Seafolly Pty Ltd v Madden

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FEDERAL COURT OF AUSTRALIA

Seafolly Pty Ltd v Madden [2012] FCA 1346

Citation: Seafolly Pty Ltd v Madden [2012] FCA 1346
Parties: SEAFOLLY PTY LTD (ACN 001 537 748) v LEAH MADDEN
File number: VID 764 of 2010
Judge: TRACEY J
Date of judgment: 29 November 2012
Catchwords:

TRADE PRACTICES – misleading or deceptive conduct claimed where allegations of copying swimwear designs – consideration of relevant legal principles – whether statements misleading, deceptive or false – whether statements expressions of opinion or statements of fact – whether representations were “false” and asserted that goods were of particular “style or model” – whether ss 52 and 53(a) of the Trade Practices Act 1974 (Cth) apply where contravention by natural person –whether impugned conduct occurred “in trade or commerce” – damage to reputation claimed – economic loss claimed – whether loss and damage actually suffered – no significant or ongoing damage – limited damages awarded under s 82 of the Trade Practices Act 1974 (Cth) – declaration sought – granting of declaration warranted – permanent injunction sought to restrain further allegations of copying – whether injunction would serve a purpose – whether possibility that contraventions will be repeated – injunction granted

TRADE PRACTICES – cross-claim of misleading or deceptive conduct – whether representations made apt to mislead – cross claim not made out

TORT – claim for injurious falsehood – consideration of relevant principles – whether pecuniary loss suffered

INTELLECTUAL PROPERTY - copyright infringement claimed where allegation that photographs of swimwear reproduced and communicated to the public without license – whether ownership of copyright at the relevant times established

DEFAMATION – cross-claim that defamatory allegations made – whether statements made defamatory – whether contextual truth defences made out – whether fair comment defence made out – whether defence of qualified privilege made out  
Legislation: Competition and Consumer Act 2010 (Cth), Schedule 2, ss 18, 29
Copyright Act 1968 (Cth), ss 31, 36, 41, 115, 119
Fair Trading act 1987 (NSW), ss 42, 44(a)
Fair Trading Act 1989 (Qld), ss 38, 40
Federal Court of Australia Act 1976 (Cth), s 21(1)
Trade Practices Act 1974 (Cth), ss 52, 53(a), 80
Trade Practices Amendment (Australian Consumer Law) Act (No 2) 2010 (Cth), Schedule 7, Item 7
Cases cited: Adam v Ward [1917] AC 309 – considered, applied
Ainsworth v Criminal Justice Commission (1992) 175 CLR 564 – cited
Australian Competition and Competition Commission v Chen (2003) 132 FCR 309 – cited
Australian Competition and Consumer Commission v Dataline.Net.Au Pty Ltd (in liq) (2007) 161 FCR 513 – cited, considered
Australian Competition and Competition Commission v Hughes [2002] FCA 270 – considered, applied
Bateman v Slatyer (1987) 71 ALR 553 – cited
Berry v Federal Commissioner of Taxation (1953) 89 CLR 653 – cited
Brabazon v Western Mail Limited (1985) 8 FCR 122 at 129 – cited
Chakravarti v Advertiser Newspapers Limited (1998) 193 CLR 519 – cited
Concrete Constructions (NSW) Pty Ltd v Nelson (1990) 169 CLR 594 – considered, applied
CPA Australia Ltd…
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Details
Case
[2012] FCA 1346
Decision Date

CaseChat Overview and Summary

Seafolly Pty Ltd, a swimwear manufacturer, brought a case against Ms Leah Madden, an independent swimwear designer, in the Federal Court of Australia. Seafolly claimed that Madden had made false allegations that Seafolly copied some of her designs, leading to a dispute over the provenance of swimwear designs. Madden, on the other hand, filed a cross-claim asserting that Seafolly had engaged in misleading or deceptive conduct, copyright infringement, and defamation. The court was tasked with deciding whether Madden's statements were misleading or deceptive, whether they were expressions of opinion or statements of fact, and whether Seafolly had suffered actual economic loss. The court also needed to determine if the alleged conduct occurred in trade or commerce and if the statements were "false" and asserted that the goods were of a particular "style or model." Additionally, the court had to consider if sections 52 and 53(a) of the Trade Practices Act 1974 (Cth) applied when the contravention was by a natural person. The court also needed to decide if an injunction would serve a purpose and if there was a possibility that the contraventions would be repeated. The court found that Madden's cross-claim under the Trade Practices Act also failed.

