Diesel Spa v Hwang

Note: Settlement and entry of orders is dealt with in Order 36 of the Federal Court Rules.

REASONS FOR JUDGMENT 1 These reasons concern an application for relief against Albert Ezekiel for infringement of the Diesel trade marks, misleading or deceptive conduct and false representations in contravention of ss 42 and 44 of the Fair Trading Act 1987 (NSW) and passing off. 2 Diesel designs, manufactures, markets and distributes clothing and fashion accessories by reference to the name "Diesel". It has a website located at www.diesel.com. Since 1994, Angus Imports has been the Australian distributor of Diesel products pursuant to an agreement with Diesel. 3 The Diesel trade marks relate to clothing and goods in classes 25 (clothing, footwear and headgear) and 42 (retailing and wholesaling of clothing and clothing accessories) under the Trade Marks Act 1995 (Cth) ("the Act"). There is no dispute as to the validity of the Diesel trade marks or the standing of Diesel and Angus Imports, as trade mark owner and distributor respectively, to bring these proceedings. 4 By Amended Statement of Claim filed on 11 July 2005, the Applicants allege that, since at least 17 November 2003, without the agreement or approval of the Applicants, Albert Ezekiel has promoted, distributed, offered for sale, sold and/or exhibited in public infringing products in Australia. These products are allegedly sold by reference to the Diesel trade marks, where the fixing of the trade marks to the infringing products was not done by or with the licence or approval of the Applicants or any person with the authority to authorize such action. 5 On 12 August 2004, the Applicants' solicitor executed orders made by this Court and searched the premises of Rainbow Apparel Pty Ltd ("Rainbow Apparel") at Kippax Street, Surry Hills. There is evidence that an entity known as Rainbow Wear also operates from these premises. It is alleged that the search revealed that the occupiers of the Kippax Street premises promoted, advertised, distributed and offered for sale infringing products. These allegations against other infringers are not disputed by Albert Ezekiel. 6 The Amended Statement of Claim alleges that documents obtained during the search of the Kippax Street premises indicate that the operators of Rainbow Apparel had sold infringing products to Albert Ezekiel. These products are itemised in detail in the particulars to cl 10 of the Amended Statement of Claim. It is alleged that these documents, in the form of invoices, delivery documents, statements and record books, show that on 12 November 2003, 26 infringing products were invoiced to Albert Ezekiel for a price of $398.00 and a number of subsequent purchases were made by him up to July 2004, on which date four infringing products were purchased for a price of $132.00. The documents obtained during the search of the Kippax Street premises refer to the name "Albert" and contain the telephone number for Albert Ezekiel's family home at 88 Beach Street, Bondi. 7 The Applicants allege that Albert Ezekiel has infringed the Diesel trade marks by using marks in the course of trade in Australia which are substantially identical and/or deceptively similar to the Diesel trade marks in connection with the goods and services in respect of which the Diesel trade marks and devices are registered, in breach of subsecs 120(1) and (2) of the Act. 8 The Applicants claim to have established a valuable reputation and goodwill in Australia by reference to the Diesel trade marks and that the business and goods of the Applicants in the clothing area are widely and favourably known and identified by the general public in Australia by reference to those trade marks, which are used in packaging, marketing, promotional and advertising material relating to the sale of the products. It is said that the Diesel trade-marked goods are available for sale from retailers throughout the world, including Australia, and are known to be distinctive of and to signify exclusively the business and goods sold by the Applicants. The goods are also promoted on the Diesel website. The basic claim in relation to the allegations of misleading or deceptive conduct, false representations and passing off is that Albert Ezekiel has made representations which erroneously indicate that the infringing products are associated with, or have a provenance related to, the Diesel products. Albert Ezekiel does not dispute that the Diesel name is well-known in Australia. The Applicants claim loss and damage to their commercial reputation and goodwill as a consequence. 9 The present hearing is limited to the question of liability and the grant of injunctive and declaratory relief. Damages and other relief are to be decided separately.

