Cartier International Bv and Others v. Kaybee International Ltd

CACV000041/1983

Contempt of court - injunction and Anton Piller Orders against corporation - company disobeyed those orders - Appellants directors of the corporation - committal orders made against Appellants - orders made on ground (inter alia) that they had aided and abetted corporation - O.45 r.5 not a complete code for punishment of directors for contempt - in so far as complaint was one of aiding and abetting service of injunction and Anton Piller orders on appellants not necessary - in so far as committal orders made by way of enforcing obedience to Anton Piller order against corporation personal service of a copy of Anton Piller Order on Appellants should be dispensed with under O.45 r.7(7) - no sufficient evidence that Appellants aware of existence of items not disclosed as required by Anton Piller Order.

Litton Q.C. & Westbrook for Appellants

Rogers for Respondents

BETWEEN

-------

Coram: Sir Alan Huggins, V.-P., Yang, J.A. & Barker, J.A.

Date: 21st July 1983

___________

JUDGMENT

___________

Sir Alan Huggins, V. -P. :

1. The two Appellants appeal against orders committing them for contempt in relation to two orders of the High Court, dated respectively 17th September 1982 ("the Injunction Order") and 15th December 1982 ("the Anton Piller Order"). Neither the Injunction Order nor the Anton Piller Order was directed to them personally but both were directed to the company of which the Appellants are directors. The first order enjoined the company against manufacturing watches of a design registered by the Plaintiffs. The second order required the company (inter alia) to disclose watches of that design which were in its possession.

2. The present proceedings resulted from a search made of the company's factory on 13th December 1982 by the Plaintiffs' solicitors, when they were acting on behalf of other clients. The evidence was that watches of the Plaintiffs' design were noticed to be in the course of manufacture. Both Appellants were present on the premises. On the strength of this the Anton Piller Order was obtained and a further visit was made to the factory on 15th December. The 1st Appellant was present and was shown the order. He did not. disclose any watches. The 2nd Appellant arrived while the factory was being searched. Eventually a total of 29 infringing watches was discovered.

3. It is necessary first to. consider on what basis the orders of committal were made. A director of a body corporate may be committed by way of enforcement of an order against the corporation: O.45 r.5.  On behalf of the Appellants Mr. Litton submits that O.45 is a complete code and that it represents the only jurisdiction under which a director can be committed for contempt. That being so, he says, the orders in this case must have been made under O.45 r.5. It is contended on behalf of the Respondent that a director may also be committed as an aider and abetter of the company in the same way as any other "third party" could be committed for interfering with or obstructing the course of justice, and that that is what happened here.

4. It was suggested by Mr. Litton that the indorsement of the notice of motion for committal with a reference to O.46 r.5 was a mistake and that O.45 r.5 must have been intended. Mr. Rogers assures us that there was no mistake and that O.46 r.5 was cited because the second part of the orders sought related to leave to issue a writ of sequestration against the company.  I think that is sufficient answer to the submission that the Respondent, by its notice of motion, expressly limited its application for committal to one under O.45 r.5.

5. The judgment does not refer to O.45 r.5 but does find each of "the Defendants" guilty of contempt and I think the learned judge must have been under the impression that separate contempt were being alleged. The orders o committal might suggest that O.45 r.5 was the basis of the application. After the usual recitals they read:

"This Court being of opinion that the Defendant ,  has been guilty of a contempt of this Court by a breach of the said Injunction DOTH ORDER that the Defendant's directors, namely, Jaikishin Bhagchandani and Lakshman Kuma Chatlani do stand committed to Prison for the period of one month for their said contempt and the Defendant Company do pay a fine for the sum of fifty thousand dollars".

It was, of course, the Respondent which had the carriage of the orders and the recital here of the finding of contempt against the company points to an enforcement of the orders against the company. That interpretation of the orders is, however, immediately put in doubt by the reference to "their said contempt", which suggests a separate and distinct contempt from that of the company.

6. I therefore proceed to inquire whether the Appellants could lawfully be committed for a separate contempt. It is abundantly clear that persons other than those against whom an order of the court has been directly made can be committed for contempt if they contumeliously incite those persons to defy the court's order: Seaward v Paterson 1897 1 Ch. 545. However, Mr. Litton argues that it is unrealistic to regard directors as third parties capable of inciting the company: as the company can only act through its servants, this is tantamount to saying that a person can incite himself. Although the very terms of O.45 r.5 point to the difference in legal identity between the company and its directors, there is at first sight some force in this argument. However, it must be remembered that O.45 could prima facie be prayed in aid even against a director who has been innocent of any contempt, and that is why this Order insists that he shall' have been personally served with the order against the company before he can be committed: it would be unjust to commit him for the company's disobedience to an order of which he had no knowledge. No such injustice could result where he has been directly and knowingly responsible for the company's disobedience.

7. It was conceded that both Appellants were aware of the Injunction Order, and before the judge the main issue in respect of that order was whether the solicitor?? who visited the factory on 13th December was right when she said that watches of the Plaintiffs' design were then in the course of manufacture." It was further contended that, even if such watches were being manufactured,` there was no sufficient evidence that the Appellants were aware of such manufacture.

