CARTIER INTERNATIONAL AG AND OTHERS v. DYNASTY JEWELRY (HONG KONG) LTD AND OTHERS

HCMP 704/2018

[2021] HKCFI 138

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

MISCELLANEOUS PROCEEDINGS NO 704 OF 2018

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J U D G M E N T

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Background

1.  These proceedings were commenced by the Plaintiffs in October 2017 in respect of the Defendants’ infringement of their registered trade marks and copyright, and passing off of jewellery not of their products as being the jewellery of the Plaintiffs.  The trademarks and copyrights relate to well-known jewellery items bearing the “Cartier”, “VCA” and “Piaget” marks and designs, including the Cartier Love Device, the 4 leaf clover “Alhambra” motif, and the heart-shaped 3 leaf clover Frivole motif.

2.  On 27 October 2017, the Plaintiffs applied for interim injunctive relief against the Defendants, and by consent, an order was granted by the Court for the Defendants’ delivery up of items which infringe the Plaintiffs’ intellectual property rights and for discovery (“Consent Order”).  The Plaintiffs’ claims of infringement are not disputed and on 20 December 2017, judgment was entered against the Defendants by consent, whereby permanent injunctions were granted and final orders were made for delivery up and discovery (“Consent Judgment”).

3.  Paragraph 1 of the Consent Order compels the Defendants to deliver up all articles and materials in their possession, power, custody or control, including jewellery or parts thereof (“Infringing Goods”), moulds, tools, plates, drawings, artworks, labels, leaflets, certificates, boxes and packaging, whether in physical form or in electronic form (“Offending Items”), the retention, use or sale or dealing therewith by the Defendants would offend against the Defendants’ undertakings to the Court not to infringe the trademarks, pass off the Plaintiffs’ jewellery, or otherwise infringe the intellectual property rights of the Plaintiffs (“Delivery Up Order”).

4.  Paragraph 2 of the Consent Order (“Disclosure Order”) requires each of the Defendants to make an affidavit/affirmation to disclose the names and addresses of all entities: (a) who have supplied and/or provided the Defendants any of the Infringing Goods (“Supplier”); and (b) whom the Defendants have by any means howsoever supplied, provided, sold, distributed, offered to sell or supply, offered to distribute and/or exhibited in public in the course of trade any of the Infringing Goods (“Recipient”).  The Disclosure Order further requires the Defendants to supply the dates, prices and quantities of sales and dealings and to exhibit all relevant documents in the possession, power, custody or control of the Defendants.

5.  Paragraph 3 of the Consent Order (“Verification Order”) requires each of the Defendants to make an affidavit/affirmation to verify that the Infringing Goods and the Offending Items required to be delivered up had been fully complied with by each Defendant.

6.  The terms of the Consent Judgment are substantially similar to the Consent Order.  A permanent injunction is contained in paragraphs 1 to 3 of the Consent Judgment, to restrain infringement of the Plaintiffs’ intellectual property rights.  Paragraph 4 of the Consent Judgment contains an identical Delivery Up Order, covering the Infringing Goods and the Offending Items in the possession, power, custody or control of the Defendants. Paragraph 5 contains the Disclosure Order, requiring the disclosure by affidavit of the names and addresses of all Suppliers and Recipients, and of all relevant documents including contracts, purchase orders, invoices, delivery notes, payment records and receipts in the possession, power, custody or control of the Defendants.

7.  Paragraph 6 of the Consent Judgment requires each of the Defendants to make an affidavit/affirmation to set out the number of Infringing Goods sold by each Defendant, the number of the Infringing Goods which remain unsold, the sums received or receivable by each Defendant in relation to the Infringing Goods, and the costs incurred by each Defendant in respect of the sale of the Infringing Goods, and to exhibit all documents including contracts, invoices, orders, payment records and receipts.

8.  Paragraph 7 of the Consent Judgment contains the Verification Order.

9.  The Defendants accepted service of the Consent Order and the Consent Judgment, with penal notices endorsed, on 6 November 2017 and 26 January 2018 respectively.  There is no dispute as to the service requirement.

10.  On 7 May 2018, the Plaintiffs obtained leave of the Court to commence committal proceedings against the Defendants, on the ground that they are in breach of the Consent Order and the Consent Judgment.  According to the Statement served pursuant to Order 52 rule 2 RHC, the Plaintiffs allege the following breaches by the Defendants:

(1)  the Defendants were in possession of 92 items of the Infringing Goods prior to the Plaintiffs’ issue of the Writ in HCA 2449/2017, and has failed to deliver up such items or to account for the same;

(2)  the Defendants failed to disclose the names and addresses of all entities who had supplied and/or provided the Defendants with the Infringing Goods;

(3)  the Defendants failed to disclose records of payment made by them for the Infringing Goods;

(4)  the Defendants failed to disclose the names and addresses of all entities whom the Defendants supplied, provided, sold, offered to sell or supply the Infringing Goods;

(5)  the Defendants failed to verify that the Infringing Goods and the Offending Items had been delivered up in compliance with the Delivery Up Orders under the Consent Order and the Consent Judgment;

(6)  the Defendants failed to deliver up the Offending Items in the possession of the Defendants;

(7)  the Defendants failed to make an affirmation setting out the number of the Infringing Goods sold, the Infringing Goods which remain unsold, the sums received or receivable by each Defendant in respect of the Infringing Goods sold, and the costs incurred in respect of the sale of the Infringing Goods, and to exhibit all documents relating to such information; and

(8)  the Defendants failed to verify their compliance with paragraph 6 of the Consent Judgment.