evidence of Albert Ezekiel 10 Albert Ezekiel's defence is to deny that he ever knew anything about any Diesel products or any invoices or the sale of any Diesel products. He says that he has had nothing whatsoever to do with the sale, distribution or purchase of any such products. He has consistently denied any involvement in relation to the alleged infringements. 11 Albert Ezekiel has filed a number of affidavits in support of his case. 12 In an affidavit sworn on 12 November 2005, Albert Ezekiel says that he has resided in the family home at 88 Beach Road, Bondi, since 1965. He says that, at all times, the telephone has remained in his father's name, "Abraham", and that it is currently listed in the White Pages and on the internet as belonging to "A Ezekiel". Since his father became ill in 1998, Albert Ezekiel has cared for both his parents. During Albert Ezekiel's long term care of his parents at the family home, the family home became known to relatives, family friends and acquaintances as "Albert's place". Albert Ezekiel's father died some time ago. Albert Ezekiel subsequently spent a long period of time caring for his mother with the assistance of his brother Morris. Morris Ezekiel returned to Victoria in October 2003. In about September 2003, a family friend, Solomon Ezekiel (no relation), came to reside in the family home and assisted Albert Ezekiel with the running of the household. Morris Ezekiel returned to Sydney in early November 2003 and December 2003 to visit his mother and help Albert Ezekiel to find a permanent nursing home for her. Morris Ezekiel periodically returned to Sydney after this time. Albert Ezekiel also says that he has suffered from ill health since about late November 2003. 13 In his affidavit, Albert Ezekiel addresses in detail each of the invoices alleged to be made out to him and denies that he had any commercial or other relevant association or relationship with the other Respondents, including those who sold the goods. He contends that the invoices found on the Kippax Street premises did not relate to him but probably related to the affairs of his brother Morris or to a different Albert. At the hearing before me, Albert Ezekiel speculated that the word "Albert" appearing on invoices and other documentation was a mistake arising because Morris, who had extensive dealings with Rainbow Apparel in the infringing products, was frequently at the family home at 88 Beach Road, Bondi, and was present at Bondi on or about the time of the relevant invoices relied upon by the Applicants. He also said that the invoices did not have the name "Ezekiel" or the address of 88 Beach Road on them. He therefore says that the statements and invoices were wrong in invoicing him for the goods. On the scenario advanced by Albert Ezekiel, the invoices did not relate to him but rather to Morris Ezekiel or a different Albert. 14 Albert Ezekiel has also filed an affidavit sworn by his brother Morris, who lives at Caulfield in Victoria, on 12 November 2005. Morris confirms that the telephone number (02) 9130 1873 is for the family home at 88 Beach Road, Bondi, and is still in his father's name, Abraham Ezekiel. The Applicants notified Albert Ezekiel that they wished to cross-examine Morris Ezekiel, however, Morris Ezekiel did not attend Court for cross-examination. Morris Ezekiel does not say in his affidavit that he purchased, ordered or took delivery or control of the goods from the Bondi premises or that he used them for commercial purposes. 15 A further affidavit of Solomon Ezekiel, was filed by Albert Ezekiel in the proceedings. This affidavit was not objected to by the Applicants, however, it does not really carry the matter any further. Solomon Ezekiel verifies that Morris Ezekiel was a frequent visitor to the family home and assisted with the care of his parents. He also says that Morris Ezekiel would receive many telephone calls whilst in residence at the family home and often messages would be taken for him. I accept the evidence of Solomon Ezekiel, but it does not answer the case made by the Applicants.

