SIEGAU TRADING LTD. AND ANOTHER v. TIME FORCE LTD. AND OTHERS

----------

------------------------

J U D G M E N T

------------------------

Sir Derek Cons, V.P.:

1. This is an appeal from the decision of Godfrey, J., given on 5th November last year by which he declined to grant a Mareva Injunction against one Christian Marcel Frommherz. Mr. Frommherz is the 2nd defendant in the proceedings below. The plaintiffs are Siegau Trading Ltd. and Econ Swiss China Time Ltd., companies whose business is in the making and selling of watches, particularly in the range of watches known as "Benetton by Bulova". They claim copyright and distribution rights in these watches.

2. From 1986 to January 1991 Mr. Frommherz was employed by the plaintiffs, for the last three years as their managing director. In the latter month, i.e. January 1991, he was dismissed by them. He almost immediately set up a competing business, together with a Mr. Chan Yiu Keung, the 3rd defendant below, operating that business by means of two companies, Time Force Ltd., the 1st defendant and Crystal Day Ltd., the 4th defendant. The plaintiffs allege that all four defendants have been infringing their copyright in the "Benetton' by Bulova" watches and, in addition, claim that Mr. Frommherz financially abused his position when he was their managing director. These claims are denied and Mr. Frommherz, in particular, has a counterclaim for monies he says are due to him.

3. On 2nd July last year, i.e. the day before the writ was issued, the plaintiffs obtained from Barnes, J., ex parte interim injunctions, Mareva Injunctions and an Anton Piller Order, which were effective against Mr. Chan and the two defendant companies. Three days later, apparently as a temporary measure, the Mareva Injunctions were discharged upon undertakings by the three defendants, firstly that they would not manufacture and deal with the watches in question, secondly as to payment of money into a particular account and thirdly, in terms similar to a Mareva Injunction, with savings for the two companies "in the normal course of business dealings" and for Mr. Chan "in the usual course of his lifestyle" or until further order.

   There were interim proceedings which need not trouble us and then in November came the proceedings before Godfrey, J., in which he declined, in addition to the Mareva Injunction I have already mentioned, to release the three defendants from their undertakings regarding the manufacture and dealing in the watches; but, being satisfied that there was nothing to warrant the suggestion that there was a real risk that the 3rd defendant would dissipate his assets to avoid judgment, he released Mr. Chan from what I would call the " Mareva undertaking". However, as a condition of refusing to grant a Mareva against Mr. Frommherz he required Mr. Frommherz to give a like undertaking with regard to the manufacture and dealing.

4. By this appeal the plaintiffs seek, in addition to that undertaking, a Mareva in the terms set out in the Notice of Appeal. Wisely Mr. Ma, who now appears for the plaintiffs, but not below, eschews the grounds set out in the Notice and puts his case, without objection from Mr. Yan, who appears for the defendants, on the grounds that the judge "mis-apprehended the facts and has failed to properly exercise his discretion? The former, I understand, to be a challenge to the judge's conclusion that Mr. Frommherz "has conducted his affairs honestly and openly", and the latter, I think, refers to the suggestion in Mr. Ma's skeleton argument, which was helpfully sent to us before we came to court today, that it is illogical for the judge in effect to continue the Marevas against the two companies but refuse it against Mr. Frommerz.

5. To make good the first of the two submissions, i.e. that the judge mis-apprehended the facts, Mr. Ma, who has obviously spent a great deal of industry upon this appeal, took us through the relevant evidence to suggest several instances or incidents which illustrate in his submission a lack of integrity in Mr. Frommherz:

(1) that Mr. Frommherz enrolled his girlfriend on the payroll of the company, as a market trainee, but apparently she did no work. Mr. Frommherz answers that the company knew all about it at the time and that he has agreed to re-pay whatever had been paid to her;

(2) that he exceeded greatly his credit card facilities from the firm in the sum, I think, of something like $2 million. It is admitted by Mr. Frommherz that he did overdraw, at least to the extent of $400,000, but it has to be noted that he has a counterclaim for monies due to him which go back several years;

(3) the suspicious and unexplained position of Mr. Frommherz with regard to dealings in the "Benetton by Bulova" watches with a particular Swiss company - unexplained in the sense that weaknesses pointed out in his earlier explanation of "parallel imports" remain, at the moment, unanswered;

(4) what is said to be an unethical attempt to gain control of what I take to be an Italian affiliate of the plaintiff companies by way of borrowing money from a minority shareholder, a course which, according to Mr. Unruh of the plaintiff company, was specifically excluded by the terms of his agreement with Mr. Frommherz. As far as these proceedings are concerned, that allegation remains unanswered, but it is to be noted that litigation is proceeding in the Italian courts;

(5) in an affidavit in these proceedings Mr. Frommherz made a completely unfounded assertion that Mr. Unruh had been convicted of fraud and spent time in prison, an allegation which was withdrawn by his counsel at the last hearing;

(6) that his company was in possession of confidential documents belonging to the plaintiffs which bear a date subsequent to his being dismissed from the plaintiff companies; and

(7) that despite his assertion on oath that his worldwide assets included bank accounts only in Hong Kong, he appears to have a bank account in Switzerland.

6. Mr. Ma has addressed us very ably upon these factors; what he has said could well have been, and possibly was, addressed to the judge below, but I am not, for my part, persuaded that the judge mis-apprehended the facts when he said that it seemed to him that the "2nd defendant, like the other defendants, has conducted his affairs honestly and openly", which I take to mean in the context that they did not conceal the fact that they were setting up a competing business and that what they have done in the course of that business is no more than what Mr. Frommherz believes they are entitled to do. In my view that could not be said to be a view which no reasonable judge could take on the evidence which was before the court.

7. As to the judge's improper exercise of discretion, I accept that on the face of it there is an illogicality or inconsistency between continuing the Marevas against the two companies but discontinuing them against Mr. Frommherz. This matter, however, has to be considered in the light of the judge's comments which show that in some way or other, which with respect I find difficult to understand, he was very much affected by the fact that these were not Mareva injunctions granted against the two companies but were undertakings which they had given themselves. He refers to this in p. 6 of his judgment when he says that their position is different "because of the undertakings they have already given" and again at p. 8 of his judgment when referring in detail to the 1st and the 4th defendants. For that reason it seems to me that this otherwise illogical fact, which does not necessarily tell in the plaintiff's favour, is not a factor sufficient to persuade me that he did improperly exercise a discretion which, by the rules under which litigation is conducted in these courts and under the English jurisdiction, is a discretion left solely to the judge at first instance.

8. For these reasons I would dismiss the appeal.

Sears, J.:

9. I agree.

Bokhary, J.:

10. I also agree. I do not think the judge below misapprehended the evidence. He was aware that there were serious questions, including questions as to Mr. Frommherz's probity, to be investigated at the trial. It is for those who seek Mareva relief to establish a real risk of dissipation leading to the non-satisfaction of judgment in the absence of Mareva relief. The judge below was entitled, in my opinion, to come to the conclusion that that risk had not been established. on the evidence before him. I too would dismiss the appeal.