The Ridge Trading Pty Ltd v JC Export & Import Pty Ltd

[2010] FMCA 424

FEDERAL MAGISTRATES COURT OF AUSTRALIA

THE RIDGE TRADING PTY LTD v JC EXPORT & IMPORT PTY LTD & ANOR [2010] FMCA 424

TRADE PRACTICES – Claim under s.52 of the Trade Practices Act 1974 (Cth) – alleged copying of the bathmat ensembles – copied mats sourced from China – found in the Sydney market bearing identification labels of the original genuine mat – claim for damages pursuant to s.82.

Trade Practices Amendment Act 1977 (Cth)
Trade Practices Act 1974, ss.52, 82
Federal Magistrates Court Rules 2001 (Cth), r.15.24
Report of the Trade Practices Act Review Committee, Swanson Report (1976)

Banque Commercials SA (in liq) v Akhil Holdings Ltd (1990) 169 CLR 279 Cadbury Schweppes Pty Ltd v Darrell Lea Chocolate Shops Pty Ltd (2007) 72 IPR 261 Campomar Sociedad Limitada v Nike International Ltd (2000) 202 CLR 45 Cubillo v Commonwealth of Australia (2000) 103 FCR 1 Cubillo & Anor v Commonwealth(No.2) [2000] FCA 1084 Commercial Union Assurance Company of Australia Ltd v Ferrcon Pty Ltd & Anor (1991) 22 NSWLR 389 Dodds Family Investment Pty Ltd (formerly Solar Tint Pty Ltd) v Lane Industries Pty Ltd (1993) 26 IPR 261 Equity Access Pty Ltd v Westpac Banking Corporation and Westpac Savings (1989) 16 IPR 431 Erven Warnick v J Townsend & Sons (Hull) Ltd (the Advocaat case) [1979] AC 731 Esso Petroleum Co Ltd v Southport Corporation [1956] AC 218 Hornsby Building Information Centre Pty Ltd v Sydney Building Information Centre Pty Ltd  (1978) 18 ALR 639 Jones & Dunkel (1959) 101 CLR 298 Lumley Life Ltd & Drake & Edes Pty Ltd v IOOF of Victoria Friendly Societies (1989) 16 IPR 316 McWilliams Wines Pty Ltd v McDonald’s Systems of Australia Pty Ltd (1980) 33 ALR 394 Moorgate Tobacco Co Ltd v Phillip Morris Ltd (No 2) (1984) 156 CLR 414 Parkdale Custom Built Furniture Pty Ltd v Puxu Pty Ltd (1982) 149 CLR 191 Parker – Knoll Ltd v Knoll International Ltd [1962] RPC 265 Taco Company of Australia Inc v Taco Bell Pty Ltd (1982) 42 ALR 177 The Ridge Trading Pty Ltd v JC Exports & Imports Pty Ltd [2007] FMCA 1927 Thorp v Holdsworth (1876) 3 Ch D 637 Zaccardi v Caunt [2008] NSWCA 202

Applicant:

The Ridge Trading Pty Ltd (ACN 095 377 718)

First Respondent: JC Export & Import Pty Ltd (ACN 106 389 968)

Second Respondent: Zhen Qing Huang

File Number: SYG 1785 of 2006

Judgment of: Lloyd-Jones FM

Hearing dates:

4, 5, 6, 7, 8 August 2008;
8, 9, 10, 11 ,12 December 2008;

20 February 2009 & 3 and 4 June 2009

Delivered at: Sydney

Delivered on: 29 June 2010

REPRESENTATION

Counsel for the Applicant: Mr C Moschoudis

Solicitors for the Applicant: Mr H Lu, Luminous Legal

Counsel for the Respondent: Mr P G Bolster

Solicitors for the Respondent: Mr Shun Cheng, Gray & Perkins

ORDERS

1. The first Respondent by itself, its servants and/or its agents be restrained from selling, offering or exposing for sale, distributing and / or marketing in Australia any bathroom mat set or individual bathroom mat set or individual bathroom mat bearing the name the Ridge Trading Pty Ltd and / or product barcode 9338312000000 on the products or on any packaging of these products.

2. The first Respondent deliver up bathroom mat sets and individual bathroom mats purchased, acquired, or imported from any supplier or source other than the Applicant bearing the name The Ridge Trading Pty Ltd and a product barcode 9338312000000 on the product and any packaging of these products.

3. The parties file written submissions on costs by Monday, 19 July 2010.

FEDERAL MAGISTRATES
COURT OF AUSTRALIA AT
Sydney

SYG 1785 of 2006

The Ridge Trading Pty Ltd (ACN 095 377 718)

Applicant

And

JC Export & Import Pty Ltd (ACN 106 389 968)

First Respondent

Zhen Qing Huang

Second Respondent

REASONS FOR JUDGMENT

The proceedings

1. The original application was filed in this matter on 23 June 2006 seeking ex-parte orders in the following form:

   a)Until further order the first Respondent by itself, its servants and/or its agents be restrained from selling, offering or exposing for sale, distributing and/or marketing in Australia any bathroom mat set or individual bathroom mat bearing the name The Ridge Trading Pty Ltd and/or product barcode 9338312000000 on the products or any packaging of these products

   b)Until further order the first Respondent by itself, its servants and/or agents be restrained from passing off bathroom mat sets or individual bathroom mats which are not connected in the course of trade with the Applicant, as products distributed by the Applicant

   c)The first Respondent deliver upon oath, on or before 3 July 2006, all documents (including but not limited to Australian Customs import records, invoices, delivery and/or consignment notes, bill of lading, packaging list and packaging declarations) relating to bathroom mat sets and individual bathroom mat orders, purchased, acquired, or imported from any supplier or source other than the Applicant, in respect of the period 1 January 2005 to date.

2. The matter was first before this Court on 23 June 2006 but was adjourned to 7 July 2006 for further directions.  On the 7 July 2006 ex-parte orders were made in the form set out in (a) and (b) above and listed for further directions before the Court on 23 July 2006.  Since that date, the matter has been before this Court on numerous occasions during which a large number of procedural issues were contested by the parties.  This included a Notice of Motion heard on 8 September 2006 with judgment delivered on 29 September 2006 in the decision The Ridge Trading Pty Ltd v JC Exports & Imports Pty Ltd [2007] FMCA 1927.

3. On 9 February 2007, orders were made referring this matter to a Registrar of this Court for mediation.  The mediation took place on

   
   

   9 May 2007 before Registrar Lackenby but was not settled.  Consequently the matter was referred back to this Court for further directions.

4. The final hearing commenced on 4 August 2008 and was heard over the 13 days with adjournments caused by the unavailability of witnesses resident in China and being required to give evidence via video-link.

Background

1. The Applicant has been conducting its business since March 2005 as The Ridge Trading Pty Ltd (“the Ridge Trading”), trading as “JJ Trading” of 14 Lennox Street, Morabin, Victoria.  Mr Ru Min Yao (“Mr Yao”) is the proprietor of the Ridge Trading.  The activities of this business include importing and distributing a wide range of wholesale goods including bathroom mat sets (“bathmats”).  It is these bathmats that are the subject of these proceedings.  The Applicant’s trading activities encompassed markets throughout Australia.  Mr Yao purchased these bathmat ensembles (described below) from the Tianjin Jianghua Xinke Carpet Co. Ltd of Wuqing Huaxing Economic Area situated in the Tianjing Province, China.  The original bathmats were designed by Mr Yao’s wife, Tian Tang, who had a significant input into the manner in which these mats were designed and specifically manufactured by Tianjin Carpet Co. for The Ridge Trading Pty Ltd.

2. Within Australia, The Ridge Trading Pty Ltd is deemed the manufacturer pursuant to the operation of s.74A(3) of the Trade Practices Act 1974 (Cth) (“the Act”). There is no dispute that The Ridge is a corporation as defined under the Act that is carrying on business, trade and commerce and is distributing to retailers including bathroom mats and bathroom mat sets.

3. The Respondent, JC Export & Imports Pty Ltd (“JC Exports”), is conducted by the second Respondent, Mr Zhen Qing Huang also known as Stephen Huang who is the sole Director, shareholder, manages and controls the corporation.  The Respondents from 18 September 2010 conduct a wholesale distribution service on the premises at unit 10/14 Child’s Road, Chipping Norton in NSW.  JC Export & Imports in their Defence admit that it purchased 11,210 bathmat sets from the Ridge Trading.  This initial relationship is admitted and is therefore not in dispute between the parties. 

4. Between 1 March and 2 August 2005, The Ridge Trading according to its records sold to JC Export & Import Pty Ltd an amount of 12,960 bathmat sets.  After that date no further bathmats were sold to JC Exports & Imports. These particular bathmat sets bore the name “Home Fashions” and are described as “Deluxe Bathroom Mat Set” (the characteristics of the packaging and identifying marks are set out in detail below). They were only supplied in four colours including blue, brown, burgundy and green.

5. Mr Yao states that on or about 28 September 2005, he enquired with Mr Huang via telephone as to why no further orders for bathmat sets were received. Mr Huang advised Mr Yao that they were difficult to sell.  Mr Yao indicated that he was advised by an independent source that on a recent visit to the JC Exports & Imports’ warehouse in Sydney he purchased bathmats, marked as distributed by The Ridge Trading and included 12 sets per carton.  The authentic bathmats distributed by Ridge Trading were packed in batches of 15 and distributed in cartons.

6. Mr Yao visited Sydney between 11 March 2006 and 13 March 2006 and made his own enquiries at a number of stores in NSW selling bathmat sets bearing the name the Ridge Trading as the distributor on the packaging. The packaging, label, style and appearance on those bathmat sets sold in Sydney stores appeared almost identical to the bath mat sets that The Ridge Trading usually distributes however on close examination, differences were distinguishable.  These included:

   a)the colour of these bathroom sets are lighter;

   b)a pink mat was available that was not available in the Ridge Trading product range; and

   c)the pile on these mats was of lesser quality.

   Mr Yao indicated that his company had not authorised any other company or person to distribute or sell bathmat sets imitating the product distributed by his company.

7. Mr Yao and a colleague Ms Ruijuian Jin visited a number of stores and purchased bathmat sets from each of those stores.

8. Mr Yao alleges that Mr Huang of JC Exports & Imports engaged in conduct in breach of s.52 of the Act by arranging for the production in China and the subsequent importation into and distribution for sale within Australia of two piece bathmat sets that were similar to, or copies of the mats and mat sets imported into Australia by The Ridge Trading Pty Ltd.

9. On or about 11 April 2006 Mr Yao instructed Oakfair Lawyers of Box Hill, Victoria to write to each of the identified stores stocking these mats requesting:

   Re: Intellectual property Infringement

   We have been instructed to act for the owner and director of The Ridge Trading Pty Ltd trading as JJ Imports which manufactures, amongst other items, bathmats.

   Our client tells us that it has now come to his notice that you have been selling bathmat sets bearing his company name “the Ridge Trading Pty Ltd”. Our client tells us that he ahs not supplied or sold you his bathmats bearing his company’s name. He has evidence that the bathmat set that your are selling from your store are not manufactured by his company despite bearing his company’s name and passing off as his company’s products.

   We are instructed to request your immediate attention to the following:

   1.  To remove from your shelves all bathmats for public sale, bearing our client’s company name and make available to our client for inspection

   2.  Advise our client of the name of your supplier from whom you obtain these bathmats bearing our client’s company name, when you first commenced purchase of these bath mats from your supplier and details of the quantities of purchase over the relevant period of time that you have been dealing with these suppliers.

   We ask that you cooperated with our client in this matter. We place you on notice that should you not cooperate, you may be joined in any action against these suppliers against whom our client will seek damages and loss of profit.

   We ask that you or your legal representative respond to this letter within seven days from the date hereof, failing which our client will take all steps necessary to protect his company’s rights in this matter, including the commencement of legal action without any further notice.

