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| I I * | I | . | 1 |
| I | IN THE FEDERAL COURT OF AUSTRALIA ) | ) | No. NG 571 of 1992 |
| i | NEW SOUTH WALES DISTRICT REGISTRY ) | \ |
I
BETWEEN: LEVI STRAUSS & CO.
First applicant
LEVI STRAUSS (AUSTRALIA)
PTY. LIMITED
Second applicant
| AND: | MING ON TRADING CO. PTY.
LIMITED |
| First respondent |
STAR ENGRAVING CO. PTY.
LIMITED |
| Second respondent |
| VLAD VORONOV |
| Third respondent |
COMPTROLLER-GENERAL OF
CUSTOMS |
Fourth respondent
PETER HISLOP
Fifth respondent |
FEDEaAL COURT
| CORAM: | BEAUMONT J. | OF AUSTPDLIA |
| 2 APR 1993 |
| PLACE : | SYDNEY |
LlGMARY
EX TEMPORE REASONS FOR JUDGMENT
| These proceedings are brought by Levi Strauss and CO | L |
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| as first applicant and Levi Strauss (Australia) Pty. Limited | i |
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| against the respondents alleging the infringement of several | 1 |
| registered trademarks. Anton Pillar orders were made last | : |
| year by Burchett J. There have been a number of directions | I |
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hearings and the matter was set down today for final hearing, notwithstanding that the third respondent Vlad Voronov has not
| been served. I have evidence which satisfies me that every , . | . , |
reasonable effort has been made to attempt service.
The Controller General of Customs, the fourth respondent, has entered a submitfing appearance, except on the impression of costs, and I will return to the claim for relief made against the fourth respondent later. So far as concerns the first and second respondents the matter has been resolved and the Court congratulates the parties and their representatives in that behalf. However, so far as the fifth respondent is concerned the proceedings commenced this morning. I have read the affidavit evidence filed on behalf of those parties. There are no pleadings in the matter but the applicants' further amended application seeks orders restraining all respondents, including the fifth respondent, from infringing four of the first applicant's registered
In opening the applicant's case, counsel for the applicants said that the evidence would disclose that the third respondent had placed orders with the first respondent for the design of certain labels, that the first respondent had, in turn, placed orders with the second respondent for the manufacture of certain plates, and that the second respondent had, in turn, retained the fifth respondent to produce the artwork necessary for the plates.
| The evidence read on behalf of the applicants in the proceedings, so far as they are brought against the fifth respondent, has in fact established that case. In particular, the applicants read an affidavit sworn on 8 September 1992 by | . . * |
Mr G.T. Perry, the Managing Director of the second respondent,
which affidavit was filed on behalf of the second respondent at a time when the proceedings were still a live issue between the applicants and the second respondent.
M r perry corroborated the case outlined to me by
counsel and, in particular, indicated that the fifth respondent had been engaged by the second respondent as a commercial artist to prepare the artwork in relation to the supply of photo engraving to the first respondent. For this purpose the fifth respondent was supplied with the label in question on 7 July 1992 to enable him to do the artwork for
On 10 December 1992, the fifth respondent swore an affidavit which was filed in these proceedings. In that affidavit the fifth respondent said that since June 1990 he had carried on business as a graphic artist and had been engaged in that capacity by the second respondent as a subcontractor on numerous occasions.
He confirmed that in July 1992 he had been engaged by the second respondent to prepare artwork in relation to a three-colour woven tag which was supplied to him by the second respondent at that time. The tag was illustrated with a drawing of a man carrying what appeared to be a saddle and a branding iron next to the word, "Levi's", with the letter "E" drawn at an angle. Underneath this appeared the words "Authentic Western wear, Levi Strauss & CO, San Francisco".
| According to the fifth respondent's affidavit, the tag and the artwork were collected by the second respondent in | , , |
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| July 1992. At this time, the fifth respondent rendered an account to the second respondent for the artwork in the sum of | 1. |
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| $22.50. The fifth respondent went on to say that he had not supplied any artwork, the subject of these proceedings, to any | I ' |
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| person or company other than the second respondent. He | : |
| asserted in his affidavit that when retained by the second respondent, it was his belief that the second respondent was |
| employed as a subcontractor of the first respondent and that |
| the first respondent was a client of the applicants. He said |
that he believed that the artwork which he prepared was
something that was authorised by the applicants. |
Paragraph 14 of his affidavit is as follows:
| "The o n l y record | I | have | o f the sub jec t | artwork i s |
| contained on part | o f a computer f i l e on which I | s t o r e |
artwork prepared by me. I t i s poss ib le t o d e l e t e the part o f the computer f i l e which contains the record of
| . .-p | . | . | . | . | . . | -. | - - . | - . | - - -. -. - | - |
t h e subject artwork."
