New South Wales Supreme Court CITATION : Henry Leung v Hing Ling Yu [2008] NSWSC 90 HEARING DATE(S) : 31 January 2008 JUDGMENT OF : McDougall J at 1 EX TEMPORE JUDGMENT DATE : 31 January 2008 DECISION : See paragraphs [54], [59] and [60] of the judgment. CATCHWORDS : TRADE PRACTICES – misleading or deceptively conduct – passing off – whether 'get-up' sufficiently distinctive – whether exclusivity of reputation is required – whether serious question to be tried – interlocutory injunction – whether granting of interlocutory injunction will have the practical effect of determining the final issue. LEGISLATION CITED : Fair Trading Act 1987 CATEGORY : Procedural and other rulings Beecham Group PLC v Colgate Palmolive Pty Limited (2004) 64 IPR 45 CASES CITED : Cadbury Schweppes Pty Limited v Darrell Lea Chocolate Shops Pty Limited (2007) 159 FCR 397 Jessica Estates v Lennard [2007] NSWSC 1434 Kolback Securities Limited v Epoch Mining NL (1987) 8 NSWLR 533 Henry Pui Hung Leung (Plaintiff) Hing Ling YU t/as Hot Dollar Eastwood (First Defendant) Wai Kwong Yu t/as Hot Dollar Eastwood (Second Defendant) Wei Dong Gu t/as M's Hot Dollar (Third Defendant) PARTIES : May Warehouse Variety Pty Ltd (ACN 086 003 965) t/as Hot Dollars Warringah (Fourth Defendant) Shi Hua Chen t/as C & L Hot Dollar (Fifth Defendant) Zong Sheng Chen t/as CXL Hot Dollar Discount Store (Seventh Defendant) Jian Ping Zheng t/as ZC IJJ International (Eighth Defendant) Robert Law (Ninth Defendant) FILE NUMBER(S) : SC 1413 of 2006 COUNSEL : A R Lang (Plaintiff) N Kidd (Defendant) SOLICITORS : Rutland's Law Firm (Plaintiff) Allens Arthur Robinson Solicitors (Defendants) IN THE SUPREME COURT OF NEW SOUTH WALES EQUITY DIVISION McDOUGALL J 31 January 2008 (ex tempore – revised 4 February 2008) 1413/06 HENRY PUI HUNG LEUNG v HING LING YU t/as "HOT DOLLAR" EASTWOOD AND ORS JUDGMENT 1 HIS HONOUR: The plaintiff (Mr Leung) says that he operates some 25 "Hot Dollar" shops at suburban locations in New South Wales and the Australian Capital Territory. He describes those shops as "discount variety stores". The evidence suggests that they sell a wide variety of goods. The defendant (Mr Zheng) operates a discount variety store at North Rocks under the name of "Hot Dollar". Mr Leung claims to have remodelled his "Hot Dollar" shops utilising a distinct logo, fit out and signage (which it is convenient to refer to comprehensively as "get-up"). Mr Zheng has remodelled his shop utilising what Mr Leung says is a misleadingly or deceptively similar get-up. Mr Leung seeks an interlocutory mandatory injunction that in effect, if granted, would require Mr Zheng to undo his refit. The relevant facts 2 Mr Leung operates his shops through different companies. He says that he is in control of each of those companies and that he has given to each of them permission to use the "Hot Dollar" logo and get-up. None of those companies are parties to these proceedings. 3 Mr Zheng and the other defendants operate some nine or ten "Hot Dollar" shops in suburbs of Sydney. 4 Mr Leung claims to have become entitled to the exclusive use of the "Hot Dollar" name by virtue of an agreement made on 13 June 2003 with Mr Jia Li He (Mr He). (It may be noted that Mr Leung apparently acquired one, and perhaps two, "Hot Dollar" shops before that agreement was made, in about 2001 or 2002). 5 By way of sideline: it is by no means clear that the relevant clause - clause 6 - of the agreement of 13 June 2003 has the effect of assigning to Mr Leung all rights to the "Hot Dollar" name. That may not matter because Mr Leung's case today is put on the basis of a reputation derived from his allegedly distinctive get up which includes but is not limited to the "Hot Dollar" name and logo. 6 Mr Zheng claims to have become entitled to his "Hot Dollar" shop and to the right to use the "Hot Dollar" name in connection with it by virtue of an oral agreement made with Mr He in about November 1997. 7 To the extent that it is relevant, I note that the other defendants likewise claim to have become entitled to their respective "Hot Dollar" shops, and to the right to use the "Hot Dollar" name in connection with them, by agreements usually but not always made orally with Mr He. With one or two exceptions those alleged agreements are said to have been made before 13 June 2003. 8 It appears to be common ground, at least for today's purposes, and in any event I proceeded on the basis that Mr He established the "Hot Dollar" concept and set up a number of "Hot Dollar" shops. 