Ladakh Pty Ltd v Quick Fashion Pty Ltd
[2012] FCA 389
•19 April 2012
FEDERAL COURT OF AUSTRALIA
Ladakh Pty Ltd v Quick Fashion Pty Ltd [2012] FCA 389
Citation: Ladakh Pty Ltd v Quick Fashion Pty Ltd [2012] FCA 389 Appeal from: Ladakh Pty Ltd v Quick Fashion Pty Ltd & Anor
[2011] FMCA 519Parties: LADAKH PTY LTD (ACN 079 120 595) v QUICK FASHION PTY LTD (ACN 126 154 890) and FENG JIANG File number: VID 1021 of 2011 Judge: JESSUP J Date of judgment: 19 April 2012 Catchwords: INTELLECTUAL PROPERTY - Copyright – Original work used as pattern for ladies’ dress – Trade competitor’s dress placed on market with same pattern – Whether to be inferred competitor copied pattern or authorised copying – Onus of proof.
PRACTICE AND PROCEDURE – Costs – Whether error in exercise of discretion.
Cases cited: Interlego AG & Anor v Croner Trading Pty Ltd (1992) 39 FCR 348
Barrett Property Group Pty Ltd v Dennis Family Homes Pty Ltd (2011) 279 ALR 12
Bowen Investments Pty Ltd v Tabcorp Holdings Limited (No 2) [2008] FCAFC 107
Clarendon Homes (Aust) Pty Ltd v Henley Arch Pty Ltd (1999) 46 IPR 309
House v R (1936) 55 CLR 499
IceTV Pty Ltd & Anor v Nine Network Australia Pty Ltd (2009) 239 CLR 458
Jones v Dunkel (1959) 101 CLR 298
Pacific Gaming Pty Limited v Aristocrat Leisure Industries Pty Ltd (2001) 116 FCR 448
Ron Englehart Pty Ltd v Enterprise Constructions (Aust) Pty Ltd (2010) 88 IPR 622Date of hearing: 24 February 2012 Place: Melbourne Division: GENERAL DIVISION Category: Catchwords Number of paragraphs: 44 Counsel for the Appellant: Mr C Golvan SC with Mr E Heerey Solicitor for the Appellant: Middletons Counsel for the Respondents: Mr AJ Ryan SC with Ms SK Gatford Solicitor for the Respondents: Minter Ellison
IN THE FEDERAL COURT OF AUSTRALIA
VICTORIA DISTRICT REGISTRY
GENERAL DIVISION
VID 1021 of 2011
ON APPEAL FROM THE FEDERAL MAGISTRATES COURT OF AUSTRALIA
BETWEEN: LADAKH PTY LTD (ACN 079 120 595)
AppellantAND: QUICK FASHION PTY LTD (ACN 126 154 890)
First RespondentFENG JIANG
Second Respondent
JUDGE:
JESSUP J
DATE OF ORDER:
19 APRIL 2012
WHERE MADE:
MELBOURNE
THE COURT ORDERS THAT:
1.The appeal be dismissed.
2.The appellant pay the respondents’ costs of the appeal.
3.Order 2 be stayed for 14 days, during which time the parties have liberty to apply.
Note:Entry of orders is dealt with in Rule 39.32 of the Federal Court Rules 2011.
IN THE FEDERAL COURT OF AUSTRALIA
VICTORIA DISTRICT REGISTRY
GENERAL DIVISION
VID 1021 of 2011
ON APPEAL FROM THE FEDERAL MAGISTRATES COURT OF AUSTRALIA
BETWEEN: LADAKH PTY LTD (ACN 079 120 595)
AppellantAND: QUICK FASHION PTY LTD (ACN 126 154 890)
First RespondentFENG JIANG
Second Respondent
JUDGE:
JESSUP J
DATE:
19 APRIL 2012
PLACE:
MELBOURNE
REASONS FOR JUDGMENT
This is an appeal from an order made by the Federal Magistrates’ Court of Australia on 2 September 2011, dismissing a copyright infringement action brought by the appellant, Ladakh Pty Ltd. The artistic work upon which the appellant sued was an elaborate butterfly pattern printed on to fabric used in the clothing industry, and specifically, in the facts before the Federal Magistrate, on ladies’ dresses.
The first respondent, Quick Fashion Pty Ltd (“the respondent”) was a wholesaler and distributor of women’s clothing, under the “Sweetacacia” brand name. The second respondent, Feng Jiang was the only director of the respondent. The respondent operated from premises at Collingwood, Victoria, and distributed garments by way of wholesale to various Australian retailers. The garments which were controversial in the present case had been purchased from a Chinese company, Allure Fashion Development Co Limited (“Allure”), located in Guangzhou. Allure, in turn, had obtained the material from which the garments were made, already printed, from another Chinese company, Da Shun Clothing (“Da Shun”).
The Federal Magistrate found that the butterfly pattern upon which the appellant sued was an original artistic work in which the appellant owned the copyright. There is no challenge to that finding in this appeal. Her Honour also accepted the appellant’s case that the respondent had sold, in Australia, garments patterned with a copy of the appellant’s work: that is to say, the patterns appearing upon the garments sold by the respondent had been created by a reproduction of the appellant’s work. This conclusion too is the subject of no challenge in the present appeal.
