Shining Knitters Co Ltd v. Salvatore Ferragamo S.P.A.

CACV000145/1981

Appeal from Order in the nature of Anton Pillar Order made ex parte - whether sufficient evidence existed for the making of Order - preconditions for the making of Anton Pillar Orders. Risk of self-incrimination - construction of order made.

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Coram: Leonard, V-P., Cons & Zimmern, JJ. A.

Date: 22 January 1982

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JUDGMENT

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Leonard, V-P:

1. These appeals were heard together at the request of the parties.

2. On 25th November, 1981 Bewley J. made an Order ex parte on the application of the respondent against Knit Studio 58 Ltd. ("Knit") and Ying Tai (F. E.) Ltd. ("Ping Tai") the appellants in Civil Appeal No. 144 of. 1981.

3. On 27th November, 1981 he made a similar Order ex parte against Shining Knitters Co. Ltd. ("Shining") the appellants in Civil Appeal No. 145 of 1981.

4. These Orders restrained the appellants from dealing in or with cardigans of a particular pattern in which the plaintiffs claimed copy- right (the "Restraint Order") and went on to give ancillary relief based on the Anton Piller Type Order. The ancillary relief called on Knit, Ying Tai and Shining to "permit" representatives of the respondent to enter on premises occupied or controlled by one or other of the appellants to look for and inspect cardigans of the type in which the respondents claimed copyright and to remove them into the custody of the plaintiffs' solicitors for safe keeping (the "Entry Order") and called on Knit, Ying Tai and Shining to deliver up all such cardigans to the respondents' solicitors (the "Delivery Up Order") and "further immediately upon the service of this Order by a director or proper officer disclose to the person serving this Order, the exact whereabouts of and the persons or companies known by the defendant to have possession, power, custody or control of cardigans as aforesaid" (the "Disclosure Order").

5. These appeals are brought against so much of the Orders made as granted ancillary relief. The Restraint Order is being dealt with elsewhere.

6. The evidence before Bewley J. when the Orders were made, besides showing the entitlement of the respondent to the copyright of the design of the cardigans, also, tended to show that the appellants or some of them were "just about to make a further substantial shipment of their cardigans to the U.S.A." under a brand name "Ciao Originals" where they would be sold at less than half the price commanded by the respondents' cardigans. A private investigator had spoken to a representative of Knit and had asked about cardigans under the label Ciao Originals. The representative replied "Oh we have made thousands of them" that they were "a very hot item", that "they keep coming back for more" and that a shipment was due to be exported on or before let December 1981.

7. Knit and Ying Tai share an office, Knit being the agent for Ciao Originals and Ying Tai and Shining manufacturers. Shining had delivered 9 cartons to Maersk Line (H.K.) Ltd. on 25th November, 1981 for despatch to the U.S.A. It was primarily this shipment which the respondents were anxious to halt so that there was included in the Order made a provision that each defendant "do take all such steps as are necessary to prevent such cardigans leaving the possession, power, custody or control of that defendant and from leaving or being removed from the jurisdiction" of the Court. Mr. Liao before us limited his submissions to the Entry Order, the Delivery Up Order and the Disclosure Order. The Orders made against Knit and Ying Tai were not immediately observed by them so that somewhat different considerations might have been in Bewley J's mind when he made the Order of the 27th November against Shining than applied when he made the Order of the 25th. Mr. Liao did not distinguish between the two Orders. From perusal of the affidavits I am satisfied that the respondents have a strong prima facie case of breach of their copyright by Knit and Shining and have established a likelihood that if the shipment in question had left on the 27th they would have been occasioned serious damage and there was evidence that Knit had not taken any step to halt the shipment. We were told by Mr. Rogers (and this Mr. Liao did not gainsay) that the trial judge had been informed when the Order against Shining was obtained that Knit had not observed the Order of the 25th and that the only reason the goods did not leave the jurisdiction was because the respondents' solicitors had thought to give notice of the injunction to the shippers.

8. The Orders were made on the usual undertaking as to damages and a further undertaking on the part of the plaintiff not to institute or cause to be instituted any prosecution of the appellants in respect of infringement of copyright.

9. Mr. Liao's clients did not see fit to apply to Bewley J. to discharge these Orders but relied on Bestworth Ltd. v. Wearwell Ltd. ⁽¹⁾ as establishing that this Court could and should entertain an appeal against the Orders notwithstanding -

(a) that no application to discharge them had been made; and

(b) that they were spent.

Proceedings are not being pursued against Ying Tai and they have dropped out of the matter.