8. If the watches seen on 13th December did not infringe the Plaintiffs' design the company was not guilty of contempt and the Appellants could not be guilty: see Webster v Southwark London Borough Council 1983 1 W.L.R. The judge was satisfied that the watches seen were of the Plaintiffs' registered design, and in my view there was ample evidence on which he could so find. 'Before us Mr. Litton submitted, however, that the evidence as to the knowledge of the Appellants was insufficient to discharge the heavy burden of proof in committal proceedings. There was clear and uncontradicted evidence that the factory manager, one Wong Yee-Kwan, was in charge of the day today running of the factory and that he had under him a supervisor, Alice Cheuk Luk-sham. There was, however, no evidence as to the precise functions performed by the Appellants and they denied all knowledge of the manufacture of infringing watches: their presence in the factory was not of itself enough to fix them with knowledge. Their denial that infringing watches were being manufactured did not prove that they must have been alive to what was going on: In re Bramblevale Ltd. 1970 1 Ch. 128, 136. On the other hand, the 1st Appellant asserted that he knew what kinds of watches were being made and he in fact refused to deliver watches ordered by one customer, so that, once the judge found that infringing watches were being made, the 1st Appellant was fixed with knowledge of those infringing watches. Moreover, the evidence of the 2nd Appellant was that the 1st Appellant "handles Hong Kong made watches". The 2nd Appellant similarly Asserted that he knew that only non-infringing watches were being manufactured and did not merely deny that infringing watches were being made. It. must be accepted that the judge was in error in stating that the 2nd Appellant was the "managing Director" of the company, for there was no evidence to that effect. However, the judge does not appear to have attached any significance to this distinction between the two Appellants and would clearly have come to the same conclusion even if he had realised that the 2nd Appellant was not the "managing Director".

9. What caused me some anxiety was the argument based on the following passage at the end of the learned judge's judgment:

"Mr. Bhagchandani and Mr. Chatlani are clearly the alter ego of the Defendant company. Their knowledge is clearly also the Defendant company's knowledge."

If the judgment had related solely to the case against the two Appellants, this might have indicated that, because the company was guilty of contempt, the Appellants must also be guilty. However, the judgment related also to the case against the company and I am satisfied that the judge was, on the contrary, indicating that if the Appellants were guilty the company was necessarily guilty. That reasoning was unexceptionable.

10. Although O.45 is a self-contained code for the enforcement of judgments and orders (see 1982 Supreme Court Practice 746 (45/1/1)) I am not persuaded that it constitutes a complete code for the punishment of contempts or, in particular, that O.45 r.5 is a complete code for the punishment of directors of corporations for contempt.  O.45 is applicable where it is sought to enforce an order against a company by committal of its directors but does not apply where it is sought to punish a director for a contempt for which he is personally responsible.  As was said by Brightman, J. in Biba Ltd. v Stratford Investments Ltd. 1973 Ch. 281, 287C:

"... a person who consciously aids and abets a contempt is liable to proceedings for contempt, quite apart from R.S.C., O.45 r.5".

It is argued by Mr. Litton that it would be artificial to hold that a director of a company is a "third party" who can aid and abet a contempt by his own company. Such an argument necessarily imposes a gloss on Salomon v Salomon & Co. 1897 A.C. 22 and in my view cannot be accepted. Once it is acknowledged that a director can be guilty of aiding and abetting the company, I see no reason why it should be thought necessary to provide for service of the order against the company on the directors: they could not be guilty of aiding and abetting a breach of the order by the company unless they had notice of the order. As we have seen, knowledge of the order is admitted by both the Appellants.

11. The only other point which arises in relation to the Injunction Order is the contention that the judge "saw no distinction at all in the positions and responsibilities of" the two Appellants. The judge did not use any such words: what he said was that both of them knew full well what was being done in the factory and were fully responsible therefor. I think there was evidence which justified that conclusion and in so far as the order for committal is based upon the breach of the Injunction Order the appeal should be dismissed.

12. The committal in relation to the Anton Pillar Order was, again, primarily based upon the Appellants' aiding and abetting the company. However, Mr. Rogers also relied upon O.45 and submitted that the failure to effect personal service of the Order upon the Appellants was not fatal in view of the terms of r.7(6).

