Cartier International Ag and Others v. Dynasty Jewelry (Hong Kong) Ltd and Others

HCMP 704/2018

[2021] HKCFI 1005

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

MISCELLANEOUS PROCEEDINGS NO 704 OF 2018

________________________

________________________

BETWEEN

________________________

________________________

J U D G M E N T

________________________

1.On 19 January 2021, this Court found the 3 Defendants guilty of contempt of Court, in respect of their failure to comply with the Consent Order and the Consent Judgment, by failing to make disclosure of the names, addresses and particulars of recipients of counterfeit jewellery supplied by them, and failure to disclose documents in their possession, power, custody or control relating to their supply, sale or offer to supply or sell the infringing goods and items defined in the court orders. The definitions used in the Judgment of 19 January 2021 are adopted for this Judgment.

2.Submissions were heard on 29 March 2021 on the appropriate penalties to be imposed in respect of the Defendants’ contempt.

3.The legal principles on sentencing have been set out in JSC BTA Bank v Solodchenko (No 2) [2012] 1 WLR 350 and Bruno Arboit v Koo & Anor HCMP 2749/2012, 18 May 2016.  The contempt in issue in the present proceedings is non-compliance with a court order.  As Jackson LJ pointed out in JSC BTA Bank (at paragraph 45 of his judgment):

“The sentence for contempt performs a number of functions. First, it upholds the authority of the court by punishing the contemnor and deterring others. Such punishment has nothing to do with the dignity of the court and everything to do with the public interest that court orders should be obeyed. Secondly, in some instances it provides an incentive for belated compliance, because the contemnor may seek a reduction or discharge of sentence if he subsequently purges his contempt by complying with the court order in question.”

4.In RACP Pharmaceutical Holdings Ltd v Li Xiaobo HCA 490/2007, 14 April 2008, the court also highlighted the important principle that court orders are made to be obeyed:

“They are not guidelines, to be ignored or paid lip service to at the behest of the parties affected. They are the building blocks by which the administration of justice is made workable. Litigants who willfully breach orders at the expense of their opponents to their advantage do so at risk of losing their liberty for being in contempt of court.”

5.In JSC BTA Bank, Jackson LJ observed (at paragraph 51 of his judgment) that as the authorities reveal, any deliberate and substantial breach of the restraint provisions or the disclosure provisions of a freezing order is a serious matter, which breach normally attracts an immediate custodial sentence measured in months rather than weeks and may well exceed a year.  In Law Lai Lan v Tamang Prem Chandr [2018] HKCFI 536, the court found that the respondent’s conduct of breach, in complying with an injunction and disclosure order, was willful and contumelious, and considered the appropriate starting point for sentence to be 12 months’ imprisonment.

6.The factors to be considered in sentencing have been usefully summarized in Bruno Arboit, and these include the nature of the order, the nature and extent of the breach, whether the contempt was contumacious or intentional, whether the plaintiffs have been prejudiced by the contempt and whether such prejudice is capable of remedy, whether the contemnor appreciates the seriousness of the deliberate breach, whether the contemnor has cooperated, whether there are aggravating and mitigating factors, and whether the contempt has been purged.

7.In this case, the Infringing Goods which had been sold and offered for sale by the Defendants were flagrant copies of the various designs of the “Cartier”, “VCA” and “Piaget” jewellery.  The Plaintiffs’ trademarks were engraved on the copies sold and offered for sale.  In most cases, the counterfeit jewellery bore copyright notices, and were supplied with counterfeit packaging boxes and counterfeit certificates of authenticity.  From the evidence of the items dealt with by the Defendants, it could be seen that the Plaintiffs’ designs have been slavishly copied to a very high degree of similarity.

8.Whilst I found that on the evidence, it was not proved beyond a reasonable doubt that the Defendants were the manufacturers of the Infringing Goods, it was clear on the evidence, and as referred to in paragraphs 66 and 67 of the Judgment of 19 January 2021, that the Defendants were closely working in conjunction and in cooperation with a third-party supplier/manufacturer.  The 2^nd Defendant had, throughout a period of 14 months, made numerous telephone inquiries with the 4^th Plaintiff, seeking detailed information and meticulous specifications required for manufacturing the jewellery items, obviously to pass on to the manufacturer.  The Defendants had informed the investigators posing as purchasers that the Defendants were able to supply a wide range of counterfeit jewellery, and that all of the jewellery featured in the Catalogue could be produced and supplied by the Defendants, on demand.