Applicable Legal principles

11.  The legal principles applicable to consideration of a case of contempt of court have been helpfully summarized by Au-Yeung J in paragraphs 108 to 118 of her judgment in Bruno Arboit as Sole Liquidator of Highfit Development Company Limited v Koo Siu Yang & Another, HCMP 2749 of 2012, 8 March 2016, and these principles are relied upon by the Defendants in their defence. Pertinently, the burden is on the plaintiff to prove a defendant’s contempt beyond reasonable doubt.  As observed by Rhind J in Concorde Construction Co Ltd v Colgan Co Ltd & anor (No 2) [1984] HKC 253, if there is a hypothesis which might reasonably be consistent with the defendant’s innocence then he is entitled to be acquitted, as there is no onus on the defendant to prove anything affirmatively.  A court order should be construed strictly because a finding that the order has been breached has a potentially draconian effect on the commercial and economic freedom of an individual.

12.  A material consideration in this case is that where it is alleged that a defendant has failed to produce documents as ordered by the court, it must be proved that the alleged contemnor had the document in his possession, custody or power at the time of the order (Re Bramblevale Ltd [1969] 3 All ER 1062; Ip Pui Lam Arthur v Alan Chung Wah Tang & anor CACV 214/2016, 16 February 2017).  There is no presumption of fact that a state of things proved to exist at a certain date must have continued to exist, in the absence of contrary evidence.  As the Court highlighted in Bramblevale, and lest it be forgotten in these times in Hong Kong, the presumption of considerable importance is that a man is innocent unless he is proved to be guilty.

The evidence of the Defendants’ activities

13.  There is no dispute over the Plaintiffs’ intellectual property rights, or their reputation in the jewellery items sold under the respective brand names and designs of “Cartier”, “VCA”, “Van Cleef and Arpels”, “Piaget”, the Clover motifs and the Love device.  The Plaintiffs maintain that the Infringing Goods sold and offered for sale by the Defendants were flagrant copies of the original genuine items, with the Plaintiffs’ trade marks engraved on the copies, and in most cases, the counterfeit jewellery bore copyright notices and were supplied with counterfeit packaging boxes and counterfeit certificates of authenticity.  There is little doubt from the evidence of the items dealt with by the Defendants that the Plaintiffs’ designs have been slavishly copied to a very high degree in terms of similarity.

14.  The Defendants consented to judgment and there is no dispute as to their infringement of the Plaintiffs’ rights.

15.  On the evidence filed, the main issue now in dispute is the extent of the Defendants’ activities and whether they were engaged in the manufacturing of the counterfeit products, or whether they had only obtained supplies of the Infringing Goods from a third party.  The question of whether the Defendants had complied with the Delivery Up Order and the Disclosure Order under each of the Consent Order and the Consent Judgment turns on this essential issue.

16.  On the Plaintiffs’ case, the Defendants had been engaging in large-scale counterfeiting activities, which included the manufacturing and sale of counterfeit jewellery together with the packaging boxes and counterfeit certificates for the same, and the 2^nd and 3^rd Defendants (the only shareholders and directors of the 1^st Defendant) had profound knowledge in the manufacturing of counterfeits, which indicated that they had been actively involved in the manufacturing process.

17.  The Plaintiffs rely on the Defendants’ own website which stated that the 1^st Defendant and its subsidiary were manufacturers and exporters of fine jewellery, that their head office which was located in Hong Kong focused on export trade while the factory located on the Mainland was solely for manufacturing.  The Defendants’ webpage claimed that the 1^st Defendant produces high quality jewellery, that its target market is overseas customers, and that its products are exported worldwide, with 40% of its products being exported to the USA, and the remaining 60% to various European countries, the Middle East and Asia.  The prices of the 1^st Defendant’s products were stated to vary from US$100 to US$10,000.  The Defendants stated in its website that with the manufacturing plant on the Mainland, the 1^st Defendant annually manufactured over 100,000 jewellery pieces.

18.  On the evidence, it cannot be disputed that the Defendants’ business at the material time comprised the sale and offer for sale of a whole range of different jewellery items, of which complaint has not been made by the Plaintiffs in respect of any alleged infringement of their intellectual property rights (“Legitimate Jewellery”).  This is evidenced not only by what was stated in the Defendants’ website, but is also supported by the evidence procured and adduced by the Plaintiffs, from which it is clear that the Defendants had exhibited their Legitimate Jewellery items in their showroom and fair booth, and that both the 2^nd and 3^rd Defendants had solicited the sale of such Legitimate Jewellery items.  Apart from the sale and dealings in the Infringing Goods of which the Plaintiffs complain, there is clear evidence that the Defendants had a legitimate business, in the course of which they offered a large range of jewellery pieces which do not infringe the Plaintiffs’ rights.  This was in fact acknowledged by the Plaintiffs, when they applied for interim injunctive relief against the Defendants in October 2017, and claimed then that the 1^st Defendant’s business would not be stifled by any injunction which may be granted.

19.  The Defendants made affirmations in opposition to the contempt proceedings but Counsel for the Defendants did not seek to rely on these affirmations and the Defendants elected not to give evidence, as they were so entitled.

20.  As proof of the Defendants’ manufacturing and other infringing activities, the Plaintiffs rely on the admissions which were made by the 2^nd and 3rd Defendants, when investigators posing as purchasers visited the Defendants’ booth at the Hong Kong Jewellery & Gem Fair in June 2017 (“Fair”), and the Defendants’ office thereafter.

Dealings at and after the Fair

21.  According to the evidence of Ahmed Refaei Abdellatif (“Ahmed”), the investigator engaged by the Plaintiffs to conduct investigations into the Defendants, he visited the Defendants’ booth at the Fair on 22 June, 23 June and 24 June 2017, and met with the 2^nd and 3^rd Defendants there.  During his visit on the first day of the Fair, he was discreetly told by the 3^rd Defendant that he could supply products which were the same as original Cartier, VCA, Hermes, Bulgari and Tiffany products.  Ahmed was shown samples of Cartier, VCA and Hermes pieces, and was informed by the 3^rd Defendant that the Defendants had been in business for 27 years, had a factory located in China, used high quality gold and diamonds, and that they ship discreetly to their main markets which were Europe, Russia and the Middle East.  The 3^rd Defendant also told Ahmed that the Defendants required a 70% deposit for “famous brands”, 50% deposit for “non-famous brands”, with the balance to be paid before shipping, and further, that they could supply certificates and packaging boxes for an extra US$50, and that these were all manufactured and printed in-house.  According to Ahmed, the 2^nd Defendant showed him several Cartier and VCA pieces, and was able to provide selling prices on the spot for some of these pieces.  In reply to Ahmed’s queries, the 2^nd Defendant confirmed that the Defendants made all the famous brands at their factory, but said that they only did so for their “secret customers”.  The 2^nd Defendant also informed Ahmed that the Defendants had customers who continued to order Cartier “LOVE” bracelets from them, although the Defendants had to be very cautious when dealing with these items.