The appellant’s case before the Federal Magistrate was that that reproduction had occurred at the hand, or under the authorisation, of the respondent in Australia. That allegation was denied by the respondent, and there was no direct evidence upon which the appellant could rely. The appellant’s case was, therefore, necessarily one of inference. The Federal Magistrate was not satisfied that the inference sought by the appellant could be drawn. Although her Honour considered that it was obvious that the respondent’s garments were printed with a copy of the appellant’s work, she refused to draw the inference that the copying had been done, or authorised, by the respondent in Australia.
It is her Honour’s refusal to draw that inference of fact which is now the subject of appeal in the present proceeding, and (apart from a question as to costs) is the only matter which arises for consideration. The appeal is, therefore, exclusively concerned with matters of fact.
The appellant’s work was created by computer in June 2009. The work was created in a substantially red colourway and also in a substantially blue colourway. At about the end of July 2009, the artwork for the red colourway version of the butterfly pattern was sent to the appellant’s factory in China, operated by a company called Shanghai Yixin Fashi Limited China (“Yixin Fashi”). This was done on a compact disc delivered by DHL International Parcel Post. Upon receiving the disc, Yixin Fashi sent it directly to the company which it used for the manufacture of fabric, Zhegiang Yatai Printing Co Limited (“Zhegiang Yatai”) based in Shaoxing, about 120 km distant from Shanghai. Having received printed fabric from Zhegiang Yatai, Yixin Fashi then proceeded to make up the garments, the sewing component being outsourced to a sub-contractor. According to the Federal Magistrate’s reasons, on 11 November 2009, 1854 completed dresses, and, on 14 November 2009, 749 completed skirts, both in the butterfly print, were sent from China to the appellant in Australia. The skirts were first dispatched to retailers on 17 November 2009, and the dresses were first so dispatched on 18 November 2009. There was no evidence from any retailer as to when the dress or the skirt was first placed on public display, but, on any view, this could not have happened before the dates mentioned here.
Turning to the activities of the respondent, on the respondent’s evidence it was in about October 2009 that it received from Allure a fabric swatch card which showed the butterfly print in two colourways, one red/orange and the other blue/purple. The card indicated that this had originated from Da Shun. The respondent ordered a sample of a garment in the red/orange colourway, and subsequently ordered 125 dresses printed with the butterfly print in that colourway. The respondent’s evidence before the Federal Magistrate was that this order had been placed by facsimile sent by the respondent to Allure on 10 November 2009. The timing, and genuineness, of that order were controversial before the Federal Magistrate, and remain so on appeal. However, the fact of the order was established on any view since, on about 30 December 2009, 110 dresses were received by the respondent from Allure. These were printed in the butterfly print, in the red/orange colourway.
According to evidence from Allure led on behalf of the respondent before the Federal Magistrate, a representative of that company first saw the butterfly print on fabric at a Da Shun shop in the Guangzhou International Textile Trade Centre at about the end of September 2009. It was that sighting which gave rise to Allure sending the swatch to the respondent in October 2009. Allure confirmed that it had received a facsimile order from the respondent for 125 garments in the butterfly print on 10 November 2009. Having received that order, on 16 November 2009, Allure ordered the corresponding fabric from Da Shun, and collected the fabric that same day. In evidence was Da Shun’s invoice No 2066, dated 16 November 2009, for the fabric. On 5 December 2009, Allure packed 110 dresses for export to the respondent in Australia. This consignment left China on 29 December 2009, and was the consignment to which I have referred as having arrived at the respondent’s premises on 30 December 2009.
On 9 January 2010, a representative of the appellant purchased at retail a dress which had been supplied to the retailer by the respondent, and was in the butterfly print which had been copied from the appellant’s work. Two letters of demand were subsequently sent to the respondent, and, in due course, the proceeding from which the present appeal is brought was instituted.
The appellant’s case was, and is, that its dress, as displayed at retail, came to the attention of the respondent in the period immediately subsequent to 17‑18 November 2009; that the respondent, in Australia, had caused the butterfly pattern on the dress to be copied (by some means); and that the respondent had sent the copy of the pattern – most probably in a digital form – to Allure in China, which pattern was then used to make the garments which arrived at the respondent’s premises on 30 December 2009. The respondent’s case was as I have briefly outlined the facts above. It said that the order of events was as follows. Allure saw a run of fabric displaying the butterfly print in Da Shun’s shop; Allure sent a swatch of fabric with the butterfly pattern to the respondent; the respondent (previously unaware of the pattern) ordered dresses made from fabric on which the pattern was printed; having received that order, Allure obtained the necessary fabric from Da Shun; and Allure made the dresses from this fabric, and exported them to Australia, where they arrived on 30 December 2009.
Before the Federal Magistrate, the appellant’s case was heavily inferential. It had no direct evidence that the respondent had caused the butterfly pattern to be copied in Australia. Its case was that, having been caught selling garments printed with that pattern, which on any view had been copied from the appellant’s work, it lay upon the respondent to give a complete explanation as to how this came about. As argued by the appellant on appeal, there was, in effect, a “reverse onus of proof” in this regard. Before the Federal Magistrate, the respondent called evidence from Allure (which enabled her Honour to make findings upon which, in part, my narrative of the facts above was based), but called no evidence from Da Shun. The latter circumstance was, according to the appellant, a glaring omission in the respondent’s case, and ought to have produced an observation by the Federal Magistrate that it was unlikely that any evidence that could have been given by Da Shun would have assisted that case.
