GM Holden Ltd v Paine

GM Holden Ltd v Paine - [2011] FCA 569 - FCA 2011 case summary — Zoe

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INDEX Content Para No(s) A INTRODUCTION [1] - [10] B THE CLAIMS [11] - [68] (a) Trade Mark Infringement [15] - [34] (1) Trap purchases [16] - [24] (a) Trap purchases at Bob Jane Bankstown [16] - [17] (b) Trap purchases at Tyre Factory, Bayswater [18] (c) Trap purchases at Tyre Factory, Sunshine [19] (d) Trap purchases - Other evidence [20] - [23] (e) Trap purchases - Conclusion [24] (2) Sales on eBay [25] (a) 19″ Advertisement [26] (b) Wheels and Tyres Advertisement [27] - [28] (c) Later evidence of Mohamed and Moussa Taleb [29] - [32] (d) Wheel centre caps added by Bob Jane [33] (3) Conclusion on Trade Mark Infringement [34] (b) Trade Practices Act and Fair Trading Act Infringement [35] (c) Design Infringement [36] - [64] (1) VE GTS Design [40] - [43] (2) Pentagon Design [44] - [45] (3) Other matters [46] (d) Sydney Tyres [47] - [51] (e) Liability of Mohamed and Ahmed Taleb [52] - [68] (1) Mohamed Taleb [52] (2) Ahmed Taleb [53] - [59] (3) Other matters [60] - [66] (4) Conclusion [67] - [68] C DAMAGES AND OTHER RELIEF [69] - [101] (a) Compensatory damages (1) Lost profits identified in invoices [76] - [84] (2) Lost profits identified in the imported goods [85] - [88] (3) Damage to reputation [89] - [93] (b) Exemplary damages [94] - [98] (c) Additional damages under s 75(3) of the Designs Act [99] - [100] (d) Other relief [101]

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A. INTRODUCTION 1 The first applicant, GM Holden Ltd (ACN 006 893 232) (GM Holden), is the exclusive manufacturer, wholesaler and distributor of all Holden vehicles, branded new and spare parts and accessories for Holden vehicles in Australia. GM Holden only sells spare parts and accessories for GM Holden vehicles to a network of authorised retailers and wholesalers (Holden Dealers). 2 In 1987, GM Holden established an official branded performance vehicle division. The performance vehicle division modifies standard Holden vehicles using unique body-work, alloy wheels, interiors, upgraded performance engines, brakes, transmissions and suspension. The performance division is known as Holden Special Vehicles (HSV). Under licence from GM Holden, Premoso Pty Ltd (Premoso) operates the performance division. Premoso only sells genuine spare parts and accessories for HSV vehicles to a network of authorised retailers and wholesalers (HSV Dealers). HSV Dealers are required to only sell spare parts and accessories to customers who provide a build and tag number to certify their ownership of a HSV vehicle. Of the approximately 250 current Holden Dealers, 60 are also HSV Dealers. 3 The second applicant, General Motors LLC (General Motors), is the owner of all trade marks associated with official Holden products. A special power of attorney has been given by General Motors in favour of the General Counsel of GM Holden to enforce Holden's intellectual property rights within Australia. GM Holden is responsible for the management and protection of all registered and un-registered trade marks, registered designs and copyright associated with Holden products in Australia. 4 General Motors is the owner of all trade marks associated with official Holden products, GM Holden and HSV in Australia including the following registered trade marks: Trade Mark No. Trade Mark Classes 563702 (HSV Rondel Mark) 12, 16, 21, 25, 28, 37 639717 (Holden Lion Mark) 12, 36 831207 HSV 6, 9, 12, 14, 16, 18, 20, 21, 24, 25, 28, 35, 36, 37, 39 1003159 HOLDEN 12

