Salvatore Ferragamo S.P.A. v. Knit Studio 58 Ltd and Another
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CACV000155/1981 Infringement of Copyright - Interlocutory injunction -Serious question to be tried - Balance of convenience - Relevant considerations in that regard - Weight to be given to possible damage to reputation for exclusivity of design and quality.
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_____________________ Coram: Hon. Leonard, V.P., Power, Jackson-Lipkin, JJ. Date: 16 February 1982 ___________ JUDGMENT ___________ 1. In these actions the appellant, Salvatore Ferragamo S.p.A. alleges that the respondent in Appeal 154 of 1981, Knit Studio 58 Limited and the respondent in Appeal 155 of 1981, Shining Knitters Co. Ltd., have infringed its copyright in artistic work relating to a cardigan. The appeallant has issued writs seeking injunctions against the respondents restraining them from such infringements and from passing off goods not of the appellant's manufacture as and for goods of the appellant. The appellant also sought an order for delivery up of infringing goods and damages. On the 25th November, 1981 Bewley J. made an ex parte order restraining the respondent and the second defendant, Ying Tat (Far East) Ltd. in Appeal 154 from dealing with goods similar in type to the said cardigan and allowing the appellant to enter the premises of those respondents and to seige cardigans of that type found therein. The learned judge further ordered that a summons should be issued returnable for hearing on the 2nd December, 1981. A similar order was made as regards the respondent in Appeal 155 on 27th November, 1981. 2. On the 26th November and the 27th November, the writs of summons claiming the relief set out above were issued. 3. On the 2nd December, the inter partes summonses in both actions were heard by Mayo, J. who delivered his decisions thereon on the 11th December. At the outset of the hearing on the 2nd December, Mr. Rogers who was then, as he is now, appearing for the appellant informed the court that he was not proceeding against the second defendant in the first action (No. 8358 of 1981) and the learned judge ordered that the ex parte order should no longer have any application against that party. The learned judge found that there was a serious question to be tried as regards the allegation of infringement of copyright but he considered it doubtful whether the appellant had any real prospect of success in the passing off claim. He then turned to consider the balance of convenience. He said that he was satisfied that if appropriate undertakings were given both parties would be able to make any award for damages which was likely to be made at the trial of the action. He took note that Mr. Rogers attached particular importance to his claim that the appellant would suffer damage to their reputation and that this would be irreparable if the respondents were allowed to continue to export garments of this kind to the United States. The affidavits filed by the parties showed that allegedly infringing cardigans were manufactured by Shining Knitters Co. Ltd. to the order of Knit Studio 58 Limited who, in turn, had received orders therefor and design instructions from Ciao Originals Limited, an American company, who supplied the finished product to "TALBOTS" an American retail and mail order company. There was no evidence to indicate that either of the respondents had ever knowingly infringed any copyright the appellant might have in the design of the cardigan. The learned judge went on to say that in this connection he considered it pertinent to observe that nowhere in the papers filed in support of the application was it suggested that the cardigans which Knit Studio 58 Limited were seeking to export to the United States were of inferior quality. It is difficult to understand how the learned judge could have come to make this observation. Mr. Frank Fong in paragraph 7 of his affidavit indicates with particularity that the cardigan made by the Shining Knitters Co. Ltd. is markedly inferior to that made by the appellant. It may be, as was suggested by Mr. Liao who appeared for the respondents, that the learned judge meant to indicate that the cardigans made by the respondents were not of "poor" quality. However this was not what he said and anyone giving a fair reading to this passage of the judgment could not be left with the impression that this was what was meant. The learned judge went on to observed that if damage had been occasioned to the appellant by the alleged infringements then it seem likely that this damage would have already occurred. This statement is correct in so far as it goes but it does seem to overlook the likelihood that further infringements will do more damage. The learned judge went on to indicate that he considered one of the significant factors was that the garments manufactured by the appellants were aimed at a different segment of the market than that to which those manufactured by the appellant. 4. The last matter to which the learned judge turned his mind before deciding where the balance of convenience lay was the fact that Knit Studio 58 Limited was using part of its quota to export the goods in question to the United States and that if an injunction issued it would be prevented from fully utilizing its quota for the year 1981 and that the effect of this might well be that its quota for future years would be reduced. He also took into account that if an injunction was issued the reputation of the defendants with the customers in the United States might be damaged. Having considered all of the matters urged by Counsel he declined to "extend this injunction in the manner sought by the plaintiff" and ordered a speedy trial. 