Stabicraft Marine Limited v Sea King Boats Limited
[2022] NZHC 2447
•23 September 2022
IN THE HIGH COURT OF NEW ZEALAND INVERCARGILL REGISTRY
I TE KŌTI MATUA O AOTEAROA WAIHŌPAI ROHE
CIV-2022-425-000002
[2022] NZHC 2447
BETWEEN STABICRAFT MARINE LIMITED
Plaintiff
AND
SEA KING BOATS LIMITED
First Defendant
AND
HAMISH CRAIG
Second Defendant
AND
THE CHIEF EXECUTIVE OF THE NEW ZEALAND CUSTOMS SERVICE
Person Required to be Served
Hearing: 6 September 2022 (Heard at Christchurch) Appearances:
I Finch for Plaintiff
G F Arthur KC for Defendants
P H Courtney for Person Required to be ServedJudgment:
23 September 2022
JUDGMENT OF DOOGUE J
This judgment was delivered by me on 23 September 2022 at pm pursuant to Rule 11.5
of the High Court Rules
Registrar/Deputy Registrar Date:
STABICRAFT MARINE LTD v SEA KING BOATS LTD [2022] NZHC 2447 [23 September 2022]
Introduction
[1] Under Part 7 of the Copyright Act 1994 (the Act), which deals with border protection measures, the owner of a copyright work can lodge a notice requesting detention of pirated copies (NRDPC) of that work with the New Zealand Customs Service (Customs) in order to enforce their intellectual property rights and to minimise losses associated with counterfeit or pirated goods.1
[2] On 21 September 2021, the plaintiff, Stabicraft Marine Ltd (Stabicraft), lodged with Customs several NRDPCs requesting detention of pirated copies and attaching designs of marine craft in respect of which they claimed copyright.2
[3] The first defendant, Sea King Boats Ltd (Sea King), imported a 9.3 metre pontoon boat (an Easy Craft 9.0) (the detained boat) for ultimate use by a third party who wants to start a fishing charter business on Great Barrier Island.
[4] The detained boat was built by a company in China called Shandong Allsea Boats Co Ltd and was then shipped to Sea King which is based in Invercargill.
[5] The detained boat arrived in New Zealand on 22 December 2021. As a result of NRDPCs served on Customs by Stabicraft, Customs detained the boat under s 135A of the Act. Customs inspected the detained boat and on 16 January 2022 made a determination under s 137(3) that it appeared to be a pirated copy of one of the works contained in the NRDPCs.
[6] The defendants — Sea King and Mr Hamish Craig, managing director of Sea King — seek an order that the detained boat be released on the ground that Stabicraft did not comply with the border protection procedures under the Act. They say the Chief Executive of Customs (Chief Executive) is bound in those circumstances to release the detained boat.
1 Copyright Act 1994, s 136(1).
2 In the form prescribed by the Copyright (Border Protection) Regulations 1994.
[7] In the alternative, they seek determinations from the Court that there is no seriously arguable case the detained boat is a pirated copy and that it is in the interests of justice that the detained boat be released.
[8]Stabicraft opposes the applications. Customs abides the Court’s decision.
[9] Because of the conclusion that I have reached on the claim set out in [6], it is not necessary to consider the claim set out at [7].
Statutory scheme — pt 7 of the Act
[10] The border protection measures of the Act are governed by ss 135 to 146 of the Act, the Copyright (Border Protection) Regulations 1994 and the Copyright (Border Protection) Amendment Regulations 2003. These provide the mechanism for NRDPCs to be filed, enforced and discharged. Where a NRDPC has been lodged and accepted by Customs, any pirated copy of the work the subject of the notice that is imported into New Zealand may be detained by Customs and the claimant of the copyright notified.
[11]Sections 135 to 146 cover six broad areas:
(a)the procedure for lodging the NRDPC with customs (s 136);
(b)examination by Customs to determine whether an item is a pirated copy (ss 137 and 138);
(c)the issue of the determination by Customs (s 139);
(d)detention of pirated copies (ss 140 and 141); and
(e)forfeiture of goods by consent (s 141A).