Objection having been taken on behalf of the applicants to the form of some of .' the material in the affidavit of the fifth respondent to which I have referred, I granted leave to the fifth respondent to call oral evidence on the point and this was done. Counsel for the applicants, then proceeded to cross-examine the fifth respondent.
During the course of this cross-examination, I inquired of counsel for the parties what the real matter in contest between them was and made the obvious point that it was hardly likely that the fifth respondent, knowing what he now knows, would wish to agitate in any Court the question whether the applicants' trademarks had been infringed. I also inquired of counsel for the applicants whether any claim for damages was to be made as against the fifth respondent and if so, what the amount of that claim would be.
| I expressed at the time, the difficulties I then felt, as to how any substantial claim for damages could be advanced with any real prospect of success. I suggested that the matter be adjourned so that the parties and their representatives could consider their respective positions. This afternoon I was informed, on the resumption of the hearing that, save with respect to the question of costs, the position as between the applicants and the fifth respondent had been resolved. |
I was informed by counsel for the fifth respondent, that her client was prepared to offer certain undertakings to the Court, without admissions and without prejudice. Those undertakings were as follows: 1) that the fifth respondent would delete any record of the art work referred to in para.14 of his affidavit; and 2) that he would not, hereafter, supply art work bearing any of the applicants' trademarks, without the prior consent of the second applicant.
The Court congratulates the parties and their representatives on resolving the matter, to that extent at least. However one matter remains outstanding and that is the question of costs. The position is that the applicants seek an order that the fifth respondent pay the applicants' costs of the proceedings. On behalf of the fifth respondent, it is submitted that the proper order is that there be no order as to costs save for the costs of today. In order to understand the context in which the application for costs arises, it is
| necessary to refer to some of the history of the matter. |
Proceedings were first before the Court on 12 August 1992 in an ex parte application made in the chambers of Burchett J. On that occasion, his Honour made orders in the nature of an Anton Pillar order but further ordered that each of the respondents be restrained from infringing the applicants' registered trademarks by making, advertising, offering for sale, selling or distributing clothing or labels for clothing which bear markings which are the same as or which are substantially identical with or deceptively similar to the registered trademarks in question.
| I note that,,,pn | the face of it, the order appears to |
be in permanent form but I take this to be a slip and I would interpret the order to. be intended to be made on an interim basis only and certainly, as a matter of usual practice, to be made up to and including further order. Nothing, I think, turns on the form of that order, for present purposes. Burchett J made the application returnable at 2.15 pm on
14 August. On that occasion the matter was heard by Foster J
who stood the matter over to 4 September but made orders in accordance with the short minutes which had the effect of making the existing injunctions remain in force until further order and directed that the first respondents file and serve an affidavit in effect by way of discovery of relevant material. At that stage, the fifth respondent had not been
| joined in the proceedings. |
The matter was before the Court again on 4 September and dealt with by Foster J. The existing injunctions were continued until further order and the matter was stood over until 25 September. Again, the fifth respondent had not been joined at that stage. On 25 September, Burchett J dealt with the matter and made orders as asked in a notice of motion as follows :
| "1 . | That | th is | No t i ce | o f | Motion | be | r e t u r n a b l e |
i n s t a n t e r .
| 2 . | Grant | l e a v e t o the App l i can t s | t o f i l e and | serve |
| a | Fur ther | Amended | Appl ica t ion | j o i n i n g | the |
| Comptroller-General | o f Customs | and | P e t e r - H i s l o p |
a s Respondents t o the proceedings.
