Yunnan Baiyao Group Co Ltd v Tong Jum Chew Pte Ltd & Another

• Jurisdiction: Singapore
• Judge: Choo Han Teck JC
• Judgment Date: 21 October 2002
• Neutral Citation: [2002] SGHC 246
• Docket Number: Suit No 163 of 2002
• Date: 21 October 2002
• Published date: 19 September 2003
• Year: 2002
• Plaintiff Counsel: Margaret Neo Kee Heng and Petula Wong I-Lin (Hoh & Partners)
• Citation: [2002] SGHC 246
• Defendant Counsel: Tan Tee Jim SC (instructed counsel) and David Khong (Wendy Wong & Partners)
• Court: High Court (Singapore)
• Subject Matter: How acquired,Passing off,Whether goodwill in common words,Requirements to establish action in passing off,Whether parallel imports amount to passing off,Goodwill,Tort,Quality of goods

Judgment

GROUNDS OF DECISION Cur Adv Vult

1. The plaintiffs are a public company in China and whose government has a 31.5% shareholding in it. In 1995 the plaintiffs were given the licence to be the sole manufacturers of a product, known as Yunnan Paiyao, for a period of 20 years. This product is a herbal drug claimed by its manufacturers and purveyors to have been discovered over 100 years ago in China, and is reputed for its homeostatic qualities. It is used for the arrest of bleeding and the healing of wounds. The plaintiffs sued the defendants in this action for passing off the Camellia brand of Yunnan Paiyao ("Camellia Yunnan Paiyao") as a product of the plaintiffs. The first defendants are a Singapore company that imported Camellia Yunnan Paiyao into Singapore. The second defendants are a partnership firm that sells traditional Chinese medicine. One of the three partners of this firm, namely, Mr. Tong Yen Tien, is also a director and shareholder of the first defendants. The Camellia Yunnan Paiyao is distinctive by its yellow and red packaging as well as the trademark Camellia flower. The plaintiffs acknowledge that this trademark belongs to a Chinese government-owned company called Yunnan Medicines & Health Products Import and Export Corporation ("YIE"). Camellia Yunnan Paiyao has been sold in Singapore through various agents (other than the plaintiffs) for over 30 years in the yellow and red packaging.

2. It is not disputed that by an agreement of 18 May 2000 the first defendants were appointed the sole agents for YIE in Singapore for the distribution and sale of YIE products including the Camellia Yunnan Paiyao. It is not disputed that at all material times YIE purchased its supply of Yunnan Paiyao from the plaintiffs under the terms of a written agreement. The plaintiffs conceded that the Yunnan Piyao made by them is marketed under two brand names. One was the Camellia Yunnan Paiyo, the other was Yunfeng Yunnan Baiyao. It is an important (undisputed) fact that the packaging of the Camellia brand was done by the plaintiffs with materials (the packaging) supplied to them by YIE. It is equally important to note at the outset that this was not a case of a sole agent trying to steal his principal's mark. The incontrovertible fact was that the get-up of the Camellia brand Yunnan Paiyao belongs to YIE. Counsel for the plaintiffs submitted that the words Yunnan Paiyao in English as well as in Chinese constituted a mark which belonged to the plaintiffs. I shall revert to this argument shortly.

3. The evidence was not very precise or comprehensive, but sufficient for me to find that the Yunnan Provincial government appears to have an interest in this product. Hence, when a rift appeared between the plaintiffs and YIE sometime between 1995 and 1996, the state intervened and helped to mediate a settlement. It is not clear whether a legally binding settlement had been reached under Chinese law, but there is an unchallenged report documenting the assertion by the provincial government that the Yunnan Paiyao is a national treasure and ought to be properly preserved and marketed. It suggested the formalisation of what was already the practice in which Yunfeng Yunnan Baiyao is sold domestically, while the Camellia Yunnan Paiyao is sold internationally. It is noted that the product itself is essentially the same; only the name and packaging differ. This much was conceded by the plaintiffs, at least until April 1998.