EVIDENCE OF APPLICANTS 16 It is not suggested by Albert Ezekiel that the records obtained by the Applicants are not authentic or that the Applicants are not entitled to bring proceedings on the trade marks. Rather, Albert Ezekiel seeks to explain them and proffers an explanation as to why the documents seized from the Kippax Street premises refer to "Albert" and the telephone number of the family home at 88 Beach Road, Bondi. 17 Counsel for the Applicants refers to, and relies on, s 1305 of the Corporations Act 2001 (Cth), which provides that a book kept by a body corporate under a requirement of this Act is admissible in evidence in any proceeding and is prima facie evidence of any matter stated or recorded in the book. The term "books" is defined in s 9 of the Act to include any record of information, however compiled, recorded or stored, but it does not include certain types of index. This definition is an extremely wide one and, on its face, it covers all records and documents. 18 The evidence for the Applicants is based on the records seized from the Kippax Street premises of Rainbow Apparel on 12 August 2004 pursuant to the search order made by Ryan J on 11 August 2004. 19 The sole director, secretary and shareholder of Rainbow Apparel is Eun Kyoung Han, who has given evidence that she used the name "Kim" in invoices and statements. She confirms this in relation to an invoice to "Morris" from "Kim". The other documents in the same handwriting indicate that she is the contact person for Rainbow Wear at the Kippax Street address. The documents obtained on the search, including the invoices, refer to "Kim" as the person whom the invoices/statements are from. In some invoices, the reference is to "Rainbow" rather than "Kim". 20 The evidence in the Applicants' case is that, on the search of the Kippax Street premises, their solicitor seized a number of records containing details of persons to whom it is said Rainbow Wear sold Diesel-branded clothing of various types. The solicitors found approximately 200 boxes of counterfeit Diesel stock on the premises, together with a number of other garments of well-known fashion labels. A number of the documents seized from the premises included the name of Rainbow Wear, which has a bank account. In a company search of Rainbow Apparel Pty Ltd, the registered office was shown at the Kippax Street premises and the sole director was shown as Eun Kyoung Han. Statements of account were also obtained in relation to Rainbow Apparel. 21 The names of purchasers of Diesel-branded products appear in short form on the face of the invoices seized from the Kippax Street premises. The tax invoice statements that refer to "Albert" range from 12 November 2003 to 26 July 2004. Most of these statements and documents bear the name "Albert" as addressee and are expressed to be from "Kim". On their face, they relate to Diesel shorts, shirts and other clothing items. By way of example, there is a tax invoice statement of 19 November 2003 addressed to "Albert" from "Kim" for 30 Diesel shirts at a price of $16.00 each, with a total amount of $480 having being paid. 22 The Applicants' solicitors also seized a list of names and telephone numbers from the Kippax Street premises, which the Applicants say is a list of names of purchasers of the Diesel-branded products. The name "Albert" is listed on this document, together with the telephone number 9130-1873, which is the telephone number of "A Ezekiel" at 88 Beach Road, Bondi. 23 Another list of names, numbers and addresses seized from the Kippax Street premises contains the name "Morris" with a telephone number of 0411-319-957, which is the mobile phone number of Morris Ezekiel. The seized documents also contain a number of tax invoice statements from 2003 and 2004 addressed to "Morris" from "Kim". These statements include a detailed accounting document which provides, under the heading "Morris", a list of the purchases made by "Morris" from 17 March to 4 May, including the purchase of Diesel-branded products on 2 April, 13 April, 21 April and 28 April. This is addressed to "Morris" from "Kim" and records an outstanding balance of $15,531.00. 24 A further document shows the separate accounts of "Morris" and "Albert". This document shows that "Morris" has an account of $91,922.00 and "Albert" has an account of $20,921.00. 25 Also in evidence are the Terms of Settlement between Diesel Spa, Diesel Wholesale Pty Limited and Morris Ezekiel, dated 24 December 2004, which recite an undertaking by Morris Ezekiel to immediately cease the distribution and offering for sale of any clothing with Diesel trade marks and to pay a sum of $28,000.00 to Diesel Spa and Diesel Wholesale. There are photographs of the goods seized at the premises showing clothing with the Diesel trade marks prominently displayed on the clothing. 26 Of importance in the Applicants' case is an invoice dated 12 November 2003, which was addressed to "Albert" from "Kim". This invoice was originally addressed to "Morris from "Kim" but the name "Morris" has been crossed out and the name "Albert" substituted. This invoice refers to the purchase of $910.00 worth of products in respect of numerous Diesel-branded products and also records that the amount of $910.00 was paid on 17 November 2003. The Applicants say that this evidences a separate dealing by Albert Ezekiel with Kim in relation to the infringing goods. The large quantities of the Diesel-branded goods indicate that they were bought for the commercial purpose of on-sale or distribution and not for personal use.

