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Natuzzi Spa v De Coro Ltd

Judgment Cited authorities 24 Cited in Precedent Map Related
Vincent
Judgment Date16 January 2007
Subject MatterCivil Action
Judgement NumberHCA1702/2001
CourtHigh Court (Hong Kong)
HCA001702A/2001 NATUZZI SPA v. DE CORO LTD

HCA 1702/2001

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NO. 1702 OF 2001

____________

BETWEEN

　 NATUZZI SPA Plaintiff
　 and 　
　 DE CORO LIMITED Defendant

____________

Before: Hon Lam J in Court

Dates of Hearing: 4, 7-11, 14-18, 24-25 & 28-30 November 2005; 1-2 & 5-6 December 2005; 18-20 April 2006; 2-4, 8-12, 15-19 & 22 May 2006; 14-15 & 23-25 August 2006 and 7 December 2006

Date of Judgment: 16 January 2007

_______________

J U D G M E N T

_______________

1. Natuzzi SPA is the holding company of the Natuzzi Group. The group was founded in 1959. The headquarters of the group is in Santeramo in Colle, a little town near Bari in the Puglia province of Italy. In 2000, it described itself in its annual report as Italy’s largest furniture manufacturer. The group designed, produced and sold residential upholstered furniture. Most of its employees came from Bari. According to its chairman’s report, the sale in the financial year of 2000 reached a record high of ITL 1,333 billion. North America and Europe are the major markets for its furniture.

2. In the recent years, Natuzzi increasingly encountered competitions from manufacturers operating at lower costs. In May 2005, it had to approve a Reorganization Plan to reduce operating costs. It planned to reduce the work force in Italy by up to 1,320 employees by the end of 2005.

3. One of the competitors is the Defendant. Although the Defendant is a Hong Kong company, its factory is in mainland China. The Chairman and Chief Executive Officer of the Defendant, Luca Ricci came from Italy. His father is also in the sofa business as proprietor of Tre Erre SpA. That company specialized in high quality sofas.

4. The Defendant set up its factory in Shenzhen in 1997. It had experienced substantial growth. In 2005, its annual sales was around US$300 million, employing 3,600 workers.

5. The disputes between the parties in this action focused on events in March 2001 when both of them were preparing for one of the major trade exhibitions for the upholstery industry, viz. the High Point exhibition in the United States. In a nutshell, the Plaintiffs claimed that the Defendant had unlawfully procured the services of Natuzzi’s designer and prototypists and used the designs of the Plaintiffs in some of the exhibits.

6. In legal terms, the Plaintiffs sought relief against the Defendant based on the following causes of action,

(a) procurement of breach of contract;

(b) infringement of copyright.

7. Regarding the tort of procurement, the Plaintiffs alleged the Defendant wrongfully procured the breach of employment contract by its employees,

(a) Mr Bosco and Mr Pennacchia, two prototypists, before their resignation took effect;

(b) Mr Scarati, a designer, both before and after the termination of his employment.

8. Regarding infringement of copyright, by the time of closing submissions, the Plaintiffs confined the claim to five of its models: 1839, 1565, 2021, I100 and I104.

Procurement of breach of contract

A. The laws applicable

9. I have alluded to the rule of double actionability in Paragraph 40 of my judgment in HCA 4166 of 2003. Neither party addressed this court on the conflicts of law implications in their closing submissions in this case. I therefore proceed on the same basis as I did in HCA 4166 of 2003 and confine myself to Hong Kong law in deciding the claims of the Plaintiff under this head.

B. Bosco and Pennacchia

10. In February 2001, Mr Ancona the prototypist who had been working for the Defendant had to return to Italy. The Defendant had to get some Italian prototypists to work in its factory. There were emails between Mr Ricci and Mr Prati on the one part and Mr Baron on the other part in early February 2001 on this subject. Mr Baron suggested a prototypist called Giuseppe Lella. He also suggested enlisting the assistance of Mr Scarati in recruiting Italian prototypists. On 12 February 2001, Mr Ricci informed Mr Baron that the Defendant had located Mr Lella. Mr Lella agreed to visit the Defendant’s factory in Shenzhen on 25 February 2001.

11. In the meantime, Mr Scarati indicated on 12 February 2001 that he could recommend some prototypists. After his visit to the Defendant’s factory in the end of February, Scarati contacted several prototypists who were then working for the Plaintiff. On 7 March 2001, Scarati informed Ricci by email that he had two prototypists available for hire and he asked for information about the remuneration package. In that email, Scarati referred to the need for both of them “to be constantly present in the factory for the pre-market and market stages and perhaps alternate their presence in the other periods.”

