Facton Ltd v Xu

[2013] FMCA 90

FEDERAL MAGISTRATES COURT OF AUSTRALIA

FACTON LTD & ORS v XU & ORS [2013] FMCA 90

COPYRIGHT – Infringement of applicants copyright – infringement of applicants trade mark.

PRACTICE & PROCEDURE – Default judgement on liability only arising from default by first, third and fourth respondents in failing to comply with orders made by the Court pursuant to rules 13.03B of the Federal Magistrates Court Rules 2001 (Cth) – whether costs should be referred for taxation under Part 40 of the Federal Court Rules 2011 (Cth) pursuant to rule 21.02(c) of the Federal Magistrates Court Rules 2001 (Cth) – whether costs should be paid within 28 days pursuant to rule 21.02(2)(d) of the Federal Magistrates Court Rules 2001 (Cth).

Federal Magistrates Court Rules 2001, r.13.03A, 13.03B, 21.02

First Applicant: FACTON LTD

Second Applicant: G-STAR RAW C.V.

Third Applicant: G-STAR AUSTRALIA PTY LTD (ACN 084 011 852)

First Respondent: JIA ZHI (JOHN) XU

Second Respondent: YUN QUE MA

Third Respondent: BAIS BROS PTY LTD (ACN 115 249 404)

Fourth Respondent: APPAREL 23 PTY LTD (ACN 144 882 128)

File Number: MLG 1698 of 2010

Judgment of: Emmett FM

Hearing date: 14 February 2013

Date of Last Submission: 14 February 2013

Delivered at: Sydney

Delivered on: 14 February 2013

REPRESENTATION

Counsel for the Applicants: Mr C Wood

Solicitors for the Applicants: K & L Gates

First Respondent: In person

Second Respondent: Mr L Kramer

Solicitors for second respondent: Horowitz & Bilinsky

Third Respondent: No appearance

Fourth Respondent: No appearance

THE COURT DECLARES THAT

1. The first, third and fourth respondents have infringed the G-Star Trade Marks (as defined in paragraph 5 of the Fourth Further Amended Statement of Claim) in breach of section 120 of the Trade Marks Act 1995 (Cth) (Trade Marks Act).

2. The first, third and fourth respondents have infringed or authorised the infringement of the Copyright Works (as defined in paragraph 7 of the Fourth Further Amended Statement of Claim) in breach of sections 36, 37 and 38 of the Copyright Act 1968 (Cth) (Copyright Act).

3. The first respondent has contravened:

   (i)prior to 1 January 2011, sections 42 and 44 of the Fair Trading Act 1987 (NSW) (FTA) and sections 52 and 53 of the Trade Practices Act 1974 (Cth) (TPA) by operation of section 75B of the TPA; and

   (ii)post 1 January 2011, sections 18 and 29 of the Australian Consumer Law (NSW) as found in schedule 2 to the Competition and Consumer Act 2010 (Cth) (ACL) (as adopted by section 28 of the FTA (ACL NSW)).

4. The third and fourth respondents have contravened prior to 1 January 2011:

   (i)sections 52 and 53 of the TPA; and

   (ii)sections 42 and 44 of the FTA.

5. The third and fourth respondents have contravened post 1 January 2011:

   (i)sections 18 and 29 of the ACL.

6. The first, third and fourth respondents have engaged in conduct which constitutes the tort of passing off.

THE COURT ORDERS THAT:

1. Judgment be entered against the first, third and fourth respondents pursuant to rule 13.03B of the Federal Magistrate Court Rules 2001 (Cth).

2. The first, third and fourth respondents, whether by themselves, their directors, 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 Respondents' Products (as defined in paragraph 14 of the Fourth Further Amended Statement of Claim) or any clothing or clothing accessories to which the G-Star Trade Marks and/or the Copyright Works have been affixed or applied without the knowledge, authority or licence of the Applicants or any of them;

   (b)disposing or dealing with the Respondents' Products in any other way than in accordance with order 9 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 8(a) above;

   (d)representing that the Respondents' Products are imported, manufactured, advertised, promoted, offered for sale or sold with the sponsorship or approval of the applicants or any of them.