13. It is, of course, conceded that there could be no aiding and abetting a failure to disclose the infringing watches unless each Appellant knew (1) of the order to disclose and (2) of the existence of the watches.  Both Appellants contend that they were totally unaware of the existence of the watches and that the. evidence of knowledge is insufficient. The evidence relied upon by the Respondent is that during the visit on 13th December both Appellants were present and told lies about making watches in breach of the Injunction Order; that they then questioned the Respondent's solicitor about watches similar to those of the Respondent's design; that the 1st Appellant lied on 15th December concerning the types of watches manufactured by the company and, in particular, said that the company had never "dealt with" any watches bearing the mark "Megatron"; that there were watch dials with the mark "Megatron" in the premises: that 25 infringing watches bearing the mark "Megatron" were hidden and were found only after a thorough search (it is accepted that there was no evidence to support the judge's finding that the 25 infringing watches were hidden under other watches); that the 2nd Appellant arrived while the search was going on 15th December and that both Appellants were "unhelpful and unto-operative"; that watches which infringed the Injunction Order had been wrongfully removed from the factory between the visit on 13th December and that on 15th December; and that there was an advertisement still affixed to the wall of one of the offices showing a "gift set" which included a watch of a design which infringed the Respondent's design. There can be no doubt that this evidence raised grave suspicion that the Appellants were aware of the infringing watches, but I think it falls short of proving knowledge beyond all reasonable doubt.

14. It follows that the Appellants were guilty of contempt only if they were brought within O.45. Neither of them was personally served in accordance with r.7(3), but the 1st Appellant was served on behalf of the company and unquestionably was fully aware of the terms of the Anton Piller Order. It is difficult to believe that the 2nd Appellant did not equally become aware of the full terms of the order when he returned to the factory, but there is no evidence that it was shown or explained to him and in my view his knowledge was not proved with the necessary degree of certainty.

15. The conviction of the 1st Appellant depends, at least in part, upon r.7(7), which empowers the court to dispense with service of a copy of an order under the rule if it thinks it just to do so. No question was raised before the judge as to the sufficiency of the service, probably because the Respondents were relying primarily upon aiding and abetting. However, the matter has now been argued and I must deal with it. Had the sufficiency of the service been questioned, the judge would doubtless have been invited to find that the 1st Appellant was aware of the terms of the Anton Piller Order and to hold that it was just to excuse personal service.  I am satisfied that he would inevitably have done so.

16. It remains to decide whether, it not having been sufficiently proved that the 1st Appellant knew of the existence of the infringing watches, he could nevertheless be convicted as a director of the company. Mr. Rogers contends that someone in the company must have known of the existence of the infringing watches and that the 1st Appellant, as a director, can be punished even if he personally was not aware of them. He cited no authority for this proposition and I confess that I find it offends my sense of justice. It is one thing to punish a director for the company's failure to do something where it lies within the power of the director to ascertain whether the order has been obeyed and to ensure compliance if it has not: it is another to punish him if he had no reasonable opportunity to ensure compliance. There is another objection to the committal for the breach of this order. For my part I cannot accept the premiss that someone in the company must have known of the infringing watches. The suggested reasoning. was that all these watches must have been some of those being manufactured on 13th December and that they could not have found their way to the place where they were found "hidden" unless someone had put them there. Again, one may suspect that these were some of the watches manufactured on 13th December, but the evidence is far from conclusive: they were few in number and could conceivably have lain there forgotten by everyone from a much earlier date.

17. There was some discussion whether this was a criminal or a civil contempt. As I have always understood it, .the question is in the end material only to the form of the order for committal which should be made. Proceedings for contempt may be either in aid of enforcing a still subsisting order made for the sole benefit of a party in a civil matter (in which event a committal may be made for an indefinite period, i .e. until the contemnor has purged his contempt) or simply to punish the scandalizing of the court or a past disobedience of an order (where the committal should be for a fixed term). The former would be a civil contempt and the latter a criminal contempt: see Attorney General v Kissane (1893) 32 L.R.Ir. 220, 274 and Danchevsky v Danchevsky 1974 3 W.L.R. 709, 712. Mr. Litton has argued on the authority of Lord Diplock in Attorney General v Times Newspapers Ltd. 1974 A .C. 273, 307H that even where the object of the committal is to punish disobedience of an order made for the benefit of a party in a civil proceeding and a fixed term is appropriate the contempt is a civil contempt. I do not think it is necessary for us to reach a concluded view on the matter, because it is conceded that the standard of proof required is the same whether the contempt is civil or criminal: see In re Bramblevale Ltd. (supra).

18. I would allow the appeal to the extent I have indicated.

Yang J .A.:

19. I too would allow the appeal to the extent and for the reason indicated by the learned Vice-President.

20. Clearly, on the evidence, both Appellants knew that the infringing watches were being manufactured on their Company's premises, and quite irrespective of the issue of the service of the Injunction Order, they were guilty of contempt as aiders and abettors.

21. Though the Anton Piller order was not served on the Appellants in accordance with O.45 r.7(3), they might nevertheless be committed for contempt of that order if they were found to be aiders and abettors. For the reasons stated in the Vice-President's judgment, neither Appellant could be found guilty of aiding and abetting because of the lack of sufficient evidence showing knowledge that the offending watches were on the Company's premises. Mr. Rogers sought to rely on O.45 r.7(6). The rule is applicable to cases where a person is ordered to abstain from doing an act. The order in this case required the Company to disclose the whereabouts of the watches.

Barker, J .A.:

22. I   agree and there is nothing I can usefully add.

21st July 1983

Representation:

Litton Q.C. & Westbrook for Appellants

Rogers for Respondents