12. Hence, Scarati understood there was a special need for the services of these prototypists for the High Point pre-market and market.

13. On the same date, Ricci responded by email asking Scarati for advice as to the package to be offered. He further said, “Let me know as soon as you can because it is a decision we have to make no later than tomorrow.”

14. These emails have to be read in the context that by then, the Defendant had already secured the services of Giuseppe Lella and his brother Giovanni Lella (who was not a prototypist on his own, working more as an assistant or an assembler at that time). They had arrived at the Defendant’s factory on 3 March 2001. They also had the service of Giuseppe Quattromini on a short term basis. Thus, the Defendant had a demand for prototypists at that time over and above the need to have one prototypist replacing Mr Ancona. The preparation for High Point exhibition must bea matter of high priority in the Defendant’s factory during March 2001. Ricci did not correct Scarati about the Defendant’s special need of prototypists for the purpose of the High Point exhibition.

15. Mr Ruscigno gave evidence about Scarati’s approach on 10 March 2001. Despite submissions to the contrary by defence counsel, I do not find his evidence inherently implausible. I find him to be a credible witness and I accept his evidence about the meeting with Scarati. He was asked to go to Scarati’s home with Mr Bosco. During the meeting, Scarati told them the Defendant was looking for prototypists to work in Shenzhen on a collection for the High Point exhibition in April. Bosco agreed to visit the Defendant’s factory to meet Mr Ricci. Ruscigno subsequently declined as he did not want to leave Italy.

16. Scarati did not contemplate Ruscigno’s refusal. He wrote to Ricci on 12 March 2001 that the two prototypists would arrive at Shenzhen on the next Saturday, viz. 17 March. After he learnt of Ruscigno’s decision, Scarati approached Pennacchia. This is evidenced by an email around 13 March referring to the “Pennacchia operation”.

17. Bosco and Pennacchia came to the Defendant’s factory on 17 March 2001. The evidence shows that even though they were interested in working for the Defendant, no prior decision had been made about their employment either on their parts or on the part of the Defendant. The Supplemental Witness Statement of Bosco and the 2nd Affidavit of Pennacchia filed on behalf of the Plaintiff contained evidence to that effect. Naturally, they wished to learn more about the Defendant by visiting the factory. At the same time, Ricci also needed to test their skills and abilities. The air-tickets issued for them also covered a return journey on 18 March. Hence, they did not tender their resignations to the Plaintiff before they left Italy.

18. It was after a meeting with Ricci at the Defendant’s factory on 17 March 2001 that Bosco and Pennacchia decided to take up the jobs. Ricci also found them suitable for the Defendant’s purposes. This is evidenced by an email of 17 March 2001 from Scarati to Ricci. In that email, Scaratti asked about what he was supposed to do with regard to their resignations from the Plaintiff.

19. On 20 March 2001 the Plaintiff received Bosco and Pennacchia’s letters of resignation dated 19 March 2001 through post. Bosco’s letter specified that resignation was to take immediate effect. However, Pennacchia’s letter did not so specified. This prompted a response from the Plaintiff on 23 March 2001 that the termination of his employment would only take effect after three months in accordance with the provisions of the Collective Contract of the National Labour applicable to Pennacchia under Italian law.

20. On 1 April 2001, the Plaintiff wrote to Pennacchia again demanding him to resume his duty at the Plaintiff and reminding him of the requirement of three month’s notice and his resignation not taking effect until 30 June 2001. Pennacchia responded on 19 April 2001 saying that he intended his resignation of 19 March 2001 to take effect immediately as from 19 March.

21. In his closing submissions, Mr Smith SC contended that although Bosco’s employment was terminated on 20 March 2001 by his letter of resignation, Pennacchia’s employment was not terminated until 23 April 2001 when the letter of 19 April 2001 was received by the Plaintiff. That was also the position taken by the Plaintiff in a letter of 27 April 2001.

22. I do not accept that contention. Pennacchia’s letter of 19 March 2001 did not stipulate that he would resign in three month’s time. He simply said he resigned. This had to be read in the context that although he (as well as Bosco) initially asked leave of absence from the Plaintiff for several days before he went to Shenzhen, he never returned to work. The Plaintiff might have its reason to require a three months’ notice period, but that was clearly not what Pennacchia tried to achieve in his letter of 19 March 2001. When an employee tendered his resignation and did not return to work thereafter, it...

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