9 Mr Leung's case today is that in 2003 he caused a new get-up to be created for a "Hot Dollar" shop at Bondi. He says that this new get-up was thereafter used for "Hot Dollar" shops opened at Parramatta and Blacktown in 2004. He says (or more accurately, his assistant Mr Gui Yu Huang (Mr Huang) says) that the new get-up was modified in mid-2005 and that it has been used in all "Hot Dollar" shops opened thereafter. 10 The alleged distinctive features of the get-up on which Mr Leung relies include the following: (1) a stylised "Hot Dollar" logo in a distinct font and with distinctive orange and black colouring; (2) a large rectangular entrance to the shop enclosed by an orange arch; and (3) orange aisle ends and orange wall panels said to be marked with distinctive signage and other information. 11 There seems to be little doubt that, at least in the general sense, Mr Zheng's refit embodies those elements of Mr Leung's particular (allegedly distinctive) get-up. The evidence does not permit, and it is neither desirable to make, findings as to the degree of resemblance nor as to points of difference. 12 Mr Zheng explains his new get-up by saying that he retained an interior designer, Mr Mark Li (Mr Li) who had done the refit for the "Hot Dollar" shop at Warringah Mall operated by the fourth defendant. Mr Zheng knew, when he retained Mr Li, that Mr Li had done work also for Mr Leung. However, on the evidence of Mr Huang, it was not Mr Li but a Ms Euhai who had created or designed what Mr Leung says are distinctive features of his shop's get-up. It is clear that Mr Zheng's refit substantially changed the appearance of his shop. (In saying this is, it is necessary to bear in mind that Mr Zheng's original lease within the North Rocks shopping mall had come to an end and that he had to move to another shop within the same mall, so that a new fitout was in any event necessary.) 13 Photographic evidence suggests that the get-up of the shop that Mr Zheng acquired from Mr He was not like the get-up of his present shop. Further, and as I have said, that photographic evidence suggests that the get-up of Mr Zheng's present shop bears at least some resemblance to Mr Leung's allegedly distinctive get-up. Mr Leung's case 14 For present purposes, Mr Leung relies on sections 42 and 44 of the Fair Trading Act 1987. He says that Mr Zheng's conduct, which I have summarised briefly, amounts to misleading or deceptive conduct in breach of section 42; a representation that goods or services supplied by Mr Zheng have sponsorship, et cetera which they do not have, contrary to section 44(e); and a representation that Mr Zheng has a sponsorship that, in fact, he does not have, contrary to section 44(f). 15 Mr Leung claims that he has established a discrete reputation in the get-up to which I have referred and that this reputation inures for the benefit of the business operated by him through his 25 or so shops, and that it will inure for the benefit of further shops to be opened by him. He says that the relevant elements of his get-up distinguish the business that he conducts and will continue to conduct under the "Hot Dollar" name. He says that it is not necessary that the reputation be exclusive. This point was established by the decision of the Full Court of the Federal Court of Australia in Cadbury Schweppes Pty Limited v Darrell Lea Chocolate Shops Pty Limited (2007) 159 FCR 397 at 418 [96]. However, there is no principle that exclusivity can never be relevant and, in my view, this is recognized by the wording of their Honours in the paragraph to which I have referred. In truth, this is but another way of saying that, in deciding whether or not someone has engaged in misleading or deceptive conduct, it is necessary to examine the whole of the evidence that has been adduced in the light of the case that has been pleaded. Exclusivity may and will often be relevant to that question; but neither exclusivity nor the absence of it can be determinative. 16 Mr Leung says that Mr Zheng's get-up infringes Mr Leung's proprietary rights and thereby infringes the reputation that Mr Leung claims to have built up. Mr Leung says that this amounts to an appropriation without consent of his intellectual property. 