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(collectively the Trade Marks). General Motors licenses use of the Trade Marks to GM Holden, which in turn sublicenses use of the Trade Marks to Premoso. 5 Since July 2006, GM Holden has manufactured and sold the VE series Commodore. Premoso has utilised the design of 20 inch alloy wheels identified as VE GTS, which are factory fitted on all GTS variants of version 1 of the E series HSV (the VE GTS Wheels). The E series HSV is based on the VE model Commodore and was manufactured and sold between 11 August 2006 and 19 August 2009. GM Holden has offered a style of the 20 inch alloy wheels as an optional extra when purchasing a VE model Holden under the style name "Supersport" (the Supersport Wheels). Supersport Wheels are manufactured for Holden by a United States based company, Trade Union International, Inc, through its Chinese manufacturer, Nantong Trade Union Aluminium Alloy Co. 6 Since 31 March 2008, Premoso has utilised the design of a 20 inch alloy wheel identified as "Pentagon", which are offered as an optional extra when purchasing an E series model vehicle from the HSV range including the E2 Clubsport, Clubsport Tourer and Maloo Vehicles (the Pentagon Wheels). Each of the VE GTS, Supersport and Pentagon Wheels are designed to be fitted on vehicles based on the VE model Holden, and will not fit on earlier model Commodores without modification. 7 The third applicant, GM Global Technology Operations Inc (GM Global), is the owner of all registered designs utilised in the manufacture of HSV and Holden vehicles, parts and accessories. GM Global licenses use of the registered designs to GM Holden. GM Holden sublicenses use of the designs to Premoso. GM Holden and GM Global are wholly-owned subsidiaries of General Motors. 8 The registered designs in Australia of which GM Global is the owner include the following: Registration No. Representation Status 305935 Registered and Certified (VE GTS Design) 319648 Registered and Certified (Pentagon Design)

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B. THE CLAIMS 11 The applicants seek relief against the Talebs for trade mark and design infringement, passing off and misrepresentations in breach of ss 52 and 53(a) of the Trade Practices Act 1974 (Cth) (the TPA) and the equivalent provisions in the Fair Trading Act 1987 (NSW) (the FTA). 12 The applicants allege that since at least 11 November 2008, each of the Talebs and Taleb Tyres (or any of them) has, without the licence or authority of the applicants, imported, manufactured, offered for sale and sold products which (i) embody designs that are identical to, or substantially similar in overall impression to, the Designs; or (ii) are offered by reference to signs which are substantially identical with or deceptively similar to the Trade Marks, including: 1. the Supersport Wheels; 2. the Pentagon Wheels; and 3. VE GTS Wheels. It will be necessary to return to consider these allegations in further detail later in these reasons for decision. 13 On 10 March 2010 the solicitors for the applicants sent a letter of demand to Taleb Tyres and Mohamed Taleb requiring them, inter alia, to: 1. provide an undertaking that they, whether themselves, their servants, agents, employees or any of them, will immediately cease and forever refrain from importing, manufacturing, promoting, offering for sale or selling … products bearing Holden Intellectual Property, without the licence, approval or authority of [GM Holden]; 2. acknowledge that their importation, offering for sale or selling of such products is an infringement of [GM Holden's] intellectual property rights; 3. provide a statutory declaration detailing: 3.1 the number and full particulars of products they have manufactured, imported, taken orders for, purchased, received, promoted, offered for sale, sold or otherwise dealt with; 3.2 the name and contact details of all suppliers from whom they have received products and the quantity received from each supplier; and 3.3 the name and contact details of all customers (including other businesses) to whom they have sold products and the quantity sold; and 3.4 deliver up to the applicants' solicitors: 3.4.1 all stock … in the possession, custody or control of Taleb Tyres and Mohamed Taleb; and 3.4.2 all packaging, purchase orders, invoices and other materials in any form which include or refer to products in their possession, custody or control. The letter of demand was not complied with. The applicants' solicitors sent a further letter on 21 September 2010 requesting that they comply with the 10 March letter. No response was received. The Talebs and Taleb Tyres were then joined as parties to these proceedings. 14 The applicants contend that the Talebs engaged in contraventions acting as joint tortfeasors with Taleb Tyres, in that they have procured or directed the following contraventions: 1. the use of trade marks in the course of trade in Australia (which are substantially identical with and deceptively similar to the Trade Marks) on products in breach of ss 120(1) and 120(2)(a) of the Trade Marks Act 1995 (Cth) (the TMA); 2. without the licence or authority of GM Global, made, offered to make, sold, offered to sell or imported into Australia for sale or use for the purposes of any trade or business a product, which embodied a design that is identical to, or substantially similar to the overall impression of, one or more of the Designs therefore infringing s 71 of the Designs Act 2003 (Cth) (Designs Act); 3. represented that the products were the same as, or emanated from the same trade source as, the Holden products, or were authorised by or associated with the applicants, thereby engaging in misleading or deceptive conduct in breach of ss 52 and 53(a) of the TPA and ss 42 and 44(a) of the FTA; and 4. passing off the products as certified Holden products.