10. Mr Yao indicated that on or about 12 September 2006 he telephoned his cousin Huawei Ye, a practicing Chinese lawyer, seeking his advice as to what action he could pursue in China regarding the alleged copying of his bathmat ensembles.  Mr Yao indicates that he was advised that he would be required to obtain evidence and that he should apply to the Industry and Commerce Administration Bureau (“the Bureau”) that administers the fair trading provisions of Chinese law.  He subsequently made enquiries via email to the Jiangsu Province, Suqian City Industry and Commerce Administration Bureau who indicated they could assist in protecting the legal rights of his company and required relevant details.  Mr Yao was also invited to visit Suqian City in December to assist the Bureau in the making of enquiries.

11. On 5 November 2006 Mr Yao travelled to Suqian via Shanghai to attend the Bureau and present his documentation.  On or about 14 December 2006 Mr Yao accompanied officials from the Bureau on their inspection visit to the offices of LongHua Carpet.  Present during this inspection were four officials (two wearing uniform) and Mr Long Zhao and Mr Yao.  At sometime during the visit Mr Zhao’s son-in-law, Mr Cao Yang Liu, joined those present.

12. When Mr Yao was in the LongHau Carpet factory, he took photographs of a bathmat which was on display in the factory showroom.  That bathmat had a coloured cardboard printhead which bore the name Ridge Trading although it was a bathmat set that Mr Yao indicated that he had not ordered from LongHua or any other manufacturer.

13. Fundamental to this case is the allegation that the LongHua Carpets manufactured, at the request of Mr Huang, through the middle man, Liang De Guan mat sets that were copies of The Ridge Trading mats.

Pleadings

1. The Statement of Claim filed on 28 September 2006 by the Applicant pleaded the cause of action which is set out below.  On 10 November 2006, the Respondents filed their defence and these clauses are set out immediately below the relevant clauses of the Statement of Claim:

   1. At all material times the Applicant is and was a company duly incorporated and liable to be sued in and by its corporate name and style.

   Defence: Admitted.

   2. As and from 1 March 2005 the Applicant carried on a business importing and distributing to wholesalers goods, including bathroom mat sets, amongst other things, from premises situated at 14 Lennox Street, Moorabbin in the State of Victoria.

   Defence: the Respondents say that from time to time the First Respondent purchased bathroom mat sets from the Applicant but otherwise does not know and cannot admit the contents of the same.

   3. The first Respondent is and was at all material times:

   (a)  A company duly incorporated and liable to be sued in        and by its corporate name and style;

   (b)  A trading corporation

   (c) A corporation within the meaning of the Trade Practices Act 1974 (Cth) (“the TPA”)

   Defence: admitted.

   4. The second Respondent is and was at all material times the sole director and shareholder of the first Respondent and has the management and control of the first Respondent.

   Defence: admitted.

2. Statement of Claim, paragraph five:

   5. As and from 1 March 2005 the first Respondent carried on a   business distributed to retailers goods, including bathroom mat sets, amongst other things, by way of conducting a wholesale distribution business from premises situated at Unit 10, 14 Childs road, Chipping Norton in the State of New South Wales.

   Defence: The Respondents admit that at all material times the first Respondent has carried on business from the premises stated and that its business has included selling bathroom mat sets supplied by the Applicant as well as bathroom mats obtained from other sources.

3. Statement of Claim, paragraph six:

   6.     The Applicant is the registered holder of unique Bar Code 933831200

   Defence: The Respondents do not know and cannot admit the circumstances surrounding the registration of the barcode referred to therein.

4. Statement of Claim, paragraph seven:

   7.     Between 1 March 2005 and 2 August 2005 the Applicant sold to the first Respondent about 12, 690 bathroom mat sets (“the 2005 bathroom mat sets”), bearing on the plastic packaging the brand name “Home Fashions”, described as “Deluxe Bathroom Set” and further identified with the following words and numbers: “The Ridge trading Pty Ltd Bar Code 933831200”. The bathroom mats came in 4 colours. Each colour selection also carried an individual Item Number and a 4 digit code added after the Bar Code, as summarised below:

Colour	Item Number	Bar Code
Blue	MT-303	9338312001516
Brown	MT-221	9338312001523
Burgundy	MT-379	9338312001509
Green	MT-292	9338312001530

Defence: The Respondents admit that between 1 March 2005 and 2 August 2006 the Respondents purchased 11,210 bathroom mat sets from the Applicant, not 12,690 as claimed by the Applicant. Otherwise, the Respondents admit the rest of this paragraph.

1. Statement of Claim, paragraph eight:

   8. The Applicant purchased the bathroom mat sets from a manufacturer in Tianjing, China and imported them into Australia. At the time of importation, the manufacturer of the bathroom mats did not have a place of business in Australia, by reason of which the Applicant is deemed by the operation of section 74A(3) to have manufactured the goods for the purposes of Part VA of the TPA.

   Defence: The Respondents, in light of the Applicant’s failure to provide particulars concerning the manufacture and importation of bathroom mat sets by the Applicant, do not know and cannot admit the circumstances surrounding the Applicant’s acquisition of the bathroom mat sets referred to therein.

2. Statement of Claim, paragraphs nine and ten:

   9. On or about 11 August 2005 the first Respondent purchased 9,900 bathroom mats from a supplier other than the Applicant.

   10. On or about 9 April 2006 the first Respondent purchased 9,000 bathroom mats from a supplier other than the Applicant.

   Defence: The Respondents admit the purchase of bathroom mats in paragraph 9 and 10 from a supplier other than the Applicant, say that none of these mats bore any physical resemblance to the bathroom mat sets of the Applicant, but otherwise deny the paragraphs.

3. Statement of Claim, paragraph 11:

   11. The first Respondent sold, supplied and/or distributed to various retailers the bathroom mats referred to in paragraphs 9 and 10 (collectively referred to as “the 2006 bathroom mat sets”).  The various retailers including the following retailers:

   (1) N.K. Variety (Australia) Pty Ltd t/as The Discounters 92 Queen Street St Marys NSW 2760;

   (2) Mainleading Pty Ltd t/as Rockdale Shopping Paradise

   507 Princes Highway Rockdale NSW 2216;

   (3) Hot Price Pty Ltd

   17-19 Queen Street St Mary NSW 2760;

   (4) C.Y. Shao & A.Y. Shi t/as Budget Beaters

   283A Liverpool Road Ashfield NSW 2131;

   (5) Ms Sabrina Gao t/as Best Bargain

   Shop 30G Roselands Centro, Roselands NSW 2196;

   (6) TEK’s Gift & Things Pty Ltd

   244 Liverpool Road Ashfield NSW 2131;

   Defence:  the first Respondent has sold bathroom mat sets sourced from the Applicant to various retailers, including three of the retailers referred to therein , namely NK Variety (Australia) Pty Ltd t/as The Discounters, Ms Sabrina Gao t/as Best Bargain and TEK’s Gift and Things Pty Ltd but not the other individual retailers referred to in clause 11.

   Deny that, except in the case of bathroom mat sets sourced from the Applicant, any of the mats sold bore any physical resemblance to the bathroom mat sets of the Applicant.

4. Statement of Claim, paragraphs 12 and 13:

   12. The 2006 bathroom mat sets were similar to the 2005 bathroom mat sets, sold and supplied by the Applicant to the first Respondent, except that the 2006 bathroom mat sets are in colours different to the range of colours of the 2005 bathroom mat sets.

   13. The 2006 bathroom mat sets have identical packaging to the 2005 bathroom mat sets and contain the following statements on their packaging: the brand name “Home Fashions”, “Deluxe Bathroom Set” and are further identified with the following words: “The Ridge Trading Pty Ltd”.  The 2006 bathroom mat sets bear the following Item Numbers and Bar Codes:

Colour	Item No	Bar Code
Blue	MT2-292	9338312001530
Pink	MT2-303	9338312001516
Brown	MT2-303	9338312001516

Defence: In answer to paragraph 12 and 13 the Respondents say that the mats referred to in paragraph 8 above bore no similarity to the bathroom mat sets referred to in paragraph 7 of the Statement of Claim and further say that the mats did not:

(a) Include any reference to “Home Fashions”, “Deluxe Bathroom Set” or “The Ridge Trading Pty Ltd” either on their face or on their packaging.

(b) Bear the item numbers or bar codes referred to therein.

1. Statement of Claim, paragraphs 14 and 15:

   14. The 2006 bathroom mat sets are not bathroom mat sets that the Applicant at any time imported into Australia, nor distributed, nor sold.

   15. Further the 2006 bathroom mat sets are not bathroom mat sets that the Applicant sold, supplied or distributed to the first Respondent.

   Defence: In answer to paragraph 14 and 15 of the Statement of Claim the Respondents admit that the mats referred to in paragraph 7 above were not sourced from the Applicant.

2. Statement of Claim, paragraph 16:

   16. The Applicant also did not authorise the first and the second Respondent to use its registered bar code 933831200.

   Defence: The Respondents deny that they have ever used bar code 933831200.

3. Statement of Claim, paragraph 17:

   17. On or about 13 January 2006, the first and second Respondents purchased 11,370 mats from a supplier other than the Applicant (“the additional mats”).

   Defence: admitted.

4. Statement of Claim, paragraph 18:

   18. The additional mats have identical packaging to the 2005 bathroom mat sets and contain the following statements on their packaging: the brand name “Home Fashions”, “Deluxe Bathroom Set” and are further identified with the following words: “The Ridge Trading Pty Ltd”.  The additional mats also bear an item number MT2-303 and barcode 9338312001516.

   Defence: In answer to paragraph 18 the Respondents say that the mats referred to in paragraph 17 of the Statement of Claim bore no similarity to the bathroom mat sets referred to in paragraph 7 of the Statement of Claim and further say that the mats did not:

   Include any reference to “Home Fashions”, “Deluxe Bathroom Set” or “The Ridge Trading Pty Ltd”

   Bear the item numbers or bar codes referred to therein.

5. Statement of Claim, paragraph 19:

   19. The Applicant has never imported, distributed or sold the additional mats into Australia.  The Applicant also did not authorise the first and second Respondent to use its registered bar code 933831200 on the additional mats.

   Defence: In answer to paragraph 19 the Respondents admit that the mats referred to in paragraph 17 of the Statement of Claim were not sourced from the Applicant and deny that they have ever used bar code 933831200.

6. Statement of Claim, paragraphs 20 and 21:

   20. The first and second Respondent engaged in conduct that was misleading or deceptive or likely to mislead or deceive in contravention of section 52 of the TPA.

   21. Further, or in the alternative, in causing or allowing the bathroom mat sets to be packaged and made available for sale, the first Respondent and the second Respondent engaged in conduct that was misleading or deceptive or likely to mislead or deceive in contravention of section 52 of the TPA.

   Particulars of the conduct that was leading or deceptive

   (a)    falsely asserting that the 2006 bathroom mat sets and the additional mats were supplied or distributed by the Applicant;

   (b)    falsely asserting that the Applicant was the deemed manufacturer of the 2006 bathroom mat sets and the additional mats;

   (c)    falsely asserting that the 2006 bathroom mat sets and additional mats had, the approval of, or affiliation with, the Applicant;

   (d)    without any authorisation from the Applicant, using the words and numbers: “The Ridge Trading Pty Ltd” on the 2006 bathroom mat sets, the additional mats and/or the plastic packaging to the bathroom mat sets and the additional mats.

   (e)    without any authorisation from the Applicant using the Item No. MT2-303 and MT2-292 and the Bar Codes bearing the number “933831200” on the 2006 bathroom mat sets, the additional mats and/or the plastic packaging to the bathroom mat sets and the additional mats.

7. Statement of Claim, paragraph 22 (marked 8 on page 4):

   The Applicant suffered, or is likely to suffer, loss or damage by the conduct of the first and second Respondents in contravention of section 52 of the TPA.

