GUCCIO GUCCI S.P.A. SEVERIN and Another v. NP PING TIN

IN THE COURT OF APPEAL

1993, No.71
(Civil)

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J U D G M E N T  O F  T H E  C O U R T

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Macdougall, V.-P.:

1. The appellant seeks an order that a finding of contempt of court by Mortimer J, as he then was, and a fine of $3000 imposed as a penalty for committing the contempt be set aside. He also seeks to have an order for indemnity costs to be set aside or replaced by an order for party and party costs. The respondents, by way of a respondent's notice, contend that the judge's decision should be affirmed on an additional ground.

2. The matter had its origin in an Anton Piller order made by O'Connor J on 6 September 1990 on an ex parte application by the respondent in respect of certain watches said to be counterfeit.

3. That order restrained the appellant from dealing with certain defined watches and required the appellant to make disclosure of evidence.

4. Clause 1 of the order defines the watches to which it relates.

5. It reads:

"(1) That the Defendant be restrained until judgment in this action or until further Order in the meantime from doing the following acts or any of them that is to say:-

(a) removing from the jurisdiction of this Court, or importing advertising for sale selling distributing destroying, or otherwise interfering with or disposing of or parting with possession power or control of (save to the Plaintiffs' Solicitors):-

(i) any watches the same as or substantially the same as those watches exhibited to the affidavit Jacqueline Rowland-Rouse sworn herein.

(ii) any watches bearing any marks the same or substantially the same as all or any of the first plaintiffs' registered trade marks numbers B278/82, B2783/82 or B2782/82 or any watches which infringe the Second Plaintiff's copyright subsisting in the design for the First Plaintiff's 9000 watch or any other watches being an imitation or a substantial or purported imitation of the Plaintiffs' 9000 range of watches as illustrated in exhibit "GCI" to the affidavit of Gary Chow;

(all such watches hereinafter being referred to as "Imitation Watches");"

6. Clause 2 of the order relates to disclosure. The relevant parts read as follows.

"(2) That the Defendant do forthwith disclose to the persons serving this Order upon him;

(a) the whereabouts of all Imitation Watches which are in his possession custody power or control;

(b) full particulars of the identity of each person known to him as having in anyway dealt with Imitation Watches whether by way of manufacture, importation, keeping, distribution or sale or otherwise and in particular to the best of his knowledge and belief:

(i) the names and addresses of all persons who have supplied or offered to supply the Defendant with Imitation Watches;

(ii) the name and addresses of all persons to whom the Defendant has supplied or offered to supply any Imitation Watches;

(iii) full details of the dates and quantities of each act of offer to supply or supply referred to in (i) and (ii) above;

(c) the location of any premises where Imitation Watches are or have been or are likely to be kept;"

7. Clause 5 of the order, the alleged breach of which gave rise to the application for committal for contempt of court, reads:

"5. That within 7 days of the service here of upon them the Defendant do make and serve upon the Plaintiffs' Solicitors an affidavit setting out in full and verifying all the facts stated or which they are obliged to state pursuant to paragraph 2 of this order and exhibiting there to copies of all relevant documents and confirming that they have complied with the orders for delivery up and disclosure of information and documents required by this Order."

8. On 25 September 1990, a week after the execution of the Anton Piller Order, the appellant swore an affidavit, purportedly in compliance with the order, in which the following are the relevant passages:

"1. This affirmation is made in compliance with paragraph (5) of the order made by Mr. Justice O'Connor dated 6th September 1990. A sealed copy of the said order was served on me on 18th September 1990.

2. I have no knowledge of the Imitation Watches referred to in the said order which the Plaintiffs are alleging in this action that I have been dealing with and that by reason of which I have infringed their alleged intellectual proprietary rights and interests.

3. In relation to paragraph (2)(a) of the said order, I have not nor ever have had in my possession, custody, power or control any Imitation Watches.

4. By reason of the matters deposed in paragraph 3 above, I have no particulars of the matters set out in paragraph (2)(b) of the said order.