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(d) Trap purchases - other evidence 20 On 12 November 2010, Mohamed Taleb was directed to file an affidavit which identified the names and addresses of all persons known by him to have been involved at any time in the sale, purchase or supply of products which embodied designs that were: (i) identical to, or substantially similar in overall impression to, the Designs; or (ii) offered under or by reference to signs which were substantially identical with or deceptively similar to the Trade Marks of 12 identified products. The list of products included the Supersport Wheels, the Pentagon Wheels and the VE GTS Wheels. 21 In response to that direction, on 24 November 2010 Mohamed Taleb swore an affidavit which exhibited a schedule which was said to contain the names, addresses, telephone numbers, fax numbers, email addresses and domain names of persons involved at any time in the manufacture, importation, sale, offer for sale, purchase, order, supply, distribution, promotion or provision of any of the products listed in the orders of 12 November. Part of the schedule included a Taleb Tyres transaction history report for wheels specified as "S720855120SILV - NEW WHEEL". The report records sales of 169 wheels between January 2009 and January 2010 for $36,257.20. The transaction history report records the sale to Bob Jane Bankstown of 20 wheels on 4 December 2009. For those reasons, I accept that the wheels purchased by Mr Fahd at Bob Jane Bankstown were supplied by Taleb Tyres. 22 Another transaction history report recorded sales by Taleb Tyres of 71 wheels specified as "20' S7 WHEEL" for a total price of $14,457.50. As noted above at paragraph 16, the "S7" also designates the "Supersport" style wheels. 23 In addition to these transaction history reports produced by Mohamed Taleb, the applicants' solicitors were told by Bob Jane Corporation Pty Ltd (Bob Jane) that it had conducted an investigation of all stores to identify the sale of any wheels and wheel centre caps which potentially infringed the Trade Marks and the Designs. Bob Jane provided the applicants' solicitors with the following documents: 1. on 31 March 2010, a sales report summarising (i) details of sales of potentially infringing products by Bob Jane Bankstown; and (ii) the supplier of the products. The sales report contained the entries relating to Taleb Tyres listed in Annexure A; 2. on 28 October 2010, another sales report, listing potentially infringing products sold by all of the Bob Jane stores, which included the entries relating to Taleb Tyres listed in Annexure B; and 3. numerous invoices from Bob Jane and Taleb Tyres for wheels designated "SUPERSPORT 20X8 5/120", "SUPERSPORT 20X8 5/120 VE", "S720855120SILV" and "20″ S7 WHEEL". The Taleb Tyres invoices were addressed to Bob Jane Preston and Bob Jane Bankstown.