10. As I understood Mr. Rogers, he did not contend that this Court should refuse to deal with the appeals on either basis.

11. Mr. Liao's first argument was that there was unsufficient evidence before Bewley J. and that these Orders should never have been made. The Writ in each action claims two injunctions, the first to restrain infringement of copyright and the second to restrain passing off. The evidence of passing off is negligible and may be ignored but the evidence of infringement of copyright appears to me to establish a strong prima facie case. It was rather to the evidence or lack of it as to the necessity for ancillary relief that our attention was directed by Mr. Liao. He suggested that the advertisements exhibited to the plaintiffs' affidavits showed that the goods were to be retailed in the U.S.A. by a well known company and that the affidavits contained no suggestion of concealment or of an attempt to destroy the goods. In E. M. I. Ltd. v. Pandit⁽²⁾ what was sought was ex parte relief similar to but very considerably wider than the Entry Order granted to the plaintiffs. Templeman J. observed "if it appears that the object of the plaintiffs' litigation will be unfairly and improperly frustrated by the very giving of the notice which is normally required to protect the defendant, there must be exceptional and emergency cases in which the Court can dispense with the notice and, either under power in the rules to dispense with notice or by the exercise of its inherent jurisdiction make such a limited Order, albeit ex paste, as will give the plaintiffs the relief which they would otherwise be unable to obtain. In the present case I am satisfied that, if notice were given to the defendant, that would almost certainly result in the immediate destruction of the articles and information to which the plaintiffs are entitled ..... " (page 305) at a later stage in the judgment he said "I think it right to stress that, in my judgment the kind of order which is sought now can only be justified by a very strong case on the evidence and can only be justified where the circumstance are exceptional to this extent, that it plainly appears that justice requires the intervention of the Court in the manner which is sought and without notice, otherwise the plaintiffs may substantially be deprived of a remedy" and later "it must be shown that irreparable harm will accrue, or that there is a high probability that irreparable harm may accrue to the plaintiffs, unless the particular form of relief?now sought is granted to them".

12. In the Anton Piller⁽³⁾ case what the plaintiffs sought to combat was in the nature of industrial espionage and entry to premises was sought -

"For the purposes of -

(a) inspecting all documents or articles relating to the design manufacture sale or supply of copies of the plaintiffs' equipment;

(b) removing into the plaintiffs' solicitors custody -

(i) all original documents relating to the manu-facture, operation or maintenance of the plaintiffs' equipment which ...... has been supplied by the plaintiffs to the defendants;

(ii) all documents or articles relating to the design, manufacture, sale or supply of copies plaintiffs' equipment".

13. These purposes are wider than the purposes for which entry is sought in the instant cases. It seemed to the Master of the Rolls that such an order could be made ex parte "but that it should only be made where it is essential that the plaintiff should have inspection so that justice can be done between the parties and when, if the defendant were forewarned, there is grave danger that vital evidence will be destroyed, that papers will be burnt or lost or hidden, or taken beyond the jurisdiction; and so the ends of justice be defeated; and when the inspection would do no real harm to the defendant or his case". Ormrod L. J. regarded the proposed order as "at the extremity of this Court's powers". He considered that "There are three essential pre- conditions for the making of such an order  ...... First there must be an extremely strong prima facie case" (by which I take him to have meant an extremely strong prima facie case of the tort alleged). "Secondly the damage, potential or actual must be very serious for the applicant. Thirdly, there must be clear evidence that the defendants have in their possession incriminating documents or things, and that there is a real possibility that they may destroy such material before any application inter partes can be made".

14. In making the third precondition I consider that he intended it to have reference to the particular purpose for which entry to premises was sought in the case before him. For there the entry was sought for the purpose of examining papers of the defendants to establish misuse of the plaintiffs' plans. In our case entry is sought for a purpose which has much less potential for injury to a defendant namely seeking inspect-ing and removing for safe keeping cardigans which were an infringement of the plaintiffs' cardigans; no question of inspection or removal of documents arises. The real purpose of the entry was to prevent the export of articles in which the respondents had a proprietary interest. The refusal of Knits representative to disclose the identity of the factory where the shipment in question was or where there goods were being stored coupled with the fact that shipment was imminent was sufficient to indicate great urgency and provided justification for both the Entry Order and the Delivery Up Order even though made ex parte. That the respondents have a proprietary interest in the cardigans in the hands of Knit and Shining is a further justification for those Orders and I would not disturb them.