The court held that Madden's statements were indeed misleading and deceptive, and that they were expressions of fact rather than opinion. The court found that Seafolly had suffered some economic loss, but not significant or ongoing damage. The court granted limited damages of $25,000 under section 82 of the Trade Practices Act 1974 (Cth). The court also granted Seafolly's application for a declaration that Madden had engaged in misleading and deceptive conduct and made an injunction to restrain Madden from reproducing Seafolly's photographs and making similar statements to third parties. The court dismissed Madden's cross-claims with costs and ordered Madden to pay Seafolly's costs of the application. Seafolly was substantially successful in vindicating its reputation, and it should have the costs of its application. Madden's cross-claims should be dismissed with costs.

Orders

Orders of the court

2. The Respondent pay the Applicant damages in the sum of $25,000 pursuant to s 82(1) of the Act for damage suffered by the Applicant caused by the conduct of the Respondent.

3. The Respondent, whether by herself, servants or howsoever otherwise, in trade or commerce, be restrained from:

4. reproducing or authorising the reproduction of the Seafolly Photographs without the consent of Seafolly; and

5. making the Representations or any other statements or claims similar to the Representations to third parties or aiding, abetting, counselling or procuring the making of the Representations or any other statements or claims similar to the Representations to third parties.

The Respondent pay the Applicant’s costs of the application.

The cross-claim be dismissed with costs.

Note: Entry of orders is dealt with in Rule 39.32 of the Federal Court Rules 2011

Background

Background to the litigation

The applicant (“Seafolly”) alleges that the respondent, Ms Leah Madden, has made a number of serious and false allegations against it. These allegations relate to the provenance of designs of ladies’ swimwear marketed by Seafolly. Put simply, Seafolly claims that Ms Madden has made public statements which suggest wrongly that Seafolly has copied some of her designs. THE BACKGROUND FACTS The genesis of the present dispute can be traced back to 1 September 2010 although it was influenced by Ms Madden’s perception of events which had occurred earlier in that year. On 1 September 2010, Ms Madden saw a copy of the September/October edition of a magazine called “The Gold Coast Panache”. The front cover was dominated by a picture of a well known model, Samantha Harris, who was, at the time, an “ambassador” for Seafolly. Ms Madden claimed that her immediate thought was that Ms Harris was wearing one of her (Ms Madden’s) creations known as the ‘High Society Bikini’. On turning to an inside page, however, Ms Madden discovered that Ms Harris was wearing a Seafolly ‘Goddess’ bikini. Ms Madden considered that the Seafolly garment was remarkably similar to her own design. Ms Madden recalled that, earlier in the year, she had some dealings with Ms Julie McLaren. Ms McLaren had become an employee of Seafolly in about 2001. In her role as an Account Manager she had handled the account for the retail outlets conducted by Sunburn Company Pty Ltd (“Sunburn”). In 2009 Seafolly had acquired a 68% interest in Sunburn. Shortly afterwards Ms McLaren was employed as a buyer by Sunburn. In May 2010, the Rosemount Australian Fashion Week (“RAFW”) was held. This event was one of the premier occasions for the promotion of swimwear for the forthcoming season. It was attended by designers, wholesalers and retailers. It provided the opportunity for designers to market their ranges to retail chains. On 6 May 2010, Ms McLaren attended a pre-arranged buying appointment with Ms Madden at a Sydney hotel. They met in a suite. Ms Madden showed Ms McLaren samples of her White Sands swimwear range. Some of the garments were worn by a model who was present. Ms McLaren took some photographs on her Blackberry phone. On the following day Ms McLaren attended a ramp presentation of the White Sands range. Again she took some photographs on her Blackberry phone. During their meeting Ms McLaren told Ms Madden that she liked some of the garments which she had seen but budgetary constraints were likely to make the placing of any orders difficult. Despite some follow-up contact by e-mail from Ms Madden, Ms McLaren placed no orders for White Sands products. Nor did she respond to the e-mails. In July 2010, a major international swimwear show took place in Miami in the United States. Both Seafolly and White Sands ranges were on display. Each company had a booth or a stand at the show. As Ms Madden passed the Seafolly stand she saw Ms McLaren wearing a Seafolly badge. Ms McLaren explained that, because she had previously worked for Seafolly, she had been asked to help out at the Miami show. Her attendance in Miami had been paid for by Seafolly.

