PIERRE A. NOBS AND ANOTHER v. KANTEC ELECTRONICS CO. LTD

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NO. A6051 OF 1998

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REASONS FOR DECISION

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1. The Plaintiffs are licensed world wide to manufacture and sell the watch known as "Watch Flemming Bo Hansen". The 1st Plaintiff received a copy of the pamphlet issued by the Defendant headed "In Memory of Di" in which the Defendant tried to market a watch which according to the 1st Plaintiff was an imitation of his Flemming Bo Hansen watch.

2. As a result the Plaintiffs' solicitors were instructed to investigate. Mr R J Campbell from the Plaintiffs' solicitors on 6th March 1998 went to the Defendant's office. On arrival he was received and taken to the conference room which doubled as a large show room displaying a large number of products sold by the Defendant. He was shown 2 catalogues issued on behalf of Kantec Electrical Appliance Co Ltd showing premium watches and low costs electrical items and a quantity of promotional materials issued by the Defendant and the material headed "In Memory of Di" was amongst those materials.

3. Ms Mak who received Campbell showed him a sample of watch AE3001 and a sample of watch AE3002. Campbell asked if he could obtain samples of those watches. He was told that those were the only ones that were presently available but if he wanted them she could obtain further samples from "my factory" and it would take 2-3 weeks to produce such samples. Campbell ordered a number of those samples and some other items. He was given a receipt signed and chopped on behalf of the Defendant.

4. With those informations, the 1st Plaintiff and Campbell each filed an affidavit and obtained an Anton Piller Order on 17th April 1998. Execution of the said order was carried out on 20th April 1998.

5. On 23rd April 1998, the Defendant took out an inter parte summons to discharge the Anton Piller Order.

6. The summons to discharge the Anton Piller Order came before Mr Recorder Kotewall. It was adjourned to 28th April 1998 before me.

7. In the original Anton Piller case, Anton Piller KG v Manufacturing Processes Ltd [1976] Ch 55, Ormrod LJ said at p.62:

"There are 3 essential pre-conditions for the making of such an order, in my judgment. First, there must be an extremely strong prima facie case. Secondly, the damage, potential or actual, must be very serious for the applicant. Thirdly, there must be clear evidence that the Defendants have in their possession incriminating documents or things, and that there is a real possibility that they may destroy such material before any application inter partes can be made."

8. The Court of Appeal in Ng Chun Fai Stephen v Tamco Electronics (HK) Ltd [1993] 1 HKC 160 held:-

"(1) In an application for an ex parte application, both counsel and counsel's solicitors bear a very heavy responsibility. It is of the utmost importance to the administration of justice that such responsibilities be discharged properly. The applicant's solicitors and counsel come under a duty to assist the judge so as to ensure that the court does not make an order which perpetrates an injustice against the absent party. Thomas A Edison v Bullock [1913] 15 CLR 679 applied.

(2) Anton Piller orders and Mareva injunction orders are wholly exceptional and are devised for use in rare and extreme cases. They are powerful and valuable weapons against fraud or dishonesty. No such order should ever be made unless necessary in the interests of justice; nor in terms wider than necessary to achieve the legitimate object of the order; nor unless there is real reason to believe that without such an order the party against whom the order is made would disobey an injunction for the preservation of the evidence the destruction of which would defeat the ends of justice.

(3) The purpose of an Anton Piller order is to preserve evidence that a defendant, apprised of impending litigation, would be likely to conceal or destroy so that it would not be available as evidence supporting the plaintiff's cause of action. Applicants for an order of such severity are under a strict duty to make to the court a full and frank disclosure of all matters that could be relevant and, having obtained the order, neither to act oppressively nor abuse their power in executing the order. A decision whether or not an Anton Piller order should be granted required a balance to be struck between the plaintiff's need that the remedies allowed by the law for the breach of his rights should be attainable and the requirement of justice that the defendant should not be deprived of his property without being heard. Columbia Picture Industries v Robinson [1987] Ch 38 applied.

(5) That fact that there was overwhelming evidence that the defendant had behaved wrongfully in his commercial relationship does not necessarily justify an Anton Piller order. Lock International v Beswick [1989] 1 WLR 1268 and Anton Piller v Manufacturing Processes [1976] Ch 55 applied.