17 Mr Zheng's case is that Mr Leung has not made out a prima facie case that the get-up in question has become distinctively significant of Mr Leung's business. Mr Zheng relies on the fact that signage and get-up similar to that used by Mr Leung has been used at "Hot Dollar" stores operated by other defendants – specifically, at Warringah Mall, Lane Cove and Rhodes - and that those are acknowledged not to be stores associated with Mr Leung. Serious question to be tried 18 I conclude that there is a serious question to be tried as to whether the new get-up of Mr Zheng's current store is similar to the current get-up of Mr Leung's shops. That will come as no surprise given what I have said already as to the similarities between the two demonstrated by the photographic evidence. 19 However, the serious question to be tried is not limited to the appearance between the relevant shops. Mr Leung's case is that the two are misleadingly or deceptively similar. He must show, as his counsel Mr AR Lang in submissions put it, that there are a substantial number of consumers who, knowing of Mr Leung's chain of stores and of the indicia said to have been associated with them, would think that the North Rocks store was part of that chain. Alternatively, as Mr Zheng put it through his counsel Mr NJ Kidd, Mr Leung must show that the name and getup had become distinctive of his business in the geographical area within which that business operates. 20 The evidence does not satisfy me that Mr Leung has a strong case on the issue as I have just stated it. There are a number of reasons for this. 21 The first relates not so much to Mr Leung's reputation as to the possibility that consumers would be likely to confuse Mr Zheng's shop with Mr Leung's chain. Mr Zheng's evidence on this application was that the very great majority of the customers of his shop were locals who had been coming to it at least for as long as he and his wife had been operating the shop (since 1997). He said that most of those customers were known to his wife by name. There is no evidence to suggest that any of those customers have any belief whatsoever that Mr Zheng's shop is associated with (or for that matter not associated with Mr Leung's chain). Indeed, there is no evidence that the specific local clientele of Mr Zheng's shop even knows about Mr Leung's chain. 22 I accept that we have moved a long way from the village-based economies of the 18th and earlier centuries. I appreciate that people are far more mobile now than they were even a hundred years ago. (It has been said that as late as the First World War, the great majority of Englishmen had never travelled more than 7 miles from the localities of their birth.) But it does not follow that the customers of Mr Zheng's store go there because they think it is associated with or sponsored by Mr Leung's chain. Indeed, the evidence that they are local and repeat customers would suggest the contrary. Further the evidence that they are, for the great bulk, local would suggest that they have not come there because they have become aware of the "Hot Dollar" Brand through prior association with one or other of Mr Leung's chain. 23 In summary, there is no evidence of crossover between Mr Leung's operations and Mr Zheng's: crossover in either direction. 24 Although, as I have said, Mr Leung's case is based on the entirety of his allegedly distinctive get-up and not just on the use of the "Hot Dollar" name, it is nonetheless relevant to bear in mind that there are nine or ten "Hot Dollar" shops operating in the Sydney metropolitan area that are not associated with Mr Leung. Although none of those shops has a get-up which is closely similar to that now claimed by Mr Leung, it is nonetheless the fact that some features of that get-up, including the use of orange arches and orange signage, extend beyond Mr Zheng's shop to other shops operated by other defendants. 25 In summary, I think, the case that Mr Leung has acquired the reputation alleged (even on a non-exclusive basis) and that the reputation is being infringed is not strong. 26 That is not to say that Mr Leung cannot succeed on the final hearing. But the strength of his case is a matter to be taken into account in assessing whether, overall, the interests of justice require the grant of the injunctions sought, bearing in mind the impact that those injunctions, if granted, would have on Mr Zheng, and bearing in mind other relevant factors. 27 In the present case, although the mandatory injunctions which are the primary focus of Mr Leung's application are sought on an interlocutory basis, it is my view that their grant would have a substantially final effect. Their grant would have that effect because Mr Zheng would be required to obtain his lessor's consent to carry out the works necessary to undo his recent refit. (I interpose that an alternative prayer for relief would require him to seek that consent.) 