Facton Ltd v Chung Lim Sports Cap Pty Ltd - [2010] FMCA 584

FEDERAL MAGISTRATES COURT OF AUSTRALIA

FACTON LTD & ORS v CHUNG LIM SPORTS CAP PTY LTD & ORS

[2010] FMCA 584

COPYRIGHT – Alleged infringements of trade marks and copyright – items sold with logos the subject of trade marks and copyright – alleged breach of Fair Trading Act 1987 (NSW) – passing off – consideration of remedies.

Trade Marks Act 1995, s.120
Fair Trading Act 1987 (NSW), ss.42, 44
Evidence Act 1995, s.79
Copyright Act 1968, s.115(4)

Pan Pharmaceuticals Ltd (In liq) v Selim [2008] FCA 416
G‑Star Royal Denim KFT v Urban CulturePty Ltd [2009] FMCA 1317
Review Australia Pty Ltd v Innovative Lifestyle Investments Pty Ltd (2008) 78 IPR 289

First Applicant:

FACTON LTD (FORMERLY KNOWN AS G-STAR RAW DENIM KFT)

Second Applicant:

G-STAR AUSTRALIA PTY LTD
(A.C.N. 084 011 852)

Third Applicant:

G-STAR INTERNATIONAL B.V

First Respondent:

CHUNG LIM SPORTS CAP PTY LTD (A.C.N. 096 765 123)

Second Respondent:

JAE HYO KIM

Third Respondent:

JUNG SUK SEO

Fourth Respondent:

DAVID SEO (HYEUNG JU SEO)

File Number:

MLG 877 of 2009

Judgment of:

Burchardt FM

Hearing date:

11 June 2010

Date of Last Submission:

11 June 2010

Delivered at:

Melbourne

Delivered on:

16 August 2010

REPRESENTATION

Counsel for the Applicants:

Mr M. J. Rivette

Solicitors for the Applicants:

Middletons

Counsel for the Respondents:

Mr J. R. Young

Solicitors for the Respondents:

Kim & Associates Solicitors

THE COURT DECLARES THAT:

The Respondents or any of them have infringed the G-Star Trade Marks (as defined in paragraph 5 of the Amended Statement of Claim) in breach of section 120 of the Trade Marks Act 1990 (Cth);
The Respondents or any of them have infringed or authorised the infringement of the Copyright Works (as defined in paragraph 6 of the Amended Statement of Claim);
The Respondents or any of them have contravened sections 42 and 44 of the Fair Trading Act 1987 (NSW) (FTA);
The First Respondent has contravened sections 52 and 53 of the Trade Practices Act 1975 (Cth) (TPA);
The Second, Third and Fourth Respondents or any of them have contravened sections 52 and 53 of the TPA (by virtue of the operation of section 75B of the TPA); and
The Respondents or any of them have engaged in conduct which constitutes the tort of passing off.

THE COURT ORDERS THAT:

The Respondents or any of them, whether by themselves, their servants, employees, agents or otherwise howsoever be restrained, in trade or commerce from:
(a)Importing, manufacturing, promoting, advertising, distributing, offering for sale, selling or exhibiting in public, the Infringing Products (as defined in paragraph 10 of the Amended Statement of Claim) or any other clothing and clothing accessories to which the G-Star Trade Marks and Copyright Works have been affixed or applied without the knowledge, authority or licence of the Applicants;
(b)Disposing or dealing with the Infringing Products in any other way than in accordance with Order 8 below;
(c)Authorising, causing, procuring or inducing any person to do any act which would be an infringement of the injunction referred to in paragraph (a) above;
(d)Representing that the Infringing Products or any other clothing or clothing accessories to which the G-Star Trade Marks and Copyright Works have been affixed or applied without the knowledge, authority or licence of the Applicants are imported, manufactured, advertised, promoted, offered for sale and/or sold with the sponsorship or approval of the Applicants or any of them;
(e)Representing that the Infringing Products or any other clothing and clothing accessories to which the G-Star Trade Marks and Copyright Works have been affixed or applied without the knowledge, authority or licence of the Applicants are the G-Star Products (as defined in paragraph 3 of the Amended Statement of Claim);
(f)Representing that the Infringing Products or any other clothing and clothing accessories to which the G-Star Trade Marks and Copyright Works have been affixed or applied without the knowledge, authority or licence of the Applicants emanate from the same trade source as G-Star Products;
(g)Representing that the Infringing Products or any other clothing and clothing accessories to which the G-Star Trade Marks and Copyright Works have been affixed or applied without the knowledge, authority or licence of the Applicants are made by the Applicants or any of them;
(h)Representing that the Respondents or any of them are licensed, authorised, sponsored, approved or endorsed by the Applicants or any of them; and
(i)Passing-off of the Infringing Products or any other clothing and clothing accessories to which the G-Star Trade Marks and Copyright Works have been affixed or applied without the knowledge, authority or licence of the Applicants as:
(i)the G-Star Products; and
(ii)Having the sponsorship, approval or a connection or affiliation in the course of trade with the Applicants or any of them and the G-Star Products.
The Fourth Respondent pay the Applicants $500 as compensatory damages.
The Fourth Respondent pay the Applicants $15,000 for damages to reputation.
The Fourth Respondent pay the Applicants $15,000 additional damages pursuant to s.115 of the Copyright Act 1966.