22.  On 23 June 2017, Ahmed purchased 3 counterfeit Cartier pieces and 2 counterfeit VCA pieces at the Defendants’ booth, at the total price of HK$108,888 (“1^st Batch”).  He was also shown 7 other pieces of counterfeit Cartier and VCA jewellery.

23.  On the third day of the Fair (24 June 2017), Ahmed purchased 5 of the jewellery items which had been shown to him the previous day, paying HK$90,000 for them (“2^nd Batch”).  He was shown more counterfeit items of Bulgari, Hermes, Tiffany and VCA jewellery at the Defendants’ booth, which he took photographs of.

24.  On 18 July 2017, Ahmed visited the 1^st Defendant’s office in Ocean Centre, where he met with the 2^nd and 3^rd Defendants.  The 2^nd Defendant led Ahmed to a showroom, where she showed Ahmed some items of jewellery which were not infringing items.  There was no Cartier or VCA jewellery displayed in the showroom.

25.  During the meeting, the 3^rd Defendant informed Ahmed that the 2^nd and 3^rd Defendants had attended the Singapore Jewellery and Gem Fair (“Singapore Fair”) the previous week, where they had sold all of their Cartier, VCA, Tiffany, Chanel and Bulgari jewellery, and that one UK client had purchased “a large quantity”.  The 3^rd Defendant also informed Ahmed that he would be attending a jewellery fair to be held in Bahrain the coming November.  According to Ahmed, the 2^nd Defendant then went into a room and returned with a box containing VCA and Cartier jewellery which were shown to Ahmed.  Photographs were taken of the items.

26.  According to Ahmed, the 3^rd Defendant claimed that he could show Ahmed some more new Cartier and VCA samples which he had just provided to another client, and suggested that they could meet at the 1^st Defendant’s office on 20 July 2017.

27.  At the meeting on 18 July 2017, Ahmed purchased 4 Cartier boxes and 2 Cartier certificates for US$200, converted to HK$1600.  The 3^rd Defendant then showed Ahmed a 250-page catalogue, which featured jewelleries of famous brands including Cartier, VCA, Piaget, Bulgari, Chanel and Tiffany (“Catalogue”).  The Catalogue was given to Ahmed, who was told that all of the jewellery featured in the Catalogue could be produced by the Defendants on demand.

28.  After the meeting on 18 July 2017, the 2^nd Defendant set up a Whatsapp chat group (“Chat Group”) for Ahmed, the 2^nd Defendant and the 3^rd Defendant, for ease of communication.  Within 3 days, the 2^nd and 3^rd Defendants sent to Ahmed via the Chat Group 158 photographs of jewellery of Cartier, VCA, Piaget, Bulgari and other brands (“Whatsapp Photographs”).

29.  On 26 July 2017, Ahmed sent to the Defendants 12 photographs of the items depicted in the Whatsapp Photographs and asked for their prices.  The 2^nd Defendant replied in the Chat Group, with prices quoted.

30.  On 18 August 2017, Ahmed sent to the 2^nd Defendant, via the Chat Group, images of 2 items of counterfeit Piaget jewellery, namely the “Possession Pendant” and the “Rose Ring” (“3^rd Batch”), which were included in the Whatsapp Photographs.  He asked the 2^nd Defendant if these items were in stock, and asked for samples of certificates and packaging to go with the items.  The 2^nd Defendant replied that the Possession Pendant was in stock, but that it would take the Defendants 2 weeks to produce the Rose Ring.  She also invited Ahmed to visit the Defendants’ office the same day, to look at items of jewellery before they were delivered to other clients.  Photographs of 3 items (the Cartier Les Oiseaux Liberes ring, the Panthere white gold necklace, and the Caresse d’Orchidees white gold necklace) were sent with the 2^nd Defendant’s message.

31.  When Ahmed went to the 1^st Defendant’s office at 4:30 pm on 18 August 2017, he was told that the Possession Pendant was being delivered, but that the Rose Ring had to be made.  Whilst waiting for delivery of the pendant, the 2^nd and 3^rd Defendants showed to Ahmed further samples of jewellery, which included Cartier and VCA items, photographs of which were taken by Ahmed.  He made payment of HK$28,500 for the 3^rd Batch, including the packaging boxes and certificates, and it was agreed that the pendant would be picked up by Ahmed later.

32.  On 22 August 2017, Ahmed was notified that the Possession Pendant was ready for collection.  He went to the office of the 1^st Defendant to pick it up.  There at the office, Ahmed heard the 3^rd Defendant talking on the telephone with someone named Jonathan, who appeared to be a foreign client who was in Hong Kong.  A transcript of the recording of the 3^rd Defendant’s conversation at one end was produced in evidence.  The 3^rd Defendant was recorded to be asking “Jonathan” whether he “got the heart shape is OK” for the “Piaget of hearts”.

33.  Ahmed took delivery of the Rose Ring and 2 Piaget packaging boxes at the 1^st Defendant’s office on 28 August 2018.  During this visit, Ahmed claims that the 3^rd Defendant informed him that the Defendants could make all the Alhambra Clover collection of VCA.