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(c) Later evidence of Mohamed and Moussa Taleb 29 The trial of this proceeding was held on 18 April 2011. On 8 April 2011, Mohamed Taleb filed an affidavit in these proceedings in which he asserted, for the first time, that the "Supersport" style wheels supplied by Taleb Tyres did not include the caps on which the relevant Trade Mark appears. I reject this evidence. It is directly contradicted by the contemporaneous advertisements placed by Taleb Tyres on eBay, namely the 19″ Advertisement and the Wheels and Tyres Advertisement, both of which referred to the fact that Holden caps were included: see [26] and [27] above. It is also directly contradicted by the products themselves. Each of the wheel centre caps, the wheels and the label on the packaging of the "Supersport" style wheels bears the same part designation "S7", which suggests that the components were manufactured, packaged and imported together. 30 It is also recent invention. In addition to the contemporaneous advertisements, it is contrary to the fact that Mohamed Taleb failed to refer to or assert that the "Supersport" style wheels supplied by Taleb Tyres did not include the caps on which the relevant Trade Mark appears in any of the following contexts: 1. in telephone discussions with the applicants' solicitor on 26 February 2010 when they discussed the removal of the 19″ Advertisement from the eBay website; 2. in response to a letter of demand sent by the applicants' solicitor dated 10 March 2010 which included allegations of infringement of the Trade Marks by the sale of "Supersport" style wheels to Bob Jane Bankstown; 3. in response to further emails sent by the applicants' solicitor dated 17 and 25 March 2010; 4. in the Fast Track Response dated 24 November 2010; and 5. in his initial affidavit sworn on 24 November 2010. Moreover, there was no reference to the claim in any letter sent by the respondents' solicitors to the applicants' solicitors, including the letter dated 11 January 2011. For these reasons it is not necessary to further consider the respondents' submissions regarding the wheel centre caps. 31 Moussa Taleb was called by the respondents to give evidence. He also filed an affidavit sworn on 8 April 2011 in which he said that he drafted these advertisements but "inadvertently included the word, 'Holden' because he had used a template which contained that word in relation to sales of other Holden wheels (inclusive of wheel centre caps) which Taleb Tyres had acquired as a result of trade-ins by customers". His further evidence was that the wheels that were sold on eBay described as "Supersport" style wheels would have been supplied without any caps whatsoever but that if someone particularly wanted caps, they would supply generic caps that had no markings on them. I also reject this evidence. It is also recent invention. I do not accept that the text in the 19″ Advertisement and the Wheels and Tyres Advertisement was extracted from a template for the sale of second hand goods. The products offered for sale in these advertisements were new goods which were identified in a precise manner. Moreover, as the applicants' Counsel submitted, these advertisements offered delivery to all parts of Australia. The advertisements were not advertisements for one or two products but advertisements drafted to offer for sale a significant volume of these products, which is what Taleb Tyres did: see [28] above. 32 For those reasons, I reject the respondents' contention that none of the "Supersport" style wheels supplied by Mohammed Taleb and Taleb Tyres included wheel centre caps bearing the Holden Lion Mark.

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(D) SYDNEY TYRES 47 Mohamed Taleb was at all material times the sole director, secretary and shareholder of Sydney Tyres Australia Pty Ltd (ACN 108 548 714) (now Tassa Pty Ltd) (Sydney Tyres). The shareholder of Sydney Tyres (Mohamed Taleb) resolved to wind up the company on 14 December 2010. 48 Documents produced under subpoena by the Australian Customs and Border Protection Service (Customs) record a large number of importations of "car wheels" by Sydney Tyres from "Nantong Trade Union Aluminium Alloy Co" of Weier Road, Jiangsu Oidong Economic Development Zone, China. A spreadsheet of the importations was tendered in evidence. The total quantity of goods described as "car wheels" was 15,691 units, for a total price of over $1.95 million. 49 Mohamed Taleb has not explained any of these importations in either of his affidavits. The applicants submitted that these unexplained importations support the finding that the Court should reject his evidence that he simply purchased all relevant wheels from the back of a truck, from a person called "Mike", for cash with no receipts. In cross examination, Mohamed Taleb said he did not know Mike's last name. He said in the real world this is how business is conducted. He admitted that the business did not claim any GST input credits for the purchases from Mike and he knew he was buying goods that were unauthorised or not authentic. 50 The applicants also submitted that the evidence supports a finding that Mohamed Taleb had been operating a large and sophisticated importation business which he has not properly explained to the Court and that a percentage of the 15,691 wheels infringed the Trade Marks and/or the Designs. The first finding, regarding the large and sophisticated importation business, is open on the facts. A large number of wheels were imported by a company controlled by Mohamed Taleb. The second finding, that a percentage of the 15,691 wheels infringed the Trade Marks and/or the Designs, is not in my view a finding supported by evidence. 51 Put another way, even if the Court was to assume that the Nantong entity from which Sydney Tyres imported the large numbers of tyres was the same entity as supplied Holden with its genuine Holden products (see further paragraph 5 above), the circumstances appearing in the evidence do not in my opinion support any inference that may reasonably be drawn that some of the imported tyres were products that infringed the Trade Marks and/or Designs: Jones v Dunkel (1959) 101 CLR 298 at 304-305. This is in large part due to the paucity of available documents relating to the trade and/or business affairs of Sydney Tyres. No invoices, company orders or other similar documents were tendered that established, for example, that the tyres ordered by Sydney Tyres from Nantong Trade Union Aluminium Alloy Co were in fact tyres that infringed Holden Trade Marks and/or Designs. In fact, the only evidence before the Court concerning the wheels available for purchase from Nantong Trade Union Aluminium Alloy Co of Weier Road, Jiangsu Oidong Economic Development Zone, China was print outs from the Trade Union website which did not include images of any of the infringing products. Therefore, I reject the applicants' submissions in relation to Sydney Tyres.