   Particulars

   (a) 18,900 bathroom mat sets imported by the first Respondent and the second Respondents x lost revenue of $2.98 per set = $56,322.00

   (b)  $11,370 additional mats imported by the first and the second Respondents x lost revenue of $2.98 per mat = $33,882.60

   Defence: The Respondents deny the entitlement of the Applicant to any of the relief sought.

8. Statement of Claim, paragraph 23 (marked 9 on page 4):

   The Applicant claims:

   (a) damages pursuant to section 82 of the TPA in the amount of $90,204.60;

   (b)    interest on damages recovered pursuant to Federal Court Rules Order 35 Rule 8;

   (c)     That the First Respondent and the second Respondent by themselves, their servants and/or agents be restrained from selling, offering or exposing for sale, distributing and/or marketing in Australia any bathroom mat sets or any mats bearing the name The Ridge Trading Pty Ltd and/or Product Bar Code 933831200 on the products or on any packaging of those products.

   (d)    That the First Respondent and the second Respondent by themselves, their servants and/or agents be restrained from passing off bathroom mat sets or any mats which are not connected in the course of trade with the Applicant, as products distributed by the Applicant.

   (e)     That the First Respondent and the second Respondent delivery up on oath to the Applicant or its nominated agent for destruction all bathroom mat sets or any mats which are not connected in the course of trade with the Applicant, as products distributed by the Applicant.

   (f) costs.

   Defence: XXXX

   In the premises the Respondents deny the entitlement of the Applicant to any of the relief sought in paragraph 9 (where it appears on page 4 of the Statement of Claim).

Applicant’s Exhibits

i)A1 – Affidavit of Hudson Lu (4/08/08)

ii)A2 – Letter: Luminous Legal to Cumberland Frank Lawyers (7/02/07)

iii)A3 – Bathmat – Red

iv)A3 – Bathmat – Brown

v)A3 – Bathmat – Blue

vi)A3 – Bathmat – Green

vii)A4 – Bathmat – Pink

viii)A5 – Bathmat – Pink

ix)A6 – Bathmat – Blue

x)A7 – Bathmat – Striped, invoice

xi)A8 – Bathmat – Brown, invoice

xii)A9 – Bathmat – Pink, invoice

xiii)A10 – Bathmat – Pink, invoice

xiv)A11 – Bathmat – Brown, invoice

xv)A12 – Photos x 2: Label, Mat

xvi)A13 – Cardboard label for bathmat

xvii)A14 – bundle of documents

xviii)A15 – documents x 3

xix)A16 – Invoice dated 5/01/06

xx)A17 – Tax invoice (JC Export and Import) No. 484

xxi)A18 – Photocopy Tax Invoice – Budget Beaters (26/05/06)

xxii)A19 Invoice – JC Export & Import No. 229 and 387

xxiii)A20 Photocopy tax invoice – Teks (26/05/06)

xxiv)A21 – Invoice –  JC Export and Best Bargain (5/12/05)

xxv)A22 – Receipt – Best Bargain (2/05/06)

xxvi)A23 – Letter – Best Bargain to Oakfair Lawyers (12/05/06)

xxvii)A24 – Invoice : JC Export (7/03/06)

xxviii)A25 – Invoice: Hot Price (04/04/08)

xxix)A26 – JC Export invoice: Shopping Paradise, Rockdale (3/02/06).

xxx)A27 – Rockdale Shopping Paradise receipt (3/04/06)

xxxi)A29 – Letter – Oakfair Lawyers to Rockdale Shopping Paradise receipt (3/04/06)

xxxii)A30 – Notice to Produce: To JC Export & ZC Huang

xxxiii)A31 – Letter: Gray & Perkins to Luminous Legal (2/08/08)

xxxiv)A32 – Letter: Oakfair Lawyers to JC Export (4/05/06)

xxxv)A33 – List of documents

xxxvi)A34 – List of documents

xxxvii)A35 – DIMIA documentation

xxxviii)A36 – DIMIA documentation – Subpoena for production

xxxix)A37 – Statement of Mr Guan (Liang-De) November 2006, January 2007 (in Mandarin)

xl)A38 – Photographs – colour of the bathmats

xli)A39 – Application to remain permanently in Australia

Respondent’s Exhibits

xlii)R1 – Envelope – Subpoenaed material

xliii)R2 – Covering letter & Notice to Produce (21/07/08)

xliv)R3 – Photos x 2

xlv)R4 – Photograph

xlvi)R5 – Chocolate brown set – photos x 2

xlvii)R6 – Packaging x 2 photos

xlviii)R7 – Shipping agreement

xlix)R8 – Foreign exchange document: R8 (1); (2); (3); (4); (5)

l)R9 – Sales contracts x 3

li)R10 – Original receipts x 6

lii)R11 – TT application (29/11/05)

liii)R12 – Transaction invoice with translation (5/01/2007)

liv)R13 – Affidavits of Ms R. Jin (2 Copies)

lv)R14 – Letter: Oakfair Lawyers (05/06/06)

lvi)R15 – Statement of Liang De Guan (4/08/08)

lvii)R17 – Affidavit of Mr Huang with paginated bundle of documents (14/02/08)

lviii)R18 – Affidavit of Huang Zhen Qing (28/07/08)

The Applicant’s case

1. Mr Moschoudis indicates that Ridge Trading imported and distributed a wide range of products including bathmats. Ridge Trading obtained approval for a unique bar code, 93831200, to be affixed to these bathroom mat ensembles. The ensembles were purchased from LongHua carpets who in turn commissioned their manufacturer by Xia Jing in China. Details of this relationship are not before the Court and do not appear to be material to the proceeding as a whole. As neither LongHua carpets or Xiao Jing are present or represented in Australia by definition pursuant to s.74(3) of the Act, Ridge Trading is deemed to be manufacturer of these ensembles. JC Exports is an Australian incorporated company and is involved in trade and commerce for the purposes of the Act.

2. Mr Zhen Quing Huang is the sole director and manager of JC Export and has control of the company.  Mr Huang claims that between 1 March and 2 August 2005 the Ridge Trading sold to JC Exports 12,690 genuine bathmat ensembles from the Ridge Trading (11,210 ensembles purchased were admitted by JC Exports however this discrepancy does not appear to be material).  It is claimed that on 11 August 2005 JC Exports purchased 9,900 bathmats and on 9 April 2006, 9,000 bathmats from a supplier other than Ridge Trading.

3. It is submitted that the second Respondent, Mr Huang, denies that he sold or distributed any bathroom mat ensembles supplied by Ridge Trading.  The gravamen is that the mats that were sold by Mr Huang were packaged in such a way that appears similar to the mats and packaging of Ridge Trading to such an extent where not only was it similar but it bore the name of Ridge Trading on the packaging.

Evidence of Mr Yao

1. Mr Yao is the managing director of the Applicant company in these proceedings.  The company operates a wholesale business, supplying a variety of homeware products to grocery stores, hardware shops and other retail stores in Victoria and New South Wales.  Mr Yao prepared, deposed and filed three affidavits which were read and relied upon being:

   i)23 June 2006 (first affidavit of Mr Yao);

   ii)21 February 2007 (second affidavit of Mr Yao); and

   iii)21 October 2007 (third affidavit of Mr Yao).

   Mr Yao gave sworn evidence via a Mandarin – English interpreter and was cross-examined in relation to these affidavits.

2. Mr Yao gave evidence that the printhead (second affidavit of Mr Yao, Annexure D) which became Exhibit A13 was the printhead supplied by Mr Liang De Guan on behalf of J C Exports and Imports.  Mr Yao said in his affidavit at (11)(b):

   The printhead enclosed with the certificate of Mr Zhao was signed by Mr Zhao and Mr Caoyang Liu (Mr Zhao’s son in law).  I have examined the printhead; the writing on the printhead clearly reads “THE RIDGE TRADING PTY LTD”; the barcode number is the same as the barcode registered and used by the Applicant on its brand of bathroom mats.  It is identical to the print head on the bathroom mat sets originally sold by the Applicant to the First Respondent.

3. Mr Yao, in his second affidavit, indicated that he made enquiries with the Jiangshu Province Suqian City Industry and Commerce and the Bureau concerning the alleged copying of his bathmat ensembles and the protection of his company’s legal rights.  He indicates that on 5 December 2006 he travelled to China and visited the Bureau.  He states that he provided the officials with Ridge’s Trading’s ASIC registration documents, documents relating to Ridge Trading’s exclusive barcodes and sample bathmats manufactured for and distributed by his company.  The Bureau was also supplied with samples of the alleged copied bathmats. 

4. Mr Yao states that on 14 December, he accompanied Bureau Officials on an inspection of the offices of LongHua Carpets.  During the visit he states that he observed that Mr Long Zhao, the Managing Director of LongHua Carpets provided the Bureau Officials with certain documentation.  Part of the documentation concerned contracts between LongHua Carpets and JC Exports.  Copies of these documents are attached to the second affidavit of Mr Yao and are identified as Annexure “E”. 

Evidence of Mr Long Zhao

1. Mr Long Zhao is the managing director of LongHua Carpet Ltd (“LongHua”). Mr Long Zhao resides in Shunhe Town, Suyu District, Jiang Su Province in China.  Mr Long Zhao prepared, deposed and filed one affidavit:

   i)1 April 2008 (affidavit of Mr Long Zhao)

   which was read into evidence.  Mr Long Zhao attended Court and gave evidence via a Mandarin – English interpreter and was cross-examined.

2. Mr Long Zhao had in his possession documentation which he had brought from China.  He explained under oath that strict Chinese regulations governed the retention of such documents and that he would not permit the documents to be removed from his possession.  He did agree to the photocopying of select pages provided he was present during that process and that the documents were not disassembled in order to undertake the photocopying process.

Evidence of Ruijuan Jin

1. Ms Ruijuan Jin, a customer service consultant and a friend of Mr Ru Ming Yao, prepared, deposed and filed the following two affidavits:

   i)14 August 2007; and

   ii)21 October 2007.

   These affidavits were read into evidence.  Ms Jin gave evidence on 8 December 2008 via the medium of a Mandarin – English interpreter.

Evidence of other witnesses subpoenaed by the Applicant

1. Mr Hudson Lu, solicitor for the Applicant, sought to obtain witness statements and affidavits from the respective proprietors of the establishments from which Mr Yao and Ms Ruijuian Jin purchased bathmat ensembles.  All these parties declined this invitation from Mr Lu excludingt Mr Chi Kwun Lui the director of NK Variety (Australia) Pty Ltd, and consequently an application was placed before the Court seeking an order to issue subpoenas to the following parties:

   a)NK Variety (Australia) Pty Ltd;

   b)Mainleading Pty Ltd;

   c)Hot Price Pty Ltd;

   d)TEK’s Gift and Things Pty Ltd;

   e)Oljay Karacoban;

   f)Sabrina Gao;

   g)Hui Lang Huia; and

   h)Cai Yun Shao.

   Details of the evidence given by these various parties is referred to below under the relevant exhibit number.  The affidavit of Mr Chi Kwun Lui, was deposed 5 December 2008 and filed in Court on 9 December 2008, was read into evidence.

Exhibits A3 Blue, A3 Brown, A3 Burgundy and A3 Green [X]

1. The genuine Ridge Trading bathroom mat ensembles are supplied in four colours being blue, brown, burgundy and green and can be identified by the unique item number and barcode reference:

   a)Blue          – MT2- 303- 9338312001516 (Exhibit A3 – Blue)

   b)Brown      – MT2- 221- 9338312001523 (Exhibit A3 – Brown)

   c)Burgundy – MT2- 379- 9338312001509 (Exhibit A3 – Burgundy)

   d)Green       – MT2- 292- 9338312001530  (Exhibit A3 – Green)

2. Mr Yao tendered four bathmat sets in the original Ridge Trading colours.  Contained in these bathmat sets are two mats.  The larger of the two mats can be described a floral designed bathmat approximately 65cm x 40cm with a 4cm fringe.  The second bathmat is approximately 40cm x 40cm with a semi-circle removed from one side to fit around the base of a conventional bathroom toilet.  This mat has a fringe of three sides but not on the cut-out side.  These two mats are packaged with a cardboard coloured printhead and a plastic hanger similar to a conventional coat hanger. This printhead is attached to the mat by three plastic fasteners.  All of this is contained within a clear plastic bag and this complete package including the mats and the packaging will be referred to as “Bathroom Mat Ensembles”.  The printhead which is printed in numerous colours carries a heading “Home Fashions” and below that “Deluxe Bathroom Set”. 