FEDERAL MAGISTRATES
COURT OF AUSTRALIA
AT MELBOURNE

MLG 877 of 2009

FACTON LTD (FORMERLY KNOWN AS G-STAR RAW DENIM KFT)

First Applicant

G-STAR AUSTRALIA PTY LTD (A.C.N. 084 011 852)

Second Applicant

G-STAR INTERNATIONAL B.V

Third Applicant

And

CHUNG LIM SPORTS CAP PTY LTD (A.C.N. 096 765 123)

First Respondent

JAE HYO KIM

Second Respondent

JUNG SUK SEO

Third Respondent

DAVID SEO (HYEUNG JU SEO)

Fourth Respondent

REASONS FOR JUDGMENT

Introductory

The applicants in this case sue for declaratory relief, injunctions and damages under a variety of statutes and at common law.
The claims arise from the alleged sale of counterfeit G‑Star product by the fourth respondent on 6 March 2009.
The fourth respondent is the only respondent against whom the matter is now proceeding. The first to third respondents are respectively a company in which the fourth respondent was asserted to have an interest and relatives of the fourth respondent.
Counsel for the fourth respondent (who for convenience I will refer to hereafter as the respondent) correctly submits that there are two critical factual issues. The first is whether the so‑called “trap purchase” made on 6 March 2009 was in fact made from the fourth respondent at all. The second is whether if the purchase was made from the respondent, the items were counterfeit.
For the reasons that follow, I have concluded that the trap purchase items were indeed purchased from the fourth respondent and were counterfeit.
I further find that the applicants are entitled to declaratory relief, injunctive relief should it be pressed, and damages as a result of the various contraventions of the law that these Reasons describe.

The applicant group of companies

Following some earlier confusion, the applicants filed an amended statement of claim on 13 April 2010. From that statement of claim, it is clear that the first applicant is asserted to have been at all material times, including now, a company incorporated pursuant to the laws of Hungary and entitled to sue in its corporate name. The third applicant is a company incorporated pursuant to the laws of the Netherlands and the second applicant, as its title indicates, is incorporated pursuant to Australian law. Although some time was expended during the currency of the hearing as to the proof of these formal matters, I am quite satisfied on the affidavit material filed by Mr De Bil that matters are as he says and that the corporate identity of the applicants has been proved.
From the material filed by the applicants, it is plain that all three applicants are part of what one might describe as the G‑Star group of companies.
The first applicant, Facton Limited, is (and relevant documentation has been exhibited from Hungary to bolster the satisfaction of the Court that it is indeed incorporated in that country), the owner of the trademarks referred to in the statement of claim. It licenses the use of its registered trademarks to the third applicant, G‑Star International B.V. It owns and operates the G‑Star website and has created a reputation in the G‑Star brand.
All of these matters are clear from the, relevantly unchallenged, affidavit of Mr De Bil filed on 3 December 2009, together with the affidavit of Jonathan Feder filed on 25 March 2010 and more particularly, exhibits JAF1 and 2 to that affidavit. The objection to paragraph 8 of Mr De Bil’s affidavit filed on 29 March 2010 is rejected. In my view, Mr De Bil’s conclusions based on his examination of company records is not hearsay. Rather it reflects an assertion validly based upon scrutiny of admissible business records.
The third applicant, G‑Star International B.V, is licensed by Facton to use the G‑Star trademarks described in the statement of claim. The third applicant also created copyright works referred to in the statement of claim. It designs, manufactures, advertises and sells in a large number of countries G‑Star branded product and has advertised the G‑Star brand since 1989. The third applicant has also created a reputation in the G‑Star brand.
These matters are likewise, in my view, established by the affidavit of Mr De Bil filed on 29 March 2010, together with the affidavit of Mr La Fontaine and exhibits JLF1 and JLF2.
It should be noted that despite earlier indications that they would be required for cross‑examination, neither Mr De Bil nor Mr La Fontaine were ultimately challenged in cross‑examination.
The second applicant which is, of course, the only Australian applicant is, pursuant to a licence agreement with the third applicant, the exclusive wholesaler and distributor in Australia of the G‑Star product supplied by the third applicant. It sells to certain concept franchise stores and over 40 independent retailers. It has sold substantial quantities of G‑Star product in Australia and extensively advertises and promotes the G‑Star brand in Australia. It likewise has created a substantial reputation for the G‑Star brand, but clearly in Australia alone.
All these matters likewise are clearly established by the affidavit of Mr De Bil filed on 3 December 2009.
It is clear from the affidavit of Mr De Bil that the fourth respondent is not a retailer to which the second applicant sells and indeed, the respondent concedes that this is so.
The structure of the G‑Star group of companies at times during the trial created some measure of confusion. Counsel for the applicants purported to assert from the bar table that this sort of company structure was typical in international marketing company groups, but I regard that assertion as inadmissible and irrelevant. What I am concerned with is the particular circumstances here.
Nonetheless, although the matter becomes at times slightly convoluted, it seems quite clear to me that this G‑Star brand has been created by the applicants. The first applicant owns the trademarks, the third applicant is licensed to use the trademarks and created the copyright works, and the second applicant actually does the selling in Australia.