34.  Another investigator posing as a purchaser, Kathleen Humphreys (“Humphreys”), also attended the Fair on 25 June 2017, where she met the 2^nd and 3^rd Defendants at the Defendants’ booth.  There is no dispute that the items exhibited in the display windows of the booth were not Infringing Goods, and when Humphreys asked for the prices of those jewellery pieces exhibited, the 3^rd Defendant showed her actual samples of the products.  In the course of their discussions over the samples, the 3^rd Defendant informed Humphreys that the Defendants own a factory in China and have very specialized equipment, and do everything in-house apart from diamond cutting.  The 3^rd Defendant stated that the Defendants used very high quality materials, that their factory underwent regular testing, and that they used to manufacture for famous brands.

35.  When Humphreys asked the 3^rd Defendant whether they could supply “brands”, the 3^rd Defendant indicated that he could, but stressed that they must be very cautious.  Humphreys then asked whether the Defendants could supply Cartier items and the 3^rd Defendant replied in the affirmative.  He showed Humphreys a bracelet which bore the Hermes trademark, and when Humphreys told him that she was looking for a Cartier Panthere ring, the 3^rd Defendant told her that they had it, but it had been sold.  The 2^nd Defendant then passed a Cartier white gold Panthere bracelet, a Cartier yellow gold Panthere bracelet and a Cartier Love bracelet to the 3^rd Defendant, and Humphreys took photographs of these items.  She inquired about the selling prices and the 2^nd and 3^rd Defendants were only able to provide the price of the Love bracelet.  They explained that the other bracelets were new items and the prices were not yet available.  The Panthere bracelets came with packaging boxes.

36.  Humphreys paid HK$27,300 for purchase of the Cartier Love bracelet.

Inquiries made with the 4^th Plaintiff

37.  The Plaintiffs place particular reliance on the recorded telephone inquiries made by the 2^nd Defendant with the 4^th Plaintiff’s staff at its E-Commerce and Client Relations Centre (“Centre”), and the telephone conversations between the 4^th Plaintiff’s staff and the 2^nd and 3^rd Defendants, or their representatives.

38.  The 4^th Plaintiff provides customer services and support for various luxury brands which include the 1^st and 2^nd Plaintiffs and Piaget.

39.  According to the Plaintiffs’ evidence, the 2^nd Defendant had made frequent telephone calls to the Centre, the earliest in February 2016 and the last one in October 2017, in the course of which she made inquiries and sought detailed particulars of the Cartier and VCA jewellery pieces.  The transcripts of the 29 recorded telephone calls made to the Centre, between August 2016 and October 2017, show that the 2^nd Defendant asked for meticulous details such as the precise dimensions and particular features of the motifs, the thickness of the necklaces, the position of the clasps, the combinations of the precious stones used and the methods of construction of different jewellery pieces.

40.  The Plaintiffs claim that the 2^nd Defendant’s inquiries demonstrate that she was seeking information and specifications required for manufacturing counterfeits identical to the genuine items.  The Plaintiffs pointed out that for some of the items on which the 2^nd Defendant had made inquiries, the 4^th Plaintiff’s employees had explained that the items were not available for sale in Hong Kong, but that had not deterred the 2^nd Defendant’s requests for information, and that this demonstrated that she was not seeking the details for purchase.

41.  The inquiries made by the 2^nd Defendant were made on the basis that she had seen the items on the Plaintiff’s website, or with the claim that she was asking for someone else who was interested in the items but could not visit the shop.  That may explain the references which the 2^nd Defendant had made to specific model numbers and to general specifications of the items.

42.  However, on reviewing the transcripts, I agree that the meticulous details sought by the 2^nd Defendant, the type of particulars asked for and the frequency of the inquiries made are not consistent with the usual inquiries a customer would normally make, either for general interest or for the purpose of making a purchase.  An interested buyer might be interested in and refer to the general appearance and size (as large, medium, or small) of the particular clover motifs of the Alhambra necklace, but the inquiries made by the 2^nd Defendant focused on the combination or layout of the different sizes of particular dimensions/measurements of the motifs.  I agree that as a whole, the inquiries are more consistent with someone focused on the production of the particular items.

Whether there was breach of the Court orders

43.  It is against the background of the evidence described above that I consider the question of whether the Defendants had complied with the Consent Order and the Consent Judgment, and whether I am satisfied beyond reasonable doubt that they were in breach.

The compliance made by the Defendants

44.  The 3^rd Defendant made his 1^st affirmation on 27 November 2017 (“1^st Affirmation”), as a director of the 1^st Defendant, and on behalf of himself and the 2^nd Defendant, purporting to be in compliance with the Consent Order.

45.  In compliance with the Disclosure Order with regard to the Supplier, the 3^rd Defendant claims that the Infringing Goods were supplied by a company in Shenzhen (高雅(深圳)公司), the contact person of which is one Mr Tam (“GY”).  The 3^rd Defendant claims that the Defendants do not know the address of GY, but the telephone numbers of GY were given in the affirmation.

46.  The 3^rd Defendant claims that the Infringing Goods ordered and received from GY consisted of 20 pieces of jewellery (“20 Items”), 4 packaging boxes bearing the name “Cartier”, 2 certificates bearing the name “Cartier” and 2 packaging boxes which bear the name “Piaget”.  Particulars of the 20 Items, the packaging boxes and the certificates, the dates received and the respective prices paid were supplied, together with copies of the invoices issued by GY.  The 3^rd Defendant claims that no invoice had been issued by GY for the packaging boxes and the certificates.

47.  In compliance with the Disclosure Order with regard to the Recipients, the 3^rd Defendant claims in his affirmation that 17 pieces of jewellery (“17 Items”), 4 packaging boxes bearing the name “Cartier”, 2 certificates bearing the name “Cartier”, and 2 packaging boxes bearing the name “Piaget” had been sold to 4 purchasers in total, namely, Ahmed, Boldmere Enterprises (an English company for which Humphreys had purported to act in her purchase of the Infringing Goods), one Madam Ma and one Madam Chow (the addresses of Ma and Chow were not known to the Defendants).  Particulars of the sale of these 17 Items, the boxes and the certificates including the dates and prices of the sales, were provided, together with copies of the invoices issued by the 1^st Defendant (apart from the packaging boxes and certificates supplied to Ahmed, for which no invoice had been issued).