[12] A “pirated copy” is defined in s 135 of the Act, relevantly in this case, as any copy of a copyrighted artistic work that has been made:
(a)directly or indirectly from the copyright work;
(b)without the licence of the person who owns, in the country where the copy is made, the copyright in the work; and
(c)in circumstances in which the making of the copy would, if it had been done in New Zealand, have constituted an infringement of copyright under the Act.
[13] The Copyright (Border Protection) Regulations 1994, as amended by the Copyright (Border Protection) Amendment Regulations 2003, contain the form of the NRDPC that must be lodged with Customs. Where applicable, the regulations are cited in the Act (see for example ss 136(3) and 140(3)(b).
[14] The content of any NRDPC is dictated by s 136 of the Act. The minimum content is as follows:
(a)a statement that the claimant owns the copyright in the work (s 136(1)(a));
(b)particulars supporting such a claim, including the title of the copyright work, the name of the author (if known) and the year in which the work was first published (s 136(2)(a));3
(c)a request that Customs detain any pirated copies that come into its control (s 136(1)(b));
(d)the enforcement period of the notice (s 136(2)(b)); and
(e)the name and contact details of the claimant or agent overseeing the notice (regs 3 and 7 of the Regulations).
3 In accordance with reg 3 of the Copyright (Border Protection) Regulations.
[15] Every notice lodged under s 136(1) must be in the prescribed form set out in the schedule to the Regulations.
[16] Under s 136(3) of the Act, the Chief Executive has a discretion to accept or decline NRDPCs submitted to him or her.
[17] Following acceptance of a NRDPC, Customs will monitor goods imported into New Zealand to determine whether or not goods are counterfeit or pirated copies.
[18] The procedure for issuing determinations pursuant to the acceptance of an NRDPC is set out in s 137 of the Act. Of particular importance in this case is the language of s 137(1)(b) which says:
137 Determination whether item is pirated copy
(1) Where—
…
(b)the chief executive forms the opinion that any item that is in the control of the Customs may be a pirated copy to which the notice relates,—
…
(emphasis added)
[19]This phrase is repeated at s 137(3):
(3)Whether or not the chief executive conducts any investigation, he or she must, within a reasonable period of forming an opinion under subsection (1), make a determination whether or not the item appears to be a pirated copy to which the notice relates.
(emphasis added)
[20] Under s 140 of the Act, unless the importer voluntarily forfeits the goods to the Crown for destruction the goods will be detained by Customs until any of the following events occurs:
(a)Customs is served with an order under s 141(1) of the Act that the NRDPC be discharged;
(b)Customs is served with an order under s 141(2) of the Act that the goods be released;
(c)following an application under s 141(3), the Court determines the goods are not a specified item that is a pirated copy;
(d)any proceedings under s 141(3) in respect of the goods are abandoned; or
(e)10 working days have elapsed since the notice of determination was served (under s 139) and Customs has not received notice of proceedings having been commenced under s 141(3) of the Act.
[21] I note the wording of s 140(1) repeats the phrase “a pirated copy to which a notice accepted under section 136(3)(a) relates”.
[22] The purpose of the issuing of proceedings under s 141 is to have the Court make a decision as to whether the detained goods are pirated and should be forfeited to the Crown or released to the importer.
How were the border protection measures applied in this case?
[23] Stabicraft gave NRDPCs in writing to the Chief Executive on 21 September 2021 under s 136.
[24] Following receipt of a notice such as given by Stabicraft, the Chief Executive must then form an opinion as to whether any item in the control of Customs may or may not be a pirated copy to which the notice relates.4
[25] Having initially detained the boat under s 135A, Customs formed the opinion the detained boat may be a pirated copy and, after conducting an investigation, went on to make a determination (under s 137(3)) that the detained boat did appear to be a pirated copy of Stabicraft’s copyrighted works covered by the NRDPC. The Chief
4 Copyright Act, s 137(1)(b).
Executive caused written notice of the determination notice (under s 139) to be served on Stabicraft and the defendants on 21 January 2022.
[26] Stabicraft had 10 working days thereafter in which to file proceedings under s 141(3). Stabicraft served a statement of claim on the Chief Executive on 27 January 2022.