15. The third ground of appeal ("The learned judge failed to consider sufficiently or at all the risk of self-incrimination to the defendants in making ...... the Order") is appropriate only to that part of the Order requiring the disclosure of "the exact where-abouts of and the persons or companies known by the defendant to have possession, power, custody or control of cardigans as aforesaid". The phrase "cardigans as aforesaid" is ambiguous. It could relate either to cardigans of the type exhibited JKA5 to the affidavit of Mr. Allan and all cardigans of the same pattern without further qualification or it could relate to those cardigans with the further qualification that they be in the possession; power, custody or control of the defendants. The latter alternative seems to me to be both the correct and the intended meaning of the Order because of the final requirement of the paragraph, that the defendants "do take all such steps as are necessary to prevent such cardigans leaving the possession, power, custody or control of that defendant and from leaving or being removed from the jurisdiction of this Honourable Court". The word "such" which I have emphasized must refer back to "cardigans aforesaid". The "cardigans aforesaid" are to be prevented from leaving the possession, power, custody or control of the defendants.

16. The question then resolves itself into the following - can defendants who admittedly have in their possession, power, custody or control infringing articles properly object, on grounds of self-incrimination, to disclosure of their whereabouts? I do not think so. The Orders must be looked at in their entirety. Any damage to the defendants from which criminal liability might arise would be occasioned by compliance with the earlier parts of the Order rather than by self-incrimination. A final objection to the Order made i.e. that it might compel the defendants to reveal the names of innocent third parties is, I consider, more legalistic than real. The Order was made ex-parte. The appellants by appealing against the orders rather than applying to set them aside have avoided condescending to give evidence. Their claim of privilege is made only by counsel and the existence of any such innocent third parties remains unestablished. I would dismiss these appeals.

Zimmern, J. A. :

17. These two appeals are in respect of the same subject matter. On 25th November 1981 and 27th November 1981, Bewley J. upon ex parte applications by the same plaintiff, a foreign corporation, granted injunctions against the defendants Knit Studio 58 Ltd. and Ying Tai (Far East) Ltd. in Action 8358 of 1981 and Shining Knitters Co. Ltd. in Action 3899 of 1981 from manufacturing offering for sale selling, supplying or otherwise howsoever parting with possession of or dealing with cardigans of the type exhibited to an affidavit until after the hearing of an inter partes summons subject to conditions with which the plaintiff has complied. The learned judge in each case made two ancillary orders and I set out the second in full :

"3. Each of the Defendants do forthwith upon the service of this Order deliver up to the Plaintiff's solicitors all cardigans of the type exhibited "JKA-5" to the aforesaid affidavit of James Kennoway Allan and all cardigans of the same pattern in that Defendant's possession, power, custody or control and each of the Defendants do further immediately upon the service of this Order by a director or proper officer disclose to the person serving this Order the exact whereabouts of and the persons or companies known by the Defendant to have possession, power, custody or control of cardigans as aforesaid and do take all such steps as are necessary to prevent such cardigans leaving the possession, power, custody or control of that Defendant and from leaving or being removed from the jurisdiction of this Honourable Court."

18. On the return date we were told the matter was adjourned and on the 7th December all the Orders against Ying Tai (Far East) Limited were, discharged and save for that we do not know whether further Orders were made.

19. On 2nd December 1981 the defendant issued their Notices of Appeal against the ancillary orders the grounds of appeal being

l. The learned judge erred in law and in fact in making so much of the said Order as aforesaid.

2. There is no material or no, sufficient material for the learned judge to exercise his discretion in making so much of the said Order.

3. The learned judge failed to consider sufficiently or at all the risk of self-incrimination to the defendants in making so much of the Order.

We have before us the Notices of Anneals, the Orders, the Statements of Claim, two affidavits in each Action filed on behalf of the plaintiff with exhibits.

20. The plaintiff's complaints as shown on the affidavits are that, it was established in Italy in 1926 trading in footwear for sale primarily in Italy and the United Kingdom. It then went, into the cardigan business in a subtantial way and sold its wares in Hong Kong since not later than 1974. It now has an agent in Hong Kong which operates two boutiques in the plaintiff's name selling a full selection of its goods including clothing, knitwear, leather handbags, men's and women's shoes, wallets, scarves and ties, one in the Peninsula Hotel and the other in Mitsu Koshi Store. It has advertised extensively in Hong Kong. It claims copyright in the artistic works relating to its double pocket shawl necked cardigan produced from a sketch made by one of its employees in 1971. It has since then produced and exported successfully this cardigan to many countries in the world including Hong Kong and the United States of America. It recently discovered that copies of its cardigan were being sold in the U.S. said to be "CIAO ORIGINALS" at a fraction of the plaintiff's price. Through agents it traced the source of supply to Hong Kong. It alleges copies were being manufactured by Shining Knitters Co. Ltd. at the instance of Knit Studio 58 Ltd. The affidavits show, albeit hearsay, admissions that large quantities of such cardigan had been manufactured and exported to the U.S. and that another shipment was to be effected on or about the 27th November, 1981. All that evidence is before us completely unchallenged.