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(2) Ahmed Taleb 53 The applicants also submitted that Ahmed Taleb was a joint tortfeasor in the trade mark infringement and passing off committed by Taleb Tyres. The following matters are relevant to the consideration of this submission. 54 On 1 April 2011, this matter was fixed for hearing on 18 and 19 April 2011. On 1 April, there was no suggestion of Ahmed Taleb being unavailable. 55 In fact, no difficulty with him appearing at the trial was raised until 12 April (six days before the hearing) when the respondents filed and served an outline of submissions stating that Ahmed Taleb would not be available for cross examination because he had a long-standing business commitment in China. No application for an adjournment of the hearing was made. No application to have Ahmed Taleb give evidence by video link from China was made. No application to have Ahmed Taleb give evidence by telephone was made. Instead, the respondents sought to tender an affidavit sworn by Ahmed Taleb. The applicants objected and the objection was upheld. 56 Having made no attempt to appear at the trial or seek an adjournment, the Court is entitled to accept that the evidence he would have given would not have assisted his case: Jones v Dunkel (1959) 101 CLR 298. 57 What then is the evidence against Ahmed Taleb? On the one hand, Mohamed Taleb gave evidence that his father was not involved in the day to day management of Taleb Tyres other than when Mohamed Taleb was overseas in late October and early November 2010. 58 On the other hand, there is other evidence which supports the contention that Ahmed Taleb played a significant role in the conduct of Taleb Tyres including that: 1. Ahmed Taleb had a long and personal involvement in running the Taleb Tyres business, having established the business in 2003 and having been sole director from this time until 2006, when Mohamed Taleb became the "sole manager"; 2. although on 14 December 2010 Fadia Taleb was the sole director of Taleb Tyres and had held that position since 16 February 2010, Mohamed Taleb's evidence was that she was not really a director of the company. Rather, Ahmed Taleb had been the sole director of the company since its incorporation in December 2003 until 16 February 2010; 3. on 14 December 2010, the shareholders, Mohamed and Ahmed Taleb, resolved to place Taleb Tyres into liquidation; 4. on 14 December 2010, Ahmed Taleb caused himself to be registered as the person carrying on business in New South Wales under the business names "TALEB TYRES" and "TALEB TYRES AUSTRALIA"; 5. in October 2010, Ahmed Taleb became the sole shareholder in "AM TALEB HOLDINGS PTY LTD" (ACN 094 089 040), a company which is registered as carrying on business as "TALEB TYRES & WHEELS". The sole director and secretary is Mohamed Taleb. Ahmed Taleb was a director for one day - 11 October 2010; 6. Ahmed Taleb manages the day to day affairs of the business as a caretaker when Mohamed Taleb is overseas; 7. on at least one occasion, 5 June 2009, Ahmed Taleb is recorded as the salesperson of the infringing products; and 8. in the liquidation of Taleb Tyres, he and Mohamed Taleb claimed an employee priority debt of $50,120. 59 For those reasons, I find that Ahmed Taleb was a joint tortfeasor in the trade mark infringement and passing off committed by Taleb Tyres by reason of the matters set out in Keller v LED Technologies at [291], [404] and [405], namely that: 1. Ahmed Taleb had the necessary knowledge; 2. Ahmed Taleb used the company, Taleb Tyres, as an instrument of his own wrong; 3. Ahmed Taleb made the tort his own; and 4. he had a close personal involvement in the infringing acts of Taleb Tyres.

