record any such arrangement. Finally, I am minded to order that the costs of the defendants’ motion be the parties’ costs in the proceeding.

123. For these reasons, I dismiss the defendants’ notice of motion and request the parties to bring in short minutes within 14 days to reflect this and the other matters I have raised at [101] and [117]-[122] of these reasons.

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Decision last updated: 25 May 2021