4. The significance of April 1998 is that at that time the plaintiffs asserted that YIE were in breach of contract and had not made payments due to them. YIE, in turn, asserted that the plaintiffs were in breach in not delivering supplies in the manner and quantity required. The dispute between them is immaterial to this action save that consequent upon the dispute, the plaintiffs (unilaterally, according to YIE) terminated their contract with YIE in April 1998. Thereafter, on 25 December 2001, the plaintiffs appointed a Singapore company called Teck Hong Hung Pte Ltd (a company incorporated in 1996) as its sole agents in the distribution and sale of Yunfeng Yunnan Baiyao (in Singapore). Teck Hong Hung’s managing director is one Mr. Chan Yan Chye. He testified that he was introduced to the plaintiffs in July 2000 and he expressed an interest in distributing the plaintiffs' product for them in Singapore. It will be noted that May - July 2000 was also the time the first defendants were in touch with YIE to become their sole agents in Singapore. Reverting to Mr. Chan, he testified that he conducted a market survey and found that the Camellia brand was by far better known than the plaintiffs' Yunfeng brand that was sold in a red, green and white packaging. Mr. Chan reported this survey to the plaintiffs, and also submitted some samples of Yin’s Camellia Yunnan Paiyao, as well as some samples of the plaintiffs' Yunfeng Yunnan Baiyao, to the Health Sciences Authority ("HSA") for testing. The HSA found an excessive concentration of mercury in the Camellia Yunnan Paiyao, but only a trace element in Yunfeng Yunnan Baiyao. Consequently, the defendants were ordered to withdraw the Camellia brand from the market. It transpired at trial before me, that in both brands - the Yunfeng as well as the Camellia brand - there is a tiny red pill in each packet of Yunnan Paiyao capsule and also one in each bottle of the powdered form. This one tiny pill was meant for instances of severe pain. It is this pill that contains mercury. It is the same for the Yungfeng pill as well as the Camellia pill. The capsules and powder of both brands do not contain mercury. However, Mr. Chan sent only the red pill of the Camellia brand but, at the same time, sent only the plaintiffs' capsule (without the red pill) to HSA for testing. This episode was relevant in that the plaintiffs had initially sought to show that the defendants' product was a counterfeit because of the mercury content in the Camellia Yunnan Paiyao, and none in the Yunfeng Yunnan Baiyao. After Mr. Chan was cross-examined, this point no longer featured in the plaintiffs' case.

5. Some trap purchases were made of the Camellia brand Yunnan Paiyao on behalf of the plaintiffs, and subsequently, the defendants' stocks were seized and the plaintiffs commenced this action. The supply in question concerned four shipments of Camellia Yunnan Paiyao ordered by the first defendants and delivered by YIE through Cheerwise Industrial Ltd ("Cheerwise"), their joint-venture partners in Hong Kong. The evidence of Mr. Tong and Miss Xue Xiaoli, the export manager of YIE, was that the supply of Camellia Yunnan Paiyao to the first defendants came from stocks ordered by YIE from the plaintiffs prior to April 1998, with the exception of the third shipment in which YIE bought some Yunfeng brand directly from the Yunan Paiyao Group Corporation which they say, is the plaintiffs' parent company. YIE then sent that shipment to Cheerwise who re-packaged them into the Camellia packaging, complete with Camellia brand literature before re-exporting them to the first defendants in Singapore. At this point, it would be convenient to deal with one evidential issue. Miss Neo, counsel for the plaintiffs, made a valiant attempt to establish a break in the paper trail leading from the orders from the first defendants to the delivery of the supplies under the four shipments.

6. One of her main grounds was that the numbers did not tally. The plaintiffs had a report that referred to the quantity supplied on one shipment as "4g x 6 bottles" and the total sum of the order would, if based on that scale, be 30,000 bottles - not the 60,000 bottles that the defendants said they ordered. Miss Xue carefully took me through the relevant invoices that clearly dispelled any notion that less than 60,000 were ordered. Miss Xue further explained that the "4g x 6 bottles" was the description on the plaintiffs' standard, printed form and was in fact referring to their product for the domestic market. The invoices for the export market indicates "4g x 10 bottles". I find this explanation perfectly acceptable, not only because there was no significant countervailing argument against it, but also that I find Miss Xue to be a very reliable witness who had first-hand knowledge of the dealings between the plaintiffs and YIE, as well as between YIE and Cheerwise and the first defendants. Her evidence on this point was consistent with the purchase documents as well as with the evidence of Mr. Tong Yen Tien (who purchased them from YIE for the first defendants). He is also a witness who I judge to be reliable.

7. The amended statement of claim pleaded a single cause of action, namely the tort of passing off. The particulars of the wrong are pleaded in 10 of the Statement of Claim to the following. First, that the defendants' product contained the description that the product was manufactured by the plaintiffs, and the packaging on the defendants' product also bear the words "Yunnan Paiyao" in English as well as in Chinese characters. The only difference being that the plaintiffs' spelling of "Baiyao" was changed to "Paiyao". Secondly, the defendants advertised the claim that they were "the sole agents in Singapore of the products of the plaintiffs, that the product was founded in 1914, and that the products were from Yunnan, China". This point was not pursued at trial. Thirdly, the defendants sold products manufactured by the plaintiffs with an express representation that the product expiry date was 2004 when the expiry dates were 1999 and 2001 for the...