3. The back of the printhead also carries the title “Home Fashions” and a 7cm x 8cm white box which carries the following message

   Gentle Warm Machine Wash

   Or Hand Wash

   Do Not Bleach

   Dry In Shade

   Do Not Dry Clean

   THE RIDGE TRADING PTY LTD

   Item No. MT2 - XXX

   Barcode 933831200XXXX

   [four washing instruction symbols]

    
    

Exhibit A4 Pink X

1. This is an alleged non-genuine bathmat ensemble which was purchased from C.Y. Shao & A.Y. Shi trading as Budget Beaters of 283A Liverpool Road, Ashfield NSW on 12 March 2006 at 14:13 for an amount of $9.99.  The proprietors of the firm declined to prepare an affidavit at the request of the Applicant solicitors and consequently a subpoena to give evidence and produce documents was issued. Mrs Cai Yun Shao answered the subpoena to give evidence and produce documents.  Evidence in cross-examination was conducted via a Mandarin – English translator.  Her evidence was that the mats were nothing special.  They were just normal toilet mats. The name Ridge Trading and the cardboard attached to the mats meant nothing to her.

2. A distinguishing quality of this ensemble is that it is pink (not a colour in the genuine range).  The number MT2-303 and barcode 9338312001516 appear on this ensemble which is the code that is used to identify the blue mats in the genuine range (i.e. Exhibit A3 Blue).

Exhibit A5 Pink X

1. This is an alleged non-genuine floral pink coloured bathmat that does not have a print head or hanger.  This mat was purchased from Budget Beaters.  The purchase price was $9.99.

Exhibit A6 Blue X

1. This is an alleged non-genuine floral bathroom mat ensemble coloured blue.  This mat was purchased from TEK’s Gifts & Things Pty Ltd of 244 Liverpool Road, Ashfield NSW 2131 on 26 May 2006 for $12.99.  The proprietors of the firm declined to prepare an affidavit at the request of the Applicant’s solicitors and consequently a subpoena to give evidence and produce documents was issued.  Mr Oljay Karacoban answered the subpoena to produce documents and gave evidence.  In cross examination Mr Karacoban stated that he sold bathroom mats from 15-20 different companies and that the name Ridge Trading meant nothing to him.  Further the packaging was generic and there was nothing special about the floral mats that he had sold.

2. The information panel on the rear of the header board contains the item number MT2-292 and the mat has the barcode 9338312001530.  Neither the item number nor the barcode match the corresponding identification codes on the genuine bathroom mat ensembles.  It is also noted that the colour blue on this exhibit is different from that of the genuine item.

Exhibit A7 X

1. This mat was purchased from Main Leading Pty Ltd, trading as Rockdale Shopping Paradise, 507 Princes Highway, Rockdale NSW 2216 on 3 April 2006. The proprietors of the firm declined to prepare an affidavit at the request of the Applicant’s solicitors and consequently a subpoena to give evidence and produce documents was issued.  Mr Jason Zhu answered the subpoena, produced documents and gave evidence in cross-examination through a Mandarin – English translator.  No comparable mat was tendered by Ridge Trading in these proceedings and does not produce this type of mat.

1. This is a single mat identified as blue and brown with vertical stripes however, the printhead that is attached to this mat is of the same get-up as the printheads used on the genuine bathroom mat ensembles manufactured for Ridge Trading.  Although it is a single mat, it is packaged in the same manner in a plastic bag on a hanger and includes a printhead.  However, the plastic pin mechanism used on the genuine mats is different.

2. The information panel on the rear of the header board contains the item number MT2-303 and the barcode 9338312001516 which are the identifying traits for blue mats in the genuine range (i.e. Exhibit A3 – Blue).

Exhibit A8 Brown X

1. This is an alleged non-genuine floral bathmat ensemble coloured brown.  This mat was purchased from N. K. Variety (Australia) Pty Ltd trading as The Discounters of 92 Queens St, St Marys NSW 2760 on 4 April 2006 for $9.95. The proprietors of the firm declined to prepare an affidavit at the request of the Applicant’s solicitors and consequently a subpoena to give evidence and produce documents was issued to the proper officer.  Chai Fung LUI answered the subpoena, produced documents, and gave evidence in cross-examination via a Mandarin – English translator.

2. The information panel on the rear of the header board contains item number MT 2-303 and barcode 9338312001516 which again is the identifying trait of the blue mats in the genuine range (i.e. Exhibit A3 – Blue).

Exhibit A9 Pink X

1. This is an alleged non-genuine bathmat ensemble coloured pink. This mat was purchased from NK Variety (Australia) Pty Ltd. The Discounters of St Marys on the 4 May 2006 for $9.95. The information panel on the rear of the header board has been partly removed which leaves the washing instructions but removes the company name, item number and barcode. Evidence was heard that the retailer removed part of the information panel after receiving the letter from Oakfair Lawyers which is reproduced above at paragraph [13].

Exhibit A10 Pink X

1. This is an alleged non-genuine floral bathmat ensemble coloured pink. This mat was purchased from Hot Price Pty Ltd of 17-19 Queens Street, St Marys NSW 2760 on 4 April 2006 for $11.99. The proprietors of the firm declined to prepare an affidavit at the request of the Applicant’s solicitors and consequently a subpoena to give evidence and produce documents was issued.  Ms Li Xia Liu answered the subpoena, produced documents and gave evidence through the medium of a Mandarin – English interpreter.  The information panel on the rear header board contains item number MT2-303 which again are the identifying traits for blue mats in the genuine range (i.e. Exhibit A3 – Blue).

2. In cross examination Mr Li Xia Liu stated that he sold many different types of mats and there were many different floral designs.  His evidence was that there was nothing special about the particular floral mats distributed by Ridge Trading.  When asked whether the brand meant anything to him he indicated that he never looked at the brand.  He stated that the Home Fashions design meant nothing to him and as for the name Ridge Trading he said that he did not pay much attention to it.

Exhibit A11 Brown X

1. This is an alleged non-genuine floral bathmat ensemble coloured brown. This bath mat was purchased from Sabrina GOA trading as Best Bargains of Shop 30G, Roselands Centre, Roselands NSW 2196 on 2 May 2009 for $12.00. The proprietors of the firm declined to prepare an affidavit at the request of the Applicant’s solicitors and consequently a subpoena to give evidence and produce documents was issued.  Hui Ling Qian answered the subpoena, produced documents and gave evidence via the medium of a Mandarin – English translator.   

2. The information panel on the rear of the header board contains item number MT2-303 and the barcode 93338312001516 which again are the identifying traits of the blue mats in the genuine range (i.e. Exhibit A3 – Blue).

The Applicant’s submissions

1. Mr Moschoudis indicated that he relies upon the Statement of Claim which sets out in detail the Ridge Trading’s allegations against both JC Exports and Mr Huang.

2. Mr Moschoudis submits that the issues include: the copying of the bathmats themselves; the printheads; the colours that were used; the item numbers and barcodes. All of these characteristics form part of the entire ensemble. The gravamen of the misleading and deceptive conduct is the entire ensemble which results in conduct that would be misleading and deceptive, or likely to mislead or deceive in contravention of s.52 of the Act. Damages are sought (pursuant to s.82) in the figure of $92,204.60 together with certain restraining orders.

3. Mr Moschoudis also relies on the Defence dated 7 September 2006 and signed by Mr Andrew Franks, the then solicitor of JC Exports filed 10 November 2006.  This contains a number of admissions by Mr Huang.  Importantly, it contains the denial that Mr Huang had sold or distributed any bathroom mat sets supplied by Ridge Trading that were packaged in cartons containing 12 ensembles, not the standard 15 as packaged by Ridge Trading.  It is argued that there were mats sold by JC Exports were packaged in such a way that appeared similar to the mats and packaging of Ridge Trading and the name Ridge Trading also appeared on those packages. 

4. The Statement of Claim (paragraph [11], [22] above]) identifies various retailers that are customers of JC Exports and this is admitted.  The Respondents acknowledge that these stores were customers of JC Exports to whom it had sold a range of products imported from China including bathmats from the Ridge Trading.

5. It is submitted that Mr Yao’s evidence shows that bathmat sets (purchased in 2006) were not sold to JC Exports by Ridge Trading.  These mats can be distinguished from the Ridge Trading’s range because of the extra colours (ie pink and a different shade of blue) in existence and the incorrect item numbers and barcodes.

6. At paragraph [14] in the Response (at [24] above) it states:

   14.  In further answer to the allegations in the Yao affidavit as a whole, the Respondents say that at no stage had they sold or otherwise distributed any bathroom mats or sets that bear the Applicant’s name and / or any product barcode registered by and to the Applicant that was not purchased or distributed from the Applicant.

7. It is submitted that the above assertion stands contrary to the evidence that was before this Court.  It is noted that there is a single mat to which is attached a print head associated with Ridge Trading and it clearly was not purchased from Ridge Trading as single bathmats (Exhibit A7X) were not part of Ridge Trading’s product range.  That mat which contains the print head associated with Ridge Trading is contrary to the pleadings that have been made in relation to the above Response.

8. Mr Moschoudis drew the Court’s attention to the inconsistencies in the Respondent’s pleadings. The Respondents admit the purchase of bathroom mats from a supplier than other than the Applicant and state that none of these mats bore any physical resemblance to the Applicant’s bathmat sets (Defence at paragraph [7] (at [20] above). However, in the Response filed in Court on the 8 September 2006 at paragraph [12], Mr Huang is alleged to have said to Mr Yao words to the following effect

   “I never bought bathmats from any other source than you. If the shop sells bathmats from me the bathmats must be from you originally.” (Response, paragraph 12).

9. In answer to paragraph [11] of the Statement of Claim (at [22] above) the Respondents state:

   11a) Say that the first Respondent has sold bathmat sets sourced from the Applicant to various retailers, including three of the retailers referred to therein (NK Variety (Australia Pty Ltd) t/as the Discounters, Ms Sabrina Gao t/as Best Bargains and TEK’s Gifts & Things Pty Ltd but not the other individual retailers referred to in clause 11).

10. This is contrary to the evidence that despite the mats being sold to only three retailers they were sold to a greater number as identified in paragraph [11] of the Statement of Claim.

11. Further, the Defence states:

    11b) deny that, except in the case of the bathroom mat sets sourced from the Applicant, any of the mats sold or any physical resemblance to any of the bathroom mat sets of the Applicant.

    This is contrary to what Mr Zhen Qing Huang asserted in his evidence.

12. In paragraph [11] of the Statement of Claim, the Respondents deny having used the barcode belonging to Ridge Trading.  It is argued that this is contrary to the evidence as not only was it used on the bathmat ensembles but even on the single mats that were tendered into evidence (Exhibit A7X).  Similarly the packaging used on the copied mats is exactly the same as that used by Ridge Trading being a particular plastic pin in three locations, printhead and plastic packaging open at one end.  This is established by mere visual observation. 

13. The claim in paragraph [12] of the Defence (at [23] above) again denies the use of the printheads and the bar codes. This was repeated in paragraph [13]. Exhibit A13 is the print head that was obtained from the LongHua Carpet factory, signed by Mr Long Zhao. Mr Long Zhao in his evidence before the Court confirmed his signature and that the article was sourced from his factory in China. That print head shows the item number in MT2-303 and barcode 9338312001516 which is the number that appears on the alleged copied mats identified as:

    i)A6 Blue X

    ii)A7

    iii)A8 Brown X

    iv)A9 Pink X

    v)A10 Pink X

    vi)A11 Brown X.  It is noted that the presence of the three fixing holes on the printed printhead suggests that it may have been attached to a mat but subsequently removed.