   (e)representing that the Respondents' Products are the G-Star Products (as defined in paragraph 3 of the Fourth Further Amended Statement of Claim);

   (f)representing that the Respondents' Products emanate from the same trade source as the G-Star Products;

   (g)representing that the Respondents' Products are made by the applicants or any of them; and

   (h)passing off:

   (i)their business as 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;

   (ii)the Respondents' Products as and for the G-Star Products; and

   (iii)the Respondents' Products as 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.

3. The first, third and fourth respondents, whether by themselves, their servants, employees, agents or otherwise howsoever, deliver up to the applicants:

   (a)all of the Respondents' Products in their possession, custody or control;

   (b)any and all brochures, pamphlets, advertising, labels, swing tags, promotional or marketing material and the like in their power, possession, custody or control which bear the G-Star Trade Marks or the Copyright Works or which feature the Respondents' Products; and

   (c)any materials, products or things in the first, third and fourth respondents' power, possession or control, the exploitation of which by the first, third and fourth respondents would be an infringement of the foregoing injunctions.

4. Pursuant to rule 21.02(2)(d) of the Federal Magistrates Court Rules 2001 (Cth), the first, third and fourth respondents pay within 28 days the applicants' costs of the proceeding to date, including any reserved costs and the costs of and incidental to the applicants' application for default judgment dated 7 November 2012, incurred as against these respondents.

5. The costs referred to in Order 10 above are to be referred for taxation under Part 40 of the Federal Court Rules 2011 (Cth) pursuant to rule 21.02(2)(c) of the Federal Magistrates Court Rules 2001 (Cth).

THE COURT DIRECTS THAT:

1. The applicants and the second respondent file an agreed statement of facts and issues by 28 February 2013.

2. The applicants file and serve, by way of affidavit, all evidence upon which they rely against the second respondent on the issue of liability and quantum by 28 March 2013.

3. The applicants file and serve, by way of affidavit, all evidence upon which they rely against the first, third and fourth respondents on the issue of quantum by 28 March 2013.

4. The first, third and fourth respondents file and serve, by way of affidavit, all evidence upon which they rely on the issue of quantum by 9 May 2013.

5. The second respondent file and serve, by way of affidavit, all evidence upon which she relies on the issue of liability and quantum by 9 May 2013.

6. The applicants file and serve, by way of affidavit, any evidence in reply by 6 June 2013.

7. The directions hearing listed for 12 April 2013 be vacated.

8. The matter is otherwise stood over for further directions before me on 12 June 2013 at 10.00am at Courtroom 12.1, Level 12, Terrace Tower, 80 William Street, Sydney.

FEDERAL MAGISTRATES
COURT OF AUSTRALIA
AT SYDNEY

MLG 1698 of 2010

FACTON LTD

First Applicant

G-STAR RAW C.V.

Second Applicant

G-STAR AUSTRALIA PTY LTD (ACN 084 011 852)

Third Applicant

And

JIA ZHI (JOHN) XU

First Respondent

YUN QUE MA

Second Respondent

BAIS BROS PTY LTD (ACN 115 249 404)

Third Respondent

APPAREL 23 PTY LTD (ACN 144 882 128)

Fourth Respondent

REASONS FOR JUDGMENT

1. This is the applicants’ application pursuant to r.13.03B(2)(c) of the Federal Magistrates Court Rules 2001 (Cth) for default judgment against the first, third and fourth respondents arising from orders made by me on 15 November 2012.