The G‑Star brand and its reputation

The statement of claim expressly pleads the various Australian trademarks upon which it relies. The copyright ownership created and owned by the third applicant and used on the G‑Star product is only in evidence in a rather limited way. Nonetheless, it is clear from the trademarks that are in evidence that the use of this G‑Star logo is clearly established.
The evidence before the Court establishes in my view that these products sell for what seems to me to be very high prices. It is reasonable to infer this from the figures spent on advertising by the second applicant and the sales figures generated in respect of the product (these figures being disclosed in confidential annexures to the affidavit of Mr De Bil sworn on 2 December 2009).
Whatever I might think about the matter, the three applicants have all established a reputation in the G‑Star product. Indeed, the filing of the creation and registration of the trademarks and the clearly energetic attempts that G‑Star makes to protect its brand name by actions such as these (I was made aware of several others during the proceeding), only goes to reinforce this conclusion.

The claims made by the applicants

Arising from the factual issues I indicated at the start of this decision, the applicants claim that the respondent’s conduct in offering G‑Star product for sale infringed the G‑Star trademarks in breach of s.120 of the Trade Marks Act 1995 (Cth) (paragraph 11 amended statement of claim).
The same conduct is alleged to have infringed the third applicant’s copyright in the G‑Star logos (paragraph 12 amended statement of claim).
The same conduct is alleged to have constituted misleading and deceptive conduct in contravention of s.42 of the Fair Trading Act 1987 (NSW) (the “FTA”) and further, s.44 of the FTA (paragraphs 18 and 19 of the amended statement of claim).
Finally, the fourth respondent’s conduct is asserted to constitute passing off (paragraph 20 of the amended statement of claim).

