(1) KABUSHIKI KAISHA SONY COMPUTER ENTERTAINMENT INC. also trading as SONY COMPUTER ENTERTAINMENT INC. (a company incorporated under the law of Japan) (2) SONY COMPUTER ENTERTAINMENT EUROPE LIMITED (3) SONY COMPUTER ENTERTAINMENT UK LIMITED v (1) GAYNOR DAVID BALL (2) GARY EDMUNDS (3) BORIS BAIKOV (4) Ina SOROKOVICH (5) IGOR TIPOROV (6) K SHASHKOV (7) STEPAN GVOZDEFF (the Third, Fourth, Fifth, Sixth and Seventh Defendants trading together as MC Sales and/or M-PS2 and/or Messiah 2 Team) [2004] EWHC 1192 (Ch)

IN THE HIGH COURT OF JUSTICE
CHANCERY DIVISION
[2004] EWHC 1192 (Ch)Case No Case No: HC 03 C04467Venue Royal Courts of Justice, Strand, London, WC2A 2LL
Between
(1) KABUSHIKI KAISHA SONY COMPUTER ENTERTAINMENT INC. also trading as SONY COMPUTER ENTERTAINMENT INC. (a company incorporated under the law of Japan) (2) SONY COMPUTER ENTERTAINMENT EUROPE LIMITED (3) SONY COMPUTER ENTERTAINMENT UK LIMITEDClaimants(1) GAYNOR DAVID BALL (2) GARY EDMUNDS (3) BORIS BAIKOV (4) Ina SOROKOVICH (5) IGOR TIPOROV (6) K SHASHKOV (7) STEPAN GVOZDEFF (the Third, Fourth, Fifth, Sixth and Seventh Defendants trading together as MC Sales and/or M-PS2 and/or Messiah 2 Team)Defendants
Before
Mr Justice PumfreyMr. Adrian Speck (instructed by Bristows) for the ClaimantsMr. Matthew Kime (instructed by Sarjeant & Sheppard) for the First DefendantsDate 17 May 2004
[1]Mr. Justice Pumfrey: I have before me an application pursuant to CPR 32.14 for permission to proceed with an application to bring proceedings for contempt of court against the first defendant to this action, Mr. Gaynor David Ball, in respect of false statements made which have been verified by a statement of truth.[2]Having regard to the permission which I am giving, it is incumbent upon me to say as little as possible about the merits of the case while indicating why I have decided to permit only a limited class of the statements complained of to be the subject of a application to commit and to explain at the same time why the ones I have allowed to go forward are going forward to a hearing.[3]The nature of an application to commit for a false statement verified by a statement of truth is described extensively in the judgment of Sir Richard Scott V-C in Malgar Ltd. v. RE Leach (Engineering) Ltd. [2000] FSR 393 . The general law of contempt is when one is dealing with disobedience to an order of the court. But actions done by an individual interfering with the course of justice or attempting to interfere with the course of justice were capable of constituting contempt of court.[4]The particular matters complained of in the present case are complained of in the context of an action in respect of the provision of what are sometimes called "modchips" enabling illegitimate copies of Sony PlayStation software to be used on Sony PlayStation consoles. Mr. Ball was detected as a possible source of such modchips and was sued by Sony who, I should add, did not seek relief by way of a search order against him.[5]The proceedings were started on 22nd December 2003 and after a statement of claim, which I think so far as material today is concerned, can be described as in common form were met by an amended defence in which Mr. Ball (who was at that stage pleading his own case in person) said this in paragraph 17 of his defence:
"My relationship with the other defendants was remote and I had absolutely nothing to do with design and manufacture. I provided objective technical opinions in relation to Messiah2" — which is the name of the chip — "through the medium of private forums, hosted outside the United Kingdom, that did not countenance software piracy and that banned anyone asking questions relating to piracy. My 'distribution' activities were minor — my customers lying outside the United Kingdom."
[6]Then he said:
"Messiah2 devices have been sold to overseas customers in small quantities. Customers have been sent terms of trade which include a specific and prominent clause to the effect that the Messiah2 is provided only for the purpose of making legitimate backup copies of properly licensed games and that any purchase made from me is in full acceptance of this condition. Consequently an order placed on me gave me no reason to believe that an illegal purpose was intended. In any case, when the amendments to the Copyright Act came into force on 1st November 2003, section 296 was more onerous than hitherto and so I stopped supplying the Messiah2 device."