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(3) Other matters 60 In addition to the evidence referred to above, the conduct of both Mohamed and Ahmed Taleb in the liquidation of Taleb Tyres cannot be ignored. This proceeding was commenced by the applicants against Taleb Tyres and both Mohamed and Ahmed Taleb on 25 October 2010. On 14 December, Taleb Tyres went into liquidation on the basis that the company was unable to pay an outstanding GST liability to the Australian Taxation Office of approximately $3.4 million. The proceeding against Taleb Tyres was stayed: s 500(2) of the Corporations Act. 61 The applicants were informed of the fact that Taleb Tyres was in "voluntary liquidation" on 11 January 2011. After the applicants' solicitor was informed of the voluntary liquidation of Taleb Tyres, he gave evidence that he accessed the company's website at www.talebtyres.com.au which still appeared active. Print outs from the website were tendered in evidence. Those print outs recorded that as at 22 March 2011, the copyright in the website was still held by Taleb Tyres and that a blog entry dated 23 December 2010 (after the liquidators were appointed) read: Currently we are undergoing major construction and service upgrades both in the workshop and online and would like to thank you all for your patience. On completion, in early 2011 Taleb Tyres will boast state of the art technology that this industry has not yet seen. 62 On 13 January 2011, the applicants' solicitor wrote to Mr Nolan, the respondents' solicitor, and asked whether Taleb Tyres was still operating, and if so, who owned and operated that business, and the circumstances in which that business was acquired. No response was received. 63 On 9 February 2011, the applicants' solicitor received the report to creditors dated 15 December 2010 and minutes of the first meeting of creditors dated 23 December 2010. The report: 1. records Taleb Tyres as having nil assets and nil equipment; 2. records the only liabilities as an employee priority debt of $50,120 which was claimed by Mohamed and Ahmed Taleb and related loans of $29,400; 3. records the liability to the Australian Taxation Office as nil, when in fact it was in excess of $3.4 million; 4. makes no reference to the tyre business or what became of it; and 5. makes no reference to these proceedings or the claims made by the applicants. 64 During cross examination, Mohamed Taleb admitted that the statements in the report that the liability to the Australian Taxation Office was nil and that the company had no assets were false. He also admitted that the company was wound up to avoid the liabilities owed to the Australian Taxation Office. Finally, he admitted that he moved a resolution at the first meeting of creditors on 23 December 2010 for the early destruction of the books and records of Taleb Tyres. He admitted to the Court that he was "happy to destroy as many records of the company as quickly as possible". 65 On 1 March 2011, the applicants' solicitor wrote to the liquidators expressing his concerns about the circumstances surrounding the winding up of Taleb Tyres. As at 30 March 2011, the applicants' solicitor had not received a response to that letter. 66 As is apparent, Mohamed and Ahmed Taleb are not witnesses of truth. They have disregarded their obligations to the Australian Taxation Office and their obligations under the Corporations Act. They have acted without any regard for the commercial interests of the applicants. In their conduct of Taleb Tyres, they have ignored numerous legal obligations for their own self interest. Unless their evidence was supported by contemporaneous documentary evidence from a reputable third party, it cannot be relied upon.