21. The defendants have the right of appeal against the ex parte Orders, though the usual course is to contest them on the return date of the inter partes summons provided for in each Order. For myself I have not come across such an appeal before but see Bestworth Ltd. v. Wearwill Ltd.⁽¹⁾which concerned Anton Piller Orders.

22. Mr. Liao for the defendants must then show, without any evidence filed on his clients' behalf, that the Judge was wrong and ought not to have made those ancillary orders.

23. He based his arguments on three heads. First there was insufficient evidence to support those Anton Piller Orders.

24. With respect, these Orders are in my view not Anton Piller Orders which inform are Orders directing a defendant to permit the plaintiff's nominated representatives to enter his premises to inspect documents and to remove them for safe custody.

25. As Ormrod L. J. said in Piller K. G. v. Manufacturing Processes Ltd.⁽²⁾ :

"There are three essential pre-conditions for the making of such an Order in my judgment. First, there must be an extremely strong prima facie case. Secondly, the damage, potential of actual must be very serious for the applicant. Thirdly there must be clear evidence that the defendants have in their possession incriminating documents or things, and that there is a real possibility that they may destroy such material before any application inter partes can be made."

I would also refer to the remark of Lord Denning at p.164 :

"for it is obvious that such an order can only be justified in the most exceptional circumstances."

I may add it is an Order made ex parte not necessarily by reason of urgency but with the intent that the defendant shall have no notice of it till served to prevent destruction of material documents or things. The elements of surprise and secrecy are necessary for its effectiveness. In instant cases the basis of the plaintiffs' ex parte applications was grounded on urgency firstly to prevent imminent shipment of the copied cardigans out of the jurisdiction by the defendants and secondly to recover for safe custody of their own goods which the defendants have converted. In my view there was ample evidence to justify the Orders made by the judge but the appellant further contended that he ought not to have made that part of the Order directing the defendants to disclose to the plaintiff's representative the exact whereabouts of the infringing cardigans in their possession, power, custody or control and by whom they are held on the grounds first of privilege from self-incrimination (Rank Film Distributors v. Video Information Centre) ⁽³⁾ and second that such disclosure will divulge the names of innocent third parties which may lead them to prosecution under the Copyright Act (Roberts v. Jump Knitwear Ltd.). ⁽⁴⁾

26. These contentions can be disposed of shortly. The delivery orders bound each defendant upon service to deliver up every infringing cardigan in his possession, power, custody or control. It is a common relief claimed in copyright infringment cases. There was no claim of privilege against self-incrimination in respect of it. It was challenged before us only on the ground that there was insufficient evidence to support it and I have said there was ample evidence to justify it.

27. The disclosure orders were ancillary to the delivery up orders. Their intent and purpose are clear and obvious. Delivery up of goods takes time. To minimise the risk of delay each defendant was directed upon service to disclose the whereabouts of the infringing cardigans in his possession, power, custody of control and the names of the persons or companies known by that defendant to be holding them in order that notice of the injunction may be served on them forthwith to prevent shipment out of the jurisdiction. These would be persons or companies such as forwarding agents or brokers, warehouses shipping companies or airlines. The plaintiff never sought any information from the defendants regarding the defendants' trade or business in the goods such as from whom the latter have purchased and to whom, they have sold. The disclosure orders were tied with the delivery orders and if they were to be challenged the proper forum was on evidence before the judge on the hearing of the inter partes summons. I can see no case of privilege or involvement of innocent third parties at all and would dismiss the appeal.

Cons, J. A. :

28. I have had the advantage of seeing in draft the judgments prepared by my Lord Vice-President and my brother Zimmern and fully concur.

(1) (1979) F. S. R. 320

(2) (1975) 1 W. L. R. 302

(3) (1976) 2 W. L. R. 162

(1) [1979] F. S. R. 320

(2) [1976] 2 W. L. R. at p.167

(3) [1982] F. S. R. 363

(4) [1980] F. S. R. 527

Representation:

Andrew Liao (Johnson, Stokes & Master) for Appellants.

Anthony Rogers (Hastings & Co.) for Respondents.