reasoning 27 On their face, the invoices in question provide evidence, when taken together with the other documents obtained from the premises of Rainbow Apparel, and the admitted extensive involvement of Morris, that Diesel products were invoiced to "Albert" as distinct from "Morris". They indicate debts from Albert Ezekiel, as purchaser, to Rainbow Apparel in respect of the infringing products. In some instances, there is a note of the fact of payment although the payer is not identified. There are references in the accounts to separate amounts paid and owing for "Morris" and "Albert". In addition, on the invoice dated 12 November 2003, the word "Morris" has been crossed out and "Albert" inserted. This is consistent with Albert Ezekiel making purchases independently of Morris Ezekiel. On the face of the invoices, the person liable to pay for the goods is "Albert". 28 The evidence is clear that Morris Ezekiel was actively and substantially engaged over many months in the purchase of infringing Diesel-branded products. This was admitted by Morris Ezekiel in the Terms of Settlement. It is also clear that Morris and Albert Ezekiel are very close friends and brothers and have strong family ties. It is significant that, in his affidavit and statutory declaration, Morris Ezekiel does not make any statement to the effect that, to the best of his knowledge or belief, Albert Ezekiel did not purchase any infringing products from Rainbow Apparel. Morris Ezekiel does say that he gave the telephone number of 88 Beach Road, Bondi, as a contact number for Rainbow Apparel and told them to leave any messages for him with his brother, Albert Ezekiel, however, he says that this does not mean that Albert Ezekiel was a purchaser. Morris Ezekiel then speculates that his habit of calling the family home "Albert's place" must have led to a misunderstanding by Rainbow Apparel as to who the true purchaser of the goods was and caused Albert Ezekiel to become involved in the proceeding. 29 I accept that the family home was known as "Albert's place" and that Morris Ezekiel did give the telephone number of the family home to Rainbow Apparel. However, the evidence offered by Albert Ezekiel does not explain the liability for the supply of the goods which appears on the face of the documents seized from the premises of Rainbow Apparel. It is Albert Ezekiel who has been invoiced for the goods. He is liable prima facie. There is no evidence of Albert Ezekiel informing Rainbow Apparel in relation to any of the invoices that he was not a purchaser. In view of the very close relationship between the brothers that appears in the evidence, one might have expected Morris Ezekiel to have said that he had no arrangement with Albert Ezekiel or any knowledge of any dealings between Albert Ezekiel and Rainbow Apparel in relation to any infringing products. I note that Morris Ezekiel does not verify in detail the specific dates referred to by Albert Ezekiel as the occasions on which Morris Ezekiel is said to have been in Sydney and which are said to correspond closely with the dates of the invoices addressed to Albert Ezekiel. The inference Albert Ezekiel asks the Court to make is that these invoices were intended to be made out by Rainbow Apparel in respect of purchases made by Morris Ezekiel. I do not accept this inference. I do not accept the version of events given by Albert Ezekiel, namely, that a mistake was made by Rainbow Apparel and he was wrongly invoiced over a substantial period in respect of large quantities of the infringing products. I think that the true position, having regard to the quantities of goods purchased, is that Albert Ezekiel purchased the goods with the intention to resell or distribute them. 30 I am not satisfied that the evidence establishes that there has, in fact, already been distribution of the infringing goods or "use" of the trade marks by Albert Ezekiel. However, I do consider that the goods were purchased by Albert Ezekiel with an intention to distribute or sell the infringing goods. 