The Federal Magistrate rejected the appellant’s case. In her reasons, her Honour was substantially occupied dealing, in some detail, with the respects in which, on the appellant’s then case, the respondent’s factual case lay open to suspicion. However, her Honour was unable to find any evidence which cast any real doubt upon the ostensible order of things as disclosed by the documentation produced by the respondent and Allure, which had all the hallmarks of having been prepared in the normal course of uncontroversial commercial transactions. As her Honour put it, there was no “smoking gun” with respect to the means by which the respondent came into possession of fabric printed with the appellant’s work.
As will be apparent from my narrative of the facts set out above, the evidence of the respondent’s order placed on Allure on 10 November 2009 stood directly in the way of the Federal Magistrate’s acceptance of the appellant’s case. That is because it was only on 17-18 November 2009 that the appellant’s printed garments were released into the retail trade in Australia. Its then case was that these garments had come to the attention of the respondent, and that the pattern had thereafter been copied in Australia. Had the respondent placed its order with Allure on 10 November 2009, things could not have occurred as the appellant alleged. Both before the Federal Magistrate and on appeal, it was central to the appellant’s case that the order of 10 November 2009 was fraudulent; as, for that matter, were a number of other documents to which I shall refer.
Before the Federal Magistrate, evidence was given on behalf of the respondent and on behalf of Allure. It was not suggested that the relevant witnesses had been inappropriately chosen, or that their familiarity with the events of the case was insufficiently direct. They produced the commercial documentation upon which the transactions between Allure and the respondent – and, to an extent, between Allure and Da Shun – were based. They were cross-examined extensively as to the genuineness of these documents, it being put to them, in effect, that false documents had been created, or that previously genuine documents had been altered or manipulated, to give the appearance that events had occurred earlier than had indeed been the case. On any view, the appellant’s case before the Magistrate was based, to a substantial extent, upon an attack on the credibility of these witnesses. Her Honour was not satisfied that they had “coordinated their evidence in a way that supports a conclusion of lying to the court and forging documents”. Although her Honour had some doubts as to their evidence, she said:
It should also be noted that Ms Su and Ms Lin are both young women who are employees of Quick Fashion and Allure respectively. They both gave evidence in what appeared to be a frank and forthright manner. Ms Lin in particular seemed to be genuinely affronted by the suggestion that she was not telling the truth.
Her Honour’s conclusions were squarely based upon her assessment of the credibility of witnesses who had given evidence before her. On appeal, the court is denied the advantage of having seen and heard these witnesses give their evidence. Nonetheless, if that evidence were glaringly improbable in the light of other incontestable facts, the court might be provided with a ground to interfere with the findings made by the Federal Magistrate. Far from being improbable in this sense, however, the evidence of the witnesses from the respondent and Allure was four-square consistent with the commercial documentation that existed. Based on nothing more than a number of tangential bases for suspicion, it is unsurprising that the appellant’s challenge to that evidence achieved little traction before her Honour.
Before coming to the appellant’s grounds of appeal as such, I propose to deal with its challenge to the respondent’s order of 10 November 2009. Counsel for the appellant pointed out that this copy of the order was not discovered by the respondent, but came to light only much later in the piece. They asked rhetorically: if this were a genuine order, why was it not discovered in the normal course? They submitted that there was something very suspicious, and all too convenient for the respondent, for Allure to have produced a copy of the order well after the respondent had completed its discovery obligations. I would not accept that line of attack on the legitimacy of the order. The copy of that order which was in evidence was produced from the records of Allure, not from those of the respondent. Evidence given on behalf of the respondent was that, having received the garments to which the order related, it discarded its own copy of the order. There is no reason to doubt that evidence, since, once the garments had been received, the order would have run its course, in effect, and other documentation (the invoice, for example) would be sufficient to vouch the transaction. The order not being in the possession or control of the respondent, it is unsurprising that it was not discovered. However, once the respondent came to prepare its evidence in the case, it would likewise be unsurprising, and I would infer, that Allure assisted it in a number of ways, including by providing access to such of its own records as bore upon the evidence which it was proposed to give. That, in my view, would be the conventional explanation for the order to have surfaced when it did.
There is, moreover, something on the face of the order, as produced by Allure, that strongly attests to its legitimacy. It seems that the order was sent by the respondent to Allure by facsimile transmission. Thus the version received into evidence was that which had been produced by the facsimile printer in Allure’s office. That copy of the order carries the following facsimile date imprint: “10-NOV-2009”. That is to say, on the face of it, the order was printed in the office of Allure on 10 November 2009. The significance of the date imprint on the facsimile appears to have escaped the attention of the parties in the proceeding below, and was not mentioned by the Federal Magistrate in her reasons for judgment. It came to light only when mentioned in the respondent’s written submissions on the present appeal.
Counsel for the appellant submitted that, if their case with respect to the fraudulent manipulation of documents is otherwise to be accepted, it would be consistent with that case for someone to have altered the settings on the Allure facsimile machine, such as to give the appearance that the order was printed, contrary to the truth of the matter, on 10 November 2009. However, counsel accepted that no such suggestion had been put to the witness from Allure before the Federal Magistrate. That being the case, the appellant’s submission was, with respect, a hopeless one. I have no choice but to accept that the date appearing on the facsimile imprint on the respondent’s order on Allure is a genuine one, and that the order was, therefore, received by Allure on that date, 10 November 2009.