14. Mr Moschoudis invites the Court to compare the colours on both the bathmats and the print heads of the genuine bathmat ensembles, Exhibit A3, blue, brown, burgundy and green with that of the copied bathmats (exhibits A4, A5, A6, A7, A8, A9, A10 and A11).  It is submitted that the similarity to these two groups supports the proposition that LongHua Carpets did actually reproduce the bathroom mat sets.  Significantly, LongHua Carpets were commissioned to produce all of these relevant bathroom mats.  JC Export’s own evidence is that LongHua was the company commissioned to produce bathmats.   

15. Consequently it is not surprising that an item such as Exhibit A13 was found at the LongHua factory and that it would be a probable expectation that such an item would be found where the copying was taking place.  Mr Long Zhao’s evidence is that JC Export had given the printed head board, one similar to Exhibit A13 to LongHua Carpet Company to utilise for further copying.  Mr Moschoudis refers the Court to Mr Yao’s second affidavit at paragraph [10]:

    During the visit by the Bureau Officials Mr Zhao Long said to me words to the effect: all mats are ordered by JC Export & Import Ltd of Australia.  The mats all use the colour print board of the Ridge Trading Pty Ltd supplied by JC Export & import Pty Ltd.  The colour print head was supplied to us by Mr Guan who was the representative of JC Export & Import Pty Ltd in China.

16. Mr Liang De Guan, the middle man, is the representative of JC Exports.  He gave evidence that he signed the contracts as he was authorised by JC Export to sign on the organisation’s behalf.  As the representative of JC Export, he approached LongHua Carpets to produce fake mats and this is supported by the statement made by Mr LongHua Carpets set out above in Mr Yao’s affidavit.  Mr Yao’s uncontested affidavit at [11(a)] states:

    …the certificate states that 30,585 mats were produced by Long Hua and sold to the first Respondent. 

17. Mr Moschoudis referred the Court to Mr Yao’s second affidavit and the annexures (Exhibit A14).  Within that bundle are the following documents:

    a)This is an industrial Product Purchase Agreement for two bathmats with a reference to “pink” mats.  It also has a reference to cost per unit and delivery.  The agreement was signed on 28 November 2005.  Also within the agreement is a reference to the responsibility and packaging which requires: “15cents per box, 1 plastic bag, 1 plastic, 1 colour print on each set.  Ownership of goods shall transfer on delivery. Type and date of delivery. Packaged by seller into containers.  30% deposit in advance. Balance on delivery”.  On the following page, there are details of the seller and purchaser identifying JC Exports as the purchasing corporation. (Page 3 in mandarin, p.5 in English translation)

    b)This is a further industrial Product Purchase Agreement for bathmat sets and this order also makes reference to “pink” mats.  LongHua Carpets supplies the mats and packaging which is 15 sets per box with each mat set contained in one plastic bag and a colour print head for each set. (Page 6 in Mandarin, p.7 in English translation)

    c)This is a copy of an account book and this particular account book with reference to $9,900 sets of two piece mats forwarded by Liang De Guan from Sydney being the representative of JC Export.  The price of those particular items and the relevant tax payable on those items is 157,383.65 YUAN.  (Page 9 in Mandarin, p.10  in English translation)

    d)This document is titled Pick Up document which records 9,900 synthetic mats with a reference to cubic metres and an on shore price being USD$19,305.  The receiver is recorded as JC Pty Ltd Australia. (Page 11 in Mandarin, p.12 English translation)

    e)This document is a record sheet produced by Mr Long Zhao of LongHua Carpets.  It is addressed to the purchaser JC Export & Import Pty Ltd and the price recorded in US$.  (Page 13 in Mandarin, p.14 English translation)

    f)This document is an account book and is dated 31 March 2006 and contains a reference to the second shipment. (Page 15 in Mandarin, p.16 in English translation). 

    g)This document is a pick up docket reference to JC Pty Ltd with a currency payment of $US17,607.00. (Page 17 Mandarin, p.18 English translation)

    h)This document is a record sheet for the second shipment with the seller as LongHua Carpet Co and purchaser of JC Exports.  (Page 19 Mandarin, p.20 English translation)

    i)This document is from the account book produced by Mr Long Zhao of LongHua Carpets for 9,000 bathroom mat sets for Australia totalling 507.32 m2.  (Page 21 in Mandarin, p.22 English translation)

    j)This document is a pick up document for 9,000 bath mat sets.  (Page 23 Mandarin, p.24 English translation)

    k)This document is a record sheet for 9,000 bathroom mat sets.  (Page 25 Mandarin, p.26 English translation)

18. Mr Moschoudis submits that these documents establish that two contracts were produced by Mr Long Zhao and represent the general documents for these purchases in shipments.  Other contracts (in existence) that have been produced are not genuine.  To support the contention that the documents are genuine they are sourced from Mr Long Zhao, representing LongHua Carpets who came to Australia and gave evidence which is corroborative to establish the proposition that the two contracts relied upon by the Applicant are genuine. 

19. There is no evidence to support the proposition that the three contracts produced by JC Export are genuine.  This argument was advanced in the context that during these proceedings when a Notice to Produce was issued to JC Exports calling for the three Industrial Product Purchase Agreements.  However, they were produced subsequently after Mr Yao’s affidavit detailing his trip to China and meeting with Mr Long Zhao at LongHua carpets and the location of two genuine contracts handed to the Bureau Officials.  Copies were then provided to Mr Yao which are the attachments to Exhibit A14 referred to above.

20. Mr Moschoudis drew the Court’s attention to the Notice to Produce issued by Ridge Trading pursuant to r.15.24 of the Federal Magistrates Court Rules 2001 (Cth) (Exhibit A30). That Notice required the Respondents in these proceedings to produce the following documents on 4 August 2008 at the hearing of this matter. The significant requests were:

    1. Original copies of a) bank statements; b) money transfer slips; c) receipts; d)bank notification; e) bank deposit slips; and f) any other documents between the period of 1 April 2005 and 31 December 2006 relating to: a)the payment of bathroom mats and /or mats and /or bathroom mat sets to Long Hua Carpet Co in Suqian in China by JC Export and Import Pty Ltd; and b) any refund of money from LongHua Carpet Co to JC Export & Import Pty Ltd.

    2. Original and / or copies of all documents, records and computer files pertaining to the ordering and / or receiving of bathroom mats and / or bathroom mat sets by JC Export & Import Pty Ltd and / or Zhen Quing Huan from the LongHua Carpet Co Ltd and / or any other bathroom mats or bathroom mat sets supplier between the period of 1 April 2005 and 30 June 2006 including but not limited to: a) Agreements; b) Faxes; c) Emails; d) Correspondences; e) Contracts; f) Invoices; g) Order form; h) Receipts; i) Delivery dockets; and j) Custom records.

    3. Original and / or copies of all documents, records and computer files pertaining to the supplying to and /or ordering from customers of JC Export & Import Pty Ltd of bathroom mats and /or bathroom mat sets between the period of 1 January 2005 and 30 June 2006 including but not limited to: a) Agreements; b) Faxes; c) Emails; d) Correspondence; e)Contracts; f) Invoices; g) Order form; h) Receipts; and i) Delivery dockets.

    4. Original and / or copies of all documents, records, computer files pertaining to the design and / or manufacture of bathroom mats or bathroom mat sets by JC Export and Import Pty Ltd between 1 January 2005 and 30 June 2006 but not limited to: a) design board; b) design photos; c) schematics; d) blue prints; e) patterns; f) sketches; and g) concept drawing.

21. There were two replies to the Notice to Produce and neither of those replies made any reference to the three contracts (Exhibit A31).  Mr Zhen Qing Huang and Mr Liang De Guan gave evidence in respect of these reports.  Mr Liang De Guan indicated he was unable to produce the documents.  In his evidence he indicated that they were located at his residence in Shanghai but when he was granted time to recover these documents and bring them to Court he declined to do so.  Mr Zhen Qing Huang produced documents and subsequently Mr Moschoudis claimed that they were fake.  It was submitted that there was no evidence produced by JC Exports or by Mr Zhen Qing Huang to support the assertions being made by them in Court.  There were no sample mats and no contracts in support.  Mr Long Zhao indicated that Mr Liang De Guan was not an agent for his corporation as Mr Long Zhao had indicated in his evidence that a certificate would need to be issued to verify this agency relationship.

The Respondents’ Case

1. Mr Bolster has refuted the Applicant’s claims on the following three bases.  Firstly, the copying allegation is denied.  Secondly, reputation is not established by the Ridge Trading and therefore a case for passing off is flawed.  Thirdly, there is no evidence from Mr Yao as to any decline in his sales as a result of the alleged contravention and therefore the Applicant’s claim for damages must fail.  No evidence as to Ridge Trading’s financial performance over the relevant period has been provided.

2. Mr Bolster submits that the Ridge Trading’s product identified as ‘Home Fashions – deluxe bathroom sets’ were not recognised by each of the retailers called as witnesses and cross-examined on this issue. Furthermore, the design of the mats was not distinguishable to any of those witnesses nor did the packaging nor the barcodes mean anything to them. There is no evidence establishing that the retailers could be misled as an identifiable reputation is not apparent and therefore pursuant to s.52 the passing off action must fail.

1. Mr Bolster submits in respect to the claim of damages, there is no evidence from Mr Yao as to any decline in sales as a result of the alleged contravention.  Mr Yao has not put on evidence as to his company’s financial performance over the course of the period of the alleged contravention.  There is no evidence as to what his cost base is and what his margin is on a particular mat.  Mr Yao states that he bought his mats in China for less than $1.00 but that evidence is tenuous and unsatisfactorily particularised. 

2. Mr Bolster argues in the Statement of Claim at paragraph [22] (at [29] above) the particularised loss per mat sets was $2.98 which would have been sales revenue had the Respondents not imported the mats themselves.

Evidence of Zhen Qing Huang

1. Mr Zhen Qing Huang, known as Steven Huang, is the sole director, shareholder and has the management and control of JC Exports which is wholesale distribution service operating out of the premises at 10/14 Childs Road, Chipping Norton, NSW. The principle business of the company was the importing and wholesaling of clothing mostly from China.  The company also sold many other products from time to time as well as bathmats.  Mr Zhen Qing Huang prepared, deposed and filed two affidavits which were read and relied upon being

   i)14 February 2008 (Exhibit R17) (first affidavit of Mr Zhen Qing Huang)

   ii)28 July 2008 (Exhibit R18) (second affidavit of Mr Zhen Qing Huang)

   Mr Zhen Qing Huang gave sworn evidence via a Mandarin – English interpreter and was cross-examined.

Evidence of Liang De Guan

1. Mr Liang De Guan is the commercial agent of Shanghai in the Peoples’ Republic of China.  Mr Liang De Guan states that he is an agent for different manufacturers and he deals with various products depending on market needs.  He states that he is one of many agents working for LongHua Carpet Co. Limited.  Mr Liang De Guan prepared, deposed and filed the following affidavit:

   i)15 February 2008.

2. A statement of Liang De Guan affirmed 4 August 2008 (Exhibit R15) was also filed and read.  Mr Liang De Guan gave evidence via video-link from Shanghai and was assisted by a Mandarin – English interpreter.  Cross-examination was also conducted via this medium. Mr Liang De Guan indicated that he sold carpets to customers in South America, Malaysia and India that came from LongHua Carpet Co. Ltd in Sukian Jiangsu province. He states that he had been performing this function for about seven or eight years. He had sold a lot of carpets for LongHua Carpets and had dealt with Long Zhao and Cao Yong Liu at LongHua.