28 If Mr Leung failed on the final hearing, Mr Zheng would be entitled to revert to his current get-up. To do so he would once again require his lessor's consent. Mr Zheng has said that he cannot be sure that the lessor would give the first consent (to do the works that would be insisted upon if Mr Leung succeeded today). One might think that if the lessor did consent to the works, it might be unwilling to countenance the inconvenience and delay that would be associated with another change should Mr Zheng succeed on the final hearing and seek to return to his current get-up. Balance of convenience 29 I turn now to the factors traditionally aggregated under this heading. The relevant principles 30 Mr Lang relied on the views expressed by Brereton J in Jessica Estates v Lennard [2007] NSWSC 1434. However, his Honour was there concerned with the question of whether an injunction should be granted at the stage of the final hearing. What his Honour said, in particular at [28] (on which Mr Lang relied) has to be understood on that basis. 31 It is correct to say that on a final hearing the absence of proof of substantial damage does not of itself require that a final injunction be refused. That is because the Court, in granting damages in lieu of an injunction, in effect is licensing the ex hypothesi unlawful conduct for the future. That consideration is of less significance on an interlocutory hearing where the period of the "licence" will inure only until the final hearing or, more accurately, the decision thereon. 32 In my view, the relevant principles may be taken from the decision of McClelland J in Kolback Securities Limited v Epoch Mining NL (1987) 8 NSWLR 533 at 535-536. His Honour said, and I accept, that in deciding to grant or refuse an interlocutory injunction, the Court should consider what course is best calculated to achieve justice between the parties in the circumstances of the particular case until the uncertainty is resolved by a final hearing. In making that decision, the Court must bear in mind the consequences both of the grant of an injunction and its refusal, in the former case bearing in mind the impact on the defendants if ultimately the plaintiff is found not to be entitled to the relief that it seeks. 33 Thus, his Honour said, although normally the Court does not undertake a preliminary trial, it may be appropriate to assess the strength of the plaintiff's case in seeing where the balance of convenience - in particular the balance of the risk of injustice - lies. 34 In particular, his Honour said, the Court should seek to undertake an assessment of the strength of the plaintiff's case where the decision to grant or refuse interlocutory relief may have the practical effect of determining the substance of the issue. For the reasons that I have already given I think that the grant of relief is likely to have that substantial effect in this case. Damages and the adequacy of damages 35 Mr Lang submitted that Mr Zheng's conduct was calculated to cause substantial damage to the reputation of Mr Leung's business. He submitted that there might be some diminution in the worth of the distinctiveness of the get-up. For this submission he relied on the decision of Tamberlin J in Beecham Group PLC v Colgate Palmolive Pty Limited (2004) 64 IPR 45. 36 That was a case where it was asserted that the respondent's toothpaste was misleadingly or deceptively similar to the applicant's and that to permit the respondent to continue to offer its toothpaste for sale would cause risk to the applicant's business. His Honour said at 53 [32]: "[t]he real prospect of damage... is the undermining of the strength of the association established by [the applicants] with their toothpaste products over a substantial period of time." 37 His Honour noted that this was a matter in respect of which any assessment of damages would be extremely difficult. 38 This is not a case of competing products. Nor, on the evidence, is it a case of competing businesses. Indeed, if Mr Leung is correct in saying that his chain of "Hot Dollar" stores has acquired a distinctive reputation associated with its allegedly distinctive get-up, there is no reason to think that Mr Zheng's allegedly contravening use of a similar get-up would in any way detract from that reputation, let alone cause a diminution in worth of Mr Leung's business. 