48.  The 3^rd Defendant claims in his 1^st Affirmation that the 1^st Defendant had in possession 3 items of the Infringing Goods, namely, a VCA Magic Alhambra white gold, diamond and onyx necklace; a Cartier pink gold and diamonds bangle; and a pair of VCA Vintage Alhambra white gold earrings, which were all melted by the 3^rd Defendant on 25 October 2017 (“Melted Items”).  The 3^rd Defendant claims that none of the Defendants were in possession of any Infringing Goods or Offending Items on 27 November 2017 for delivery up pursuant to the Consent Order.  To that extent, the 3^rd Defendant verified that the Defendants had complied with the Delivery Up Order under the Consent Order.

49.  The 2^nd Defendant by her affirmation of 27 November 2017 confirmed all the matters stated in the 1^st Affirmation of the 3^rd Defendant.

50.  In purported compliance with the Consent Judgment, the 3^rd Defendant made his 2^nd affirmation on 17 January 2018, on behalf of himself and the 1^st and 2^nd Defendants (“2^nd Affirmation”).  He made the same disclosures of the Supplier, giving the same particulars, as for the Consent Order.  In compliance with paragraph 5 of the Consent Judgment, the 3^rd Defendant claimed that of the 20 Items ordered by the Defendants, 17 Items were sold, and 3 pieces of jewellery remained unsold.  Particulars of the 17 Items sold, the sums received, and the costs incurred in respect of the sale, were supplied.  The relevant invoices were produced, and the 3^rd Defendant confirmed that the 3 Melted Items had been melted on 25 October 2017.  He stated that the Defendants were not (on 17 January 2018) in possession of any Infringing Goods or Offending Items for delivery up, and verified the Defendants’ compliance with the Consent Judgment.

51.  The matters stated in the 3^rd Defendant’s 2^nd Affirmation were confirmed to be true by the 2^nd Defendant.

Whether there was breach of the Disclosure and Delivery Up Orders

52.  The Plaintiffs claim that the Defendants’ disclosure is grossly deficient and dishonest, and in flagrant breach of the orders of the court. They claim that the Defendants had shown to Ahmed and Humphreys many other counterfeit items not included in the 20 Items now disclosed.  They also claim that since the 2^nd and 3^rd Defendants had repeatedly told Ahmed during their encounters that the Defendants had a factory located in China, that they used high-quality gold and diamonds, and that they made all the “famous brands” in their factory for their secret customers, the Defendants were clearly engaged in manufacturing the Infringing Goods, such that it is unbelievable that they had obtained supplies of only 20 Items from GY for sale, and that they were not in possession of any other items of infringing jewellery, or the tools and moulds for manufacturing the Infringing Goods.

53.  The Plaintiffs emphasized that the unchallenged evidence of Humphreys supports Ahmed’s evidence of what he had been told by the 2^nd and 3^rd Defendants.  The 3^rd Defendant had informed Humphreys during their meeting at the Fair that the Defendants owned a factory in China, had very specialized equipment, did everything in-house apart from diamond cutting, and could supply “brands” to Humphreys.  The 3^rd Defendant had informed Ahmed that their main markets are Europe, Russia and the Middle, and yet no disclosure has been made of the Defendants’ supply of Infringing Goods to any buyers in these markets.

54.  The Plaintiffs also rely on Ahmed’s evidence, that he had witnessed the 3^rd Defendant greeting his “number one customer in Europe”, and had heard the 3^rd Defendant talking to another customer on the telephone with regard to Piaget heart jewellery, and about other customers who had purchased jewellery from the Defendants.  The Plaintiffs claim that the Defendants had made no disclosure of their sales to any of these customers.

55.  I first deal with the issue of whether there is evidence of the Defendants’ manufacturing activities, and whether the Defendants’ assertion of having only obtained the Infringing Goods from GY as the Supplier is believable.

56.  The Defendants’ website refers to its factory plant on the Mainland and its manufacture of over 80,000 to 100,000 pieces of jewellery each year, for export to overseas markets.  However, I must give due consideration to the fact that the evidence in this case shows the Defendants’ dealings in a wide range of jewellery which are not copies of the Plaintiffs’ products.  The Defendants had at all material times a Legitimate Jewellery business.  It is very probable, and not incredible, that the factory plant and the manufacturing facilities, to which the website of the 1^st Defendant and the 2^nd and 3^rd Defendants had referred, manufactured and produced the Legitimate Jewellery only for the Defendants’ business, and that the Defendants had obtained supplies of the Infringing Goods from third parties such as GY for the Defendants’ onward sale to customers which were interested in purchasing counterfeit products.

57.  The Plaintiffs assert that the Defendants were hiding their illegitimate activities under the guise of a legitimate jewellery business.  However, there is insufficient evidence to establish this.  The Defendants’ booth at the Fair exhibited a range of its Legitimate Jewellery.  When Ahmed and Humphreys visited the booth on separate occasions, both of them were first shown the Defendants’ collection of their own jewellery.  It was only when the investigators inquired about “bigger brand names”, and “Cartier” specifically, that the 2^nd and 3^rd Defendants showed them samples of the Infringing Goods.

58.  It is very clear that on Humphrey’s own account of her meeting with the Defendants at the Fair, the information which she had obtained from the 3^rd Defendant, as to the Defendants’ factory in China, their specialized equipment and their in-house activities, was in the course of her being shown samples of the Legitimate Jewellery offered for sale at the Defendants’ booth.  She asked about “brands” only after the 3^rd Defendant’s narrative of the Defendants’ business activities.

59.  As for Ahmed’s visit, it is also clear that he was first shown various pieces of the Defendants’ Legitimate Jewellery, before the 2^nd and 3^rd Defendants showed him the counterfeit products when Ahmed asked for “bigger brand names”.  Ahmed’s evidence of his visit to the 1^st Defendant’s office on 18 July 2017 shows that even after Ahmed had purchased various items of the Infringing Goods, the 2^nd Defendant had persisted on showing Ahmed the Defendants’ own line of Legitimate Jewellery.

