Deckers Outdoor Corporation Inc. v Farley

Note:Settlement and entry of orders is dealt with in Order 36 of the Federal Court Rules. The text of entered orders can be located using Federal Law Search on the Court's website.

GENERAL DIVISION VID 1022 of 2007

REASONS FOR JUDGMENT 1 This contempt proceeding, like that dealt with in Deckers Outdoor Corporation Inc. v Farley (No 6) [2010] FCA 391, arises out of proceedings for alleged trade mark infringement, copyright infringement, passing-off and breaches of the Trade Practices Act 1974 (Cth) ("the Act") which date back to 2003: see Deckers Outdoor Corporation Inc. v Farley (No 5) (2009) 262 ALR 53. Over this period the Court made a series of orders which restrained various respondents from engaging in the manufacture, distribution and sale of counterfeit footwear which bore the "Ugg" logo. 2 In Deckers (No 6) I dealt with charges against a number of Respondents who were alleged to have contravened injunctions granted by the Court. While these charges were pending further allegations which were made against one of the Respondents, Mr Josef Vaysman. The Applicant alleged that Mr Vaysman had contravened orders which I made on 27 November 2007 and 21 January 2009. 3 The terms of the 27 November 2007 orders are set out in Deckers (No 6) at [24]. The orders relate to what are described as "the Enjoined Products". That expression is defined in the order in the same terms as appeared in an undertaking given on the same day by other parties. The definition is set out in Deckers (No 6) at [23]. In essence it refers to footwear which bears the "UGG" logo or elements of it. The parts of the 27 November 2007 orders which are of present relevance restrained Mr Vaysman personally, or acting through others, from manufacturing, distributing, disposing of or selling the Enjoined Products or procuring or inducing any other person to do so. 4 On 21 January 2009 I ordered that Mr Vaysman be restrained from approaching within 100 metres of premises at 34 Christensen Street, Moorabbin. 5 By notice of motion and statement of charge dated 10 March 2009 the Applicant alleged that Mr Vaysman had contravened these orders in a number of ways. Not all charges were ultimately pressed. The four which were pursued at trial read as follows: · Charge 4 - In breach of the November 2007 order, between March 2008 and 23 January 2009, [Mr Vaysman] deliberately and voluntarily manufactured the Enjoined Products at Suite 11, 34 Christensen Street Moorabbin in the State of Victoria (the Christensen Street Factory). · Charge 5 - Further, in breach of the November 2007 order, between March 2008 and 23 January 2009, [Mr Vaysman] deliberately and voluntarily distributed, disposed of, dealt in, sold and/or exported the Enjoined Products from the Christensen Street Factory. · Charge 7 - Between March 2008 and 23 January 2009, in breach of the November 2007 order, [Mr Vaysman] has deliberately and voluntarily directed or procured the 23rd Respondent (Sanauria Pty Ltd) to manufacture, distribute, disposed of, deal in, offer for sale, sell and/or export the Enjoined Products at and/or the Christensen Street Factory. · Charge 12 - In breach of the 21 January 2009 order, on 5 March 2009, [Mr Vaysman] deliberately and voluntarily approached within 100 metres, and indeed entered, the premises at Suite 11, 34 Christensen Street, Moorabbin in the State of Victoria. 6 Mr Vaysman maintained that he was not guilty of any of these charges. 7 The Applicant is required to establish each of the charges beyond reasonable doubt. In Deckers (No 6) I summarised the relevant principles at [128]-[131]. I do not repeat what I there said. I have had regard to those principles in dealing with the present charges against Mr Vaysman. 8 It was necessary, in respect of each of the charges, for the Applicant to prove that: · The relevant order was made by the Court; · The terms of the order were clear, unambiguous and capable of compliance; · The relevant order was served on Mr Vaysman; · Mr Vaysman had knowledge of the terms of the particular order; and · Mr Vaysman had breached the terms of that order by acts which he performed deliberately and voluntarily. See Advan Investments Pty Ltd v Dean Gleeson Motor Sales Pty Ltd [2003] VSC 201 at [31] and [32]. 9 Mr Vaysman did not seek to dispute and I am satisfied that each of the orders which I made on 27 November 2007 and 21 January 2009 was made by the Court and that the terms of each of those orders was clear, unambiguous and capable of compliance. 10 Mr Vaysman admitted that a sealed copy of the November 2007 orders had been served on him on 30 November 2007. He also admitted that a sealed copy of the 21 January 2009 orders was personally served on him on 23 January 2009. 11 By mid December 2007 Mr Vaysman was represented by solicitors and counsel appeared on his behalf at a hearing on 14 December 2007. No suggestion was made at that hearing that Mr Vaysman had not been advised of the terms of the November 2007 orders or that he did not understand them. On 5 July 2008 senior counsel representing him in the earlier contempt proceeding advised the Court that Mr Vaysman and his wife had instructed him that they had "never intended to break the [November 2007] orders and certainly intend to abide by the orders of the Court in the future … They are completely prepared to make further undertakings to abide by Court orders." Such instructions could not have been given had Mr Vaysman not been aware of the terms and effect of the 2007 orders. I am, therefore, satisfied beyond reasonable doubt that Mr Vaysman had knowledge of the terms of those orders at relevant times. 12 Mr Vaysman admitted that the terms of the 21 January 2009 order had been orally translated to him in his native language (Russian) on 23 January 2009. 13 Mr Vaysman's defence to Charges 4, 5 and 12 was that the Applicant had not proven beyond reasonable doubt that he deliberately and voluntarily performed the acts which constituted a contravention of the terms of the orders. He defended Charge 7 on the basis that the Applicant had not established beyond reasonable doubt that he had performed the alleged contravening acts.