That being so, the appellant’s case cannot succeed. It is chronologically impossible for the respondent to have copied the appellant’s pattern according to the sequence of events upon which the appellant’s case was based in the Federal Magistrates’ Court, and remains based in this court. I did not understand counsel for the appellant to suggest that, absent a successful challenge to this facsimile imprint, there was any basis upon which their client’s appeal may be upheld.
In the circumstances, as it seems to me, the appellant’s factual grounds of appeal, alleging various errors made on the part of the Federal Magistrate, are somewhat moot. They must, however, be dealt with.
It was submitted on behalf of the appellant that the court would draw an inference of copying where the objective similarities between the respective works were sufficiently great, and it could reasonably be inferred that the respondent had had access to the copyright owner’s work. In such a case, according to the appellant, the burden of proof shifted to the respondent. The appellant relied upon what was said by the Full Court in Pacific Gaming Pty Limited v Aristocrat Leisure Industries Pty Ltd (2001) 116 FCR 448, 454 [19]):
Whether there has been copying is a question of fact. Where the objective similarities are sufficiently great and it has been shown that the alleged infringer had an opportunity to gain access to the copyright owner's work the court will draw an inference of copying.
The same submission was made to the Federal Magistrate, who said:
It seems to me that, logically, the authorities relied on by Ladakh are not engaged in this case, because there is an unresolved preliminary issue of whether the print on the fabric used in Quick Fashion’s butterfly print dress was Quick Fashion’s work, or someone else’s work.
On appeal, the appellant argued that her Honour had been in error in her conclusion that Pacific Gaming, and other authorities relied on by the appellant to similar effect, were not engaged.
As accepted by counsel for the appellant on the appeal, there is no “reverse onus of proof” save in the sense that, in an appropriate case, the evidential onus may shift to the respondent if the applicant’s case is sufficient to raise an inference of copying. If the matter of copying is in issue, and the respondent gives no evidence about that matter, an inference adverse to the respondent may readily be drawn: Jones v Dunkell (1959) 101 CLR 298. This is, in my view, the jurisprudential basis of the principle stated in Pacific Gaming and like authorities.
In the way it was advanced by the appellant in the present case, however, this principle is fundamentally disconnected from the facts. That lack of connection was recognised by the Federal Magistrate and, in my view, rightly so. Whether there had been copying was not (at least relevantly to the present point) controversial. It was not, therefore, to the point to argue that the fact of copying might be inferred from “objective similarities”. Neither was this a case in which the respondent remained silent as to the means by which it came to have in its possession garments patterned with the appellant’s work. Doubtless accepting that it carried at least the evidential onus on that question, the respondent did lead evidence as to how it came by those garments. The Federal Magistrate accepted that evidence, and then proceeded to decide the case on the basis that, taking all of the evidence into account, the appellant had the legal onus. Her Honour was, in this respect, undoubtedly correct. Perhaps more importantly with respect to the ground of appeal presently under discussion, her Honour was no less correct to say that the authorities upon which the appellant relied were not engaged in the proceeding before her.
My rejection of the appellant’s reverse onus point affects a number of the other arguments raised on behalf of the appellant in the appeal. It was submitted that it was a “remarkable coincidence” for Da Shun to have had in its stocks a quantity of fabric printed with the butterfly pattern within the very same time frame that the appellant’s own suppliers were preparing garments which were distributed from the appellant’s wholesale premises on 17‑18 November 2009. It was, of course, no coincidence at all: her Honour found that the respondent’s pattern was a copy of the appellant’s work. This amounted to a finding that the pattern appearing on the fabric being sold by Da Shun had been copied from that work. On the appellant’s case, the only way this could have happened was, on the probabilities, by way of the respondent’s access to garments printed with the butterfly pattern when it viewed them in Australian retail outlets in the period subsequent to 17‑18 November 2009. Thus, as indicated above, it was necessary for the appellant to submit that the commercial documentation ostensibly created as between the respondent and Allure was fraudulent.
It was because the appellant’s case had this strongly inferential aspect that the Federal Magistrate turned her mind to how Da Shun might otherwise have come into possession of the pattern which, it may be inferred, it caused to be printed onto the fabric which it sold to Allure. The alternative possibility to which her Honour gave attention was that there had been a “leakage” of the appellant’s artwork at some stage during the printing or production process of the appellant’s own garments in China. Her Honour found that such leakage was “a distinct possibility”. Her Honour noted the appellant’s own admission that many Chinese fabric printing companies “probably leaked their customers’ designs”. She continued, however, that “this sort of speculation is not of assistance”. Her Honour then said:
The simple fact is that there were numerous people, in Ladakh, Yixin Fashi, Yatai Printing and, possibly, Afa Textiles, who had access to the electronic file or the fabric itself, and who could have copied the butterfly drawing. There was some discrepancy in the evidence about whether all of Ladakh’s garments in the butterfly print were made by one subcontractor or a number of subcontractors. Either way, there were many people who had the relevant opportunity.