39 Mr Lang relied on other questions relating to damages. He submitted that Mr Zheng's business, being outside the control of Mr Leung, might be conducted in a way that would be deleterious to the reputation of Mr Leung's business. However, the only example given - relating to the alleged sale of counterfeit goods - was not conduct alleged against Mr Zheng but conduct alleged against other defendants. (No interlocutory relief has been sought against those other defendants.) There is no evidence whatsoever that Mr Zheng is conducting his business in a way that could, let alone is likely to, harm such reputation as Mr Leung may have. 40 Mr Lang referred to some evidence of misdelivery of mail. It may be that there is some expense in sending it on, but that is hardly a reason for granting the interlocutory relief sought. This is at best evidence of confusion; and again, it does not relate to Mr Zheng or his business. 41 Mr Lang referred also to the loss of opportunities for leases of new stores. It may be that in a particular shopping mall only one discount variety store would be permitted. It may be that it is a case of "first in best dressed". There is some evidence that such a situation may have arisen in relation to another defendant. There is no evidence that such a situation has arisen in relation to Mr Zheng. On the contrary, on Mr Leung's case, Mr Zheng is interested in opening another "Hot Dollar" shop but has sought Mr Leung's consent to, or assistance in carrying out, this objective. (I might add that the evidence at this point is contested but taking the matter from Mr Leung's perspective and at its highest, this can hardly be evidence that Mr Zheng will seek to undercut or divert opportunities from Mr Leung.) 42 Thus, I do not think that there is a substantial case made out that Mr Leung is likely to suffer real damage as a result of Mr Zheng's conduct, if that conduct should be found in breach of the statutory provisions to which I have referred or otherwise to constitute passing off. 43 In truth, I think the real remedy to which Mr Leung would be entitled, if he succeeds, is an account of profits. It can hardly be to Mr Leung's disadvantage that Mr Zheng should continue to trade and make profits if that is the relief which in due course Mr Leung is held to be entitled to. In this context I note that at the outset of the hearing I raised the point that no relief had been claimed requiring Mr Zheng to keep adequate records of his trading. Accordingly, it is not necessary to explore whether such relief ought to be granted. Other factors 44 As I have said, if the injunctions sought are granted without condition they will require Mr Zheng to carry out the works that are the subject of the injunctions. However, as is clear from his lease, he cannot do so without the consent of the lessor. In circumstances where it is by no means clear that the lessor will give that consent, the Court should be slow to grant an injunction where the alternatives to which it would expose the injuncted party are either proceedings for contempt or a breach of his lease. 45 Further, Mr Zheng said that he spent about $135,000 on his recent fitout. That expenditure would be wasted were he required to undo the work. I accept that the undertaking as to damages would be likely to catch the wasted expenditure; and it might also be sufficient to catch the cost of restoration if ultimately Mr Zheng succeeds. But the works would undoubtedly cause disruption both to Mr Zheng's business and other businesses. The quantification of the disruption to Mr Zheng's business might not be easy. The undertaking as to damages might not in a practical sense be fully effective. Delay 46 There was an issue as to delay. The evidence showed that Mr Zheng had completed his works in late September 2007 and that Mr Leung became aware of them within a week or two thereafter. Mr Leung's solicitors wrote to Mr Zheng's solicitors on 26 October 2007 requiring the giving of undertakings. Mr Zheng's solicitors replied on 9 November 2007 seeking an extension of time to reply. That time was extended by letter dated 12 November 2007. The extended date was 26 November 2007. On that date, Mr Leung's solicitors wrote saying that their clients would not give the undertaking sought. 47 Nonetheless, Mr Leung did not seek interlocutory relief until after the end of term: he approached Hoeben J, apparently, for short service, on 17 December 2007. Two approaches to have the application heard during vacation were refused - firstly by Simpson J and, secondly by Campbell JA (sitting at first instance as the vacation duty judge in the Equity Division). 