5. In relation to paragraph (2)(c) of the said order, I also have no knowledge of where any Imitation Watches are or are likely to be kept.

6. In relation to paragraph (2)(d) of the said order, I have never dealt with or been involved in the Imitation Watches and thus have none of those documents and papers therein referred to in my possession or power. I also have no knowledge where there may be kept with such documents and papers."

9. At the hearing on of the 1993 application for committal for contempt of court on the ground that the appellant had failed to comply with Clause 5 of the order of O'Connor J, the respondent adduced evidence which included the testimony of the president, a Mr. Kondo, and the manager, a Mr. Shinkai, of a Japanese company named Kibune Industry Co. Ltd. ("Kibune").

10. These two witnesses testified that they had purchased from the appellant what they thought were genuine Gucci watches and that they had sold on two of the consignments of those watches to the United States of America. As a result of subsequent complaints and investigation, Mr. Kondo and Mr. Shinkai were convicted in Japan of a commercial crime concerning dealing in counterfeit watches, some of which they testified had been supplied by the appellant. However, both men were unable to say whether the watches exhibited to the affidavit of Jacqueline Rowland-Rouse were counterfeit.

11. The appellant did not give evidence before Mortimer J but sought to rely on affirmations filed for the purpose of the committal proceedings. In these affirmations he asserted that Mr. Kondo and Mr. Shinkai had given false evidence and that the watches which he had sold to Kibune were entirely different from those with which the proceedings before O'Connor J were concerned. They were gold plated costume jewellery watches that he had obtained from Taiwan and which bore the name "Gay Uano".

12. Mortimer J stated that in determining whether the appellant had been in contempt of court there were three issues that had to be resolved. First, had it been proved beyond a reasonable doubt that the appellant had supplied to Kibune watches bearing the name Gucci? Secondly, if so, had it been proved to the same standard that those watches were counterfeit watches? Thirdly, if it had not been proved beyond reasonable doubt that the watches were counterfeit Gucci watches, did O'Connor J's order require the appellant to disclose any dealings that he had had in watches which were genuine Gucci watches or which he believed to be genuine Gucci watches?

13. As to the first of these issues, Mortimer J formed the view that Mr. Kondo and Mr. Shinkai had at least suspected that the watches were counterfeits and had closed their eyes to the matter. He came to this conclusion in the light of the minimal documentation accompanying the delivery of the watches to Kibune, the absence of any reference in that documentation to Gucci watches, the fact that the watches had been supplied to Kibune in polythene bags and the fact that, when sent to the United States, the watches were enclosed in presentation boxes that had been separately obtained from Taiwan. Mr. Kondo testified that it was not unusual for famous brands of watches to be sold without accompanying presentation boxes. Mr. Shinkai testified that sometimes watches would be supplied by one source and that presentation boxes would come from another source. There was no evidence to the contrary. Mortimer J found that it had been proved beyond reasonable doubt on the basis of the testimony of Mr. Kondo and Mr. Shinkai that watches bearing the name Gucci had been supplied to Kibune by the appellant. He rejected the appellant's evidence that he had supplied "Gay Uano" watches to Kibune.

14. On the second issue Mortimer J was of the view that the evidence that Mr. Kondo and Mr. Shinkai had given concerning their convictions in Japan was neither admissible nor relevant to prove that the watches were counterfeit. It is now conceded that such evidence was inadmissible for that purpose. Although he found that the appellant had lied on affidavit about his transactions with Kibune concerning the watches and that the circumstances of the transactions were highly suspicious, Mortimer J concluded that, since Mr. Kondo and Mr. Shinkai were unable to say whether the watches exhibited to the affidavit of Jacqueline Rowland-Rouse were in fact counterfeit, the evidence merely permitted him to find that the watches were probably counterfeit. This fell short of the required standard of proof beyond reasonable doubt.

15. Mortimer J put the matter in these words:

"I am asked to rely upon the way in which the watches were dealt with, and - if I so found - upon the fact that the defendant lied in his affidavit about these transactions. Well, the circumstances are highly suspicious. But it seems to me that I must be very careful about relying upon the circumstances to prove this matter when clear proof would be so simple.