THE EVIDENCE 14 The orders made in November 2007 were made after evidence was tendered to the Court which strongly suggested that counterfeit Ugg footwear was being manufactured by Mr Vaysman and others at the premises at 1 Roper Street, Moorabbin. Search orders were made and were executed at the premises on 13 November 2007 and 12 December 2007. The factory was found to be equipped with machinery for the manufacture of footwear and large quantities of counterfeit Ugg footwear were discovered when the searches were undertaken. After these searches it would have been evident to Mr Vaysman that the Applicant was aware that the Roper Street premises were being used for the manufacture of counterfeit footwear and that any continuation of manufacture at that factory was likely to be detected. 15 Mr Vaysman wished to continue manufacturing footwear. He sought the assistance of his son Vladimir to establish a new factory at 34 Christensen Street Moorabbin. As the sole director and share holder of a company named Sanauria Pty Ltd ("Sanauria') (the Twenty-Third Respondent in the proceeding) he secured these alternative premises. The lease was entered into by Mr Vaysman, on behalf of Sanauria on 28 February 2008. Machinery used in the making of footwear was installed. Thereafter production of counterfeit footwear was resumed at the new factory. Mr Vaysman admitted that he was personally involved in that manufacturing process. Vladimir Vaysman paid the rent on the premises. 16 Later in 2008 the Applicant became aware that counterfeit footwear was still being sold and made inquiries. As a result of those inquiries it had reason to believe that the footwear was being manufactured at the Christensen Street premises. A further search order was obtained in relation to those premises. When it was executed on 23 January 2009 Mr Vaysman was present on the premises and more counterfeit footwear was discovered. So too were invoices for the supply of "Ugg" stamping blocks and embossing blocks to Sanauria. Those invoices were dated 18 and 25 November 2008 respectively. The invoice for the embossing blocks had a notation on it which read "PAID 26/11/08". An "Ugg" stamping block was attached to a "Torelli" machine which was used to stamp the rubber soles of boots and shoes.