Principle submission

1. Mr Bolster submits that the preponderance of evidence is against the proposition that LongHua Carpets, at the request of Mr Zhen Qing Huang through the middle-man Mr Liang De Guan, manufactured bathroom mat ensembles that were copies of the Ridge Trading’s mats.  Seven issues are submitted in support of this contention which are:

   i)There is no satisfactory evidence that the mats made by LongHua Carpets in China were copies of the Ridge Trading mats.

   ii)The Ridge Trading transaction / invoice documents do not correlate with the objective documents, namely the shipment documents and various bank transfers.

   iii)No copied mats were found in the JC Exports’ factory / warehouse in Chipping Norton.

   iv)There is no satisfactory evidence that the copied mats are in fact copies.

   v)The events at LongHua Carpets in December 2007 are questionable.

   vi)Mr Long Zhao had a motive not to provide the Chinese Government Officials with the three authentic invoices that affect the transactions.

   vii)The commercial realities are against JC Exports copying mats identified by reference to the Applicant.

2. Mr Bolster submits that the evidence of Mr Long Zhao is crucial to this case as he was the person in the Applicant’s case who made the bathroom mat ensembles.  However, in his evidence, he did not identify the actual mats he made or expressly how many.  He did not produce the design of the mats, nor did he identify the mats by reference to those that Mr Yao had taken to China at the time that he visited LongHua Carpets with the government officials.  Mr Bolster contends that at the end of Mr Long Zhao’s evidence, the Court could not be satisfied as to what was made at LongHua Carpets was in fact floral two piece bathroom mat ensembles and of a kind a style that Mr Yao imported from China himself.  The gaps in the evidence are unexplained and the gaps in the evidence are things that one would have expected Mr Long Zhao to provide.

3. Mr Bolster referred to the decisions in Commercial Union Assurance Company of Australia Ltd v Ferrcon Pty Ltd & Anor (1991) 22 NSWLR 389; Cubillo & Anor v Commonwealth(No.2) [2000] FCA 1084; Zaccardi v Caunt [2008] NSWCA 202. Mr Bolster refers to these decisions in respect to the Jones & Dunkel (1959) 101 CLR 298 inference that can be drawn in these circumstances and goes so far as to extend where an affidavit on a particular topic could have been dealt with but does not. It is argued that the Court could infer that it would not have helped the parties who sought to rely on that evidence.

4. Mr Bolster submits that there is no satisfactory evidence that the alleged copied mats are in fact copies.  It is argued that there is an incredible gap in the evidence in respect of the copies that were found in Australia at the various Sydney retailers.  The only evidence that those mats are copies is the lay-man evidence of Mr Yao.  In his oral evidence he has indicated that the blue in the copy mats was different to the genuine mat.  The design is slightly different.  The colours are different.  However, there is no specific evidence about his colour charts and the process by which his mats were made and how the alleged copy mats were different from his genuine mats.

5. In respect to the number of mats that were imported from China, Mr Yao’s wife Tian Tang, said that there were so many imports that she could not remember the number of containers that had come in.  There was a question of quality control to which Mr Yao originally said that this was not undertaken. Ultimately, after being quite evasive about how many mats were in containers, he maintained that he could not give an estimate as to how many mats would be in any particular container.  He ultimately accepted that 95% of the mats that came in would never have been looked at.

6. Mr Bolster submits that this case concerns $1.00 toilet mats coming into Australia by the container load from a manufacturer in China and nothing has been provided in respect of their specification or manufacture.  No one has been called from the supplier about the process.  In particular, nothing was provided in relation to their design specification, how they source their colours and how their colours met specification. The evidence of Mr and Mrs Yao is that there was no efficient system to entitle Mr Yao to rule out the possibility that Exhibits A4 Pink X, A5X, A6 Blue X, A7, A8 Brown X, A9 Pink X, A10 Pink X and A11 Brown X are in fact copies.

7. Tian Tang’s evidence is that she did not open the boxes at all.  She said that each box had an item number and a bar code attached to it and there was no need to open the boxes as you did not need know what the colour was.  Exhibits R5 and R6, which were photos tendered on behalf of the Respondents, showed the relative size of the boxes.  These boxes contained 15 mats and showed the Ridge Trading name on the side of the box together with a Melbourne telephone number.   Mr Bolster indicated that the argument that he was seeking to develop concerned the gaps in every element of Ridge Trading’s case concerning copy and authenticity of the mats. 

8. Mr Bolster contends that the LongHua Carpet documents that were handed to the Chinese Government Officials and which formed the basis of Mr Long Zhao’s affidavit, Exhibit A14, are defective.  These are the Product Purchase Agreements which are central to this case.  Two of these have been produced by the Ridge Trading and three by JC Exports.  Mr Bolster contends that the JC Export documents are authentic while the two produced by Mr Yao are not.  The telling problem with the Ridge Trading accounts is that there is no Product Purchase Agreement for the first shipment.  The explanation advanced on behalf of Ridge Trading is that there was no first shipment.  Contrary to this, Mr Bolster submits that clearly there was a first shipment as to payments were made in June 2005. 

9. In Exhibit A14  at page 9 (with English translation at p10), there is an account book entry referring to the first shipment together with corresponding pick-up docket dated 31/8/2005 at page 11 (English translation at 12) and record sheet at page 13 (English translation at p14).  The record sheet is actually the export goods special invoice which is in English and appears to have been produced on a dot printer on a standard letterhead.  Mr Bolster argues that this supports the argument that there was a first shipment which was paid for.  The JC Export payment matches the amount of its Product Purchase Agreement for that first transaction. The amount paid matches the export goods special invoice and the other accounting documents. 

10. Mr Bolster raised the question as to why it was stated that there was no first shipment.  The problem for Mr Yao that having gone to LongHua Carpets and obtained the records which did not include a Product Purchase Agreement for the first shipment and no explanation has ever been sought or proffered by Mr Yao in respect of its absence.  Similarly, Liang De Guan was unable to produce contracts referrable to his early dealing on behalf of JC Export as the middle man for the LongHua Carpets and justified this failing by indicating that no such transaction existed.

11. In the second shipment, the objective documents are not under any dispute.  Exhibit A14 page 16 is the account book entry dated 31/3/2006 which is supported by the pick up docket (p17 and 18) and record sheet (p19 and p20). These documents are consistent with the second Product Purchase Agreement produced by JC Exports. 

12. Mr Bolster points to the criticism raised by Mr Moschoudis for the failure of JC Exports to produce all three of the Product Purchase Agreements in answer to the Notice to Produce issued in August 2008 (in Exhibit A30 and A31).  However, the weight of that criticism falls away as those documents have already found their way to the affidavits.

13. The key issue about the second shipment is that there were only 6,000 two piece sets.  The balance of this shipment were single colour or multicolour stripe mats, totalling 8000 units.  The problem is that the volumes contained in the third Product Purchase Agreements does not match the results specified in all of the other documents.  The LongHua Product Purchase Agreement does not match the LongHua exporting invoice or the pick up docket, nor does it match the shipping container documentation or the bills of lading.  It does not match the bank details or the payment details and there is no explanation provided for this discrepancy.  Towards the end of Mr LongHua’s cross examination, he tried to reconcile the differences in the documentation in respect of this shipment but was unable to explain the difference.  Exhibit A14, (p.16) shows that nothing is owing, but on Mr Long Zhao’s version US$2000.00 remains outstanding.

14. A similar theme develops throughout the third shipment with some added features.  Mr Long Zhao’s documentation shows that there were 5,940 two piece sets in that shipment, the balance being 3 piece sets.  Mr Bolster advances the question as to why LongHua Carpets was making three piece sets when there was no evidence that three piece sets were sold to JC Exports.  There is no evidence about any form of three piece sets being the subject of the claim before this Court.  This case has always been about two piece sets indicating that there is a significant error in the documentation.  Significantly, the replication of the blue colour of both the two piece and three piece sets is a significant issue. Exhibit R14 (p.7) is important as something is incorrect on that invoice.  The deep blue matting in both the two piece and three piece sets is repeated and it does not appear to be any explanation for this entry. 

15. A further anomaly in respect of this document is the statement at point (II):

    … 2. Manufacture in accordance with designs provided by the purchaser.

16. This raises the question that if this is the third transaction, why is there any need for this reference?  They already have the designs.  However the designs were not produced by Mr Long Zhao and he was no asked about them.  He never produced them and nothing has been said about them in the Ridge’s case.  They were not sighted at the LongHua Carpets, but they must have been in existence if this documentation is authentic.  On the argument advanced on behalf of Ridge Trading, this is the third time that JC Exports does business with LongHua Carpets but there is still reference to designs provided by the purchaser.  As this is manufactured in accordance with previous contracts, it is assumed that there would be a reference to that earlier production and that reference at point (ii) that would normally be contained in an agreement between parties.

17. A further inconsistency (X) other matters: refer to appendix

    V. packaging and packaging supply, 15 sets/box, one plastic bag, one plastic hook and a colour print for each set. (Refer to appendix for paper box label)

18. Mr Bolster draws the Court’s attention to the matter of the appendix which contains significant information in respect to Ridge Trading’s case but the appendix has not been produced and no explanation has been given for this failure.

19. Mr Bolster refers to Mr Yao’s trip to Shunbe Town, Suyu District, Jiang Su Province in China which is located between Shanghai and Beijing.  It is submitted that travelling such a distance is an extraordinary step considering that JC Exports’ Warehouse is located in Chipping Norton, a city suburb.

20. At the directions hearing on 8 September 2008 Mr Gibaro (counsel representing the Applicant at the time) sought orders granting the Applicant and their legal representatives leave to inspect the warehouse of JC Exports. The following order was made:

    1. The parties are granted leave to make an inspection of the Respondents’ Chipping Norton premises at 2:00pm on 8 September 2006.

    This was not pursued. 

21. Mr Bolster indicates that consequently there is no evidence tendered that JC Exports ever had any copied mats in the warehouse at that time. The extent of the evidence about copies of floral two piece bathroom mat sets is limited to the material found by Mr Yao in the stores that he visited (Statement of Claim, para. [11] at [22] above). Mr Bolster argued that those mats provide insufficient evidence to establish that the mats are counterfeited. Mr Yao in cross-examination confirms that his sworn affidavit which stated that he had sent a Vietnamese ‘friend’ ,Mr Hoan ,(first affidavit of Mr Yao, paragraph [6]) to visit the Chipping Norton warehouse to identify fake mats but he himself had taken no action to visit the warehouse. It is argued that this is the substantial gap in Ridge Trading’s case, on the basis that the allegation that JC Exports copied well in excess of 13,000 mats but has failed to indicate where they are, as none of them have been found in the possession of JC Exports or Zhen Qing Huang.

22. Mr Bolster submits that there are vastly different accounts from Mr Long Zhao and Mr Yao about what happened at LongHua Carpets in December 2007.  Mr Yao does not attest to any conversation with any person at LongHua Carpets.  He was there for three hours while Mr Long Zhao said that the visit from the Officers was no longer than an hour.  There were four Government Officials, two in uniforms who it is claimed dropped everything investigate LongHua Carpets the day after Mr Yao arrived from Australia with the copied mats in a suitcase. 

23. The case advanced on behalf of Ridge Trading was that there was no fore-warning of this visit. Mr Yao, in sworn evidence, said that Mr Long Zhao was very surprised to see the government officials. The only items that was discovered were the illegitimate Product Purchase Agreements (referred to at [99] – [104] above) and the colour printboard signed by Long Zhao (Exhibit A13). Significantly, there is the photograph taken by Mr Yao and tendered in evidence (Exhibit A12) which is not a two piece floral bathroom mat ensemble but rather a single blue mat that has been packaged in a plastic Ridge Trading Home Fashions – Deluxe Bathroom Mat Set printhead and hanger. The photograph of the mat was taken on a polished concrete/ terrazzo floor.

24. Mr Yao was accompanied by his Chinese lawyer, Mr Hua Wei Ye and his agent Mr Hong Liang Wan.  Four affidavits were filed and served in these proceedings but those affidavits were not read and the deponents were not called as witnesses.  In respect of the four Chinese Government Officials, there was no evidence from them. However the second affidavit of Mr Yao, paragraph [6], states that the day before the visit to LongHua Carpets he left a number of mats alleged to be fake and a number of printheads in custody.