Other than during transportation, there was no evidence that there were any particular security measures taken to protect the fabric or the electronic file from copying. In particular, there was no evidence that anyone on Ladakh’s side asked for the compact disc to be returned. Perhaps that was because, as a matter of common knowledge, the compact disc could have been copied easily, and retrieving the original compact disc would have provided no guarantee of anything.
It must also be noted that there were certain questionable aspects of Ladakh’s evidence. For example, Ladakh initially said that Yixin Fashi was Ladakh’s own factory, when in fact it is owned by Ms Ling’s mother and brother. Ladakh also said that all the garments were manufactured in house. However, it then emerged that Yixin Fashi used outworkers. There was a lack of clarity about whether only one outworker sewed all of the 1,854 Ladakh dresses and all of the 749 Ladakh skirts in the butterfly print or whether a number of outworkers were engaged to sew the butterfly print garments.
In addition, there was a discrepancy in Ladakh’s documents concerning the size of the sample that was ordered (20 metres) and the size of the sample that was delivered (96 metres). Similarly, there was a discrepancy in JK-15 between the first page, showing a payment of ¥32,228.50 for 3069 metres of fabric, and the second page, showing a payment of ¥24,972.00 for 2081 metres. These discrepancies suggest that there might have been fabric made on Ladakh’s request that was not delivered as ordered, but provided to another entity and used for unauthorised copying.
Moreover, Ladakh’s documents show that the payment for the fabric was actually made to Afa Textiles, rather than Yatai Printing, who was said to have been the supplier. In relation to the mysterious invoicing in JK-15, Ms Ling said, of Yatai Printing:
... they’re tricky. They give us some invoice with their other purpose, but won’t hurt us, but good for them, sort of thing.
This evidence, from a director of Ladakh, indicates that Yatai Printing is not entirely above board, at least where invoicing is concerned. This evidence also casts considerable doubt on whether Yatai Printing would be as honest and careful with other people’s copyright as Ladakh claims.
On appeal, the appellants admitted that her Honour’s approach effectively imposed a negative onus upon the appellant to demonstrate that leakage could not have occurred by way of the agency of any one or more of the numerous individuals and organisations which might be expected to have come into contact with the butterfly pattern in the normal course. I would not accept the appellant’s criticism of the Federal Magistrate in this respect. As I have said, the appellant’s case was inferential, and the ostensible indications from the commercial documentation passing as between Da Shun, Allure and the respondent were inconsistent with that case. In the light of that documentation, and of the other evidence called by the respondent, the tactical position occupied by the appellant before the Federal Magistrate came very close to one in which it needed to establish that there could have been no leakage of the artwork for the pattern in the course of its own operations, or supply chain. In any event, if the respondent were able to point to circumstances, consistent with the evidence, which gave rise to the possibility of leakage from the appellant’s side, as it were, the inferential case against it (the respondent) would be that much the weaker. It was in this setting that the Federal Magistrate gave attention to those aspects of the evidence which allowed for the possibility of such a leakage. Her Honour was, in my view, not only justified in doing so, but clearly correct to have done so. In a case which was based almost entirely on inference, it was both permissible and conventional for her Honour to have derived assistance from every detail of the evidence before her which had the potential to assist with the task at hand.
It was not for the respondent to prove that the appellant’s work had been copied by reason of a leakage from the appellant’s own suppliers. It was for the appellant to persuade her Honour that, having regard to all of the facts and circumstances, copying by the respondent was to be inferred. The respondent’s case met the appellant’s case head‑on in this respect, but the former might have been significantly compromised if the respondent were unable to point to some alternative way in which the butterfly pattern, which found its way onto the respondent’s garments, might have been produced. The respondent persuaded the Federal Magistrate that this might have occurred by leakage from the appellant’s suppliers. The respondent was under no obligation to take the next step and to show that it most probably did occur by that means. Her Honour was not, in my view, in error to have accepted the respondent’s case in this respect.
Another factual matter to which her Honour had reference with respect to the derivation of the pattern on display at the Da Shun shop was that, in February 2010 (after letters of demand had been sent by the appellant), a representative of Allure (the person who gave evidence in the case) took a photograph of stock of the patterned fabric on display in that shop. That showed the butterfly pattern in two colourways, a red one and a blue one. Only garments in the red colourway had, by then, been on sale in Australia. According to the Federal Magistrate, if the respondent had copied the appellant’s fabric from a garment on display in Australia in late 2009, it would have copied the red colourway only, and not the blue one. The Federal Magistrate said:
It seems unlikely that the blue colourway would have been in the market in February 2010 if the genesis of the copying had been Quick Fashion copying Ladakh’s red colourway. Of course, with an electronic file, someone could have independently decided to print a colour variation, but it would be an extraordinary coincidence if such a person would have chosen the same colour variation as the one that Mr Kourhani created but did not use.
There was a vague intimation that Quick Fashion had arranged the manufacture of the fabric in the blue colourway for the purposes of this case. However, it seems that the respondents would not have known that Mr Kourhani had prepared a draft drawing with the blue colourway until his affidavit affirmed on 13 September 2010 was served. The photograph of Da Shun’s shop showing the butterfly fabric in the red and the blue colourways is dated much earlier, namely, 20 February 2010. There was no evidence that cameras are able to put false dates on photographs. There is no reasonable basis to conclude that the photograph was not taken on 20 February 2010.