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C. DAMAGES AND OTHER RELIEF 69 The applicants elected for damages rather than an account of profits. 70 The applicants must prove their loss on the balance of probabilities and with as much precision as the subject matter reasonably permits: Placer (Granny Smith) Pty Ltd v Thiess Contractors Pty Ltd (2003) 196 ALR 257 at 266 [37]; The Commonwealth v Amann Aviation Pty Ltd (1991) 174 CLR 64 at 80 at 83-84, 138, 153 and at 161. 71 In assessing damages, the Court must do its best to quantify the loss suffered by the applicants by reason of the respondents' breach/es, even if some degree of speculation and guess work is involved: Aristocrat Technologies Australia Pty Ltd v DAP Services (Kempsey) Pty Ltd (in liq) (2007) 157 FCR 564 at [35]; Placer (Granny Smith) at [38] and Enzed Holdings Limited v Wynthea Pty Limited (1984) 57 ALR 167 at 183. 72 As Hayne J (with whom Gleeson CJ, McHugh and Kirby JJ agreed) said in Placer (Granny Smith) at [38] citations omitted): It may be that, in at least some cases, it is necessary or desirable to distinguish between a case where a plaintiff cannot adduce precise evidence of what has been lost and a case where, although apparently able to do so, the plaintiff has not adduced such evidence. In the former kind of case it may be that estimation, if not guesswork, may be necessary in assessing the damages to be allowed. References to mere difficulty in estimating damages not relieving a court from the responsibility of estimating them as best it can may find their most apt application in cases of the former rather than the latter kind. 73 In the present case, that principle is important. It is important because the respondents failed to comply with a Court order on 12 November 2010 to provide evidence of the products imported by Taleb Tyres. Moreover a subpoena to the liquidators of Taleb Tyres produced no books and records, and Mohamed Taleb agreed that he was willing to destroy the books and records of Taleb Tyres as soon as possible. 74 Against that background, I turn to consider the various heads of damages.

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(1) Lost profits identified in invoices 76 Lost profits are an appropriate measure of damage where the parties are in actual or potential competition: Elwood Clothing Pty Ltd (ACN 079 393 696) v Cotton On Clothing Pty Ltd (ACN 052 130 462) (2009) 81 IPR 378 at [11]; TS & B Retail Systems Pty Ltd v 3Fold Resources Pty Ltd (No 3) (2007) 158 FCR 444 at [207]; Norm Engineering Pty Ltd v Digga Australia Pty Ltd (2007) 162 FCR 1 at [266] - [271]. In the present case, the respective parties are all selling wheels for Holden cars. 77 The applicants used, and I adopt, the method of calculating lost profits employed in Elwood v Cotton On at [13] and in Norm Engineering v Digga Australia at [266] - [271], as follows: 1. examine the number of sales made by the respondents; 2. assume that the respondents were trying to capture sales from the applicants (which ought to be plain in the case of replica Holden wheels); 3. assume that number of sales made by the respondents is equal to the number of sales lost by the applicants; 4. discount the number in (3) to reflect the fact that not all sales made by the respondents can be considered sales lost by the applicants. To this end, in Norm Engineering, Greenwood J at [270] stated that the discount factor should be "determined according to proper principles, so as to reflect a proportionate sense of the impact upon the applicant of the respondent's conduct"; and 5. apply any further discount necessary in the circumstances of the case. 78 The profits to be calculated for this purpose are the "lost net profits … [meaning] revenue less all costs including variable and indirect costs, but not including income tax": TS & B Retail Systems Pty Ltd v 3Fold Resources Pty Ltd (No 3) at [207] and Elwood v Cotton On at [11]. The applicant is also entitled to "recover indirect losses (such as damage to goodwill) as long as the cause is the infringement, the loss is foreseeable and is not unduly speculative": TS & B Retail Systems Pty Ltd v 3Fold Resources Pty Ltd (No 3) at [207] (per Finkelstein J) and Elwood v Cotton On at [11]. 79 In the present case, the applicants' claim for lost profits is confined to the respondents' sales of "Supersport" style wheels. The applicants submit that, in the present case, the assessment of such compensatory damages ought not differ between the various causes of action for trade mark infringement, passing off or statutory misleading conduct. Rather, the Court is entitled to assess such compensatory damages arising from each of these causes of action as co-extensive: Deckers Outdoor Corporation Inc v Farley (No 5) (2009) 262 ALR 53 at 71. 80 In quantifying the damages, the applicants rely upon the "Feedback Profile" to Mohamed Taleb's eBay account (see [28] above) which related only to the "19 INCH VE SUPERSPORT STYLE WHEELS". It listed 21 transactions each for $699, totalling $14,679. The relevant customer feedback entries are dated between October 2009 and April 2010. The transactions amount to a total of 84 wheels. Annexed to their submissions was a spreadsheet prepared by the applicants' solicitors identifying each of the sales by Taleb Tyres of "Supersport" style wheels, cross-referenced to the evidence. The total number of "Supersport" style wheels sold by the respondents and identified in the evidence was 368 wheels, for sales totalling $75,679. 81 Mr Matthew Everett, the Product Manager Collision at GM Holden, has given evidence that there was a sharp decline in the sale of Supersport Wheels commencing in mid 2008, which he believes could be attributable to replica versions becoming available at around that time. Mr Everett also gave evidence that the retail price of "Supersport" style wheels purchased from a Holden or HSV dealer (excluding tyres and fitment, but including wheel centre caps) would cost $3,202. 82 The evidence does not clearly identify the ultimate retail price charged for each of the Supersport Wheels sold on a wholesale basis by the respondents. The applicants submitted (and I accept) that there was some price differential between those products and the applicants' authentic products which justifies some discount to reflect the fact that not all sales made by the respondents can be considered sales lost by the applicants. What then is the appropriate discount? 83 The applicants submitted that the discount ought be slight. They submitted that unlike a case such as Elwood v Cotton On, the present case involved the sale of like-for-like branded goods specially designed for use in Holden cars, which are the clear market leader. Further, they referred to the fact that: 1. the applicants' authentic products were available for purchase across Australia throughout the relevant period; and 2. the customers of these products are not just average motorists but Holden enthusiasts who are specifically seeking out Holden branded goods which will fit their Holden cars. Accordingly, the applicants submitted that the Court can and should infer that a significant proportion of the customers who ultimately purchased the respondents' products would have paid the higher price for the applicants' authentic products if the respondents' cheaper products were not available. 84 Ultimately, the Court must do the best it can to determine the appropriate discount. In all the circumstances, I consider that an appropriate discount would be 40%. When applied, this discount produces a total number of lost sales of 220 units, or 55 sets of four wheels. That total number of lost sales should then be multiplied by the applicants' net wholesale profit per full set of four Supersport wheels with wheel centre caps, which was set out by Mr Everett in Confidential Exhibit MLE-8 to his affidavit affirmed on 12 April 2011.

