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Waiting for a Chinese court’s ruling before lifting a stay on NSW proceedings

Justice Rees finds that the NSW Supreme Court has jurisdiction and is an appropriate forum to hear a claim in respect of a tort possibly committed in China but where damage was suffered in Australia, subject to a temporary stay until the conclusion of proceedings in China.

Sapphire Group Pty Limited (Sapphire) and Black Bear Asset Management Pty Limited (Black) hold the registered trademark for “Glasshouse Fragrances” in Australia.

Mr Staples, formerly a director of Saphire and Black, became the sole director and shareholder of Luxotico HK Limited (Luxotico), incorporated in Hong Kong. Luxotico applied to register the “Glasshouse Fragrances” trademark in China for several classes of goods and services. This would prevent Sapphire and Black selling in China using the “Glasshouse” brand.

Black filed oppositions to Luxotico’s registrations, alleging prior use and bad faith, in the Chinese intellectual property court (CNIPA). Those proceedings were at appellate stage.

Sapphire and Black commenced proceedings in the NSW Supreme Court against Mr Staples and Luxotico, alleging the tort of intentional infliction of economic harm using unlawful means – that is, whether the trademark applications were filed in China contrary to Chinese law – and seeking to restrain them from exploiting those marks in China, or alternatively damages.

Mr Staples and Luxotico filed a motion to set aside the claim under the Uniform Civil Procedure Rules 2005 (NSW) (UCPR); relying on rule 11.6(2)(a) because service was not authorised by the UCPR; or alternatively, under rule 11.6(2)(b) because NSW was an “inappropriate forum”; or alternatively, under rule 12.11(1) for reasons including want of jurisdiction.

Her Honour observed that reliance on rule 11.6 was misconceived. Mr Staples was served in NSW and Luxotico was yet to be served. Filing a motion under that rule before being served could be regarded as submitting to the jurisdiction. Though this did not matter much as rule 12.11(4) provided that an application under rule 12.11(1) did not constitute submission to the jurisdiction and the same arguments were raised in respect of both rules.

As to jurisdiction, her Honour found that:

  • as Mr Staples was served in NSW, the Court had jurisdiction over him without it being necessary to show any other connection with the jurisdiction; and

  • the claim could be served on Luxotico outside of Australia (in Hong Kong), without leave, pursuant to paragraph (6) of UCPR Schedule 6, because the damage was suffered in Australia (subparagraph (a)(ii)) and Luxotico was a necessary and proper party to the claim properly brought against Mr Staples (subparagraph (h)).

Her Honour found that NSW was not an inappropriate forum. The need to apply Chinese law to the “unlawful means” question in the tort case (which was not limited solely to Chinese trade mark law), might have pointed to NSW being an inappropriate forum. However, Black’s claim in CNIPA would not resolve all issues between the parties in the NSW proceeding. Other considerations included that, while the registrations took place in China, the relevant instructions from Mr Staples may have emanated in NSW and that Sapphire, Black and Mr Staples were Australia based.

Her Honour dismissed the motion, but granted a stay of the proceedings until CNIPA rules on whether Luxotico is entitled to maintain the trademark registration, which will inform part of the “unlawful means” question.

If Sapphire and Black are successful in NSW, could they enforce a restraint in China, or will they need to rely on their alternative claim for damages?

This case is significant because it proceeded on the assumption that the NSW Supreme Court would accept the findings in the CNIPA ruling. It follows some recent Australian cases recognising and enforcing Chinese judgments, raising hope that China may one day recognise an Australian judgment.


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