[27] The defendants submitted the statement of claim did not amount to proceedings brought under s 141(3) and therefore service was not effected for the purpose of the border protection measures. They say the first time Stabicraft served proceedings brought under s 141(3) was when Stabicraft filed and served the amended statement of claim dated 16 March 2022.
[28] As the amended statement of claim was filed and served outside the requisite 10 working days in s 140(1)(e), the defendants say Customs must release the boat.
Application for order that goods be released
[29] Under s 141(2) any person may apply to the Court for an order that an item detained by Customs under s 140 be released, and the Court may make such an order accordingly.
[30]The substantive determination of rights is set out at s 141(3):
141Proceedings
…
(3)Any person may apply to the court for a decision on whether an item that is the subject of a determination made under section 137(3) is a specified item that is a pirated copy, and the court must make a decision accordingly.
…
[31]Section 142 sets out the powers of the Court in proceedings under s 141(3):
142Powers of Court
(1)If, in proceedings under section 141(3), the court decides that an item that is the subject of a determination made under section 137(3) is a
specified item that is a pirated copy, the court must make an order that the item be—
(a)forfeited to the Crown; or
(b)destroyed; or
(c)otherwise dealt with as the court thinks fit.
(2)In considering what order should be made under subsection (1) of this section, the Court shall have regard to—
(a)whether other remedies available in proceedings for infringement of copyright would be adequate to compensate the claimant and to protect that person's interests; and
(b)the need to ensure that no pirated copy is disposed of in a manner that would adversely affect the claimant.
(3)Where more than one person is interested in an item, the Court may direct that the item be sold, or otherwise dealt with, and the proceeds divided, and shall make any other order as it thinks just.
(4)If, in proceedings under section 141(3), the court decides that an item that is the subject of a determination made under section 141(3) is a specified item but that it is not a pirated copy, the court may make an order that any person who is a party to the proceedings pay compensation in such amount as the court thinks fit to the importer, exporter, or owner of the item.
Was notice given in accordance with s 140(1)(e)?
[32] Counsel agree that Stabicraft’s statement of claim did not expressly reference s 141(3) of the Act and nor did it expressly seek an order from the Court that the detained boat is a specified item that is a pirated copy. Instead, the relief sought was a declaration of infringement under ss 12 and 29–31 of the Act.
Statement of claim
[33] The statement of claim is in standard format. In the section entitled “The Plaintiff’s Copyright Rights” it pleaded Stabicraft is the exclusive owner of copyright in a series of artistic works, namely design and manufacturing drawings, for boats then enumerated.
[34] At paragraph [6.6], under “Particulars”, it says “A list of the Copyright Works is annexed to this Statement of Claim”. Those five copyright works are only a selection of the seven copyright works specified in the NRDPCs.
[35] There are then various pleadings with regard to Sea King’s activities. Stabicraft pleads:
13.From dates unknown to the Plaintiff, but since at least 6 November 2020, the First Defendant has advertised for importation and sale, imported and sold, and possessed and dealt with in the course of business in New Zealand four boats under and by reference to the names Explorer 600N, Explorer 750XL and Explorer 900 (together, the “Explorer Boats”).
[36] At paragraph [15.2] of the statement of claim, under the heading “Detention of Explorer boat by New Zealand Customs”, is a statement describing “a boat approximately 9 metres in length” and reference to it as having been “detained” as a result of Stabicraft’s NRDPC. There are no specific descriptors of the detained boat in that section of the statement of claim.
[37] Under “First Cause of Action Against the First Defendant: Primary infringement of copyright” the statement of claim says:
16.The First Defendant has infringed the Plaintiff’s copyright in the Copyright Works by:
16.1copying substantial parts of the Copyright Works; and/or
16.2by authorising another person to copy substantial parts of the Copyright Works; and
…
all without the licence or authorisation of the Plaintiff as the owner of the Copyright Works.
[38] Under the heading “Particulars” to that cause of action, various boats are particularised: the Explorer 600N (identified as being derived from the 2050 Supercab); the Explorer 750XL (lean back cabin); the Explorer 750XL (lean forward (pilot) cabin) and the Explorer 900. Paragraph [16.19] refers to Annexure B, which is comparative images of the Explorer boats and Stabicraft boats.