[7]The defence was amended and by paragraph 42.21 it provided:
"In or about late November 2002, the first defendant agreed to purchase some Messiah2 modchips from" — the person identified as — "the Salesman, and at that time and/or thereafter he did purchase a modest number, to supply to those people who had contacted the first defendant on the web forums asking him to supply them, and he did supply some people with them at various times thereafter. All or almost all of the supplies were to persons outside the United Kingdom (and European Union) jurisdiction and the first defendant did not believe that those modchips would be used in the United Kingdom (or European Union) jurisdiction. The first defendant made it a condition of sale of each of his sales of Messiah2 modchips that none supplied was to be used in connection with the playing of any pirate games (referring to unlawful copies of games issued by the claimants or their related companies). These modest sales were not as part of a joint enterprise with anyone else. They were independent acts of the first defendant undertaken by him to assist a modest number of like hobbyists to overcome the territoriality of their PlayStation 2 games consoles."
[8]Then further information was sought. The further information was provided under a statement of truth. In reply, "Under Paragraph 42.21", particulars of numbers were sought and the reply to replies. The first question was:
"36. Please confirm that the first defendant never supplied more than a single modchip to any such hobbyist or customer."
[9]Reply:
"36. Not confirmed. Whilst the majority of individual transactions were singletons, there were larger quantities as detailed in the account supplied."
[10]In request 37:
"If the foregoing is not confirmed please state what was the largest number of modchips supplied to any one customer."
[11]The Caimants' investigations had showed a different position. They showed that Mr. Ball was trading and had another bank account in Guernsey.[12]They made this application and were met by an affidavit from Mr. Ball in which he sets out in paragraphs 4 and 5 the true position. The truth is, he says, that he does have an account in Guernsey, he did sell approximately 6,547 modchips in relation to that bank statement. He identifies a number of other possible transactions and he gives an undertaking in paragraph 5 to complete the further account as soon as he can to the best of his ability, but he truly believes that the total number of modchips bought and sold was not greater than 9,500.[13]The position, as I understand it, is in fact for the figure 9,500 there should be substituted the figure of 13,000 or thereabouts; information that was very properly made available to the claimants by Mr. Kime on behalf of Mr. Ball this morning.[14]His apology is in paragraph 6:
"I greatly regret, and apologise to the court and to the claimants for my falsehood in the above-mentioned respects. The reason I signed the statement of truth, knowing that my answer to the relevant questions was not true, was that I was frightened by the apparent determination of the claimants to ruin me, by the fact that they had apparently already incurred £84,000 in costs, that their claim was effectively that I should pay all their damages and all their costs, and I felt that I would be utterly unable to afford to resist them regardless of how good my case might be, and that I would be unable to incur the expense of resisting their request for information by 15th April. It was impossible to provide all the detailed information the claimants had requested in the time allowed and I panicked."
[15]Further comments that may be made about that paragraph should be left over to the judge who hears the application. Paragraph 7 explains that in fact when the application for permission was launched, Mr. Ball was already — so it suggests — correcting the position with his solicitors.[16]It seems to me, in the light of the judgment in Malgar v. Leach, that the discretion to permit applications of this nature to proceed must be exercised with very great caution. It can hardly be appropriate, it seems to me, to permit a general investigation of the facts surrounding a particular infringement in the context of contempt proceedings. That is why I have excluded from the permission which I have granted the greater number of the non-disclosures and misrepresentations alleged by the claimants.[17]It seems to me also that before this discretion is exercised, the claimant must satisfy the court that there is a strong case — and preferably an admitted case — that a particular misrepresentation is untrue. Here there is in relation to the following alleged non-disclosures (which are set out in paragraph 70 and the following paragraphs of the affidavit of Mr. Dabin) two admitted non-disclosures, that is to say, the Guernsey bank account and the extent of the purchases from a man who is referred to as "Boris" and is the third defendant.[18]At the same time it seems to me, as at present advised and without coming to any final conclusion on the matter, that there is a strong prima facie case in relation to the first false statement of which complaint is made, that is to say in relation to acts done after 31st October 2003 and in respect of the commercial involvement of Mr. Ball in the sales of which complaint is made.