Charge 4 17 Mr Vaysman gave evidence that, as far as he was aware, he was the only person to produce footwear at the Christensen Street factory during the currency of the Sanauria lease. He admitted that some of this footwear included "Ugg" boots. He had made them so that they could be sold and he could make a living. The money was needed for various purposes including payment of the rent on his flat. 18 Various styles of Ugg footwear were found on the premises on 23 January 2009. Despite his general admission that he was the only person involved in the manufacture of footwear at the Christensen Street factory, Mr Vaysman denied having manufactured some of these boots. He suggested that his son Vladimir may have made some of the boots. I harbour grave reservations about the veracity of Mr Vaysman's denials that he manufactured some of the footwear which was found at the Christensen Street factory. It is not, however, necessary for me to reach a concluded view in relation to the footwear which Mr Vaysman denied making. This is because he admitted in evidence to having produced up to eight pairs of short black boots per week which had a label on the heel reading "AUS Classic Ugg". Having made the boots he put the labels on them. 19 Mr Vaysman was the moving party responsible for the transfer of manufacturing from the Roper Street factory to the Christensen Street factory. He sought and obtained the assistance of his son Vladimir in establishing the new factory. Mr Vaysman, however, disavowed being pressured by Vladimir in relation to the establishment or operation of the production process at the Christensen Street premises. In any event, Vladimir Vaysman left Australia on 28 November 2009 and had not returned at the time that the search order was executed on 23 January 2009. In the meantime Mr Vaysman continued to work at the factory. 20 Mr Vaysman's own evidence satisfies me, beyond reasonable doubt, that he consciously and voluntarily made the "AUS Classic Ugg" boots thereby contravening the orders which I made on 27 November 2007.

Charge 5 21 Mr Vaysman's admissions (see above at [17]) that he manufactured counterfeit footwear at the Christensen Street factory and sold that footwear in order to make a living is sufficient to satisfy me beyond reasonable doubt that he deliberately and voluntarily sold Enjoined Products from that factory.

Charge 7 22 The evidence clearly establishes that Mr Vaysman was the sole director and shareholder of Sanauria at relevant times. He was aware of this even though it is more likely than not that Vladimir was responsible for incorporating Sanauria. Mr Vaysman was aware that Sanauria had a bank account and that he had signed documents relating to that account which Vladimir had asked him to sign. On 23 January 2009 Mr Vaysman claimed that the Sanauria account cheque book was his. There is also no dispute that Sanauria, acting through Mr Vaysman, entered into the lease of the Christensen Street premises. 23 This evidence is not, however, sufficient to make good Charge 7. It is one thing to say that counterfeit footwear was manufactured on premises leased by Sanauria. It is another to assert that Mr Vaysman had directed or procured Sanauria to manufacture the footwear which was made on the premises. 24 Sanauria maintained a cheque account with the ANZ Bank. Between 12 November 2007 and 11 July 2008 $165,187.94 was deposited into this account. Subsequent deposits in 2008 were: · 11 July - 12 August 2008: $3,449.07. · 12 August - 12 September 2008: $23,530.18. · 12 September - 10 October 2008: $78,546.00. · 10 October - 12 November 2008: $122,517.04. · 12 November - 12 December 2008: $161,710.90. Most of these funds where, in due course, withdrawn either to pay suppliers or rental or transferred to other accounts controlled by Vladimir Vaysman. 25 Vladimir Vaysman appears to have been responsible for most of the banking transactions during 2008. Mr Vaysman was, however, aware of the existence of the account and that funds were being paid into it and withdrawn from it. He signed cheques at the request of Vladimir. He held the account cheque book. He received the bank statements at his residential address. 26 Some of the funds deposited in the Sanauria account came from sources such as PayPal and are likely to be the product of sales effected using the internet. 27 This evidence strongly suggests that Sanauria was engaged, during 2008, in large scale commercial activities involving the sale of goods of some description. They may well have been Enjoined Products but it is also a possibility that footwear not bearing the Applicant's logo were manufactured at and sold from the Christensen Street factory. Some of the deposits may have come from other entities controlled by Vladimir Vaysman and not be payments for the sale of Enjoined or other products. Given the existence of hypotheses which are consistent with innocence I cannot be satisfied beyond reasonable doubt that Sanauria, acting at the behest of and through Mr Vaysman, manufactured and sold Enjoined Products from the Christensen Street factory. 28 There was evidence of a single purchase a pair of baby booties which bore an "Ugg ® Australia" label. The purchase occurred on 14 October 2008 through a website entitled www.uggshop.usa.com." The purchaser's credit card was debited in favour of "Sanauria Pty Ltd, Caulfield AU." This was the only direct evidence of Sanauria being involved in sales of Enjoined Products. The evidence did not, however, establish that the baby booties were manufactured at Christensen Street by Mr Vaysman. 29 It is not, therefore, possible to conclude, beyond reasonable doubt, that Charge 7 has been made out.

