Burden v ESR Group (NZ) Limited

High Court

Muir J

10 June 2015, further submissions on 19 and 20 June and 3 July 2015, 14 July 2015.

[2015] NZHC 1649

Copyright – border protection measures – border enforcement notices based on copyright in furniture items - Notices of Determination – application to court that items detained be released – approach to take to applications – “foregone conclusion” or interim injunction principles – relevance of balance of convenience – s 141 Copyright Act 1994 (NZ)

Facts:

The first plaintiff was Mr Burden, the managing director of the second and third plaintiffs (Plantation Grown Timbers (International) Ltd and Plantation Grown Timbers (Vietnam) Ltd).

The first defendant was ESR Group (NZ) Ltd, a furniture importer and retailer. The second defendant was Morrow Marketing Management Ltd, a furniture supplier registered in the British Virgin Islands. The third defendant was Mr Morrow, a former employee of the first and third plaintiffs. The fourth defendant, Galaxy Home (Vietnam) Ltd, was a wholly owned subsidiary of the second defendant. Both the second and fourth defendant were controlled by the third defendant. The fifth defendant was the Chief Executive of Customs, who abided the decision of the Court.

On 20 May 2013, the solicitors for the first and second plaintiffs filed border enforcement notices with the Chief Executive of Customs pursuant to s 136 of the Copyright Act 1994, claiming ownership of copyright in certain furniture items labelled with particular brand names. The second plaintiff claimed to be exclusive licensee of the works.

Between July and October 2014, the first defendant imported into New Zealand items of furniture from Vietnam. These items were detained by Customs upon arrival on the grounds that they were pirated copies of works in which the first plaintiff owned copyright. The Chief Executive of Customs wrote to the first defendant informing it of the detention.

In September and October 2014, the Chief Executive of Customs issued Notices of Determination in which she accepted the plaintiffs’ claim that the items appeared to be pirated copies of copyright works in which the first and second plaintiff claimed protection.

The plaintiffs commenced proceedings against the defendants alleging copyright infringement and breach of the Fair Trading Act 1986. The statement of claim sought, amongst other relief, a declaration that the imported items were pirated copies and imported for other than the defendants’ private and domestic use.

The first defendant brought an interlocutory application seeking an order under s 141(2) Copyright Act for the release of the detained furniture. The substantive proceedings had not been determined.

The first defendant argued that the detention of the items was improper because the first plaintiff was not the owner of the copyright in the works referred to in the s 136 notice on which the detention was based. He argued that copyright (if any) reposed in either the second or third plaintiff and was not enforceable in New Zealand under s 232 of the Act because these were respectively BVI and Vietnamese registered companies. Further, the first defendant argued that the s 136 notice was deficient in that the first plaintiff claimed copyright ownership in an unrealistic number of items and that the images provided to Customs were of insufficient detail for Customs to properly identify infringing copies because these were respectively BVI and Vietnamese registered companies.

The first defendant submitted that an application under s 141(2) invited an approach akin to one followed in an application for an interim injunction.

The plaintiffs submitted that an approach akin to that on an interim injunction application was not appropriate and that the first defendant’s application was based on factual assumptions which would be properly tested in the substantive proceeding. The plaintiffs also submitted that despite the British Virgin Islands and Vietnam not being listed in the Copyright (Application to Other Countries) Amendment Order 2000, they were entitled to reciprocal copyright protection by virtue of the Berne Convention and TRIPs Agreement.

Held, declining (but not dismissing) the application:

  1. The primary purpose of s 141(2) (and its equivalent provisions in the Trade Marks Act 2002) was to provide a vindication of an importer’s rights and to obtain release of the detained goods if the copyright proprietor had failed to act in time to bring proceedings or give appropriate notice or had brought proceedings in time but had since abandoned them. Other potential grounds, for example, lack of any seriously arguable case that there was a copyright infringement or lack of any seriously arguable case the importation was for other than private and domestic use or something in that nature would not be excluded [24].

     

  2. There was no material difference between the absence of a seriously arguable case and other tests such as the “foregone conclusion test” (and analogy with a defendant’s summary judgment). A hopeless case should not result in continued detention of seized goods and there was no reason in terms of principle or procedure why that could not be tested by way of an interlocutory application brought in s 141(2) proceedings [27].

     

    G Sucess Co Ltd v Chief Executive Officer New Zealand Customs Service [2001] 1 NZLR 506 (HC) followed. Westpac v Kembla [2002] 2 NZLR 298 (CA) referred to.

     

  3. The proposition that, in such an application under s141(2), the Court should invoke the principles relevant to an application for an interim injunction, including a balance of convenience analysis, went beyond what had been contemplated and was not supported by the legislative framework [28].

     

  4. Resolution of the factual disputes contained in the affidavits filed in support of and in opposition to the interlocutory application was not possible within the context of an application under s141(2). The obvious procedure for dealing with those disputes was a full civil action [31].

     

    G Sucess Co Ltd v Chief Executive Officer New Zealand Customs Service (supra) followed.

     

  5. It was unlikely that signatories to the Berne Convention and TRIPs Agreement, (in this case Vietnam and BVI) who were not listed in the Copyright (Application to Other Countries) Amendment Order 2000, were to receive reciprocal protection for copyright works in New Zealand [45]. Sections 18(2) and 232 of the Copyright Act, read together, contemplated a requirement that any foreign national seeking to uphold copyright in a New Zealand Court would be either a citizen, resident or incorporated in a country recognised by the Order [45]. Regardless, the plaintiffs’ primary submission was that the first plaintiff, an Australia citizen, was the owner of copyright, Australia being recognised in the Order [46]. This submission was not so completely untenable that the first defendant’s application should be resolved against the plaintiffs at this stage of the proceedings. All of these issues were appropriately to be considered in the context of the imminent trial [57].

     

  6. The issues that a court could consider in its discretion under s 141(2) did not necessarily exclude a review of the notice on which the detention was based. Under s 141(2), no order could be made discharging the notice, but if a court nevertheless came to the view that the notice was invalid, there was no reason why it should be precluded from considering that issue in the context of a release (of detained goods) application. However, where there were extant infringement proceedings running under s 141(3), a clear case of invalidity would need to be shown [62]. The “foregone conclusion” test had not been made out [67].

     

  7. If the Court was incorrect in its finding that balance of convenience considerations were not invoked on a s 141(2) application, it would have found that the balance of convenience favoured the plaintiffs [68]. This was mainly because of the proximity of the trial. If the plaintiffs failed at trial but then appealed, a new application could be filed under s 141(2). For this reason, the application was declined, but not dismissed [69]. Other relevant balance of convenience factors were that the first defendant’s lost sales were readily calculable in damages [70], whereas the plaintiffs’ damages would be difficult to quantify [71].

     

G Hazel and S P Rosanowski for the plaintiffs.

A J Pietras for the first to fourth defendants.

Appearance of fifth defendant excused.

 

                                                                                                                        Alex Franks

                                                                                                                        Junior Barrister

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