Consequently, the evidence relating to the blue colourway would tend to suggest that Quick Fashion was not responsible for the copying. Moreover, that evidence would tend to suggest that, if there had in fact been any leakage from people associated with Ladakh, it probably occurred from Ladakh itself, rather than from its suppliers in China.
Evidence called on behalf of the appellant was to the effect that only its red/orange colourway had been sent to China. More importantly, on appeal, counsel for the appellant were able to demonstrate that what was on display at Da Shun in February 2010, although involving what might be described as a blue colourway, was not the blue colourway originally produced on behalf of the appellant, to which I have referred at para 6 above. It was submitted that the blue colourway at Da Shun was not such as would found an inference that the appellant’s original blue colourway had been sent to China and leaked. Rather, it was consistent with the appellant’s case, namely, that someone (the appellant suggested the respondent or its Chinese suppliers) had manipulated the appellant’s pattern in different colours, to suit their own purposes.
In this respect, I am persuaded that the appellant has a point. Had the Federal Magistrate given the two patterns the close attention to which they were subjected on appeal, her Honour would have discerned that the Da Shun blue colourway pattern was not the same as the original blue colourway pattern produced by the appellant and, according to the appellant, not sent to China. I accept the appellant’s case that the presence of this blue colourway at the Da Shun shop in February 2010 makes no contribution to the question whether the pattern which was used to print the Da Shun fabric ostensibly supplied in October 2009 had been leaked from the appellant’s suppliers. However, even without that contribution, the other indications, referred to at para 24 above, were, in my view, quite properly taken into account by her Honour.
The appellant’s next point related to the way in which the Federal Magistrate dealt with the question of the opportunity which the respondent had to obtain access to the appellant’s butterfly print, after it had been despatched to retail on 17‑18 November 2009. (On appeal, the appellant did not persist with an alternative allegation which it had put before her Honour, namely, that, before its garments were despatched to retail in Australia, the respondent had had the opportunity to obtain access to the pattern by way of a promotional “look book” published by the appellant.) In dealing with this access point, her Honour noted that the appellant had relied upon Clarendon Homes (Aust) Pty Ltd v Henley Arch Pty Ltd (1999) 46 IPR 309, and continued:
However, unlike a display home, dresses and skirts are not always displayed in such a way that they will be readily seen on any visit to the relevant premises. Some garments are placed in prominent window and other displays, while others might be squashed in one of countless racks. There was no evidence about how Ladakh’s butterfly print dress and skirt were displayed in about late November 2009 in any of the retail outlets where they were for sale.
Nevertheless, Ms Su, as a person with a professional interest in fabrics, would have been able to see the butterfly print on display if she had made a sufficiently thorough examination at one of the retail outlets where Ladakh’s dress and skirt were available for purchase in late November 2009. However, there was no evidence that Ms Su made any examination of any retail outlet where Ladakh’s butterfly print dress and skirt were on public display.
Ladakh emphasised that Ms Su gave evidence that she visited her customers at least once a week to see what they were selling, and that three of the customers that Quick Fashion sold its butterfly print dress to also appear on Ladakh’s list of customers (confidential exhibit JK-3, CB1903ff). The implication was that Ms Su would have visited those three customers and seen the Ladakh butterfly print. However, Ladakh’s customer list is partly undated and is partly dated 17 March 2010, well after the events in question. In any event, the court was not directed to any evidence that Ladakh had sold its butterfly print dress or skirt in late November 2009 to any of the three customers that it shared with Quick Fashion.
Ladakh suggested that Ms Su, as part of her normal research into fashion trends, would have visited retail outlets close to Quick Fashion’s premises in Sydney and Melbourne where the Ladakh butterfly print dress and skirt were on sale. However, only two retail outlets were put to Ms Su as shops that she visited. The first she said she had never heard of. The other, Myer, she said she only visited in a personal capacity because it was too pricey for Quick Fashion’s range. There was no evidence that Ms Su visited Myer in November or December 2009.
It was also put to Ms Su that she would have visited two streets in Sydney well known for their fashion outlets. However, she said she did not visit one often and did not visit the other at all.
In all the circumstances, I do not accept that Ms Su, or any one else from Quick Fashion, had access, in the relevant sense, to the Ladakh butterfly print in a retail shop in late November 2009.
In its written outline on appeal, the appellant said that the Federal Magistrate had misapprehended the “relevant sense” of access, which required the appellant “to prove a reasonable inference of access, and not access in fact”.
The appellant drew my attention to what had been said by Dodds-Streeton J in Barrett Property Group Pty Ltd v Dennis Family Homes Pty Ltd (2011) 279 ALR 12, 106 [538]:
It is well established that in the absence of direct evidence of a respondent’s access to or copying of the copyright works, the causal link may be inferred….
What Dodds-Streeton J said, however, does not support the proposition that there is a difference between “inference of access” and “access in fact”. When a court infers the existence of a fact, it is making a finding, usually on the balance of probabilities in a civil case, that that fact existed. That finding having been made, the case must be determined upon the basis that the fact existed. More significantly for present purposes, what must be decided is whether there was, or was not, access. In that regard, the Federal Magistrate followed the conventional path of receiving, and considering the credibility of, such direct evidence as there was on the subject, and placing that in the context of the facts and circumstances as a whole, for such assistance as it may have given to the process of drawing an inference. Occasionally, cases arise in which the inferential facts are so compelling as to make it almost inevitable that the direct evidence given by a witness should be rejected. On no view, however, was the present such a case.
