As English Motorcycle Trademark Infringement Case Illustrates, Honesty Is the Best Policy

A recent decision in the England and Wales Court of Appeal, the second highest court of that jurisdiction, has considered the criteria to be taken into account when deciding whether or not to grant permission for contempt proceedings. While the case, KJM Superbikes Ltd. v. Hinton, arose from a trademark infringement suit that itself was noteworthy—it highlights the degree to which companies can imply consent for parallel importing of products, potentially weakening their ability to later enforce trademarks—the appellate court focused on the role of private contempt-of-court proceedings in the English legal system. Even when brought by a private party, the appellate court said, contempt proceedings are public in nature, and serve a public purpose: to hold witnesses accountable.

As the case involved a resident of Australia, it's noteworthy for those who do business from abroad in the UK. "The international business community conducts a large amount of litigation in this country," the court noted, "and it is common for statements to be provided by witnesses from abroad for use in procedural hearings. . . . The integrity of the system as a whole would be undermined if it were thought that foreign witnesses were not subject to the same discipline as witnesses from this country."

Background of the Case

In August 2005, Honda Motor Co. Ltd. of Japan and its English subsidiary, Honda Motor Europe Ltd. (together, Honda), brought a claim against a British motorcycle dealer, KJM Superbikes Ltd. (KJM), for infringement of Honda's trademarks. The case concerned the parallel importing of Honda motorcycles into the UK, which was alleged to arise out of the sale by KJM, in the UK, of Honda motorcycles imported from abroad from an Australian company, Lime Exports.

Honda applied to the High Court for summary judgment, which KJM opposed, relying on a witness statement made by Keith Mason. In his statement, Mr. Mason described how KJM had obtained motorcycles from Lime Exports in Australia, having been put in touch with that dealer by a representative of an Australian subsidiary of Honda (Honda Australia). In reply, Honda filed three further statements, one of which was made by Anthony Hinton, general manager for motorcycles at Honda Australia.

In his statement (verified by a statement of truth in the usual way), Mr. Hinton described Honda Australia's relationship with Lime Exports as one "without having any continuous contact" and which fulfilled a "useful role in servicing the Pacific Islands (e.g. Fiji, New Caledonia and Vanuatu) which Honda Australia does not have the capacity or desire to service." He further explained that, apart from that limited class of business, neither Lime Exports nor any of Honda's other distributors in Australia was authorized to sell its products for export.

Although the trial judge gave summary judgment for Honda against KJM in respect of motorcycles that had been imported from dealers in other jurisdictions which were also in dispute, he dismissed the application in respect of the motorcycles purchased from Lime Exports, which he felt warranted further investigation. During the course of preparations for trial—and during disclosure in particular—it became clear that much of what Mr. Hinton had said in his original witness statement was untrue. There had, in fact, been almost continuous contact between Honda Australia and Lime Exports over a prolonged period of time. Documents made available through disclosure showed that Lime Exports had been supplying motorcycles to dealers in many different countries (including the Far East and Europe) with the full knowledge of Honda Australia.

In response to a letter from KJM's solicitors warning Mr. Hinton of the potential implications of his actions, namely, contempt of court, Mr. Hinton made a second statement in which he admitted he had said several things in his first statement that were to his knowledge at the time untrue. He explained that his aim had not been to mislead the court but to protect the reputation of Honda Australia within the Honda group.

Immediately after Mr. Hinton had given evidence at trial, counsel for KJM applied for permission to bring proceedings against him for contempt of court pursuant to Civil Procedure Rule 32.14 (which sets out the consequences of making false statements). Although the judge accepted that Mr. Hinton's behavior amounted to a contempt, he dismissed the application as he considered that, in all the circumstances, it would be disproportionate for proceedings to be taken against Mr. Hinton. At the end of the trial, the judge also dismissed Honda's claim against KJM in respect of the motorcycles that it had obtained from Lime Exports on the grounds that Honda Australia had authorized Lime Exports to sell its products for export markets outside Australia, including in the European Economic Area.

KJM subsequently appealed the judge's decision to refuse it permission to bring proceedings for contempt against Mr. Hinton and this was considered by the Court of Appeal.