25. When Mr Yao was questioned about the printboard, the dialogue was as follows:

    Bolster:  The only product you saw was the single mat you say was photographed and tendered as evidence yesterday?

    Yao: Yes. They bear by company’s name

    Bolster: You saw one mat with your company’s name, you took photos?

    Yao: Yes

    Bolster:  You did not get access to the mat?

    Yao:  I didn’t need access, I don’t need that mat.

    Bolster: Was the mat with Long Zhao?

    Yao:  Ask Long Zhao

    Bolster:  To the best of your knowledge?

    Yao:  Ask Long Zhao

26. Mr Yao agreed that he did not find any floral bathroom mat ensembles. Mr Long Zhao, on the other hand, said that there were a number of mats around and this evidence is contained in his affidavit at paragraph [9].

27. In respect to the status of the printboard, Long Zhao gave ambiguous evidence. Firstly, he indicated the colour printheads were supplied by Mr Liang De Guan from Shanghai.  Mr Long Zhao indicated that he gave it to the Bureau Officials during their visit.  It was stated that the printhead was removed from a leftover mat in the LongHua carpet factory.  That suggests that it was not given to Mr Long Zhao by Mr Liang De Guan.  The following evidence was given:

    Bolster:  The sample of that colour printboard was supplied by Mr Guan when he first came to LongHua

    Long Zhao: LongHua Carpets then printed the colourboard at a local print factory and annexed the colour boards to each single mat.

28. Mr Long Zhao indicated that when Mr Yao was at the factory there were some mats bearing the colour printboard which he showed to Mr Yao and Mr Yao took photographs of them.  Mr Bolster questioned whether the printboard is part of the copied mats or part of the authentic mats produced for Ridge Trading.  If it is a copy, there is not credible evidence as to why it is a copy.  There is no evidence to suggest that the cardboard is the same as used on the authentic mat ensembles.. Mr Long Zhao does not refer to mat sets at all in his affidavit evidence and his evidence does not go to resolving this issue.  All the original documents other than the one printboard discussed above were retained by the Bureau Officials.

29. Mr Bolster submits that there is a clear motive on behalf of Mr Long Zhao not to produce three authentic Product Purchase Agreements to the Chinese Government Officials.  Mr Long Zhao himself came to accept the proposition that exporters in China routinely overstate the price of their product and refund the difference to their offshore customers as a means of obtaining a taxation advantage.  The whole tenor of Mr Long Zhao’s evidence implied that was being done but he vigorously denied the prospect that this was being undertaken by his factory.  That was the motivating force behind his evidence given Mr Liang De Guan produced JC Export’s Product Purchase Agreements.

1. The shipment identified by Mr Yao (second affidavit of Mr Yao – Annexure E - photocopy of original and translation) in the JC Export Industrial Product Purchase Agreement dated 9 March 2006 is for both two and three piece bathroom mat sets (third shipment).  The agreement refers to 5,940 two piece sets in five colours and 3,060 three piece sets in the same five colours.  The three piece sets are identified as 40 x 50cm mats however none have been produced to the Court.  It is noted that the order for “deep blue” sets is duplicated for both two piece and three piece sets.  There are 9,000 pieces in total, total area of 6624.82m² and purchase price of USD18,774.00.

2. The Jiangsu Province City Export Goods – Special Invoice and the Industrial Product Purchase Agreement tendered by Mr Yao (Exhibit A14, pages 25 and 26, second affidavit of Mr Yao Annexure F page 13 and 14) refers to a total of 9,000 items as does the authentic purchase and sales contract for industrial goods issued by LongHua (Exhibit R9; affidavit of MR Long Zhao – Annexure A).  These figures match the number of items in the Bill of Lading for this shipment.

3. Significantly, the above agreements which refer to “Bathmats” with a total area of 5,073.2m with a CNN price of USD18,773.99 do not match the LongHua Carpets’ export invoice.  The unchallenged affidavit evidence (Exhibit R18) of Mr Zhen Qing Huang is that the total amount paid was US19,134.73 paid as USD6,543.73 on 13 March 2006 (second affidavit of Mr Zhen Qing Huang at [14] and [15] – Annexure H) and USD12,600 on 7 April 2006 (second affidavit of Mr Zhen Qing Huang at [16] and [17]-Annexure J).  Based on the assumption that the Industrial Product Purchase Agreement and supporting documents are correct then JC Export overpaid an amount of USD2,000 for this shipment.  Mr Long Zhao could not account for this discrepancy when cross examined on this issue.

4. The Industrial Product Purchase Agreement tendered by Mr YAO refers to a total of 9,000 items as does the authentic purchase of sales construct for industrial goods issued by LongHua (Exhibit R9).  This also matches the number of items in the Bill of Lading for this shipment.

5. Both of the Industrial Product Purchase Agreements tendered by Mr Yao (2^nd & 3^rd Shipments) refer to the following requirement:

   ii) Quality Standard: Unit felt weight 380G/M², based on purchases sampled

6. These samples were not placed in evidence nor is there any support materials. It is noted that if there were samples of both the two and three piece sets, there was no explanation provided as to why they were not produced to the Court.  Also, at no stage has there been a suggestion that Ridge Trading produced any three piece sets.  Mr Long Zhao gave no evidence about this and again, no three piece sets were ever identified or produced.  It is reasonable to expect LongHua Carpets had some of these three piece sets, particularly if the relationship was to continue, nor is there any suggestion from Mr Long Zhao that he had ever been asked to destroy the samples, designs or surplus product.

7. Thirdly, no alleged copied mats were found in JC Exports’ factory/warehouse at Chipping Norton. When that is viewed in the context of the steps taken by Mr Yao to travel to China to obtain evidence and send various friends and associates to various outlets in Sydney to buy the alleged copied mats, his failure to find any of the 30,000 mats that were said to be imported by JC Export and stored at the Chipping Norton warehouse is significant.

8. Fourthly, there is no satisfactory evidence that the alleged copied mats are in fact copies because:

   a)No evidence was led from Ridge Trading’s own manufacturer Tianjing Jianghua Xinke Carpet Co., Wuqing Huanxing Economic Area, Wu Qing, Tianjin China regarding the authenticity of the challenged mats;

   b)No evidence of the particular design which Mr Yao said was made by his wife was led; and

   c)No expert evidence was called on the authenticity issue.

   The sole evidence that the mats purchased from the various retailers were alleged copies is the evidence of Mr Yao himself.  However this evidence must be severely qualified given the limited quality control by Mr Yao with regard to the mats that came from China.  Mrs Yao confirmed that the Ridge Trading had commenced importing bathroom mat ensembles from Tianjing Carpet Co. in 1999 and between that year and 2006 they had imported too many containers to count.

9. Mr Yao in cross examination initially stated that there was no quality control however he changed this evidence during the cross examination to a position where he accepted that 95% of the mats that came in were subject to inspection.  It is noted that the bathmat ensembles were packed 15 to a box and those boxes in turn were contained in a 20 ft shipping container.  Mr Yao declined to indicate how many bathmat ensembles could fit within each container.  Further Mrs Yao, who participated in the operation of the business on an equal footing to that of her husband stated that they did not open the boxes since each box had an item number and a bar code attached.  Photographs that were tendered (Exhibit R5 and R6) show these markings on the boxes.

10. Fifthly, there was conflicting evidence given in respect of when the four government officials from the Bureau together with Mr Yao, his Chinese Lawyer, Huawei Ye and an agent visited LongHua Carpet Factory in December 2007.  The evidence is as following:

    a)Mr Yao’s evidence is that there were four officials, two from the Suqian ICB and two from Suyu Country ICB.  Mr Long’s evidence was that there were only two officials. 

    b)Mr Yao’s evidence was that the visit to the factory was for three hours.  Mr Long’s evidence was that the visit was for one hour.

    c)Mr Yao’s evidence was that when they arrived they were taken by car to a showroom where the alleged copied mat was photographed.  Mr Zhao Long’s evidence was that there was no such journey and that the showroom was next to his office.

    d)Despite Mr Yao’s anger about the copying of his mats resulting in his visit to China, he gave evidence that he took the view that he did not make a complaint against LongHua Carpets but undertook the visit to obtain evidence.  However the Officials from the Bureaus were clearly responding to a complaint against LongHua Carpets that they were copying Mr Yao’s mats.  This contention is supported in the Bureau’s visit to LongHua Carpets the day following Mr Yao’s approach to the Bureau.

    e)There is very little evidence from either Mr Yao or Mr Zhao Long as to what discussions took place by the Bureau Officials.

    f)There is no evidence from the Bureau Officials, Mr Yao’s agent or his lawyer Huawei Ye and there is no explanation as to why they were not called to give evidence.  Mr Huawei and Mr Yao’s agent provided affidavits but these were not read nor were they called.

11. The evidence given by Mr Yao regarding the head board obtained at the LongHua factory was contradicted by Mr Zhao Long in his affidavit at paragraph [9]:

    I also signed my name, affixed the company seal of Long Hua and wrote the words “colour card supplied by Mr Guan of Shanghai” on a colour print board on that day.  I gave the signed colour print board to the bureau, too.  That colour print board was removed from a left over mat in Long Hua.  The samples of that colour print board were supplied by Mr guan when he first came to Long Hua to place and order for JC.  The colour print board bears the name The Ridge Trading Pty Ltd and barcodes.  Long Hua then printed the colour print board at a local print factory and annexed the colour print boards on each single mat produced by Long Hua on behalf of JC and exported them to JC in Australia.  A copy of the signed colour cardboard is annexed and marked with letter “C”.  When Mr Yao was in Long Hua in December 2006, there was still a few mats bearing the colour print board left in the factory.  I showed them to Mr Yao.  Mr Yao also took some photos of them.

12. Mr Yao’s account is the print board signed by Mr Long Zhao (Exhibit A13) is authentic however Mr Yao does not refer to its authenticity in any way.  Mr Bolster submits that it must also follow that if it is authentic, there is no evidence, leaving aside the alleged copies brought to Sydney by Mr Yao and his Associate of any copy print board in the Ridge Trading case.  Mr Bolster acknowledges that Mr Long Zhao’s account is ambiguous but he does seem to conclude that the print board is one of the copies that was made at LongHua Carpets.  There is no evidence to corroborate this issue.  It could have been established either by comparing the print head board used in the originals supplied to Ridge Trading and Exhibit A13.

13. Mr Long Zhou does not refer to bathmat sets in his affidavit but only refers to single mats.  If there were two or three part mat sets at LongHua Carpets (according to the evidence provided by Mr Long Zhou) the question arises as to why were they not photographed and placed into evidence.  The evidence is that all the original documents, other than the printhead board, were retained by the Bureau Officials.  If there were surplus mats at the LongHua Factory it is reasonable to expect that they were either reduced or alternatively photographed during the visit.

14. Mr Long Zhao had a motive not to provide the Chinese Bureau Officials with the three authentic invoices that recorded the transaction and this is reflected by his evidence in that:

    a)There is a practice amongst certain Chinese exporters whereby the price of export transactions is overstated to obtain taxation benefits in China and in due course the amount of inflation is returned to the foreign buyer.

    b)This practice is illegal.  The concern about the significance of this illegality was demonstrated by the reaction by Mr Long Zhao under cross examination when it emerged that the monies paid to his company were consistent with the JC Export invoices but not those tendered by Mr Yao (second affidavit of Mr Yao – Annexure F).  By the end of the cross examination of Mr Long Zhao, he seemed to accept the possibility that Cao Yong Liu (his son in law) could have been involved in such practices, given his seniority, access to customers and his frequent visits to Shanghai.  However, Cao Yong Liu was not called to give evidence in this case.