Consideration of the events of 6 March 2009

Evidence in this matter was given by Stevan Musulin who is a former employee of the second applicant.
In his affidavit filed on 3 December 2009, Mr Musulin deposed that he was then an account manager for the second applicant and had been employed in that role since 2005.
He deposed that he regularly visits market stalls and retail outlets throughout Australia in order to identify sellers of counterfeit G‑Star branded clothing and accessories, which he deposed he had been trained to do by representatives of the applicant. This latter assertion emerged as untrue.
Mr Musulin deposed that on 6 March 2009, he visited stall number 265 at Sydney’s Paddy’s Markets at Haymarket and noted a number of items (approximately 50 in all) of G‑Star products on display. He deposed that at the time he purchased two items from the stall, one white G‑Star T‑shirt for $20 and one pair of blue Elwood denim jeans for $50. He exhibited the products bought as he asserted from GAS Fashion Products. He exhibited the receipt from GAS Fashion Products as exhibit SM2. A separate copy of that exhibit was later tendered in evidence as exhibit A9. It is clear that the receipt from GAS Fashion Products was for a total of $70 and it is annotated, as it emerged in Mr Musulin’s handwriting, “stall 265”.
When called to give oral evidence, Mr Musulin confirmed that he had been an account manager and had been involved in sales for the last decade.
He described his practice of putting the receipt for a product that he had bought into a bag with the product immediately after purchase (P-27). He described his practice of writing down the stall numbers on the various receipts that he obtains at the end of the day in these terms (P‑28):
“Normally the receipt just goes in the bag and I hang on to the bag and then towards the end of the thing, I try not to be too obvious that I’m doing anything particular, and I’ll write down various stall numbers as I go.”
It is clear that Mr Musulin bought from a number of stalls at Paddy’s Market on 6 March 2009. Then at P-28, he was asked the following question:
“Then at the end of the day, how do you work out what was purchased where?‑‑‑Because they stay in the bag with the receipt.”
It appears that the exhibit of the receipt is not the original because the original has to be provided by Mr Musulin to those who paid him in order to obtain reimbursement. At P-29, he said:
“It was more a case of getting an actual receipt to associate it with the counterfeit product. The stall numbers were more a reference that I could use when I was writing a report back to my head office, that I’d been to a stall at the markets and I’d purchased it from somewhere. They were never really too concerned with which stall it was, in actual fact, as long as there was a proper receipt to go along with the counterfeit product.”
Having been challenged by counsel for the respondent that he might have confused the point of purchase with stall 265, Mr Musulin said at P-30:
“I’m 100 per cent certain that the receipt and these products were purchased from GAS Fashions. I’m not 100 per cent certain that they were at stall 265. There is a possibility that I made an error that day.”
When challenged as to the amount of product on sale at GAS Fashion he said also at P‑30:
“I guess there is a possibility, because it’s generally an approximate amount. That’s why I say approximately. When I go in there, I don’t count every item one by one and spend several minutes in a stall making myself fairly obvious that I’m counting something. It’s more an approximation of what I saw at the time.”
It is clear from Mr Musulin’s answers that he saw G‑Star products at various stalls and it is clear that it was his practice to try to an extent to piece his day together at the end, very understandably in the circumstances.
I note that in relation to the issue of the ten jackets allegedly on sale at GAS Fashions, in the end Mr Musulin agreed he could not remember; it was no more likely than otherwise that he saw them at stall 265. (P‑31).
When the respondent was called to give evidence, he confirmed that he had EFTPOS facilities. He confirmed further that he was at one stage selling G‑Star products from his stall and that when requested, he sent some of that product to the applicants’ solicitor (P-39).
He said he did not know whether G‑Star would sell well and that he did not sell a lot of it (P‑40).
The Respondent’s account of the purchase of the G‑Star product (P‑40 and following) revealed that he bought it from a Chinese person who brought in a bag to him as a sample. The person who did so said he could give it to the respondent cheaply. The respondent paid by cash. This was not his normal practice. He normally purchased through a wholesaler.
He said he had not sold much G‑Star product (P‑42) and that he had heard about counterfeit products at Paddy’s Market, but did not know himself of such product.
He said at P‑44 that he did not know whether the items he sold were genuine or otherwise when he sold them (lines 46-47). He also confirmed that only he and his wife were authorised to use EFTPOS (P‑44).
The Respondent’s affidavit filed at the hearing confirms that the receipt to Mr Musulin’s affidavit was indeed from his company. He further said that he did not remember what clothing items he sold on that day, but said he did not sell any jeans for higher than $35.
He confirmed that he had been a director of the first respondent with the second and third respondents, and that the third respondent is his sister.
At paragraph 8 of his affidavit, he said:
“I confirm that I did not sell any G‑Star products on 6 March 2009 from Gas Fashion stands 470 - 472 at Paddy’s Markets.”
He went on to say that he has never had any connection with stand 265.
The only other piece of relevant evidence about the sale of G‑Star products by the respondent is exhibit JAF4 to the affidavit of Mr Feder filed on 3 December 2009. On 25 May 2009, Mr Feder wrote to the respondent setting out complaints which are reflected in the statement of claim. In response by letter dated 2 June 2009, the respondent, who does not speak or read English according to him, wrote back in English under the heading: “To whom this may concern”, the following:
“I am writing this letter on behalf of GAS Fashion regarding a letter received last week. We were notified to seize all purchase and selling of G‑Star stocks. Since that date, we have seized all our G‑Star stocks and with this letter I have posted the remaining stocks which include 2 pairs of jeans and 5 t‑shirts to the Middletons office. However I do not have the information of the person who had sold it to me as it was a one‑off purchase. He came into our shop in February with few items which were 5 pairs of jeans and 12 t‑shirts. Since then no further G‑Star stock purchases were made nor were they offered to us. I apologise for selling G‑Star stock and will no longer purchase any G‑Star stock if offered to us. Had I known that G‑Star was registered to your company, this would not have happened. Once again I apologise and we will make sure we are no longer related to any G‑Star tradings.”