48 Mr Kidd accepts that delay over the vacation should not be laid to Mr Leung's account. Nonetheless, he submits the antecedent delay should. I find that submission somewhat curious when a substantial part of the delay was occasioned, firstly, by the somewhat leisurely approach to requesting an extension of time and, secondly, by the granting of that concession. 49 In those circumstances, I think the real delay is from 26 November (when Mr Leung became apprised that the undertakings sought would not be given) until 17 December. I do not accept, even against the background to which I have referred, that it is appropriate for a party seeking interlocutory relief to wait until after the end of the regular law term before moving for that relief when the relevant facts were well known and when, on the correspondence, the interlocutory process and at least some of the affidavits in support were available. 50 I have to say that the approach to the seeking of the interlocutory relief is not entirely inconsistent with Mr Leung's approach to the litigation as a whole, it being undoubtedly the fact that he himself has been responsible for a substantial delay in bringing the matter to a state where a hearing date can be allocated. Had Mr Leung complied with the timetable ordered by the court in April last year, it is likely that he would now have the benefit of a hearing date in the near future. 51 In all the circumstances, I do not think that this is an appropriate case for the grant of mandatory interlocutory relief requiring the undoing of Mr Zheng's fitout. I do, however, note that the amended notice of motion sought in the alternative order requiring Mr Zheng to display a large sign in his shop stating that the shop, "is not owned by, operated by, or associated with the "Hot Dollar" chain of variety stores operating throughout New South Wales and the Australian Capital Territory." 52 I have to say that I fail to see any real utility in the grant of relief requiring such a sign to be displayed. Indeed, I think, the effect of such a sign might well be to make customers of the North Rocks store aware of that of which, at present, they are unaware - namely, that there is indeed a "Hot Dollar" chain of shops operating throughout New South Wales and the Australian Capital Territory. 53 In addition, an order in those terms would once again put Mr Zheng in the position of requiring his lessor's consent and might expose him to the unappealing alternatives to which I referred earlier. Conclusion and orders 54 Mr Leung has not made out his case for the grant of interlocutory relief. 55 I order that the amended notice of motion filed in court on 15 January 2008 be dismissed. Costs 56 Mr Kidd seeks an order that Mr Leung pay the costs of the application. Mr Lang submits that the costs should be costs in the cause. He points to the circumstances that I have found that there was a serious question to be tried as to the similarities in the respective get-ups. 57 The finding that there is a serious question to be tried is a necessary foundation of the grant of interlocutory relief. But it is not a finding that entitles the party in whose favour it is made to the granting of such relief. It is also necessary to address the question of balance of convenience and the other discretionary factors to which I have referred. 58 Mr Lang submits also that at least some of the evidence on which the application was brought is evidence that will inure for the final hearing. However, the dispositive issues on the interlocutory application were discrete and nothing I have said is to be taken in any way as prejudging the issue that will be decided at the final hearing. 59 In the circumstances I think that the appropriate order is that the plaintiff pay the eighth defendant's costs of the interlocutory application and I make that order. 60 I order that the exhibits on the interlocutory application be handed out. ********** DISCLAIMER - Every effort has been made to comply with suppression orders or statutory provisions prohibiting publication that may apply to this judgment or decision. The onus remains on any person using material in the judgment or decision to ensure that the intended use of that material does not breach any such order or provision. Further enquiries may be directed to the Registry of the Court or Tribunal in which it was generated.