9.From the available evidence, the counterfeit items sold by the Defendants were in the average price range of approximately HK$15,000, which is not insignificant for counterfeit jewellery.

10.Counsel for the Defendants pointed out the deficiencies in the evidence of the Plaintiffs and what is said to be the lack of credibility of the investigators.  Whatever deficiency as may exist, this Court had considered the entirety of the evidence, given the benefit of the doubt posed by the evidence to the Defendants, and found them to be in breach of the relevant court orders.

11.On the whole, the Defendants’ infringing and sales activities were serious.

12.The breaches found against the Defendants were that they failed to disclose the recipients and the particulars of: (1) their sale of 3 specific Cartier pieces, as admitted to the investigator on 18 August 2017; (2) their sale of counterfeit Cartier, VCA and other jewellery at the Singapore Fair, as admitted to the investigator on 18 July 2017; (3) their sale of the Cartier Love bracelet to their customer, as claimed on 22 June 2017; and (4) their supply of counterfeit Cartier and VCA items to a client, as admitted on 18 July 2017.

13.The Defendants’ breach was deliberate and intentional.  I reject their claim that it was impossible to comply with the disclosure orders.  The terms of the Consent Order and Consent Judgment are clear.

14.The 3^rd Defendant asserts in his affirmation filed on 22 March 2021, after the Judgment, that it was never the Defendants’ intention not to comply with the court orders, and that they cannot apologize “because that would mean accepting something that is untrue”.  He claims that “trying to impress customers, (they had) boasted about sales that never happened”.  To the extent that the 3^rd Defendant is seeking to deny that the Defendants had sold any of the jewellery they had previously admitted to have sold (as referred to in paragraph 11 above), such denial is hollow, unparticularised and unexplained, and therefore unbelievable and is rejected.

15.The 3^rd Defendant’s affirmation offered no real apology.  Any apology which might have been intended by the 3^rd Defendant in his affirmation was in any event late in the day.  Nor is there any attempt by the Defendants to purge their contempt, by making the proper disclosure, or at least by filing an affirmation, to refer to the breaches identified in the Judgment, and explain in detail why there was no breach or no sale as they may claim.

16.Having been legally advised throughout, it can hardly be said that the Defendants did not understand the seriousness of their deliberate breach of the disclosure orders.

17.As for prejudice, I accept the submissions made by Counsel for the Plaintiffs, that there was prejudice to the Plaintiffs.  Their pursuit of other infringers of their intellectual property rights have been stifled without the Defendants’ full disclosure.  The importance of disclosure orders made with restraint orders in proceedings for infringement of intellectual property rights is that further infringing activities can be stopped, hopefully at the source, and primary and secondary infringers identified, in order to fully and adequately protect the plaintiffs’ rights.  The Defendants argued that even if the counterfeit goods said to have been sold by them had all been identified, it was dubious how many of such purchasers of counterfeit jewellery would have been in the market for the genuine pieces offered by the Plaintiffs.  That cannot be the yardstick for the grant of remedies to owners of intellectual property rights, which are valuable in terms of the exclusivity they confer on the goods in connection with which the rights are applied and used, and the owners of such rights are entitled to restrain acts of infringement which amongst other things affect and damage the distinctive character or repute of their marks or labels and the goods which bear such marks and designs.

18.The only mitigating factors are that the Defendants have not defended the primary claims of infringement, and have consented to the injunction and disclosure orders and to the Consent Judgment.  Much time and costs have been saved.

19.The Defendants have pointed out that they still face the Plaintiffs’ claim for damages, which will be assessed, and that the proceedings in the past 2 years have already brought extreme anxiety and stress to the 2^nd and 3^rd Defendants, and further, that the 1^st Defendant’s business has been adversely affected.

20.Bearing in mind the seriousness of the Defendants’ deliberate breach of the court orders, the need for both a punitive as well as a coercive sentence for contempt of court, and the fact that the contempt has not been purged, I consider that the appropriate sentence in this case would be 6 weeks of imprisonment for each of the 2^nd and 3^rd Defendants.  On the evidence, they had equal roles to play in the business and activities of the 1^st Defendant.  The 1^st Defendant should pay a fine of $250,000 within 21 days.  In addition, the Defendants shall pay the Plaintiffs’ costs of and incidental to the contempt proceedings, on indemnity basis, with certificate for two counsel.

Mr William Tse, instructed by Robin Bridge & John Liu, for the 1^st to 4^th plaintiffs

Mr Neville Sarony SC and Ms Angel Lau, instructed by Gary Lau & Partners, for the 1^st to 3^rd defendants