[39]In the statement of claim Stabicraft then pleaded as follows:
16.20 The Plaintiff is unable to provide further or better particulars of how and to what extent the Explorer Boats reproduce the Copyright Works at the time of preparing this Statement of Claim as a result of having only seen two dimensional images of the Explorer Boats on the First Defendant’s website and not physical examples of the Explorer Boats in New Zealand. The Plaintiff anticipates it will be able to better particularise its claims once discovery of the Explorer Boats’ designs has been completed.
[40] None of the boats particularised in the statement of claim, nor the ones shown in Annexure B, reference the detained boat.
[41]The relief sought can be found on page 12 of that statement of claim:
A.A declaration that the Explorer Boats are each infringing copies for the purposes of section 12 of the Copyright Act 1994.
B.A declaration that the First Defendant has infringed the Plaintiff’s copyright rights in the Copyright Works in breach of sections 29, 30 and 35 of the Copyright Act 1994.
…
[42] There are other causes of action in infringement of copyright against the defendants, but they are substantively the same and do not raise any additional issues with regard to the detained boat.
Amended statement of claim
[43] By contrast, in its amended statement of claim, commencing at paragraph [18.21] Stabicraft pleads in relation to the first cause of action that the Easy Craft 9.0 is derived from various Stabicraft artistic works in which they hold copyright.
[44]At page 20, Stabicraft seeks:
A declaration that the Easy Craft 9.0 being detained by New Zealand Customs pursuant to a Border Protection Notice is an item that is a pirated copy, imported other than for private and domestic use, for the purposes of section 141(3) of the Copyright Act 1994.
The amended statement of claim therefore does apply to the Court for a decision as to whether or not the detained boat is a pirated copy.
[45] At Annexure B, the amended statement of claim includes an image of the detained boat.
Defendants’ submissions
[46] First, the defendants submitted that the statement of claim is a conventional copyright proceeding and does not qualify as a proceeding under pt 7 of the Act.
[47]They make that submission based on the following:
(a)there is no mention of s 141(3), nor any mention of “pirated copy”, nor that the detained boat was a specified item anywhere in the statement of claim; and
(b)the statement of claim does not plead that the detained boat is a copyright infringement. While the detained boat is mentioned in the preamble to paragraph [15], the causes of action in copyright infringement relate only to the Explorer 600N, Explorer 750XL and the Explorer 900. Those boats are all Explorer boats. The detained boat is an Easy Craft 9.0. Annexure B to the statement of claim does not include any image of the detained boat.
[48] Second, the defendants submitted that ss 137(1)(b), 137(3) and 140(1) all refer to a pirated copy “to which a/the notice relates” and that the language of these sections mandates that the proceeding must be constituted by a claim that Customs was correct to detain the Easy Craft 9.0 pursuant to the NRDPCs, and pursuant to the drawings contained in the relevant NRDPCs.
[49] Third, the defendants submitted their case was not one of form over substance because the Court could not have made a declaration under s 141(3) on the basis of the matters pleaded or the relief sought in the statement of claim.
[50] In support of that submission the defendants relied on the obiter dicta of Fisher J in G Sucess Company Ltd v Chief Executive Officer New Zealand Customs Service, a trade mark case most easily understood from the headnote:5
The registered proprietor of a trade mark had notified Customs of its trade mark pursuant to the border protection provisions in ss 54A to 54M of the Trade Marks Act 1953. Sucess imported jackets that bore signs and markings that Customs determined appeared to be goods that infringed the trade mark. Customs detained the jackets in accordance with its obligations under the border protection provisions.
The trade mark proprietor commenced proceedings for infringement of its trade mark. Sucess commenced a separate proceeding against Customs in which it applied to the Court under s 54G(2) of the Act for release of the jackets on the ground that there was no infringement because of insufficient similarity to the registered trade mark. The question for determination was whether it was appropriate to resolve whether there had been an infringement in the context of the application against the Customs Service.