[19]In his amended defence in paragraph 42.10 it is denied that he was so involved and I have read other paragraphs in the amended defence making it clear the flavour of that document. The numbers involved seem to me to give rise to a serious question as to whether that could ever have been considered to be a truthful statement and, in those circumstances, seem to me to satisfy the requirement that I have indicated.[20]At the same time, it is important to ensure that proceedings of this description are not used as a collateral method of placing unjustifiable pressure on defendants by wealthy claimants. In a case where the alleged non-disclosure goes merely to the merits of the proceedings, I can envisage few circumstances in which it would be justifiable, as it were, to break the proceedings for a committal motion. The non-disclosures here, however, are of a rather different class. They are concerned with the importance of the proceedings to the claimants, that is to say, whether they are dealing with a big defendant, a medium sized defendant or a small defendant and they affect, as they must affect, the decision of a rational claimant as to all sorts of matters such as the amount of resources which it is appropriate to dedicate to the particular case.[21]It may well be that the view that is taken by the court hearing the committal application — which, I should say, will not be me — that the whole flavour of the original defence and indeed substantially of the request for further information was to create a misleading picture of a much smaller course of infringement than in fact took place. Not only does this affect the claimants directly in that they are confronted with a different dimension case from the one which was sought to be suggested that they had, but it is untrue and it is, to that extent, it seems to me, very strongly to be viewed as an attempt to deflect the full force of the claimants' case and to deflect it by admitted untruths.[22]In those circumstances it seems to me that this is a case which, as I have indicated, should, as to the particular false statements that I have identified, go forward to trial. I have in mind particularly what is said in Malgar's case in the judgment of the Vice-Chancellor at page 400 where it is plain that the court must be astute not to allow tenuous or argumentative applications to commit to go forward.[23]I am satisfied that the allegations here are not tenuous though whether they amount to a contempt, of course, is not a matter for me. In those circumstances I propose to allow the application to the extent I have indicated accordingly.[24]The costs of this application will be reserved to the judge hearing the committal motion. MR. SPECK: My Lord, I am grateful. That is exactly what I suggested to my instructing solicitor when you were giving that judgment. There was one point where, I think, in your Lordship's judgment may have sounded different; my Lord thought that we did the trap purchase after the pleadings were put in. The trap purchase was done before. I just want to make that clear. I do not think it really affects my Lord's judgment — MR. JUSTICE PUMFREY: If it did say that, it should not have done. I am sorry. Did it sound like that? MR. SPECK: It did sound like that. MR. JUSTICE PUMFREY: In that case it will be corrected in the transcript. MR. SPECK: Yes. I just wanted to draw that to my Lord's attention. I think it only really leaves the matter for directions on this application. MR. JUSTICE PUMFREY: Is your evidence complete? MR. SPECK: My evidence is complete. MR. JUSTICE PUMFREY: Three weeks, one week to reply; not before, therefore, four weeks from today, to come on as soon as possible thereafter before a different judge from the one hearing the application for summary judgment. MR. SPECK: I am grateful. MR. KIME: Does your Lordship need to make any directions relating to use of material made, if you see where I am going? MR. JUSTICE PUMFREY: I think that will be a matter for the judge hearing the contempt application. If you are proposing to put in evidence on the contempt application which you wish to insulate from the summary judgment application, in other words, if you are proposing to waive privilege — MR. KIME: My Lord, yes. MR. JUSTICE PUMFREY: — then you must make it clear that that is what you are doing in the accompanying correspondence and that the material is made available on that limited basis only. I would send an enquiring letter first. If the solicitors for Sony do not agree, without having seen the evidence, that you can do that, then you must apply to the court for directions. MR. KIME: I am grateful. MR. JUSTICE PUMFREY: But I am certainly not going to drive you into, as it were, first of all, inviting you to waive privilege and then find it being used against you in another part of the action. MR. KIME: I am very grateful indeed. MR. JUSTICE PUMFREY: That will be clearly understood, will it not, Mr. Speck, by those instructing you? MR. SPECK: My Lord, we understand. We will consider the letter when it comes. MR. JUSTICE PUMFREY: Yes, very well. Do you have an application? MR. SPECK: No, my Lord. MR. JUSTICE PUMFREY: Very well. MR. SPECK: I am very grateful. MR. JUSTICE PUMFREY: Very well.

Cited in 17 later judgments

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