(8) Anton Piller orders are only to be made when there is a strong prima facie case of dishonest conduct by the defendant which indicates that the defendant would be likely to destroy the evidence of their fraud. Tate Access Floors Inc v Boswell [1991] Ch 512 applied."

9. With the pre-conditions set out in those cases, I looked at the evidence filed to consider whether the Plaintiffs had satisfied those pre-conditions and hence whether the Anton Piller order should be discharged.

PRIMA FACIE CASE

10. It is alleged that the Defendant infringed the Plaintiffs copyright. The evidence disclosed is that Defendant offered and sold samples of the subject watches. It is a secondary infringement under S.31 of the Copyright Ordinance if it can be shown that the Defendant knew or had reason to believe those watches infringed copies of the work. There is only evidence that the design has won awards in other countries but not in Hong Kong. Even according to the Plaintiffs, their counsel in his skeleton argument conceded they were "not able to point to any specific misconduct or dishonesty on the part of the Defendant, other than their openly selling and marketing the Plaintiff's well-known design. The Plaintiffs do not know the state of the Defendant's knowledge of their proprietary rights and are unable to point to direct fraudulent conduct on their part". In the premises the Plaintiffs had failed to establish the requisite knowledge at the date of the writ. In Arrowin Limited v Trimguard (UK) Ltd [1984] RPC 581 concerning infringement of copyright it was held "that the Plaintiff had failed to establish the requisite knowledge at the date of the writ and therefore the action failed".

11. The Plaintiffs through counsel at the ex parte application further conceded that the Plaintiffs only suspected the Defendant was the manufacturer of the alleged infringing watches and that the absence of firm evidence of manufacture is an important factor in granting Anton Piller relief.

DAMAGE TO PLANTIFFS

12. The second pre-condition is that the damage, potential or actual, must be very serious for the applicant. The Plaintiffs evidence is only the production of catalogues of the watch marketed to the Japanese market but not in Hong Kong. (Para 7 of Nobs 1st affidavit). In Nobs 2nd affidavit at para 3, he conceded that "Hong Kong is not the best market in the world for the Plaintiffs' watch as it is not a good market for such architectural time pieces" and that only several hundred watches are sold in Hong Kong each year. The Plaintiffs in my judgment has not satisfied the 2nd pre-condition.

RISK OF DESTRUCTION OF EVIDENCE

13. Counsel for the Plaintiffs concedes that the Defendant openly sold and marketed those watches and could not point to any specific misconduct or dishonesty on the part of the Defendant and was not able to point to direct fraudulent conduct on the part of the Defendant. The only suggestion is at para 13 of Nobs' 1st affidavit which is as follows:-

"I further believe that the Defendant has recently arranged for the manufacture of a quantity of the illicit watches and believe that the Defendant may attempt to part with the possession or control of the illicit watches and to destroy, deface, obliterate or part with the possession or control of any documentation evidencing the sources from which the Defendant purchased the illicit goods and the persons to whom the illicit goods were sold unless an order is granted and enforced without the Defendant having advance knowledge of the application for order made."

14. This is only a bare assertion. It did not disclose its source of information. There is no material fact to support such assertion.

15. There is in fact no clear evidence that the Defendant has in its possession incriminating document or material not to say any real possibility of destruction of such material or document.

16. The Defendant operated openly in its business. There is no difficulty in Campbell going to the Defendant's premises and make enquiries about the watches. There is nothing to show that the business is being conducted in so underhanded and surreptitious a way that there may be a very good ground for supposing that unless Anton Piller action is taken at the end of the day there will be nothing to fight on. (Systematica Ltd v London Computer Centre Ltd & Another [1983] FSR 313.