Although, as I say, the applicant does not speak English, it is clear that letter was signed by him and I have no hesitation in finding that he was aware of its contents and that I should treat it as an admission against interest to the extent that it is relevant.
There is one thing that can be said about exhibit JAF4. The assertion that:
“I do not have the information of the person who had sold it to me as it was a one‑off purchase – ”
is not, in fact, correct. At P‑40, the respondent confirmed that he had purchased from this vendor “eight times a year”. On the evidence before me, I am satisfied that Mr Musulin did purchase the two items which are the subject of a receipt being exhibit A9 from GAS Fashions. He was adamant that that was so and his evidence that the receipt goes straight into the bag (and that the product went with it) is in my view entirely consistent with commonsense.
The circumstances of the work Mr Musulin was doing are, of course, difficult. At one and the same time, he had to identify the offending product, make some sort of quantification as to how much of it was on sale without being too obvious, buy it and get a receipt, store the materials and the receipt together, and then move on.
However, given the clear error in the reference to shop 265, it is apparent that to at least an extent, Mr Musulin became somewhat confused that day.
I do not accept the evidence of the respondent that he did not sell this product. Whether he sold it personally or through his wife or some other person is immaterial. However, the suggestion made by counsel for the applicants that the respondent’s affidavit was carefully crafted so as to disguise the truth is not one I am prepared to uphold.
Nonetheless, I have seen both Mr Musulin and the respondent give evidence and I have no doubt that Mr Musulin’s evidence about where he purchased the offending product is correct.
So far as the other product allegedly seen by Mr Musulin at the GAS Fashions stall is concerned, I think the criticisms made by counsel for the respondent are far more forceful. It is clear that Mr Musulin bought offending product at shop 265 which is clearly not owned by the respondent.
I think I cannot be satisfied, particularly given the answers given earlier, that it is more probable than otherwise that the 50 or so items that Mr Musulin deposed to as being on sale at GAS Fashions were indeed seen there (see paragraphs 33 and 34).
Nonetheless, it is more probable than otherwise that there were other G‑Star products on sale at GAS Fashion. That this is so is clear from the fact that a certain amount of it was sent by the respondent to Middletons. He only bought the product according to him in one tranche and accordingly, it is reasonable to suppose that what had not then previously been sold was on sale.
It is not possible for me to say how much more product there was, but plainly on any view, it cannot have been less than seven further items because that is what was returned and in all probability there was other product too, because the product that was returned was not returned until some months after the purchase made by Mr Musulin.

Was the product purchased by Mr Musulin counterfeit?