15. Finally, the commercial realities are against JC Exports copying mats identifiable by reference to Ridge Trading.  In these circumstances the claim that Mr Zhen Qing Huang would get the same mats reproduced using the packaging that identified Ridge Trading was commercially improbable.  Consequently, the more probable explanation is that any bathmat ensembles that JC Exports sold to various suppliers that resembled the Ridge Trading Bathroom mat ensembles may have come from Ridge Trading itself and may not have been manufactured by the LongHua Carpet Company.

16. In respect to the second issue as to whether the Respondents engaged in the conduct alleged the evidence of three key witnesses is central to this question.  They were the Respondent, Mr Zhen Qing Huang, the Managing Director of the LongHua Carpet Company, Mr Long Zhao and the commercial agent Mr Liang De Guan.  All of these witnesses gave sworn testimony in Mandarin which was interpreted to the Court via a Mandarin – English translator.  I am not satisfied that these three witnesses were truthful in all aspects of their evidence.  There was a particular problem with Mr Liang De Guan as he gave evidence via video link from Shanghai in the absence of any Court Official.  Mr Liang De Guan was uncooperative throughout his testimony and on several occasions left the video link facility without explanation or approval.  On the first day of his evidence he indicated that he had another commitment and was no longer available to continue and departed without being excused.

17. The evidence of Mr Long Zhao is that his organisation only ever had three dealings between LongHua Carpets and JC Exports.  Those three dealings occurred on or about 30 June 2005, 28 November 2005 and 9 March 2006 in which Mr Liang De Guan was acting as an agent for JC Exports.  Mr Long Zhao’s evidence is that when Mr Yao and the Bureau Officials visited LongHua Carpets, Mr Long Zhao prepared a statement for the Bureau Officials which he and his son in law Cao Yong Liu both signed and affixed a copy of the Company seal of LongHua Carpets.  That statement is annexed and marked with the letter B to Mr Long Zhao’s affidavit.  There is no interpretation of that document in Mr Long Zhao’s affidavit. However, the second affidavit of Mr Yao an interpretation of that document is attached which indicates that JC Exports purchased synthetic and acrylic mats totalling 30,585 from LongHua Carpets during the period 2005 – 2006 and that JC Exports and Imports was represented by Mr Liang De Guan in these purchases.

18. Mr Liang De Guan’s affidavit sworn testimony was that he had sold carpets on behalf of Long Hua over a period of 7-8 years. Paragraph 6 of this affidavit states:

    [6] The Carpet I had sold to the customers in North America, Malaysia and India came from Long Hua Carpet Co in Suqian, Jiangsu Province.  I first deal with them 7 or 8 years ago. Over the years I have sold a lot of carpets for LongHua. I have been dealing with Long Zhao and Chaoyang Liu in LongHua.

19. However, this is denied by Mr Long Zhao who indicated that the first time that he or his company had dealt with Mr Liang De Guan was in June 2005 and he denies that Mr Liang De Guan had sold carpets for and on behalf of LongHua Carpets (Affidavit of Long Zhao, para. 11).

20. The other significant divergence of evidence concerns the relationship between Mr Liang De Guan and Mr Zhen Qing Huang.  In the affidavit of Mr Long Zhao paragraph [12] he states

    [12] … when I met Mr Guan on the first occasion, we had dinner together.  During the dinner he said to me words to the effect:

    “the boss of JC is my brother in laws. His wife is my younger sister”

21. In paragraph [19] of Mr Liang De Guan’s affidavit where he is responding to the second affidavit of Ru Min Yao he states:

    [19] … I deny that I am the brother of Mr Huang’s wife.  I did not know that Mr Huang’s wife had the same surname as mine until Mr Cheng [solicitor retained by the 1^st and 2^nd Respondents] mentioned this to me.

22. Mr Zhen Qing Huang’s wife, Wen Juan Guan, prepared, swore and filed an affidavit in these proceedings, but this affidavit was not read.

23. Mr Liang De Guan was cross examined extensively on this issue however, he maintained that he and Wen Juan Guan were not related.  Eventually, he conceded that they did have the same parents but they had divorced many years ago when the children were young.  One child had stayed with the father while the other child had stayed with the mother and all contact between the two parties was completely severed.  Mr Liang De Guan insisted that this was standard practice in China.  I am unwilling to accept that that this situation is the established or cultural practice in China.  However, I am prepared to accept that in circumstances where a particular acrimonious marital breaks down the parties may choose to distance themselves and avoid any further contact.  Children of the marriage in such a situation would have had this decision imposed on them and may believe that their sibling relationships have been permanently severed.

24. The Application for migration to Australia (Exhibit A35) completed by Wen Juan Guan and executed on 12 October 1997 at item 67 addresses “all brothers and sisters (including full, half, step and adopted brothers and sisters)” lists Liang de Guan. In the application for a Grant of a Visa for Temporary Residence in Australia to Engage in Employment or Other Activity for a specified period completed by Wen Juan Guan on 18 April 1995, she listed Liang De Guan as her brother.  This evidence was unchallenged and speaks for itself.

25. I note that the evidence of Mr Long Zhao is contrary to the evidence given by Liang De Guan in respect of this sibling relationship.  This casts doubt on the integrity of both witnesses’ testimonimonies.  If Mr Long Zhao stated that the first time he had met Mr Liang De Guan was in the first half of 2005 when they had dinner and Mr Liang De Guan made the statement recorded in paragraph [12] of his affidavit.  Mr Liang De Guan made such vigorous denials of his sibling in both his affidavit and under cross examination which raises the serious question as to how Mr Long Zhao would be in the possession of this material and elect to include this in his affidavit.  The business relationship could also have lasted much longer as claimed by Mr Liang De Guan. Due to the inconsistencies in both parties’ testimonies, I am not satisfied that either party is being truthful and that one version of events should be accepted in preference to the other.

26. The other significant area of concern is the authenticity of the Product Purchase Agreements. Two sets of agreements have been tendered. I am satisfied that three shipments of various mats were made to JC Exports on or about 30 June 2005, 28 November 2005 and 9 March 2006.  Putting to one side the Product Purchase Agreements for one moment, the three shipments can be substantiated by the other supporting documentation.  I accept the detailed submissions made by Mr Bolster (see [99] to [108] above) which examine the document trails that identify three shipments of bathroom and synthetic mats to JC Exports.

27. The first group of the Product Purchase Agreements are attached to the second affidavit of Mr Yao – Annexure XX.  These refer to the second (28 November 2005) and the third shipment (9 March 2006).  These two agreements appear to have been sourced from the documents handed to the Government Inspectors by Mr Long Zhao during the visit to the LongHua Carpet Factory on 14 December 2006.  The other set of Product Purchase Agreements were produced by Mr Zhen Qing Huang.

28. The second set of Product Purchase Agreements placed before the Court appear to be genuine. Therefore, falsified documents have been brought into existence for some other purpose. The argument advanced by Mr Bolster above is that a taxation benefit can be achieved by exporters if this practise is adopted. This was vigorously denied by Mr Long Zhao but no counter argument was advanced by him and the inconsistencies between the Product Purchase Agreements remain unexplained. The inference that I draw from this issue is that false testimony under oath has been given and this casts doubt on the validity on much of the evidence given by Mr Long Zhao.

29. The fact that the witnesses were willing to give false sworn testimony and to readily change their evidence puts all of their evidence in doubt. As indicated above, I accept that the non-genuine mats found in the Sydney market were sourced from LongHua Carpets however, as to whether JC Exports and Zhen Qing Huang initiated the process to copy the bathroom ensembles of the Ridge Trading remains in question. Alternatively, was Liang De Guan and Long Zhao already on their own initiative copying and distributing bathroom mat ensembles which were the Ridge Trading product?  This may explain the unchallenged evidence of Zhen Qing Huang and his sighting of the Ridge Trading bathmat ensembles in the warehouse of New Ocean Imports at the time that he was still sole New South Wales distributor of the product which was sold at a price lower than Zhen Qing Huang was sourcing the product. The existence of false documentation, the denial of the family relationship, the questionable evidence about the period of the business relationship between Liang De Guan and Long Zhao and the unexplained format of the Product Purchase Agreement all confirm this doubt.

30. I indicated above that the tort of passing off was not pleaded however argument was advanced by Mr Bolster during his oral submissions. It is widely recognised that the most important function of pleadings is to state the issues between the parties. Consequently during the trial the parties are not permitted without leave to move outside of the issues contained in the pleadings. Issues which are not raised in the pleadings are not before the Court: Esso Petroleum Co Ltd v Southport Corporation [1956] AC 218. No formal application was made on behalf of the Ridge Trading to amend their pleadings and when this issue was raised by Mr Bolster during oral submission Mr Moschoudis indicated that he was only pursuing a s.52 claim.

1. This principle was explained in Thorp v Holdsworth (1876) 3 Ch D 637per Jessel MR where he stated:

   The whole objective of pleadings is to bring the parties to an issue, and the meaning of the rules … was to prevent the issue being enlarged which would prevent other parties from knowing when the case came on for trial, what the real point to be discussed and decided was.  In fact, the whole meaning of the system is to narrow the parties to definite issues, and thereby to diminish expense and delay, especially as regards the amount of testimony required on either side at the hearing.

2. This principle was approved in Banque Commercials SA (in liq) v Akhil Holdings Ltd (1990) 169 CLR 279 per Brennan J at 287-288. In disclosing the issues, the pleading also gave each party notice of the case to be made out by the opponent. Further there is a requirement that every pleading contain a statement in summary form of the material facts on which the party’s pleading relies, but not the evidence by which they were proved.

3. If an application had been made to amend the pleadings to take into account the tort of passing off. The question would have been raised as to whether the element of a passing off action had been established in these proceedings. In Erven Warnick v J Townsend & Sons (Hull) Ltd (the Advocaat case) [1979] AC 731 Lord Diplock identified the five essential characteristics of a passing off action as being:

   “a) a misrepresentation;

   b) made by a trader in the course of trade;

   c) to prospective customers of his [sic] or ultimate consumers of his goods or services supplied by him;

   d) which is calculated to injure the business or goodwill of another trader (in the sense that it is a reasonably foreseeable consequence); and

   e) which causes actual damage to a business or goodwill of the trader by whome the action is brought or …. will probably do so”.

4. In Moorgate Tobacco Co Ltd v Phillip Morris Ltd (No 2) (1984) 156 CLR 414 per Deane J at 443-444 (with the other members of the Court agreeing) approved the Lord Diplock formulation.

5. However for the purposes of this issue I will adopt the classical trinity approach which simply expresses the core concepts of the tort as:

   (1)reputation

   (2)misrepresentation, and

   (3)damage.

6. To succeed in this approach the plaintiff must establish some reputation or goodwill in its goods, although the plaintiff does not need to demonstrate an exclusive reputation: Cadbury Schweppes Pty Ltd v Darrell Lea Chocolate Shops Pty Ltd (2007) 72 IPR 261 at [96]. This is where action in these proceedings flounder as no evidence has been led on behalf of the Ridge Trading in respect to reputation. The witnesses that were called and identified above gave sworn testimonies that the bathmat ensembles were generic mats and that the name of the Ridge Trading meant nothing to them. In these circumstances I believe this avenue fails and needs not to be further addressed.

7. In respect to the claim of damages pleaded in the Statement of Claim at paragraphs [22] and [23] in light of my finding relating to the alleged breach of s.52, I am not satisfied that a claim under s.82 of the Act can be established.

8. Although the alleged breach of s.52 cannot be sustained, I am satisfied that non-authentic bathroom mat ensembles carrying the Ridge Trading name and get up should be prevented from future sale. I am of the view that order 1 be made on 29 June 2010 should be made permanent to prevent the further distribution of the non-authentic bathmat ensembles. In light of my reasons, I order that the parties provide me with written submissions by Monday, 19 July 2010.

I certify that the preceding two hundred and six (206) paragraphs are a true copy of the reasons for judgment of Lloyd-Jones FM

Associate: 

29 June 2010