Of course without other matters, the lies of the defendant would not establish beyond reasonable doubt that these watches were counterfeit although such evidence could be important were I to take a particular view of those lies and there was other evidence as well. I find on the whole of the evidence that I have heard that it is indeed probable that these watches were counterfeit but I am unable to say that I am sure beyond a reasonable doubt that that has been proved."

16. Mortimer J then turned to the issue with which the appellants appeal is concerned, namely, whether O'Connor J's order required the appellant to disclose dealings in watches which were genuine or which the appellant believed at the time to be genuine.

17. Having examined one of the watches exhibited to Jacqueline Rowland-Rouse's affidavit, certain registered Gucci trade marks and a brochure produced by the respondent and depicting illustrations of "Gucci 9000" watches, and having accepted the testimony of Mr. Kondo and Mr. Shinkai that the watches which Kibune had received from the appellant were substantially the same as the watches exhibited, Mortimer J concluded that the watches supplied by the appellant were, if not the same, substantially the same as the watch exhibited. Accordingly, the watches supplied by the appellant fell within the definition of "imitation watches" in the order, whether or not they were imitations of genuine Gucci watches.

18. He expressed the view that although the court did not have jurisdiction to make an order in respect of a genuine watch, O'Connor J must have been satisfied on the evidence before him at the ex parte hearing that the watches exhibited were not genuine, and that since the appellant had not sought to set aside that order it continued to have effect.

19. I fully accept that an order of the court must be obeyed and that where a defendant is of the view that an ex parte order has been made on a false premise and that it is therefore impossible for him to comply with it, he should immediately apply to have the order set aside. In the present case the appellant had seven days after service of the order within which to have it set aside.

20. This, however, was not the real issue before Mortimer J. Mr. Westbrook for the appellant did not contend, either before Mortimer J or in this court, that the appellant was unable to comply with that part of the order relating to disclosure but that, since the order referred only to imitation watches, and there had been insufficient proof that the appellant had delivered counterfeit watches to Kibune, the appellant had in fact complied with the order.

21. Mr. Westbrook submitted that it is plain that the respondent's objectives in instituting proceedings against the appellant were to obtain, first, an injunction restraining him from dealing in counterfeit Gucci watches and so infringing the respondent's copyright, second, an order for delivery up or destruction of all counterfeit Gucci watches in his possession, third, an order for disclosure of the names and addresses of all those to whom the appellant had supplied counterfeit Gucci watches, and, fourth, damages for infringement of registered trade marks and copyright, passing off and conversion. None of this relief was directed, or could be directed, at the appellant's dealings in genuine Gucci watches.

22. Moreover, in paragraph 22 of her affidavit of 6 December 1990 in support of the respondent's application for ex parte and interlocutory relief, Jacqueline Rowland-Rouse swore that "the nature of the order sought will not undermine the Defendant's business activities since he will be free to deal in watches which do not infringe the proprietary rights of the Plaintiffs".

23. Although he conceded that it was possible to define "imitation watches" so as to include genuine watches, Mr. Westbrook contended that in the light of the relief sought by the respondent and of paragraph 22 of the affidavit, neither the words in sub-paragraph (1) of the order, "any watches the same, or substantially the same as those watches exhibited to the affidavit of Jacqueline Rowland Rouse sworn herein" nor the words in sub-paragraph (ii) of the order, "any watches bearing any marks the same, or substantially the same, as all or any of the 1st Plaintiff's registered trademarks...." could reasonably be said to refer to genuine watches.

24. Mr. Garland for the respondent submitted that Mortimer J was right in holding that the watches with which the appellant had dealt were the same or substantially the same as those exhibited to Jacqueline Rowland-Rouse's affidavit and that they bore marks the same or substantially the same as the Gucci trade marks. They therefore fell within the definition of "imitation watches" and had to be disclosed.