[51] In relation to the requirement to specifically plead the equivalent of s 141(3) the Court said:
[4] The notice under s 54E was issued in mid-July 2000. Within ten days solicitors Dragon Optical issued proceedings and notified Customs that they had done so. The proceedings took the form of conventional civil proceedings alleging trade mark infringement and breach of the Fair Trading Act 1986. The proceedings did not refer to s 54G(3) of the Trade Marks Act, nor did they seek relief in terms of s 54I. I make no finding of my own that those proceedings should be treated as the legal equivalent of an application by Dragon Optical under s 54G(3). It is sufficient to say that in this hearing both parties to the application were content to proceed on that assumption. In a commercial dispute of this nature it is not for me to question that concession.
[52]The Court later said:
[18] Once the registered proprietor has given notice of proceedings under s 54G(3) he or she may choose to include other causes of action in the claim. However, the proceedings should expressly refer to s 54G(3) and state that relief is sought under s 54I. …
[53] Mr Arthur KC for the defendants submitted that Fisher J has, by these dicta, indicated that had the issue of what constitutes a proceeding under pt 7 been raised with him he likely would have found that conventional civil proceedings not referring to the relevant equivalent sections of the Trade Marks Act or seeking relief in terms of
5 G Sucess Co Ltd v Chief Executive Officer New Zealand Customs Service [2001] 1 NZLR 506 (HC).
the Act did not meet the requirements for proceedings brought under s 54G(3), this applying equally to the relevant provisions under the Copyright Act at issue here.
[54] Mr Arthur accepted, to an extent, the defendants are asking the Court to read between the lines of what Fisher J said but submitted the Judge was plainly leaning towards the requirement for strict compliance with the comparable border protection measures in the Trade Marks Act. Clearly, however, given his deference to the commercial bargain reached between the parties in that case, the matter was not determined by Fisher J.
Stabicraft’s submissions
[55] First, Mr Finch submitted that Fisher J’s choice of wording (“should” and not “must”) is telling and that “should” indicates a desirability of a plaintiff referring to ss 141(3) and 142 in its pleadings rather than a mandatory obligation. That is, while it may be procedurally desirable for a plaintiff to expressly refer in their pleadings to s 141(3) of the Act and/or to state that relief is sought under s 142 of the Act, Mr Finch said there is no statutory or regulatory obligation on the plaintiff to do so.
[56] Second, Mr Finch submitted that the original statement of claim advised both Customs and the defendants of the essential legal and factual basis of Stabicraft’s claim and all necessary ingredients of that claim. There could not, in those circumstances, be any prejudice to the defendants because they knew the case they were being asked to answer.
[57] Third, Mr Finch submitted that the approach being taken by the defendants was an unnecessarily pedantic one, wherein they are applying for “summary judgment opportunistically” when correctable error by the plaintiff has been identified. He submitted such conduct is to be discouraged as it defeats the purpose of r 1.2 of the High Court Rules 2016.6 He argued this sort of approach was cautioned against in Price Waterhouse v Fortex Group Ltd.7 He relied on that case as authority for the
6 Westpac Banking Corporation v MM Kembla NZ Ltd [2001] 2 NZLR 298 (CA) at [68]. Rule 1.2 of the High Court Rules 2016 provides that the objective of the Rules is “to secure the just, speedy, and inexpensive determination of any proceeding or interlocutory application”.
7 Price Waterhouse v Fortex Group Ltd CA179/98, 30 November 1998.
proposition that pleadings should be read as conveying what they would reasonably convey, in the context of the case, “to a sensible legal mind”.8
Analysis
[58] The scheme under pt 7 of the Act for detention of items by Customs plainly relates to items that are or are suspected to be pirated copies. Sections 135A and 136 make that plain. Further, s 137(1)(b) states:
137 Determination whether item is pirated copy
(1) Where—
…
(b)the chief executive forms the opinion that any item that is in the control of the Customs may be a pirated copy to which the notice relates,—
the chief executive may conduct such investigation as he or she considers necessary in order to establish whether or not the item appears to be a pirated copy to which the notice relates.