Objection was taken to the evidence of Mr De Bil as to whether or not the purchase product was counterfeit. In the ultimate, I do not believe it is necessary for me to determine this because I am satisfied that Mr Musulin’s evidence established that it was.
As earlier indicated, Mr Musulin confirmed in cross‑examination that he had not in fact been trained in the recognition of counterfeit product.
This brings us to the question as to what evidence is required in order for it to be admissible pursuant to s.79 of the Evidence Act 1995.
In Pan Pharmaceuticals Ltd (In liq) v Selim [2008] FCA 416, Emmett J dealt with this matter in terms. Without setting it out, I respectfully adopt what was put by his Honour in that case at [30] - [37].
In particular, I note that his Honour said at [34]:
“Alternatively, such special knowledge or expertise might be the subject of experience, where no particular technical study or education has been undertaken by the witness, such as in the case of managers and the like. Such evidence will often have less weight afforded to it. While it may be admissible as opinion evidence, because of the provisions of ss.79 and 80, the Court may often be in as good a position as the so‑called expert to assess such matters if it simply goes to ordinary experience.”
Here, the evidence of Mr Musulin was, in my view, telling. He was an account manager and had been with G‑Star for 4 1/2 years, dealing with G‑Star product every day. At P‑23, the following exchange took place:
“Well, you’re not an expert in clothing?‑‑‑Well, I kind of – I guess I would be considering that’s what I work with daily for four and a half years at G‑Star. In terms of the actual construction and manufacture, perhaps not so, but, yes, it’s something that I deal with every day.”
At P‑26, the following exchange took place:
“And what do you say the training was that you underwent in relation to identifying counterfeit product?‑‑‑Generally, I deal with the product for at least eight hours a day in my day‑to‑day job and can usually form a – well, I can always form an opinion that I can tell the difference between a counterfeit product and a real product based on the actual article never having existed or been produced or sold by us.”
Given the challenges to Mr Musulin’s experience and expertise, it is a small wonder that in re-examination, counsel sought to clarify the matter further. At P‑31, the following occurred:
“Could you just explain to his Honour what your – the expertise that you developed as a result of working for G‑Star and what your day entailed?‑‑‑Basically on a daily basis we would have various customers coming into our showrooms where we would present them that current season’s range of product where they would then buy whatever product they felt was suitable for themselves and place an order. So we were dealing with pretty much all product that comes into Australia and would be stocked at any regular retailer within the country and New Zealand.”
At P‑33, despite objection from counsel for the respondent, I permitted counsel for the applicants to explain the basis upon which he determined that the products at GAS Fashion were counterfeit because it was the answers that were clearly proposed to be given that would enable me to determine the issues raised in the part of the judgment of Emmett J to which I have referred.
The answer given by Mr Musulin at P‑33 was:
“Generally the most obvious thing is the actuals (sic) tags themselves are not G‑Star style tags. We never use a metal style whatever you want to call that key chainy thing. The cardboard is a different colour. The style codes don’t exist on there that we would generally use. Internally the tags are completely different to what – how we would tag and brand our product. And then the size of certain things and the colour and font is incorrect. And the general appearance is something that I have never seen or sold before in the four‑and‑a‑half years that I’ve worked at the company. That has never been an item that we have ever put into the market as such. And the same exact would be for this item here, the T‑shirt. .... the same again. The tags are incorrect. This one, rather than using the metal keychain, uses the plastic hole punchy type thing which again we never use. We always use the same type of thing. The tags are the wrong colour. We would never use that type of tag, to begin with. And the tags internally are not the type of tag we would use. And the washing and care instructions don’t normally exist in the freight products as well as we would have them. They would normally be several different ones on there that identify where it came from and style codes for that item and a name for the actual item as well.”
In my view, this evidence is evidence I am entitled to accept. One rather wonders what expertise or training could ever be developed in the question of identifying counterfeit G‑Star product. It is not a science. It is of its nature in my view a matter quintessentially to be derived by experience. Mr Musulin had lots of experience.
The transcript does not perhaps fully record the conviction with which Mr Musulin’s evidence was given. I have no doubt that he is, in every sense of the word contemplated by the meaning of the word “expert”, both in the Evidence Act and otherwise, an expert in identifying G‑Star counterfeit product.
Not only is he an expert in assessing counterfeit product, he says and I accept, that the product purchased by him on 6 March 2009 from GAS Fashions was counterfeit.
There is, however, one area of criticism advanced by the respondent which I think I am bound in part to accept. It is quite correct that there is simply no direct evidence before the Court that the material returned to Middletons was indeed counterfeit product. It was plainly product purchased by the respondent in breach of the various restrictions imposed by G‑Star on the sale of its products, as indeed the respondent himself acknowledged in his letter to Middletons.
Nonetheless, it is far more probable than otherwise as a matter of inference that the materials sent back to Middletons were counterfeit. They were all part of a batch bought at the same time in the same unorthodox and underhand way. It is open to me to infer, despite the evident lack of any hard evidence, that all the items that were bought by the respondent from the unnamed Chinese vendor were indeed counterfeit. It beggars commonsense in all the circumstances to suggest otherwise.

Conclusions arising from these findings

It is clear that the applicants have made out their case of the infringements of the trademarks and the copyright. So much requires in the circumstances no further elaboration.
Further, in the particular circumstances as I have found them, I find that in respect of the two items sold, the respondent engaged in conduct that contravened the terms of ss.42 and 44 of the FTA.
Insofar as the claim for passing‑off is concerned, to the extent that it adds anything, I have already indicated that I accept that the applicants, and in particular the second applicant, have indeed established a reputation in the product. Further, I found the respondent’s evidence about his knowledge of G‑Star and the extent of its reputation extremely unconvincing, notwithstanding that it was given through an interpreter. It is clear that there was misrepresentation by the respondent and that damage flowed from it. To the extent that it may be relevant, I find that the passing‑off claim is made out.