25. He contended that in counterfeiting and piracy cases, a party could quite possibly be dealing in counterfeits or pirates without knowing it or, alternatively, could be dealing in a mixture of genuine items and counterfeits or pirates without being aware of it. The only practical and effective remedy is for all dealings made to the design or bearing the mark in question to be disclosed.

26. This, however, does not resolve the issue raised in the appellant's appeal. In my opinion there can be no doubt that where an order of the court puts the person to whom it is directed in peril of committal for contempt of court for failure to obey its terms, it must be couched in clear and unambiguous language.

27. To construe the definition in such a way as to include genuine watches within the meaning of imitation watches is to strain the ordinary use of language. On a proper reading of clause (1) "imitation watches" can only mean imitation watches the same or substantially the same as those exhibited to the affidavit of Jacqueline Rowland-Rouse or bearing marks the same, or substantially the same, as all or any of the stated registered trademarks of the 1st respondent, or which infringe the 2nd respondent's copyright in watches, or are an imitation or substantial or purported imitation of watches illustrated in the exhibit to Gary Chow's affidavit.

28. If in the course of subsequent proceedings for committal of a defendant for contempt of court for wilful failure to obey an order for disclosure, such as that in the present case, a plaintiff fails to prove that the watches in which the defendant was dealing were imitation watches, then he fails to prove that the defendant was guilty of contempt by not making disclosure in respect of genuine watches.

29. That brings me to the respondents' notice pursuant to which it was contended that Mortimer J's decision should be affirmed on the additional ground that the evidence adduced, including that of the appellant, was sufficient to establish beyond reasonable doubt that the Gucci watches which the appellant had dealt in were not genuine and the appellant knew them not to be genuine, Mr. Garland frankly conceded that the only evidence that the watches were counterfeit was that the watches which the appellant sent to Kibune bore the name Gucci and that he had lied when he affirmed that he had not dealt in Gucci watches but had sent entirely different watches to Kibune.

30. Can this court say that Mortimer J was plainly wrong in finding that the respondents had not proved beyond reasonable doubt that the watches which the appellant supplied to Kibune were counterfeit Gucci watches?

31. The question can be posed in another way. Was the fact that the appellant had lied in his affidavits when he asserted that he had not supplied either genuine or counterfeit Gucci watches to Kibune evidence that established beyond reasonable doubt that the watches which he had in fact supplied to Kibune and bore the name Gucci were counterfeit? Mr. Garland contends that if the watches had been genuine, there is no conceivable reason for the appellant to have lied.

32. Mr. Westbrook's response to this is that the standard of proof in contempt proceedings is proof beyond a reasonable doubt, and that lies in themselves can never prove guilt; they may only lend support to other evidence which is capable of establishing a defendant's guilt. In the present case there was no other evidence. Moreover, lies could only have been thrown into the balance in the present case if the court had been satisfied that there was no reasonable explanation for them other than that they had been told by the appellant out of a consciousness that he was guilty of dealing in counterfeit Gucci watches. For example, if the appellant had handled the watches as stolen goods, he might well have lied for fear of disclosing an offence that has graver consequences than those of contempt of court. Contrary to Mr. Garland's submission that there was no conceivable reason why the appellant did not disclose that he had sold genuine Gucci watches, if such had indeed been the case, this explanation was at least one possible, reasonable explanation for the appellant to have lied.

33. In my view Mr. Westbrook's submissions are sound and that, on this aspect of the case, Mortimer J was right. It seems likely that the respondents' legal adviser's mistakenly thought that the evidence of the convictions of Mr. Kondo and Mr. Shinkai in Japan was sufficient to prove that the watches sent to them by the appellant were counterfeit. Indeed, they remained of this view at least until the filing of the respondents' notice; and it was not until the hearing of the appeal that this contention was abandoned.

34. The vital evidence again failed to materialise when Mr. Kondo and Mr. Shinkai testified that they were unable to say that the watches exhibited to Jacqueline Rowland-Rouse's affidavit were counterfeit. The respondents were then left with nothing more than the appellant's lies to establish their case.