Charge 12 30 The evidence relied on by the Applicant to support this charge was very straightforward. It was founded on the observations of an investigator who was present outside the Christensen Street factory between 8:00 and 9:00 pm on 5 March 2009. She observed Mr Vaysman leaving the premises carrying a small box. 31 Mr Vaysman's explanation for having done so was given in an affidavit in which he deposed that: "Both of my visits to the Christensen Street factory (on 5 and 10 March 2009), which I now know were in breach of the Court order, have been prompted by threats from the landlord of those premises that items stored at the factory would be sold by him to recover outstanding rent monies. During both of these visits, I was granted access to the premises by the landlord using a key in his possession. I have breached the Court order in an honest (although mistaken) belief that a visit prompted by the landlord, with the sole purpose of making sure that my possessions were still in order would not amount to a breach of the order." Mr Vaysman was able to obtain entry because the landlord's agent gave him a key after Mr Vaysman had paid to the agent certain monies which were payable to the landlord. 32 Mr Vaysman was well aware that the Court had ordered that he should not approach within 100 metres of the premises. Despite this he contacted the agent without notice to the Applicant and obtained a key. He appears to have hoped that his entry would not be discovered by the Applicant. Alternative courses of action were available to him but were not availed of. He offered no explanation as to why he had not sought a variation of the Court order or advised the solicitors acting for the Applicant that he wished to enter the premises. Had he been concerned that the landlord might have removed or been about to remove property from the factory that belonged to him or to Sanauria, he could have confirmed the position by discussions with the agent. He did not need to enter the premises on two occasions. Mr Vaysman offered no explanation as to why it was that two visits were required in the space of six days. His visits were not "prompted" by the landlord except, perhaps, in the broadest possible sense. Mr Vaysman's account is unconvincing. More importantly, it does nothing to support his defence that the Applicant had failed to establish beyond reasonable doubt that he had acted consciously and voluntarily. 33 Mr Tony Watson, a solicitor acting on behalf of the Applicant, attended the Christensen Street premises on 23 January 2009. On that day he observed that there was a stamping block attached to the Torelli machine. Mr Watson visited the premises again on 6 March 2009. On that visit he observed that the stamping machine was placed on a trolley. It had been turned upside down. An open tool box stood nearby. The stamping block had been removed. This evidence strongly suggests that Mr Vaysman has been less than candid about the purpose of his visit to the premises on 5 March 2009 and about what he did whilst there. 34 I have no doubt that Mr Vaysman acted consciously and voluntarily in entering the Christensen Street factory on 5 and 10 March 2009.

CONCLUSION 35 Charges 4, 5 and 12 have been established beyond reasonable doubt. 36 Charge 7 has not been proven beyond reasonable doubt. 37 I will give directions as to the steps which need to be taken in advance of a hearing on penalty.

I certify that the preceding thirty-seven (37) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Tracey.