60.  According to Ahmed, the 3^rd Defendant had informed him, during his first visit to the Fair booth, of the Defendants having been in business for 27 years, with its factory located on the Mainland.  The reference to the Defendants’ factory on the Mainland was part of the 3^rd Defendant’s introduction of the Defendants’ business, and there was no direct mention of such factory being the manufacturer which produced the Infringing Goods, as well as the Defendants’ Legitimate Jewellery.  As Counsel for the Defendants highlighted, if there had been any direct reference to, or any other clear admission made as to the Defendants’ own manufacture of the Infringing Goods, the recording of such conversation would have been produced, but there is no such evidence.

61.  There is, however, the recording of Ahmed asking the 2^nd Defendant, at his first visit to the Fair booth, whether the Defendants would make the Cartier and VCA pieces for him, and whether the Defendants “did everything there in the factory”, and the 2^nd Defendant responding in the affirmative, adding that it was only for some secret customers.  Counsel for the Defendants made the point that all these assertions as to the “famous brands” being made by the Defendants themselves, in their factory, may well have been part of the Defendants’ sales talk to customers, when in actual fact, they had only obtained supplies of Infringing Goods from GY, as they have disclosed pursuant to the Court orders.  Counsel highlighted the fact that when Ahmed had asked for the prices of the Infringing Goods shown to him at the Fair, the Defendants had not even been able to give Ahmed the price: which is inconsistent with such items being the Defendants’ own, “in‑house”, products.

62.  The Plaintiffs rely on the fact that in relation to the Infringing Goods displayed, the Defendants had labels and a system of barcodes for identification.  The Plaintiffs contend that this suggests that the Infringing Goods were within the Defendants’ inventory of products which they manufactured for sale.  That is one piece of evidence, but the placing of barcodes and labels on and for the items of jewellery is not such a sophisticated and difficult process, and even for items of Infringing Goods which are supplied by third parties, it would have been inherently probable for the Defendants to have applied barcodes and labels to the pieces, to facilitate sales to and dealing with enquiries made by potential purchasers.  There is no doubt that the Defendants had brought the Infringing Goods to the Fair for sale, but the existence of the bar codes and labels on the items does not, in my judgment, lead to the only inference that can reasonably be drawn, that the Infringing Goods were manufactured by the Defendants or their factory.

63.  Perhaps the more important evidence are the telephone inquiries made by the 2^nd Defendant to the 4^th Plaintiff’s Centre, and the specifications and detailed particulars she had asked for in the course of the 29 recorded calls made during the period from 31 August 2016 to October 2017. As explained in the earlier part of this Judgment, the information and specifications sought suggest that the inquiries were made with the aim or for the purpose of manufacture of the items.  Nevertheless, the information and specifications sought may have been obtained either for the Defendants’ own manufacture, or for their procuring the manufacture or production of the items by GY, or another third party.  As the authorities make it clear (Bruno Arboit as capsule Liquidator of Highfit Development Company Limited v Koo Siu Yang HCMP 2749 of 2012, 8 March 2016; Re Bramblevale Ltd [1969] 3 All ER 1062), where there is a hypothesis which might reasonably be consistent with the Defendants’ innocence, they are entitled to be acquitted. I consider that the enquiries made, even if for production, cannot exclude the reasonable doubt that they were made only to procure manufacture by a supplier.

64.  As for the Catalogue which the 3^rd Defendant had shown and given to Ahmed, saying that the jewellery featured in the Catalogue could be produced by the Defendants on demand, it is not a catalogue produced by the Defendants or which makes any reference to the Defendants.  The Catalogue is simply a publication which features famous brands of jewellery.  What the 3^rd Defendant meant by the statement could be that the Defendants could have the jewellery produced by GY or other third parties, if Ahmed required them.

65.  Likewise, when the 2^nd Defendant informed Ahmed on 18 August 2017 that the Piaget Rose Ring could be produced in 2 weeks, this could mean either that the Defendants could produce it in their own factory, or they could arrange for it to be produced by GY or another third party.  The latter is just as likely as the former.

66.  The Plaintiffs further rely on the fact that the 3^rd Defendant was in possession of 2 images of artwork on his handphone.  Ahmed claims that during his visit to the Defendants’ booth on 23 June 2017, the 3^rd Defendant showed him these “engineering drawings” and the 2 images, which were respectively a Cartier parrot piece, and a Cartier Panthere piece.  The 3^rd Defendant was also recorded as making the following statements (“Copying Statement”), which the Plaintiffs contend constitute evidence of the Defendants’ admission of their engagement in production activities:

“3^rd Defendant: This you know, this is like copying, we do not do crazy.

[Ahmed: Hmm, I see what you mean, yeah.]

3^rd defendant: Very private.

[Ahmed: Yea.]

3^rd Defendant: Okay, but who … work with us, they had been… we met long time.”

67.  I agree with Counsel for the Plaintiffs, that the video and transcript of the recorded conversations between Ahmed and the 2^nd and 3^rd Defendants should be reviewed in the entirety, and in the context.  Doing that, and in the context of the description made in the Defendants’ website of their business and manufacturing activities, the fact of the Defendants’ dealings in a range of Legitimate Jewellery, the disclosure made by the Defendants as to their obtaining the Infringing Goods from GY, and considering the conversations conducted between the 2^nd/3^rd Defendants and Ahmed and Humphreys in the entirety (which include the conversations referred to in paragraph 66 above, and in paragraphs 80 to 85 below), I cannot conclude that the only inference which can reasonably be drawn from the 3^rd Defendant’s Copying Statement, as to what the Defendants were doing, and who they were “working with”, is that the Defendants were themselves engaged in manufacturing the Infringing Goods.  The reference made by the 3^rd Defendant to the party “working with them”, whom they had met long time ago, tends in fact to suggest that the Defendants were working in conjunction or in co-operation with a third‑party supplier/manufacturer, as opposed to their manufacturing the Infringing Goods themselves.