2. The orders sought by the applicants include declarations of infringement by the first, third and fourth respondents of trade marks and copyright owned by the applicants and declarations of contraventions of various consumer law legislation. The applicants also seek orders restraining the first, third and fourth respondents from dealing with the respondents’ products in respect of which the applicants have trade mark and copyright ownership. The orders also seek delivery up to the applicants of all the respondents’ products which would infringe the applicants’ trade marks and copyright.

3. The background of these proceedings is summarised in the applicants’ written submissions as follows:

   “The applicants commenced these proceedings on 7 December 2010 by filing an application and statement of claim.  This proceeding was initially commenced against Hassan Gogebakan.  On 9 March 2011, Hakan Turkaan was joined as a respondent to this proceeding pursuant to orders made by Federal Magistrate Riley made on 9 March 2011.  The proceeding was discontinued by consent as against Mr Gogebakan and Mr Turkaan with no order as to costs on 2 December 2011.

   On 25 August 2011, Federal Magistrate Riley made orders joining Jia Zhi (John) Xu as respondent to this proceeding and her Honour made a search & seizure order. 

   On 29 August 2011, Federal Magistrate Riley made orders joining Yun Que Ma, Bais Bros Pty Ltd and Apparel 23 Pty Ltd as respondents to this proceeding and her Honour made a freezing order.

   On 12 June 2012, Federal Magistrate Riley made orders by consent transferring this proceeding to the Sydney Registry of the Federal Magistrates Court of Australia.

   This proceeding was listed for a directions hearing before Federal Magistrate Emmett on 15 August 2012.

   Horowitz & Bilinsky filed notices of address for service on behalf of Yun Que Ma and Apparel 23 Pty Ltd on 14 August 2012 shortly prior to the directions hearing listed before Federal Magistrate Emmett.  Ms Ma and Apparel 23 Pty Ltd were unrepresented in this proceeding between 19 March 2012 and 14 August 2012.[1]

   On 15 August 2012, Federal Magistrate Emmett made a number of orders in this proceeding including:

   the applicants file and serve a fourth further amended statement of claim that identifies the relief sought by the applicants by 17 August 2012; and

   each respondent file a defence to the fourth further amended statement of claim by 28 September 2012.

   The fourth further amended statement of claim did not make any substantive amendment to the causes of action or the relief claimed.  In compliance with the Court's directions, it recorded the relief that was previously set out in the application. The respondents have been on notice of the relief claimed, in exactly that form, since 10 April 2012.

   At the directions hearing on 15 August 2012, Mr Bell, counsel for Ms Ma and Apparel 23 Pty Ltd mentioned the matter on behalf of Bais Bros Pty Ltd.

   On 17 August 2012, the applicants filed a fourth further amended statement of claim.  The fourth further amended statement of claim was served on each of the respondents.[2]

   Bais Bros Pty Ltd and Apparel 23 Pty Ltd have failed to file and serve a defence to the fourth further amended statement of claim.  Mr Xu, Bais Bros Pty Ltd and Apparel 23 Pty Ltd have failed to pay the costs order made on 15 November 2013.

   The applicants seek default judgment against the Mr Xu, Bais Bros Pty Ltd and Apparel 23 Pty Ltd on the following basis:

   [1] Feder Affidavit [4], Annexure JAF-11

   [2] Harrison Affidavit

   (a) declarations in the terms of paragraph 30 of the fourth further amended statement of claim;

   (b) injunctions in the terms of paragraph 31 of the fourth further amended statement of claim;

   (c) an order of delivery up in the terms of paragraph 32 of the fourth further amended statement of claim;

   (d) damages (to be assessed) or an account of profits (such election to be made when the applicant has all of the relevant information); and

   (e) costs.

   On 15 November 2012, the applicants' application seeking default judgment against the respondents was heard by Federal Magistrate Emmett.  The respondents sought more time to comply with the orders of the Court and to file a defence in this proceeding.  After hearing from the respondents as to the further time they needed, Federal Magistrate Emmett allowed the respondents further time to file their defences in this proceeding and her Honour made an order that the applicants would be entitled to enter judgment forthwith against any defaulting respondents if they failed to file a defence within the extended timeframe and pay the applicants' costs thrown away by the hearing of the applicants' application for default judgment on 15 November 2012, fixed at $3,000 (except for Ms Ma who only had to pay $500).”