5. It is significant to note that the learned judge appears to have believed that he was being asked to "extend" the injunctions which had originally been granted by Mr. Justice Bewley. That this is so is confirmed by the wording of the order of the 21st December, 1981 which was drawn up in consequence of the ruling by the learned judge. This order states that the "application for the extention of the injunction against the 1st defendant be dismissed". In fact the learned judge was not being asked to "extend" the injunction which had been made ex parte. In the application before him he was being asked to make a "fresh" injunction which would, if made, be valid until the decision at the trial. 6. We consider that the learned judge may well have taken a different view of the matter had he realised that this was so. Clearly if his only course was either to extend the existing injunction or to refuse it then there was no middle way open whereby he could protect the quota of the Knit Studio 58 Limited against whom no allegation of conscious wrong-doing was made. It was understandable, therefore, that the learned trial judge was most concerned to ensure that no irreparable damage by reason of loss of quota was done to that respondent. The possibility of such damage could, of course, have been avoided had it been suggested to the learned judge by the applicant that it would be prepared to accept an injunction which ran from the 1st January, 1982. 7. It must be quickly said that Mr. Liao would not then and does not now indicate that he would in any way be prepared to accept that it would be right that such an injunction be made. He argues that the appellant has not shown any actual or prospective damage to its trade or reputation and that it has not therefore established a right to any injunction. He further argues that, if an inference might be drawn from the facts in the affidavits that the appellant's reputation is being damaged by the sale of the alleged infringing cardigans on the American market, this no more than a mere possibility and is quite out-balanced, when the balance of convenience is considered, by the actual damage that would be done to the respondents if they were debarred for any period from continuing to manufacture and export their cardigans. 8. The appellant placed figures before us in an affidavit of Mr. Peter Li which suggested that the sale of his cardigan in New York might have fallen off during the last year and he suggests that this is due to the fact that the respondents have exported 12,000 allegedly infringing cardigans to the American market during that period. While these figures certainly lend themselves to this interpretation they are not conclusive and we prefer not to rely upon them in arriving at our decision. 9. A number of cases was canvassed by Counsel but both conceded that each matter depends very much upon its own facts. The case most pertinent to this hearing was Mondaress Ltd. v. Bourne & Hollingsworth (1). The following passage from Buckley L.J. at page 123 is we consider directly in point.
We are quite satisfied on the material before us that the appellant has a worldwide reputation for goods of exclusive design and high quality. We are quite satisfied that if a market is flooded of goods of identical design and inferior quality then the appellant's reputation for exclusivity of design and quality will suffer. Up to November, 1981 the appellant said that he has sold 5,237 cardigans in the United States. During that same period the defendant had exported 12,000 cardigans to the United States. We have no doubt that copies in such volume would be likely to damage the reputation of the appellant for exclusivity of design. We consider, as did the learned Lord Justice in the Mondaress case, that such damage would be incalculable and irreparable. The damage on the other hand to the respondents will be one of loss of turnover which, while it may be difficult to ascertain with absolute exactness, can nonetheless be assessed with a fair degree of accuracy. We are satisfied that, as long as the respondents do not suffer any loss of quota, and that is now academic as the shipment which might have involved such a loss has already been sent, the balance of convenience is weighed heavily in favour of the appellant. We think the learned judge was right to take into account the fact that irreparable damage by reason of loss of quota might have been done to the respondent and we feel that it was unfortunate that he considered that he was being asked to extend the existing interim injunction and that he was not urged to make a new injunction. Had he realized this he might have made it effective from 1st January, 1982. We are satisfied that, had this been done, and had the learned judge given a full weight to the fact that the garments of the respondents are inferior in quality to those of the appellant and to the fact that irreparable damage might be done to the reputation of the appellant, he would have granted the injunction sought as from the 1st January, 1982. That being so we are satisfied that we should grant an injunction in terms of paragraph 1 of prayer; but to run from to-day.
(1) (1981) F.S.R. 118 Representation: Mr. Anthony Rogers (Hastings & Co.) for Appellant in both appeals. Mr. Andrew Liao (J.S.M.) for Respondent in both appeals. Appeals: Practice: Additional evidence: Form of application. Court of Appeal: Applications: By motion only. Appeal: Application to adduce additional evidence to be heard prior to Appeal unless by consent or in special circumstances. Injunctions: Ex parte: Forms of. Interim injunctions: Difference in type. Interlocutory injunctions: Hearing: Method of disposing of prior existing interim injunctions: Circumstances when required: Circumstances when not required.