In addition to the errors alleged of the Federal Magistrate by the appellant as dealt with above, the appellant advanced a number of bases by reference to which her Honour ought, in its submission, have rejected the respondent’s version of events. The first involved a matter of terminology. The appellant’s garment was made of rayon. The respondent’s garment was made of cotton/polyester. The respondent had originally asked Allure to obtain rayon for its garment, and there was some suggestion that Da Shun produced only rayon fabric, or at least specialised in that type of fabric. This was said, by the appellant, to highlight a discrepancy in the respondent’s case, from which the Federal Magistrate ought more readily to have been disposed to reject that case. The two young Chinese ladies who were dealing with each other for the respondent and Allure gave evidence before her Honour, and that evidence was accepted. With respect to the rayon issue, the Federal Magistrate said:
In relation to the rayon issue, Ladakh’s conclusion is premised on Ms Lin’s evidence that Da Shun only sold rayon being technically correct, even though Ms Lin’s evidence was to the effect that, when she said rayon, she meant prints and Ms Su’s evidence was to the effect that when she said rayon she meant artificial cotton. There was no other evidence that Da Shun only sold rayon.
I consider that, when Ms Su said to Ms Lin in Chinese that “rayon is popular”, she meant, and Ms Lin understood, that artificial cotton prints are popular. I consider that, when Ms Lin said that she was looking for rayon prints, she meant she was looking for light weight, printed, artificial fabrics. When Ms Lin said that Da Shun only sells rayon, I do not consider that she meant that Da Shun only sells fabric that is technically rayon. Apart from anything else, it strikes me as odd that a fabric seller would only sell fabric with a particular chemical composition. On the other hand, it seems likely that a fabric seller might choose to only sell light weight, printed fabrics. That seems to be what is shown in the photograph at CB1633.
Although this issue was highly tangential to the main question which confronted the Federal Magistrate, even then I am not able to perceive error in the way that her Honour dealt with it. On appeal, the appellant’s case involved little more than a protest that the Federal Magistrate had not accepted its submissions on this point, which again depended very substantially on the credibility which the Federal Magistrate was prepared to assign to the evidence of the witnesses in question, her Honour having seen and heard those witnesses under cross-examination. No basis for the overturning of her Honour’s finding has been established.
The appellant’s next point involved an attack on the genuineness of the respondent’s purchase order of 10 November 2009. I have dealt with this subject above. Whatever scope there might have been to assail the findings of the Federal Magistrate about the genuineness of that order, it evaporated once it became clear that the appellant was in no position to challenge the facsimile date imprint on the copy of that order produced out of the custody of Allure.
The appellant next argued that the respondent had not done enough to establish the genuineness of the Da Shun invoice of 16 November 2009, addressed to Allure. The appellant pointed to a number of respects in which identification and other grammatical conventions seemingly adopted in other Da Shun invoices to Allure at about this time were not employed in the subject invoice. Particularly given the absence of anyone from Da Shun in the witness box, the appellant submitted that the Federal Magistrate ought to have rejected this invoice as a fabrication.
In the view I take, it is the appellant’s factual case which is, in this respect, highly improbable. In evidence before the Federal Magistrate were two Da Shun invoices dated 15 November 2009 (Nos 2056 and 2057), and 10 such invoices dated 16 November 2009 (Nos 2058, 2059 and 2061‑2068). The subject invoice was No 2066. They were all invoices under Da Shun’s name, logo and other details, including telephone numbers. They had the appearance of being normal invoices and, as I have said, they were in sequence. It is true that no representative of Da Shun gave evidence in the case, but it must be appreciated that the appellant’s case of deception against the respondent would have involved Da Shun and Allure conspiring with each other such that the former went back to an earlier sequence of invoices, discarded one chosen from within that sequence, and replaced it with another that had ostensible reference to Allure’s order for the butterfly patterned fabric. Although, as the Federal Magistrate acknowledged, there was a relationship of some standing between Allure and Da Shun, her Honour was quite justified, in my view, in regarding as improbable the level of deceptive co-operation between these two Chinese companies that the appellant’s case necessary involved.
The appellant next pointed out that the packing list which was generated when the garments destined for the respondent’s premises were packed by Allure in China was dated 5 December 2009, yet the garments as such were not despatched by air freight until 29 December 2009, notwithstanding that the respondent had asked for delivery “as soon as possible”. The Federal Magistrate dealt with this point as follows:
In relation to the delay between the packing list dated 5 December 2009 and the dispatch of the garments on 29 December 2009, I note that Ms Ling, a director of Ladakh, said, in relation to her own packing lists at CB993 and CB994, that it was necessary to do two packing lists for the same shipment. She said it was necessary to do one list a week or 10 days in advance of the shipment, for the purposes of making the booking, and then do another one to actually send with the shipment.
That may be so. If that is what happened in this case, there should have been a second packing list, perhaps with a later date. However, it has not been provided to the court. I can only assume that there was only one packing list in the present case. Consequently, the only explanation for the delay between 5 December 2009 and 29 December 2009 is that the Chinese authorities may have been very slow to inspect the products in this case. That does not seem to me to be a particularly compelling explanation. This matter gives rise to a reasonable suspicion that the respondents have fabricated their case.