…
[59] This links back to the lodging of NRDPCs under 136(1)(b), namely that the procedures under pt 7 are all in relation to the detention of pirated copies to which the notice or notices relate. Section 140(1) confirms this “may be a pirated copy to which a notice accepted under s 136(3)(a) relates”. Section 140(1)(c) refers to “any proceedings under s 141(3) in respect of that item (including any appeal) are determined by a decision that the item is not a specified item that is a pirated copy”. Section 141(3) perpetuates the same particular language. Section 142 confirms that, in proceedings under s 141(3), the court’s decision is one by reference to the determination in s 137(3) as to whether the item appears to be a pirated copy to which the relevant NRDPC relates.
[60] I reject Mr Finch’s submission that there is no statutory obligation for a plaintiff to refer to s 141(3) in their pleadings under pt 7 of the Act. There is clearly a statutory
8 Price Waterhouse, above n 7, at 18.
obligation on a plaintiff seeking the continuing detention of goods to apply for a determination the goods are a pirated copy “to which the notice relates”.
[61] The effect of the statutory obligation is to create a presumptive hurdle the plaintiff must establish before the proceeding can be properly constituted for the purposes of the border protection measures of the Act.
[62] I turn to Stabicraft’s first submission that Fisher J’s obiter dicta in G Sucess support its case. I do not agree the inference Stabicraft relies on can be drawn from that case. It appears that, while Fisher J was conceding the commercial bargain reached between the parties was one reached without prejudice to either parties’ position, his Honour was saying that but for that concession the plaintiff would have had to jump the presumptive hurdle.
[63] As to Stabicraft’s second submission, I do not accept its original statement of claim contained all the essential factual and legal elements so as to inform the defendants of the claim against them.
[64] Looking at the deficiencies in the original statement of claim, the Court could not have ruled on the essential question for determination in s 141(3). The relevant question for the Court to determine is whether the detained boat is a pirated copy of the designs appended to the relevant NRDPCs and not of other artistic works that Stabicraft subsequently chose to include in its amended statement of claim. The statement of claim, from a common-sense point of view, fell far short of informing the defendants what the case against them was in relation to the detained boat. It did not tell them that Stabicraft were asserting, for the purposes of the Act, that the detained boat was a pirated copy.
[65] I refer to Mr Finch’s submission that the omission to refer to pirated copy or s 141(3) in the pleading is “a correctable error”. I accept that it can be corrected in the sense that an amended statement of claim has been filed, but that correction cannot retroactively amount to a finding that the proceedings served on 27 January 2022 were properly constituted at that time.
[66] None of the authorities relied upon by Mr Finch go so far as to say that a deficient pleading can be deemed to be adequate when it does not contain mention of the particular prescribed cause of action nor the particular relief sought. I have difficulty conceiving of how a “sensible legal mind” would have thought a s 141(3) decision was being sought in the statement of claim when that simply was not pleaded.
[67] I refer to Mr Finch’s third submission that this application is effectively an opportunistic application for summary judgment. First, if the Court were to direct release under s 141(2) because there was no compliance with the requirement to serve properly constituted proceedings, that is not a determination that the detained boat is not a pirated copy. It is merely a determination that the proceedings were not properly constituted and were not commenced in time. Such a determination cannot be properly construed as a summary judgment finding in favour of the defendants that the detained boat is not a pirated copy.
Conclusion
[68] I find that Stabicraft did not serve Customs with properly constituted proceedings for the purposes of s 141(3). Customs is wrongfully detaining the detained boat in contravention of s 140(1)(e). The detained boat must be released to Sea King forthwith.
[69] In the event I came to that finding, Mr Finch requested that I stay any decision for 20 working days to enable Stabicraft to lodge an appeal. Mr Arthur submitted that such a length of stay would be seriously injurious to the third party’s business and that five working days should suffice for the filing of an appeal. I consider the merits on this limited issue lie somewhere in the middle.
Result
[70] The Chief Executive of the New Zealand Customs Service is ordered to release the Easy Craft 9.0 boat to Sea King Boats Limited.
[71] The order contained in [70] shall be stayed for 10 working days to enable Stabicraft to appeal this decision.
[72] The lodging of an appeal in the Court of Appeal shall stay the effect of this judgment until such time as the appeal is determined in that Court.
Doogue J
Solicitors:
James & Wells Lawyers, Hamilton Scholefield Law, Invercargill
Crown Law, Wellington CC:
G F Arthur KC, Wellington
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