Evidence

Evidence Before The Court

Full text does not contain this section.

Decision

Reasons for decision

Accordingly, Ms Madden’s cross-claim under the TP Act also fails.CONCLUSION In bringing this proceeding, Seafolly was concerned not only to protect its corporate reputation. It was also concerned for the reputation of its employees; false allegations had been specifically made against Ms McLaren and there were implicit suggestions that the designers of Seafolly’s creations had not relied on their own ingenuity but had chosen instead to copy designs which had been created by Ms Madden. Seafolly has been substantially successful in vindicating its reputation. It should have the costs of its application. Ms Madden’s cross-claims should be dismissed with costs.

Ratio Decidendi

Legal Principle Established

Such an injunction will also serve the public interest in ensuring that consumers of swimwear are not misled into thinking that Seafolly garments are copied from another designer’s range.Declarations Seafolly’s application sought a declaration that Ms Madden had engaged in misleading and deceptive conduct. The Court has power, pursuant to s 21(1) of the Federal Court of Australia Act 1976 (Cth), to grant binding declarations of right. This is a wide discretionary power which may be exercised when there is utility in doing so: see Ainsworth v Criminal Justice Commission (1992) 175 CLR 564 at 581-2. A declaration that a provision of the TP Act such as ss 52 and 53(a) has been contravened may be made because it protects the right of the public not to be misled or deceived by misrepresentations: see Tobacco Institute of Australia Ltd v Australian Federation of Consumer Organisations Inc (No 2) (1993) 41 FCR 89 at 98, 110. A declaration of the kind sought by Seafolly would serve a number of useful purposes. It would identify conduct that constitutes a contravention of the consumer protection provisions of the TP Act which continue to apply under the Australian Consumer Law. This would have an educative effect. Such a declaration would also identify the bases on which the granting of injunctions and the award of damages are founded. It would serve the additional purpose of marking the Court’s disapproval of Ms Madden’s conduct. These considerations, in my view, warrant the making of a declaration that Ms Madden has contravened ss 52 and 53(a) of the TP Act by making her impugned statements.The FT Act and the NSW FT Act Sections 38 and 40 of the FT Act and ss 42 and 44(a) of the NSW FT Act appear in largely the same terms as ss 52 and 53(a) of the TP Act respectively. Seafolly relied on the same facts to support its claims under all three sets of provisions. In light of my findings set out above as to Ms Madden’s liability under ss 52 and 53(a) of the TP Act, it is not necessary for me to deal with Seafolly’s respective claims under the relevant provisions of the FT Act and NSW FT Act. INJURIOUS FALSEHOOD Seafolly also sought to establish a cause of action against Ms Madden for injurious falsehood. Although they are similar in some respects, the elements of this tort differ from those required to make good a claim of defamation. The differences were explained by Weinberg J in Orion Pet Products Pty Ltd v Royal Society for the Prevention of Cruelty to Animals(Vic) Inc (2002) 120 FCR 191 at 223:“In some respects, this tort bears a marked resemblance to defamation. Both involve a false and harmful imputation concerning the plaintiff which is made to a third party. They differ, however, in that the law of defamation protects interests in personal reputation while injurious falsehood protects interests in the disposability of a person’s property, products or business. Defamation is generally actionable without proof of damage. Falsehood is presumed and liability is strict. In an action for injurious falsehood, the plaintiff must prove that he sustained actual economic loss, that the offending statement was false, and that it was made with intent to cause injury without lawful justification. The requisite state of mind is often described as malice.”