31 An important question in this case is whether proof of the purchase of infringing products in large quantities over time is sufficient to establish that the purchaser has infringed the Diesel trade marks by using the mark on the goods. In plain English terms, it is difficult to say that merely by purchasing the goods with an intention to sell or distribute those goods, a purchaser has used the trade mark so as to infringe. But in the circumstances of this case, where there is evidence of large quantities being purchased over many months, I consider that it can be inferred, in the absence of any satisfactory evidence or explanation to the contrary, that there was an intention on the part of Albert Ezekiel to distribute the goods. The goods are not said to be second-hand. They are still in the course of trade since they have not reached the consumer. Morris Ezekiel is Albert Ezekiel's brother and, on the evidence, the family bond is very close. Morris Ezekiel has admitted to buying substantial amounts of the infringing goods over time. 32 In my view, there has been no sufficient acceptable explanation by Albert Ezekiel of the case made by the Applicants on the documents to the effect that he was a purchaser or was closely involved in the purchase of the infringing products. In view of the documentary evidence, I prefer to rely on the records rather than the evidence of Albert Ezekiel, which is not supported by any records or by his brother. I consider that there is a strong inference that Albert Ezekiel, as purchaser, will distribute the goods. Accordingly, in my view, notwithstanding that there is no evidence of receipt or on-selling by Albert Ezekiel, I think the evidence is sufficient to indicate that an injunction should be granted against Albert Ezekiel to restrain any further purchases by him of the goods and to restrain any distribution, sale or marketing of the goods by him. 33 I note that, in Nokia Corporation v Truong [2005] FCA 1141 at [40], Crennan J observed that anyone who is connected in the course of trade with infringing goods is an infringer and that such a person has a duty to see that the goods are not used or dealt with in breach of the proprietor's rights. I find that Albert Ezekiel was so involved. See also Norwich Pharmacal Co v Commissioners of Customs and Excise [1972] RPC 743 at 771. 34 One difficulty with the allegation that Albert Ezekiel has infringed the Diesel trade mark by using it as required by s 120 of the Act is that there is no direct evidence that he has ever received, sold, distributed, taken delivery of or marketed the goods. It is not the law that the mere act of purchase in itself amounts to a use of the trade mark so as to constitute an infringement. I am satisfied, however, that the probability is that he has purchased the infringing goods and that it is reasonable to draw an inference that he had the disposition of the infringing goods and was involved in their distribution, and as such has used the trade marks and other marks. This is based on the large quantities of the goods purchased and the number of invoices from which I infer that the goods were purchased with an intent to on-sell or distribute them. In the case of Albert Ezekiel, the goods had not passed into consumption by an ultimate first user. In view of these extensive purchases, I consider it has been established that there is a threat Albert may distribute the goods or use them in such a way as to infringe. Therefore, I consider that grounds have been made out which justify a quia timet injunction and that such an in junction should be granted. 35 It is not necessary for me to deal with issues of passing off or misleading conduct. 36 The above findings, in my view, are sufficient to justify a claim for injunctive and declarative relief at this stage of the proceedings. Accordingly, I propose to grant an injunction against Albert Ezekiel in the terms of cl 4 of the Second Further Amended Application. I also make orders in terms of cll 5 and 6 of that Application. 37 I stand the matter over to 17 February 2006 at 9:30 am for directions as to the further conduct of this matter in relation to the other forms of relief. I order the Eleventh Respondent to pay the costs of the Applicants to date and for these costs to be taxed and recovered forthwith. I certify that the preceding thirty-seven (37) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Tamberlin.

Associate: Dated: 22 December 2005 Counsel for the Applicants: E Heerey

Solicitor for the Applicants: Middletons

Date of Hearing: 25 November 2005

Date of Judgment: 22 December 2005