4. In addition, the applicants have prepared a chronology a copy of which is annexed to these reasons and marked “A”.

5. The orders made by me on 15 November 2012 are as follows:

   “1. The applicants are to file an agreed statement of facts and issues within 7 days.

   2. Leave be granted to the second respondent to rely upon a defence to the fourth amended statement of claim filed on 8 November 2012.

   3. The first, third and fourth respondents file and serve a defence to the fourth further amended statement of claim within 7 days.

   4. The respondents pay the costs of the applicants in the amount of $3,000, being the costs thrown away by today’s interlocutory hearing, within 28 days. Each of the respondents is jointly and severally liable for the total amount of the costs except for the second respondent whose cost exposure is limited to $500.

   5. In the event that Orders 3 and 4 are not complied with, the applicants may apply to the Court for judgment to be entered forthwith against any defaulting respondents and for directions for the assessment of damages.

   6. The applicants are to file and serve, by way of affidavit, all evidence upon which they rely against all participating respondents by 24 January 2013.

   7. Each participating respondent is to file and serve, by way of affidavit, all evidence   upon which they rely by 7 March 2013.

   8. The applicants file and serve, by way of affidavit, any evidence in reply by 4 April 2013.

   9. The parties are directed to approach Registrar Tesoriero within 3 days for the purpose of continuing the mediation commenced earlier this year at the earliest date convenient for the parties and the Court and to comply with any direction for the continuation of the mediation that Registrar Tesoriero may make.  

   NOTE: It is expected that the mediation would be completed within 28 days.   

   10. The third applicant must be represented at the mediation by an officer of the third applicant with full authority to settle at the mediation, subject to consultation with the first and second named applicants, presently located in Amsterdam.

   11. The first respondent is required to attend the mediation in person. 

   12. The second respondent is required to attend the mediation in person. 

   13. The third and fourth named respondents must be represented at the mediation by officers of the third and fourth named respondents with full authority to settle at the mediation.

   14. Any person participating in the mediation is to attend the mediation in person and for the duration of the mediation, including any representative of any party.

   15.    The matter is stood over for further directions on 12 April 2013 at 10:00am at Courtroom 12.1, Level 12, Terrace Tower, 80 William Street, Sydney, before me.”

6. The applicants’ read the affidavits of Nicole Maree Harrison, sworn 9 November 2012, Jonathan Ariel Feder, affirmed 13 November 2012, and a further affidavit by Mr Feder, affirmed 11 February 2013. Based on the evidence before me I am satisfied that the first, third and fourth respondents failed to comply with Orders 3 and 4 of the orders made on 15 November 2012.

7. Rule 13.03B(2)(c) of the Federal Magistrates Court Rules 2001 (Cth) provide that if a respondent is in default, the Court may give judgment against the respondent for the relief sought if the applicant appears entitled to the relief on the statement of claim and the Court is satisfied that it has power to grant the relief sought.

8. Rule 13.03A(2) of the Federal Magistrates Court Rules 2001(Cth) defines when a respondent is in default as follows:

   “(2) For rule 13.03B , a respondent  is in default if the respondent:

   (a)     has not satisfied the applicant 's claim; and

   (b)     fails to:

   (i) give an address for service before the time for the respondent  to give an address has expired; or

   (ii)     file a response before the time for the respondent  to file a response has expired; or

   (iii)    comply with an order of the Court in the proceeding ; or

   (iv)    file and serve a document required under these Rules; or

   (v) produce a document as required by Part 14; or

   (vi)    do any act required to be done by these Rules; or

   (vii)   defend the proceeding  with due diligence.”