Decision

Giving the leading judgment, Lord Justice Sir Martin Moore-Bick held that the trial judge had erred in the exercise of his discretion. Although the judge had recognized the contempt as serious, Moore-Bick LJ considered that he had not given it the weight it deserved and had not thought proceedings were likely to result in a severe punishment or that they would do much to promote the integrity of, or respect for, the legal process in the future. The trial judge had also been unduly influenced by Mr. Hinton's "ordeal" in cross-examination.

Moore-Bick LJ made the following further observations:

Public interest. Although it is recognized that contempt proceedings may be brought by a private person, they are, in fact, public law proceedings in which the court must have regard to the public interest alone, as was observed by Vice Chancellor Sir Richard Scott in Malgar Ltd. v. R E Leach (Engineering) Ltd.

No immunity. There is no practical distinction to the principles that apply to evidence given under oath (for instance, in an affidavit) and that given by way of witness statements verified by statements of truth. The general immunity of a witness from proceedings in respect of things said in the course of giving evidence does not extend to immunity from punishment in respect of statements made under oath which are known to be false. The distinction to be drawn is not between civil and criminal proceedings but between private and public accountability. Proceedings for contempt are public in nature and by committing an act which is liable to interfere with the course of justice, a witness exposes himself to the risk of punishment by the court.

Each case to be determined on its own facts. Although there is a desire to achieve a consistent approach to contempt proceedings, this broad goal does not mean that it is accordingly necessary that all cases be referred to the Attorney General under paragraph 28.1(2)(c) of the Practice Direction supporting Part 32 of the Civil Procedure Rules. Pursuant to paragraph 28.1(2) of this Practice Direction (which sets out the three alternative courses that can be adopted by a court when a possible contempt is brought to its attention), a court is free to take whichever course appears most appropriate in the circumstances. Although, in practice, complete consistency is unlikely to be attainable, through individual decisions, the courts will establish and develop a body of principles which (building on Malgar v. Leach) will provide guidance to judges.

Factors to be Considered. When answering the question as to whether it is in the public interest for contempt proceedings to be brought, the court will need to consider many factors, among the foremost being:

• Strength of the evidence tending to show that the statement in question was false and that it was known at the time to be false.
• Circumstances in which the statement was made.
• Significance of the statement having regard to the nature of the proceedings in which it was made.
• Such evidence as there may be of the maker's state of mind (including his understanding of the likely effect of the statement and the use to which it was actually put in the proceedings).
• Whether the proceedings would be likely to justify the resources that would have to be devoted to them.

Factors such as these are likely to indicate whether the alleged contempt, if proved, is of sufficient gravity for there to be a public interest in taking proceedings in relation to it. The fact that, at the earliest opportunity, KJM warned Mr. Hinton that he might be in contempt of court as a result of his actions seems also to have been taken into account by the Court of Appeal, and any failure to provide such warning may also be considered by a court.

Caution in granting permission. The wider public interest would not be served if courts were to exercise discretion too freely in favor of allowing contempt proceedings to be pursued by private persons. There is a need to guard against the risk of vindictive litigants to use such proceedings to harass persons against whom they have a grievance, and a court should exercise great caution before granting permission. Although the Civil Procedure Rules do not prescribe categories of people that may bring contempt proceedings (only mentioning that they may be brought with permission of the court or by the Attorney General), those who are allowed to bring proceedings for contempt should usually have been directly affected by the statement.

Overriding objective. Paragraph 28.4 of the Practice Direction supporting Part 32 of the Civil Procedure Rules directs applicants to consider whether proceedings for contempt would further the overriding objective, and a court must also have this in mind.

Integrity of the legal system. There are cases where matters such as the cost of proceedings, or the domicile of the person who made the false statement might "tip the balance" (for instance, the fact that Mr. Hinton lived in Australia). However, given the significant volume of international litigation, the integrity of the legal system would be undermined if there was a perception that foreign witnesses are not subject to the same discipline as other witnesses. Matters such as cost and domicile must therefore be considered and weighed up carefully by a court in light of public interest considerations and other relevant issues.

The appeal was therefore allowed.

Summary

Individuals who sign a statement of truth knowing their evidence is untrue are potentially laying themselves open to the full repercussions of contempt proceedings. The decision by the Court of Appeal in KJM Superbikes Ltd. v Hinton reiterates the importance of honesty in witness statements and the significance placed on the statement of truth. The judgment also usefully sets out in detail the factors to be taken into consideration by the English courts when an application for contempt proceedings comes before them.