35. If the facts were as the respondents contend them to have been they should have sought and obtained from O'Connor J a precisely drawn order and have produced admissible evidence at the hearing before Mortimer J that the watches that had been delivered by the appellant to Kibune were counterfeit Gucci watches. They failed to take either of these measures.

36. For the reasons I have given I would allow the appeal and order that the finding of contempt and the fine of $3,000 together with the order for indemnity costs be set aside.

Bokhary, J.A.:

37. I would dismiss this appeal. The result reached by the judge should, in my judgment, be sustained on the alternative ground contained in the respondent's notice.

38. Quite simply, the plaintiffs' allegation was that the defendant had dealt in imitation Gucci watches. Equally simply, the defendant's answer was that the watches in question were "Gay Uano" watches. That was how issue was joined. Accordingly, the only issue was whether the watches were imitation Gucci watches or Gay Uano watches.

39. The judge found that the watches bore Gucci marks and were not Gay Uano watches. Having regard to the issue joined, all that left was the conclusion that the watches were imitation Gucci watches.

40. It was not for the judge to stray beyond that issue. Parties lead evidence by reference to the issue or issues joined. And here there was one issue only.

41. Imitation Gucci or Gay Uano: those were the only alternatives in issue. The plaintiffs' evidence established that the watches bore Gucci marks and were not Gay Uano. That eliminated the only alternative which the defendant had put in the plaintiffs' way. Their evidence eliminating that alternative proved their case against him beyond reasonable doubt.

42. Before us, Mr. Westbrook for the defendant says that there were three other possibilities. None of them are flattering to the defendant. One is that he is a handler of stolen Gucci watches. The second is that he obtained Gucci watches in breach of a restrictive agreement. And the third is that he procured someone to misuse Gucci's dies surreptitiously to make their watches for him.

43. By what he said on affirmation, the defendant left one issue for determination. That issue left no room for any of the possibilities now asserted by Mr. Westbrook. The defendant did not file any evidence to support them. And the plaintiffs certainly had no reason even to think about filing evidence to eliminate them. They did not arise for consideration, and must not draw us into speculation.

44. As to the cross-appeal seeking an increase in the penalty imposed by the judge, I would dismiss it, too. Whether we have jurisdiction to increase the penalty is not something I feel called upon to decide. In all the circumstances, including the passage of time since the penalty was imposed, I would not favour an increase even if there were jurisdiction to order it.

Sears, J.:

45. I agree that on a true construction of the order, Mortimer J was wrong to conclude that a supply of genuine Gucci watches had to be disclosed.

46. The Respondent's notice, however, has given me more difficulty.

47. The Plaintiff had to prove that:-

(i) there was a supply of Gucci watches, and

(ii) the watches were counterfeit.

48. The first was proved by the evidence of Mr. Kondo and Mr. Shinkai. The judge disbelieved the Appellant. His case was that he had supplied 'Gay Uano' watches, and nothing else. It follows therefore by virtue of the judge's finding that the Appellant, an experienced watch dealer, knew that he had supplied Gucci watches. Does his dishonesty allow the Court to infer that he must have been supplying counterfeit watches? His lies were extensive and in the absence of any acceptance by him that he was supplying any Gucci watches, it ought to be the conclusion that the watches must have been counterfeit.

49. Mr. Westbrook, however, postulates the position that he may have been the receiver of stolen property and his lies therefore cannot exclude the possibility that the Gucci watches he supplied were genuine, albeit stolen.

50. If this had been a criminal trial, I do not consider there was a 'prima facie' case against the Appellant which he would have had to answer. All the evidence by the Respondent disclosed was the supply of Gucci watches and not that of counterfeit Gucci watches. The lies therefore told by the Appellant cannot provide the requisite evidence to prove his guilt.

51. Although I agree with the judge below that the lies raise a high degree of suspicion, they cannot fill in the gap in the Respondent's case. A gap, which as Macdougall V-P has said, could have been simply closed by appropriate evidence.

52. I confess I have reached this decision with some reluctance, but I agree with Macdougall V-P that the appeal must be allowed.