Remedies

It follows that the applicants should have the declaratory relief they seek. There were no submissions by the respondent that declaratory relief was inappropriate and/or would serve no purpose. In this case, I think the declarations sought are appropriate as they put in proper context the other relief to be granted.
It is not clear to me that the injunctions sought are really necessary, given that the respondent has already undertaken not to infringe again. I will hear counsel further as to this point.
So far as damages are concerned - the actual loss that I am prepared to accept – I accept the thrust of the applicants’ written submissions set out at part 7.5 of their written submissions, although I do not accept the quantum of garments therein asserted. As I say, it is clear that in addition to the two garments on sale there must have been some seven or so more, but those were not sold. This is not an area of precision.
In respect of each item sold, I accept that a loss of $100 per infringing garment sold is reasonable. After all, the evidence establishes that for each counterfeit garment sold, it is more probable than otherwise that the applicants suffer a loss of $100 per garment. In all the circumstances, I am prepared to award the second applicant $500 under this heading.
So far as compensation for damages to reputation is concerned, I accept for the reasons I have given that all three applicants have the capacity to recover damages, although they cannot each recover in respect of the same loss. The applicants represent a group of companies and in a very real sense, there is only one damage to reputation. I have been referred to the decision of O’Dwyer FM in G‑Star Royal Denim KFT v Urban CulturePty Ltd [2009] FMCA 1317 (“Urban Culture)” in which his Honour awarded $35,000 in this regard.
Nonetheless, the facts of this case are far different in terms of scale to those in that case and in my view, under this heading, given the relatively small amount of items involved, a proper resolution of this issue is to make an award of $15,000.
The applicant also claims an award of $50,000 additional damages under s.115(4) of the Copyright Act 1968.
I have had regard to the authorities to which I have been referred, which show that there is a tendency for courts to make substantial awards in respect of additional damages under this heading. Nonetheless, each case turns on its own facts and one must approach with caution any suggestion that very substantial awards of damages are appropriate in every case.
The award made by Jessup J in Review Australia Pty Ltd v Innovative Lifestyle Investments Proprietary Limited (2008) 75 IPR 289 of $10,000 reflected different and, arguably, more serious circumstances.
Counsel for the applicants laid particular stress upon the judgment of O’Dwyer FM in Urban Culture in which his Honour made an award under this section of $50,000.
With respect, I would adopt his Honour’s observations at [22] to this effect:
“There needs to be a general deterrent to prevent similar infringements of copyright, a deterrent that is known and understood in the marketplace. It is important to protect copyright owners in the marketplace from the destructive conduct of those who seek to pass off counterfeit goods as being those of the rightful copyright owner. The conduct seriously jeopardises the physical wellbeing of not only the copyright owners in the first instance, who have, I am satisfied, invested a great deal in establishing the copyright works, but also those aligned industries that are dependent upon the subsistence of protection of copyright works to provide a viable market, leading to wealth creation and employment.”
His Honour’s findings in that case that the counterfeit garments were very good copies of G-Star product are not repeated in this case.

Mr Musulin thought they were very bad copies.
Likewise, the respondent did not gain a very significant commercial advantage selling the products bearing G-Star because, as I have indicated earlier, he sold only a few of them.
I have had regard to the matters set out in section 115(4) of the Copyright Act.
Here:
a)The flagrancy of the infringement was, in my view, significant. The respondent either knew or should certainly reasonably have known that the product was counterfeit from the unusual circumstances in which he bought it, if for no other reason.
b)It is necessary to deter similar infringements of copyright.
c)The respondent’s conduct, after being informed of his infringing conduct, was entirely appropriate. He readily cooperated and apologised, as is shown by his letter to Middletons.
d)The benefits that one can say accrued to the respondent from his conduct were relatively limited.
In all the circumstances, I think an award of additional damages of $15,000 should be made under this heading and that it should stand concurrently as an award for exemplary damages for passing‑off.
I have prepared draft orders to give effect to my conclusions. In view of my remarks at paragraph 76 above, I will hear further from counsel. I will further hear any submissions as to interest and costs.

I certify that the preceding ninety-one (91) paragraphs are a true copy of the reasons for judgment of Burchardt FM

Date: 16 August 2010