However, I do not consider that the delay between 5 and 29 December 2009, alone or in combination with the other matters identified by Ladakh, is sufficient to persuade the court that that Ms Su and Ms Lin have conspired to lie to the court and place forged documents before the court. Something may simply have gone wrong in the export process. It is a big leap to make findings of conspiracy, lies and forgery from the limited evidence that is before the court in this case.
I can see no error in this treatment of a purely factual question on the part of her Honour.
The appellant also pointed to such evidence as there was of liaison, to some extent, between the respondent’s witnesses, which was probably not unconnected, at least in the appellant’s submissions, with the ability of the two witnesses from the respondent and Allure to remember some facts with precision, facts which, in the submissions of the appellant, amounted to “obscure details”. This, again, is just another way of seeking to undermine the Federal Magistrate’s findings on credibility. Her Honour had these matters before her for consideration, and took them into account. There is no appeal point here.
Finally, there is the question of costs. After she had given judgment in the case, the Federal Magistrate received written submissions as to costs from the parties. In a second judgment handed down on 21 October 2011, her Honour awarded the respondent its costs of the whole proceeding. In so doing, her Honour rejected the appellant’s submission that, since it had succeeded on its claim that copyright subsisted in the work upon which the butterfly pattern was based, it should get its costs, and the respondents should be denied their costs, on this aspect of the case. Although her Honour recognised recent Full Court authority – Bowen Investments Pty Ltd v Tabcorp Holdings Limited (No 2) [2008] FCAFC 107 – which makes it clear that it should not be regarded as a miscarriage of the discretion with respect to costs to take an issues-based approach to the question, nonetheless her Honour considered it appropriate to follow the conventional practice, particularly since copyright subsistence was a necessary part of the appellant’s case. In that respect, her Honour perceived a distinction between a case of the present kind and a case, for example, in which an ultimately successful respondent had raised many points in the alternative, only one of which provided the basis for its ultimate success.
On appeal, the appellant accepted that a decision to take the conventional, rather than an issues-based, approach to the determination of costs was a matter which lay squarely within the discretion of the Federal Magistrate, and that her Honour’s decision could not be disturbed on appeal save by reference to categories of error of the kind identified in House v R (1936) 55 CLR 499. However, it was submitted on behalf of the appellant that the Federal Magistrate had erred in ways which, conformably with the principles in House v R, allowed for an appellate challenge to her Honour’s decision.
In her Honour’s reasons of 21 October 2011, having distinguished Ron Englehart Pty Ltd v Enterprise Constructions (Aust) Pty Ltd (2010) 88 IPR 622, the Federal Magistrate continued:
In the present case, unlike Englehart, I do not think it can be said that “there was never any plausible basis” upon which the respondents could resist the claim of copyright subsistence. There was evidence which indicated that the unusual drawing in this case was very similar to an original work by another designer, and there was authority which arguably supported the respondents’ position. Moreover, the applicant did not put on evidence from its designer which addressed the similarity with another drawing until the first day of the trial. Consequently, I do not consider that the present case is factually similar to Englehart.
On appeal, I was told that the “authority which arguably supported the respondents’ position” was IceTV Pty Ltd & Anor v Nine Network Australia Pty Ltd (2009) 239 CLR 458. It seems that the “position” of the respondents to which her Honour referred was the contention that the appellant’s work was not original since it was largely based upon an earlier design which had been created by one Matthew Williamson. According to her Honour’s reasons of 2 September 2011, the appellant’s case was that the Williamson design “did not prevent [the appellant’s] butterfly drawing having the required originality”, in which respect it relied on what had been said by the Full Court in InterlegoAG & Anor v Croner Trading Pty Ltd (1992) 39 FCR 348, 378-379. The respondent argued that, since Interlego, the test of originality had been altered by IceTV, but the Federal Magistrate pointed out that, in IceTV, French CJ, Crennan and Kiefel JJ had relied upon Interlego for the enunciation of a key principle with respect to the test of originality.
What does all of this have to do with costs? As I understand the appellant’s point, properly understood, IceTV is not inconsistent with Interlego. The respondents were wrong to have submitted to the Federal Magistrate that the test of originality to be derived from Interlego had been altered by IceTV. Her Honour was, therefore, in error to have said, in her reasons on costs, that there was authority which arguably supported the respondents’ position. If so, her Honour made an error which affected the exercise of her discretion, and House v R does not stand in the way of appellate review.
There is nothing in the appellant’s point. The Federal Magistrate went no further than to observe that there was authority which arguably supported the respondents’ position. There was such authority. The respondents’ argument in relevant respects was not accepted, but it was an argument that was responsibly open to them. Particularly given the juxtaposition of the case before her with that which arose in Englehart, where it had been found that there was never a plausible basis for resisting allegations of subsistence, there was no error in the observation which her Honour made.
In other respects, the approach which the Federal Magistrate took to the matter of costs was entirely within her Honour’s discretion. No reason has been shown why the exercise of that discretion should be disturbed.
The appeal must be dismissed. I shall give the respondents their costs but, lest there be some consideration bearing upon the matter of costs of which I am unaware, I shall stay that part of my orders for 14 days, during which time the parties will have liberty to apply.
I certify that the preceding forty-four (44) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Jessup. Associate:
Dated: 19 April 2012
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