68.  Considering the available evidence and weighing the competing factors, the assertions made by the Defendants that the Infringing Goods were obtained from GY are not unbelievable, and may be true.  In my judgment, there is a reasonable doubt in the Plaintiffs’ case that the Defendants had manufactured the Infringing Goods.

69.  As it has not been proved beyond reasonable doubt that the Defendants were manufacturers of the Infringing Goods, such that they had possession, power or custody of other Infringing Goods manufactured, it is not unbelievable that the Defendants only ordered and received from GY the 20 Items, 4 packaging boxes and 2 certificates, as deposed to in the 3^rd Defendant’s 1^st Affirmation; that he had sold 17 Items, 4 packaging boxes and 2 certificates; and that as at the date of his 1^st Affirmation on 27 November 2017, the 1^st Defendant was in possession only of 3 items of the Infringing Goods, which were melted.  There is no other fact or sufficiently cogent evidence to show that the Defendants had ordered or received more than the 20 Items, sold more than the 17 Items and that the 1^st Defendant was in possession of more than the 3 Melted Items of the Infringing Goods.

70.  The Plaintiffs complained that the Defendants had shown more Infringing Goods to Ahmed and Humphreys, and that they had failed to give any explanation or account as to what had happened to those items, other than the 20 Items.

71.  The Plaintiffs rely on Schedule 1, listing 92 items of the Infringing Goods, which the Plaintiffs say had been shown by the Defendants to Ahmed/Humphreys, but which were not delivered up.

72.  Of these, items 3, 4 and 49 depict the same piece of jewellery (item 4 showing the packaging box as well), items 8 and 48 are the same piece, and items 73 and 81 are the same piece.

73.  As for items 21 to 78 of Schedule 1, even on the Plaintiffs’ evidence, only photographs of the pieces had been sent (by Whatsapp) to Ahmed, so that is not sufficiently conclusive of the fact that the Defendants had them in their possession, custody or power.  It is possible and credible that the Defendants had obtained photographs of at least some of the items from GY, as being jewellery which were available on demand or for order.  Nor is there cogent evidence of the fact that they were still in the possession of the Defendants at the time of the service of the Consent Order, and the Consent Judgment.

74.  The Catalogue was not produced by the Defendants of their products, so the Catalogue cannot be evidence that the Defendants were in possession, custody or control of the items featured therein.  The so‑called technical drawings and the images of the 2 pieces of jewellery were seen on the 3^rd Defendant’s telephone on 23 June 2017.  I cannot conclude that the only inference which can reasonably be drawn from that, is that the Defendants had the actual drawings and the jewellery pieces in November and December 2017.

75.  I accept the submissions of Counsel for the Defendants, that the Consent Order and the Consent Judgment must be strictly construed, and by their language, they only require the Defendants to deliver up the Infringing Goods “in their possession, power, custody or control”.  There is no order which requires any of the Defendants to state on affidavit/affirmation the whereabouts or location of the Infringing Goods which they once had, but were no longer in their possession, power, custody or control for delivery up pursuant to the Consent Order and the Consent Judgment.  Nor do the Orders require the Defendants to explain why the Infringing goods were no longer in their possession, power, custody or control.  The Verification Order only requires the Defendants to verify that “the Infringing Goods required to be delivered up pursuant to the Consent Order/Consent Judgment” had been fully complied with.

76.  The 3^rd Defendant, on behalf of the 1^st Defendant, himself, and the 2^nd Defendant affirmed that as on 27 November 2017, he had been in possession of the 20 Items, 4 boxes and 4 certificates, the dates when these items were sold (before 25 October 2017), and that as on 27 November 2017 and 17 January 2018 (the respective dates of the 1^st Affirmation and 2^nd Affirmation), he was not in possession of any Infringing Goods or Offending Items, after sale of the 17 Items and the melting down of the Melted Items on 25 October 2017 (one day after the service of the Writ on the Defendants).

77.  In relation to the details and particulars of GY as the Supplier, I do not find it incredible that the Defendants only had the contact telephone numbers of GY.  The fact that the Plaintiffs were not able to receive any response when they called the telephone numbers given by the Defendants is also unsurprising.  From the evidence, if GY had supplied the Infringing Goods to the Defendants, it is clear that the goods supplied were flagrant copies and that GY had infringed the Plaintiffs’ intellectual property rights by selling and/or manufacturing the Infringing Goods.  The manufacturing and sales activities would have been and were conducted surreptitiously, and it is not incredible that GY would only give contact telephone numbers to the Defendants, without further details of GY’s source or its factory.  Nor is it incredible or unexpected that GY would not readily communicate with any stranger or unfamiliar caller such as the Plaintiffs’ representatives.

78.  In conclusion, I find that there is insufficient evidence to prove, beyond reasonable doubt, that the Defendants had not complied with the Delivery Up Order, and not made full disclosure of the Suppliers of the Infringing Goods and/or the Suppliers’ documents.

Non-disclosure of Defendants’ “other customers” and dealings?

79.  The Plaintiffs then seek to rely on the references made by the 2^nd and 3^rd Defendants to their other customers, and their supply and sales to these other customers, to show that the Defendants have not made full disclosure of the Recipients, the Defendants’ sales to and dealings with these Recipients and of the relevant documents, as required under the Consent Order and the Consent Judgment.

80.  According to Ahmed’s evidence, on the first day of the Fair, he had seen the 3^rd Defendant greeting a Caucasian male, and the 3^rd Defendant later informed Ahmed that that was his “number one customer in Europe”.

81.  Ahmed was also informed by the 2^nd Defendant on 22 June 2017 that the Defendants had “some customers” who had kept on ordering the Love bracelet from them.

82.  On 18 July 2017, the 2^nd Defendant informed Ahmed that she and the 3^rd Defendant had attended the Singapore Fair the previous week, had sold all their Cartier, VCA, Tiffany, Chanel and Bulgari items at the Singapore Fair, and further, that a UK client had purchased a large quantity. Ahmed was also told that the 3^rd Defendant would be attending a jewellery fair in Bahrain in November 2017.