3 . D i r e c t t h a t the App l i can t s f i l e and serve the Fur ther Amended Statement o f Claim on or before
October 16 , 1992.
| 4 . | | Order | t h a t | u n t i l | f u r t h e r | order | the | Fourth | |
| Respondent | be | r e s t r a i n e d | from | r e l e a s i n g | the | |
| shipment | o f | goods | i d e n t i f i e d | i n | the | |
| N o t i f i c a t i o n | o f | S e i z u r e | t o | Objector | dated | |
| September 9 , 1992 which i s annexure 'A' | t o th i s | |
| No t i ce | o f | Motion | o r o therwise | dea l ing | i n | a n y | |
| way | w i t h | the | goods | comprising | the | s a i d | |
shipment.
| 5. | | Stand | the m a t t e r over | f o r | f u r t h e r | d i r e c t i o n s | t o | |
9.30 am on October 30, 1992."
| The orders sought in the notice of motion included orders that the application be amended by joining the fourth respondent, the Controller-General of Customs, and by joining the fifth respondent. | I |
| I note that in the notion of motion filed in Court on 25 September 1992, there was a direction that the applicants file and serve a further amended statement of claim, but it is common ground that what was intended by this order was that the applicants file a further amended application. A further amended application was filed on 30 September 1992. On 30 October 1992, the matter was again listed for directions before Burchett J. On this occasion, Mr Small, solicitor, appeared for the first time for the fifth respondent. On that day, certain orders were made by consent |
as between the applicants and the second respondent, which had
the effect of dismissing the second respondent from the
proceedings. As I have already said, this matter has been
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settled between those parties.
However, so far as the fifth respondent was concerned, directions were given that the applicants file and serve affidavit material upon which they sought to rely as against the first, third, and fifth respondents. The first and fifth respondents were directed to file affidavits in reply. The proceedings were stood over until 11 December
1992. Shortly thereafter, it appears that the fifth
respondent turned his mind, in consultation with his legal advisers, to the prospect that the litigation in which he had been joined needed to be approached in a practical fashion. The attitude of the fifth respondent in this respect, and in this connection the attitude of the applicants, is reflected in correspondence which has been exchanged between the
| solicitors in the latter part of 1992 and more recently. |
| The correspondence is in each case entitled "without prejudice, l' but I have been referred to the correspondence on the issue of costs, and I think it is appropriate that regard be had to the correspondence on that issue, notwithstanding that the privilege thus arising is a joint privilege and notwithstanding that if the matter had proceeded to a substantive hearing, it would not have been open to the Court to have regard to the correspondence for the purpose of perhaps drawing an inference of weakness, at least in terms of belief, of the case of either of these parties. | 1 | - | ._.I |
| The first letter is dated 23 November 1992. | It is a |
letter apparently written by the solicitors for the fifth respondent to the solicitors for the applicants, although I am informed that the applicants' solicitors have no present record of its receipt. The document that I have been shown is a copy and the document is in the following terms:
| " W e conf inn t h a t we a c t for I&. | Peter Hislop, | the |
| f i f t h respondent | i n t h e s e proceedings. |
| Our client i s a self employed graphic a r t i s t . | On 7 |
May, 1992 our c l i e n t was engaged by the second respondent t o prepare ar twork i n r e l a t i o n t o a 3 colour woven t a g which was supp l i ed t o him by the second respondent. I t appears t h a t the i l l u s t r a t i o n
| on | the | t a g may have been a | trademark r e g i s t e r e d by |
| Our c l i e n t prepared the ar twork on | 7 May, | 1992 and |
| subsequent ly rendered | an account | t o t h e second |
| respondent, | i n t h e sum o f $22.50. | Our client's | o n l y |
| record o f the artwork i s conta ined on par t | o f a |
| computer | f i l e and | the r e l e v a n t p a r t | o f | the | f i l e can |
| W e a r e | in s t ruc ted | t h a t | o u r | c l i e n t had | no | knowledge |
| t h a t | the | second | respondent | was | a c t i n g wi thout | t h e |
| consent | o f | the | a p p l i c a n t s . | W e would | submit | t h a t | o u r |
| c l i e n t had | the | r o l e | of | a | f a c i l i t a t o r , | b u t | n o t | the |
| role | o f | a | p a r t i c i p a n t , | i n | a n y | breach | o f | your |
| c l i e n t ' s | trademark. |
| Our c l i e n t i s prepared | t o set t le | t h e proceedings | a s |
| aga ins t | him | by | d e l e t i n g | the | p a r t | o f | t h e | computer |
| f i l e | which | conta ins | the | record | o f | the | s u b j e c t |
| artwork. | Please | o b t a i n , | and | i n f o r m | u s | o f , | your |
| c l i e n t ' s | i n s t r u c t i o n s | i n r e s p e c t | o f | t h i s proposal." |
There was subsequent correspondence to which I will refer shortly, but I should interpose here a reference to a directions hearing taken by Wilcox J. on 30 November 1992. Again, Mr Small appeared for the fifth respondent and an extension of time was granted, in which affidavit material sought by the respondents, was to be filed and served. However, the transcript of the proceedings on that occasion shows that Wilcox J. then questioned the amount of any damages which might be properly sought against the fifth respondent, assuming, of course, liability to have first been established.