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Coram: Hon. Leonard, V.P., Hon. Power & Jackson-Lipkin, JJ. Date: 16 February 1982 ___________ JUDGMENT ___________ 10. By consent these two Appeals were called on and heard together. At the conclusion of the hearing, Leonard V.P. indicated that the Appeals would be allowed in part: In that decision my brother Power and I concurred. 11. I have had the advantage of reading the judgment of Power J., with which I entirely agree. 12. There is, however, a number of points of practice which arose in these Appeals, and I am delivering a separate judgment to cover those points. It must not be taken in any way to detract from the judgment of my brother Power or from my wholehearted concurrence with it. Additional evidence 13. In each of these Appeals, the solicitors for the Appellant lodged, on 11th February 1982, a document dated 10th February 1982 entitled "NOTICE of intention to apply at hearing of appeal for leave to adduce fresh affidavit evidence". It is to be observed that in each Appeal the Notice of Appeal was lodged on 21st December 1981. The Appeals were set down, (apparently in none of prescribed Appeal Lists), on 28th December 1981, Notice of Hearing in respect of Appeal 154 was sent out by the Clerk of the Court on 12th January 1982 and Notice of Hearing in respect of Appeal 155 was sent out on 19th January 1982. 14. Each of the Notices to which I have referred was in the same form, and the material parts read, "TAKE NOTICE that the above-named Plaintiff intends at the hearing of the Appeal under the Plaintiff's Notice of Appeal dated 21st December 1981 from the order berein of the Hon. Mr. Justice Mayo made on 11th December 1981 to apply to the Court of Appeal for special leave to adduce in addition to the evidence before the Court below the following evidence: .....". Each Notice was supported by an affidavit sworn by the solicitor for the Appellant on 10th February 1982, the which affidavits contained but the additional evidence sought to be used. 15. O. 59 r. 14(1) of the Rules of the Supreme Court 1967 (as amended) provides, in mandatory terms, that, "Every application to the Court of Appeal be by motion, and the provisions of Order 8 shall apply thereto.". O. 8 r. 3(1), which is also in mandatory terms, provides that "the Notice of an Originating Motion must be in Form No. 13 in Appendix A .....". The Rules, although our servants not our masters, are there to be obeyed, and where there are, as in the Hong Kong Rules, mandatory provisions that all applications to the Court of Appeal shall be by way of Notice of Motion, and that such Notices shall be in the prescribed form, it is disconcerting at the least to find before the Court two documents which in nowise conform with our Rules. 16. This matter does not rest there. Although it is true that, upon interlocutory Appeals, fresh evidence by affidavits is often admitted in the discretion of the Court (see Note 59/10/6 in the White Book), and the rule in Ladd v. Marshall [1954] 1 W.L.R. 1489 is not strictly applied where an appeal is set down in the Interlocutory List, it nonetheless incumbent upon the applicant to provide the Court of Appeal at least with some material upon which to exercise its discretion: No such material of any nature appeared in either of the affidavits lodged in support of the Notices (to which I have referred above). Fortunately that did not matter as, in the event, the applications were not proceeded with, but it could have had serious consequences. The practice on applications under O. 59 r. 10(2) was clearly laid down by the Court of Appeal in Mitchell v. Condy [1881] W.N. 83 and appears in Note 59/10/9 in the White Book. It is important that Appellants or Respondents who wish to adduce further evidence should, in the first instance, ascertain from the other parties to the Appeal whether or not the Motion is to be opposed. If it is, then, clearly, it should be set down at a date preceding the date for the hearing of the Appeal. It is singularly fortunate in these Appeals that the matter did not proceed, because if Mr. Liao had asked for time to answer the fresh evidence, the hearing of the Appeals would have had to be postponed, a great deal of the costs would have been thrown away and the time of the Court of Appeal, which could have been spent hearing other Appeals, would have been wasted. If, of course, it becomes clear to an applicant that his Motion will not be opposed, there is no reason why his Motion should not be set down immediately to precede the Appeal itself, to be heard on the same day as that Appeal. Interim injunctions 17. Interim injunctions fall into two classes, first those which are granted for a limited period of time or to a fixed date, and secondly those which are granted "until after an inter partes summons to be issued herein to-day seeking the like relief shall have been heard and determined", which is the type of Order most commonly granted ex parte in Hong Kong. 18. The essential difference between the two is that, in the former class, the Interim Order automatically terminates at the end of the prescribed period or on the prescribed date, unless application, ex parte or inter partes, is made to extend it, whereas in the latter class, the Order continues (without any further Order at all) until after the determination of the inter partes summons ordered by the Judge and referred to in the grant of the interim injunction. 