LE CLIP S.A. AND OTHERS v. WAI TAT METAL ENTERPRISE CO. AND OTHERS

IN THE HIGH COURT OF JUSTICE

HONG KONG

MISCELLANEOUS PROCEEDINGS

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IN THE MATTER of High Court Action No. 2293 of 1987

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JUDGMENT

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1. This is an application for Orders of Committal and for leave to issue Writs of Sequestration by the plaintiffs, who are Swiss, in respect of the 1st, 2nd and 4th defendants. It is not in dispute that the 4th defendant is the sole proprietor of the 1st defendant and is a shareholder and a director of the 2nd defendant. It was also not in dispute that the 1st and 2nd defendants are virtually the same and share the same premises at Rooms 1110 - 1118, Stage I, Chun Shing Industrial Building, Kwai Chung.

2. On the 22nd of April 1987 an Anton Pillar Order was made ex parte by Power J. in respect of the 1st, 2nd and 3rd defendants. This order was based on the usual undertakings including, that upon service of the order, the plaintiffs would explain to the persons on whom the order was served, in their own language, the meaning and effect of the Order and that failure to comply with it would entitle the plaintiffs to issue Contempt Proceedings. The Order was in wide terms. By it, the lst, 2nd and 3rd defendants were prohibited from manufacturing, assembling or in anyway dealing with articles known as "clip watches" which were substantially similar to watches in which the plaintiffs held copyright. The defendants were also to deliver up to the plaintiffs' solicitors all offending watches, components, blocks, dies, moulds and similar equipment used in manufacturing the watches. There was evidence from Mr. I.C. Starr of the plaintiffs' solicitors firm that he personally attended when this Order was served on the first two defendants and that the 4th defendant was then present. The effect of the Order was made clear to the 4th defendant through the use of an interpreter and a very large number of watches and manufacturing equipment was seized. During the course of the operation, the 4th defendant was asked if there were any other moulds in the premises and he said that there were not. He was made fully aware that failure to deliver up any such mould would be a contempt of Court.

3. An inter partes summons was also issued and that was heard on the 30th April. An order was made by Nazareth J. for the continuation of the injunction. The 4th defendant appeared in person at that hearing and, through a court interpreter, addressed the judge. The interpreter explained to the 4th defendant the effect of the order made and the seriousness of not complying with it. This order was served on the 4th defendant and the effect of the appropriate penal notice annexed thereto was explained to him.

4. It came to the attention of the plaintiffs that despite these orders, the 1st, 2nd and 4th defendants were continuing to manufacture watches in the premises at Kwai Chung. Accordingly, a further Anton Piller Order was applied for and granted by Bewley J. on the 12th May and executed the following day. On arrival at the premises, the plaintiffs' solicitors were told that the 1st and 2nd defendants were no longer using the premises but eventually the 4th defendant arrived after a period of some three hours.

5. A search revealed a very substantial number of completed apparently offending watches and components and also two steel moulds for their manufacture. That manufacturing had been going on was further confirmed by the evidence of a member of an investigating firm employed by the plaintiffs who had taken up employment and had worked in the factory for some two days up to the 13th May and had witnessed manufacturing of the watches taking place.

6. On the 18th May, the plaintiffs applied for leave to issue these proceedings which Mayo J. granted. In opposing the orders applied for, an affidavit has been sworn and filed by the 4th defendant. In this affidavit he does not in any way deny that he was fully aware of the orders which had been made although he says that in respect of the first order he was very frightened and was not fully able to comprehend entirely what was said to him. I am, however, satisfied that he was fully aware of the effect of the order that was served and enforced on that occasion. He says that because he was in grave financial difficulty owing to failure of certain customers to pay him and his consequent inability to pay his own creditors, he continued to manufacture watches. He said that two further moulds previously ordered were delivered to him on the 7th of May which he tested. He then decided to continue to manufacture and did so until the service of the second Anton Piller order on the 13th May when these two other moulds were removed.

7. The 4th defendant denied that he had any knowledge that the watches being manufactured were in breach of copyright until the service of the Anton Piller Orders on him. He said he was approached by the 3rd defendant to manufacture them and agreement was reached whereby the 3rd defendant would be the sole market for analog watches but the 1st, 2nd and 4th defendants would be free to sell liquid crystal digital watches. He also produced at the hearing a list of creditors and there are some 40 firms on that list who are owed substantial sums of money in some instances. I have no doubt that the 4th defendant was in very grave financial difficulty at the time of the issue of the Anton Piller orders.

8. The 4th defendant has also set out matters relating to his own personal background. It would seem that he started from humble beginnings but that, no doubt by hard work and diligence, he eventually had his own factory which in 1985 at some 30 workers and 15 machines with a turnover of about $1M a month. He said however that due to his financial difficulties he considered that, despite the penal provisions in the orders, the only way he could keep the firm going was to continue to manufacture the watches and this he did. He says he now realises that the 1st and 2nd defendants will have to be wound-up and he apologies to the Court for his actions.

9. While the Anton Piller orders were not directed to the 4th defendant, there is no dispute that he is the owner of the 1st defendant and a shareholder and a director of the 2nd defendant and was fully aware of his responsibilities and had every opportunity to ensure that the orders were complied with. The position, therefore, is not the same as Cartier International B. V. & Others v. Kaybee International Limited ^(1). That case is, however, of some assistance, because there some 25 infringing watches were hidden from those seeking to enforce an Anton Filler order and only later discovered. The offending directors of the company were committed for contempt for a period of one month. That order was revoked in the court of appeal on the grounds that the evidence of the directors knowledge of the order was not sufficient but there does not seem to have been any argument that the period of detention was not appropriate.

10. This was a blatant contempt of the Court's orders. It was continued over a period of some three weeks and it involved a very substantial number of watches being manufactured in clear defiance of the Orders. If it was not for the personal circumstances of the 4th defendant I would have ordered that he be committed for a period of three months. Taking into account, however, those circumstances, the very grave financial problems which he undoubtedly faced, and accepting that he was acting not only in his own interests but that of the workers employed by his company, I am of the view that a period of detention for one month is appropriate. I order that the 4th defendant be detained for that period.

11. There will be leave to issue writs of sequestration in respect of the 1st and 2nd defendants.

12. The plaintiffs are to have their costs including the costs of investigation, to be taxed on a common fund basis.

(1)    (1965) H.K.L.R. 127