9. I accept that the summary of the conduct of the first, third and fourth respondents in the applicants’ written submissions, reflects conduct entitling the applicants’ to move for default judgment. That summary is as follows:

   “Mr Xu, Bais Bros Pty Ltd and Apparel 23 Pty Ltd had not, at the time the Court made orders in the nature of self-executing orders:

   (a) filed a defence to the fourth further amended statement of claim within the required timed period;

   (b) complied with orders made by the Court;

   (c) done the acts required by the FMR; and

   (d) defended the proceeding with due diligence.

   Bais Bros Pty Ltd and Apparel 23 Pty Ltd have not even cured the breach that existed when the Court gave it a further chance to file a defence in this proceeding.[3]  Mr Xu, Bais Bros Pty Ltd and Apparel 23 Pty Ltd have failed to pay the costs order made on that day.[4]

   In light of the matters set out above, the applicants submit that judgment should be entered against Mr Xu, Bais Bros Pty Ltd and Apparel 23 Pty Ltd pursuant to order 13.03 of the FMR.”

   [3]Second Feder Affidavit [6].

   [4]Second Feder Affidavit [8].

10. I am satisfied that the relief sought by the applicants in the statement of claim is relief that the Court has power to order and relief to which the applicants appear to be entitled on the statement of claim. That relief is summarised by the applicants’ in their written submissions as follows:

    “In the fourth further amended statement of claim, the applicants seek that the Court makes an assessment of their entitlement to pecuniary relief.  The applicants seek:

    (a) an order for damages, including damages to the applicants' reputation, pursuant to sections 126 of the Trade Marks Act 1995 (Cth) and sections 115(2) of the Copyright Act 1968 (Cth) (Copyright Act) or an account of profits. 

    (b) an order for additional damages and conversion damages pursuant to sections 115(4) and 116 of the Copyright Act.

    (c) an order for damages under the Fair Trading Act 1987 (NSW), Trade Practices Act 1974 (Cth), Competition and Consumer Act 2010 (Cth), Australian Consumer Law and Australian Consumer Law NSW; and

    (d) an order for damages for passing off including an order for exemplary damages.

    The applicants seek orders for:

    (a) the applicants to file and serve affidavit material on the issue of quantum;

    (b) Mr Xu, Bais Bros Pty Ltd and Apparel 23 Pty Ltd to file and serve affidavit material on the issue of quantum; and

    (c) for the matter to be listed for hearing in order that the Court can make an assessment on the applicants' entitlement to pecuniary relief as against Mr Xu, Bais Bros Pty Ltd and Apparel 23 Pty Ltd.”

11. The applicants also seek an order for costs against the first, third and fourth respondents in respect of the applicants costs in seeking default judgment, dated 7 November 2012, as well as costs of the proceeding, including any reserved costs. The applicants seek an order that all those costs be taxed in accordance with the Federal Court of Australia scale of costs in default of agreement.

1. I accept the written submissions of the applicants in support of the costs application and am satisfied that, having regard to the complexity and history of this matter, it is appropriate that costs be referred for taxation under Part 40 of the Federal Court Rules 2011 (Cth), pursuant to rule 21.02(2)(c) of the Federal Magistrates Court Rules 2001 (Cth). In particular, I note that orders have been made in the nature of a mareva injunction and anton piller orders and am satisfied that the Federal Magistrates Court Rules 2001 (Cth) as to costs do not provide adequately for those applications.

2. For the same reasons, it is appropriate that any such costs order be made payable within 28 days in accordance with rule 21.02(2)(d) of the Federal Magistrates Court Rules 2001 (Cth).

3. Accordingly, in the circumstances I am satisfied that the proposed declarations and orders sought by the applicants should be made both in relation to the applicants’ application for default judgment as well as their proposed directions for the future conduct of the matter.

I certify that the preceding fourteen (14) paragraphs are a true copy of the reasons for judgment of Emmett FM

Date:  14 February 2013