19. Ordinarily the difference to which I have referred would not be of great importance, but in these Appeals it was of fundamental importance, because the Judge was led to believe that he was dealing with the former class of Order, whereas, in our view, clearly, he was dealing with the latter, and, as a result of that, he fell into such error that we felt obliged to reverse him, notwithstanding the exercise of his discretion. The blame for leading the Judge into such error must fall on both parties. 20. The Orders of Bewley J. were quite clear: At page 56 in Appeal 154 and at page 50 in Appeal 155, he made his Orders run "until after the hearing of the Summons to be taken out as provided for herein or further Order .....": And on page 58 in Appeal 154 and page 51 in Appeal 155, in the final paragraph of each Order, he directed "that a Summons be taken out returnable for hearing herein on 2nd day of December 1981 at 9.30 o'clock in the forenoon.". There can be no doubt therefore, that the learned Judge, in granting the ex parte interim injunctions, ordered them to continue to run until further Order an in any event to cease after the hearing of the inter partes summons returnable on 2nd December 1981: I have little doubt that Bewley, J. intended them to continue in force until a decision was given on the inter partes summons, but by faulty drafting of the Orders by the Appellant's solicitors, "hearing" was the operative word - although "determination" was the intended word. 21. The Plaintiff duly issued its Summonses, which are to be found at pages 60-64 in Appeal 154 and pages 53-56 in Appeal 155. Each of the Summonses was in correct form, in that it sought injunctions "until after judgment in this Action or further Order ..... and that injunctions be granted accordingly.". Unfortunately, the affirmation affirmed by Mr. Chiu Ping Chan and the affidavit sworn by Mr. Leo Rosenbaum respectively on 1st December 1981 served only to exacerbate the position: Mr. Rosenbaum at pages 72/73 in Appeal 154 said, in paragraph 12, "I would humbly beseech this Honourable Court not to confirm the interlocutory injunctions presently granted against it and to discharge the Ex Parte Order.". Of course, there was no interlocutory injunction at that stage, merely an interim injunction, and there was no need to "discharge" the ex parte Order because it would die automatically at the conclusion of the hearing. Mr. Chiu said at pages 82/83, in his paragraph 9, "I therefore earnestly request this Honourable Court to discharge the Ex Parte Order made against my company .....". 22. At the hearing before Mr. Justice Mayo, neither party pointed out to the learned Judge that he was in no way concerned with extending the Orders of Bewley J., or that he was entirely free to make such Orders, if any, as he thought fit, to run from such date as he considered appropriate - for example, immediately following the shipment referred to in the affidavits and in the judgment of my brother Power, or from a fixed date, for example 1/1/82. 23. The consequence of those unfortunate mistakes and omissions is apparent from a reading the judgment of the learned Judge at pages 162 and 167 (to which I will refer below) and the wording of his Orders at pages 8 and 10 in the bundle relating to Appeal 154, and in reading the passages at pages 94 and 99 in his judgment and the wording of his Order at page 8 in the bundle relating to Appeal 155. 24. The passages at pages 162 and 94 respectively read "the purpose of the present applications is to determine whether the injunctions which were granted should continue until the trial of these actions.".: The passages at 167 and 99 read, "I have come to the conclusion that the balance of convenience lies in favour of my declining to extend this injunction ..... I therefore refuse to extend this injunction.". 25. The Orders at page 8 in each bundle read, "IT IS ORDERED THAT ..... the application for the extension of the injunction ..... be dismissed;". In the Appeal bundle in Appeal 154, there was an additional Order at page 10, relating to the 2nd Defendant, against whom the Plaintiff did not proceed before Mr. Justice Nayo, Mr. Rogers making that clear in opening. That being made clear, the correct course would have been immediately to have dismissed the Summons against the 2nd Defendant, whereupon the ex parte injunction granted by Bewley J. would have automatically come to an end. However, in view of the manner in which the whole matter was put before the learned Judge he was induced to make the Order at page 10 (referred to above) wherein he said, "IT IS ORDERED" ..... the Injunction Order granted by the Hon. Mr. Justice Bewley on the 27th November 1981 against the 2nd Defendant be lifted (sic)". 26. It is earnestly to be hoped that solicitors and Counsel will ensure that there is no repetition of such errors as I have set out in this judgment. It is not an exaggeration to say that in my opinion, and it is shared by my brethren, these Appeals might not have been necessary, and the Judge might not have erred if the true nature of the issues before him had been put to him at the outset. This is but another example of how seemingly small matters of practice can lead to great errors of substance.
Appearances: Mr. Anthony Rogers for the Appellant in both Appeals |