17. By reasons aforesaid I see no reason why the Anton Piller Order should not be discharged.

18. I then proceed to decide whether the Plaintiff should be allowed to use the materials seized to support the re-grant of the Anton Piller Order. The principle is clearly set out in the judgment of Hoffmann J in Naf Naf SA & Another v Dickens (London) Ltd & Another [1993] FSR 434 at 427 & 428. "There is no doubt that as a matter of the law of evidence, the Anton Piller yield or the information derived from it would be admissible in these or any subsequent proceedings. That appears clearly from Helliwell v Piggott-Sims [1980] FSR 356 and follows a well established line of authority. But the admissibility of the information as evidence is not the end of the matter. There is equally no doubt that the court has a jurisdiction in personam to make an order restraining a party from making use of information which he has gained in circumstances which the court considers makes it inequitable that he should be able to do so. That jurisdiction is exemplified by a line of cases commencing with Lord Ashburton v Pape [1913] 2 Ch 469 where the information in question had been obtained in breach of confidence. It was applied by Warner J in ITC Film Distributors Limited v Video Exchange Limited [1982] Ch 431 where a party to litigation had obtained documents in the courtroom by a trick played upon his opponent. There is no English case in which this jurisdiction has been employed to restrain the use of information derived from a discharged Anton Piller order but such an order was made by the Court of Appeal of Hong Kong in Guess? Inc v Lee Seck Moa [1987] FSR 125 where the court relied upon Warner J's decision as illustrating the principle which they were applying. It appeared to the court particularly appropriate to use their jurisdiction in a case in which the Anton Piller order had been obtained by non-disclosure. They referred to a well known remark of Warrington LJ in Re Kensington Income Tax Commissioners [1917] 1 KB 486 at 509 where the learned judge said that if the applicant in an ex parte application:

does not make that full as possible disclosure he cannot obtain any advantage from the proceedings and he will be deprived of any advantage he may have already obtained by means of the order which has thus been wrongly obtained by him.

19. The Hong Kong Court of Appeal said that in the exercise of the discretion it was necessary to balance various factors. One was the seriousness of the non-disclosure. Another was the effect which a prohibition on the use of the information might have upon the court's ability to do justice in the particular case. Another was the practicality of requiring a party not to make use of information which he had obtained and obviously could not eliminate from his mind."

20. The Defendant made the application for discharge almost immediately unlike Helliwell v Piggott-Sims [1980] FSR 356 & WEA Records Ltd v Visions Channel 4 Ltd [1983] 1 WLR 721 where applications were not made immediately.

21. Since counsel for the Plaintiff had quite frankly drawn to the attention of the judge at the ex parte application of the inherent weakness of their case and that it is difficult in urgency to consider what matters not put in would be considered non-disclosure. The non-disclosure of the Defendant's promotional and advertising effects prior to March 1998 in my view is not a serious non-disclosure. Following the Hong Kong Court of Appeal's decision in Guess? Inc v Lee Seck Moa [1987] FSR 125, I exercise my discretion to allow the use of the information.

22. But even with the added material, it only showed from document seized that the Defendant purchased watches from a firm called Kwok Hong (國航) and that it ordered toolings and parts. There is no evidence that the Defendant manufactured the watches nor any evidence that the Defendant knew of the infringement of the copyright. At the execution there was no drawing found nor was any tooling or watches found. It goes to show the Defendant did not manufacture the watches.

23. As to the document in which a potential buyer made enquiry as to whether the watch was a copy watch from other famous brand and the Defendant replied, " -. This is the design from our engineer, it may be similar to any brand watches, we won't guarantee for any responsibility" Exh PAN17 of Nob's 2nd affidavit. I regard it as just an enquiry about warranty and the Defendant's reply is just a normal answer to disclaim liability. I cannot see how it can be inferred that the Defendant has any knowledge.

24. At the end of the day with all the evidence before me, I cannot say that the Plaintiffs with the materials seized improved their case and did not demonstrate that the Defendant was the sort of dishonest company which would destroy incriminating documents.

25. Hoffmann J in Lock Plc v Beswick (Ch D) [1989] 1 WLR 1268 at 1281 said, "The making of an intrusive order ex parte even against a guilty Defendant is contrary to normal principles of justice and can only be done when there is a paramount need to prevent a denial of justice to the Plaintiff. The absolute extremity of the court's powers is to permit a search of a Defendant's dwelling house, with the humiliation and family distress which that frequently involves". In the present case by not re-granting the Anton Piller Order, there is no denial of justice to the Plaintiff as with all the evidence the Plaintiff had not met the pre-conditions in the granting of an Anton Piller Order.

26. The Anton Piller Order is therefore discharged. Enquiries as to damages suffered by the Defendant as a result of the Anton Piller Order. I will hear the parties on costs.