83.  On 18 July 2017, the 3^rd Defendant had invited Ahmed to visit the 1^st Defendant’s office on 20 July 2017, so that he could show Ahmed some more new Cartier and VCA counterfeits, which he had just provided for another client.

84.  On 18 August 2017, the 2^nd Defendant had sent to Ahmed photographs of 3 pieces of Cartier jewellery and invited Ahmed to visit the 1^st Defendant’s office to look at new items, before they were to be delivered to their clients the next day.

85.  There was also a recording of the 3^rd Defendant speaking to a customer named Jonathan on 22 August 2017, about a heart shape for Piaget.

86.  The Plaintiffs highlighted the fact that no disclosure was made by the Defendants in relation to their sales and dealings with any of these clients.

87.  On behalf of the Defendants, it was argued that the terms of the Consent Order and Consent Judgment are drawn too widely, and are impossible to perform.  I do not accept such argument.  The relevant parts of the Orders require the Defendants to disclose to whom they have supplied, provided, sold or distributed the Infringing Goods, or offered to do so, in the course of trade.  If the Defendants had sold and provided any party with the Infringing Goods in the course of their trade, or had offered to do so, that falls within the disclosure to be made, under paragraph 2 (b) of the Consent Order and paragraph 5 (b) of the Consent Judgment.

88.  As stated in paragraph 67 above, I have endeavoured to examine and construe the conversations which the 2^nd and 3^rd Defendants are said to have had with Ahmed in the context, and in the entirety of the evidence as a whole.

89.  I accept the submissions of the Defendants, that the one‑sided conversation on the part of the 3^rd Defendant, with “Jonathan”, which was overheard on 22 August 2017, as to whether “Jonathan” was fine with getting “a heart shape for Piaget”, is too vague and uncertain for any inference to be drawn, that the Defendants had sold, supplied or provided “Jonathan” with counterfeit jewellery which infringes the Piaget trademark or goodwill of the 3^rd and 4^th Plaintiffs, to amount to a breach of the Consent Order and Consent Judgment and contempt.

90.  The customer greeted by the 3^rd Defendant on the 1^st day of the Fair, and said to be the Defendants’ number one customer in Europe, may well be the Defendants’ number one customer of their Legitimate Jewellery.  No inference can be made that the Defendants had sold, supplied, provided or offered to sell, supply and provide such customer with the Infringing Goods.

91.  However, in relation to the 2^nd Defendant’s Whatsapp message to Ahmed in the Chat Group on 18 August 2017, she had identified 3 specific Cartier pieces (the Les Oiseaux Liberes ring, the Panthere de Cartier necklace and the Caresse d’Orchidees necklace) and invited Ahmed to go to the 1^st Defendant’s office to look at them, before they were to be delivered to clients the next day.  This was a specific reference to the Infringing Goods to be provided and supplied, or sold, to clients.  On the evidence, they were not amongst the items disclosed to have been sold, or melted down.  On the 2^nd Defendant’s admission, that these items had been supplied to clients around 18 August 2017, I consider that the Defendants were in breach of paragraph 2 (b) of the Consent Order, and paragraph 5 (b) of the Consent Judgment, in failing to disclose the names and addresses of the customer/customers to whom the Defendants had supplied, provided, or sold the 3 Cartier pieces, or had offered to do so.  They failed to provide the details of the sales, supplies or offers and any documents in the Defendants’ possession, power, custody or control relevant to the sale, supply, or offers of these items.

92.  The statement of the 2^nd Defendant, made to Ahmed on 18 July 2017, that she and the 3^rd Defendant had attended the Singapore Fair the previous week and had sold all their Cartier, VCA, and other brands of jewellery there, and that a UK client had purchased a large quantity, was also sufficiently clear as to be an admission of the Defendants having sold Cartier and VCA Infringing Goods in Singapore.  Likewise, for the 2^nd Defendant’s statement on 22 June 2017, that the Defendants had “some customers” who had ordered the Cartier Love bracelet, I cannot find any meaning to her statement, other than as an admission that the Defendants had supplied and sold the Cartier bracelets to them. 

93.  In my judgment, the same applies to the 3^rd Defendant’s statement made to Ahmed on 18 July 2017, that they had just provided Cartier and VCA items to another client.  They were clear statements, with specific references to Infringing Goods.  There was no disclosure of any these sales and supplies.

94.  By virtue of the matters set out in the preceding 3 paragraphs, I am satisfied beyond reasonable doubt that there was breach of paragraphs 2 (b) and 5 (b) of the Consent Order and Consent Judgment respectively, in the Defendants’ failure to make full disclosure of their dealings with the Recipients of Infringing Goods.

Orders made

95.  On the evidence, I am only satisfied that there was breach of paragraph 2 (b) of the Consent Order and paragraph 5 (b) of the Consent Judgment, in that the Defendants had failed to file and serve affirmations setting out the names, addresses and other particulars of all the relevant Recipients, together with the relevant documents in their possession, power, custody or control, in relation to the Defendants’ supply or sale or offer to supply or sell the Infringing Goods to their clients, on about 18 July 2017, at the Singapore Fair, as stated by the 2^nd Defendant on 22 June 2017, and as referred to in the 2^nd Defendant’s Whatsapp message to Ahmed of 18 August 2017.  It follows that there was also breach of and non-compliance with paragraph 6 of the Consent Judgment.

96.  I find that the Defendants are in contempt of court for breach of the aforesaid orders.

97.  There shall be a hearing for further submissions on the appropriate penalty, and any other necessary and consequential order (including costs), in respect of the Defendants’ breaches which I have found.  The parties should attend before the Listing Officer to fix a date as early as possible, for hearing within the next 4 months.

98.  The parties should agree on directions for further conduct, and in the absence of agreement, a date should be fixed for the Court to make the appropriate and necessary directions.