Reverting to the correspondence, on 23 December 1992 the solicitors for the fifth respondent wrote again to the solicitors for the applicants a letter, which again was entitled "without prejudice", and the letter was in the
| "We r e f e r t o previous | communications | i n respect | o f |
| t h i s matter and | t o the attendances i n the Federal |
| Court on 11 December, 1992 for further directions. | We regret that Mr. Hall was not present i n Court |
| the conduct o f the proceedings against our c l i en t . We trus t that Hr. Webb, o f Counsel has informed you o f these comments. |
| Whilst we are hopeful that the proceedings against our c l i en t can be resolved our cl ient i s not prepared t o agree t o your proposal that he pay the |
| sum o f $3,000.00 | a s damages and costs. | |
| We confirm that our c l i en t i s prepared t o s e t t l e the proceedings on the basis that he delete the part o f h i s computer f i l e which contains the record o f the subject artwork. |
| Please inform u s o f any further instructions you |
| receive from your c l i e n t regarding the proposed |
| s e t t l e m e n t . | ' l | |
when Justice Wilcox made certain comments regarding
It appears that no reply was made to that letter
until 2 March. On that date the solicitors for the applicants wrote a "without prejudice" letter to the solicitors for the fifth respondent in the following terms:
| "We | refer t o your | wi thout | pre judice | le t ter | o f |
| December 23, | 1992, | and | t o our open le t ter o f today ' s |
| da te . |
| Our | client | r e j e c t s | the | s e t t l e m e n t | proposal | p u t | i n |
| your let ter o f December 23, 1992. | Our client i s |
| prepared | t o | sett le | these | proceedings | on | the |
| fo l lowing | terms: |
| 1 . | Your | c l i e n t | consen t s | t o | an | i n j u n c t i o n |
| r e s t r a i n i n g | him | from | i n f r i n g i n g o r | f o r g i n g | a n y |
| o f | the | t r a d e | marks | o f | Lev i | S t r a u s s | & | CO |
| r e f e r r e d | t o i n the Appl ica t ion; |
| 2. | Your | c l i e n t | d e l i v e r s | up | t o | us | or | prov ides |
| ev idence | t h a t | he | has | i r r e t r i e v a b l y d e l e t e d | the |
| computer f i l e which | c o n t a i n s | the record | o f | the |
| 3 . | Your client pays | t o our c l i e n t | the | sum | o f |
| $3,000 | a s damages and c o s t s . |
| client would be prepared t o accept payment i n three | On th is f i n a l i s s u e , we are i n s t r u c t e d t h a t o u r |
| equal m o n t h l y i n s t a l m e n t s o f $1,000, the f i r s t |
| i n s ta lmen t | t o be | made | before March | 9 , | 1993. | |
| C lear l y , | a l l p a r t i e s | t o these | proceedings | now face | |
| l e g a l | c o s t s which | w i l l | g r e a t l y exceed | the amount | i n | |
| d i spu te . | mile | the m a t t e r has considerable | v a l u e t o | |
| our | client | i n e s t a b l i s h i n g | the | l i a b i l i t y o f | p a r t i e s | |
| who | are | i n v o l v e d | i n and | f a c i l i t a t e | others | i n s a l e s | |
| o f | c o u n t e r f e i t | products | they | are | n o n e t h e l e s s | |
| commercial | i n their | a t t i t u d e | t o such | m a t t e r s . | The | |
| proposal | i n this le t ter i s put | on | t h a t b a s i s , | and | |
| r e f l e c t s the | sugges t ion made | by | J u s t i c e | Wilcox i n a | |
| d i r e c t i o n s | h e a r i n g | l a s t | year | t h a t | i t | 'may | be | |
| appropr ia te | i f M i | H i s l o p | pays | some | amount | f o r | |
| damages, | b u t I | t h i n k a r e l a t i v e l y token amount | would | |
| |
| Please | l e t | u s | know | your | c l i e n t ' s | p o s i t i o n | r e g a r d i n g | |
| t h i s o f f e r which | w i l l | remain | open | u n t i l | Midday | on | |
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