[47]

(2) Lost profits identified in the imported goods 85 In the wheel registration booklet packed inside the box of wheels purchased by Mr Fahd from Bob Jane Bankstown (see [17] above), the manufacturer of the products was identified as Trade Union International, Inc. 86 At paragraphs 47 to 51 above, I set out my findings regarding Mohamed Taleb and Sydney Tyres, including that, at all relevant times, Mohamed Taleb was the sole director, secretary and shareholder of this company, and the documents produced under subpoena by Customs showed that 15,691 "car wheels" (with a total Australian price of over $1.95 million) had been imported by Sydney Tyres from "Nantong Aluminium Alloy Co", the Chinese manufacturer of alloy wheels for Trade Union International, Inc. These importations were not explained by Mohamed Taleb in his affidavits, a fact which was relied upon by the applicants in urging the Court to reject Mohamed Taleb's evidence that he simply purchased all relevant wheels from the back of a truck from a person called "Mike", for cash with no receipts (see further paragraph 49 above). 87 I have already concluded at paragraphs 50 and 51 above that although the evidence supports a finding that Mohamed Taleb had been operating a large and sophisticated importation business which he has not properly explained to the Court, it does not support a finding that a percentage of the 15,691 wheels imported by Mohamed Taleb and/or Sydney Tyres infringed the Trade Marks and/or the Designs. 88 In certain circumstances, a Court is entitled to speculate or even guess (see Aristocrat (2007) 157 FCR 564 per Black CJ and Jacobson J at [35]; Enzed Holdings Limited v Wynthea Pty Limited at 183, per Sheppard, Morling & Wilcox JJ) in relation to the question of the quantification of damage. However, a Court is not entitled to guess at how many of the 15,691 imported wheels were "Supersport" style wheels with Holden Lion Mark caps like the ones purchased by Mr Fahd: see [72] above. That is a question of fact, and one that has not been proved on the balance of probabilities. For these reasons, the claim for compensatory damages in relation to the lost profits in the identified goods is rejected.

[48]

(3) Damage to reputation 89 In Elwood v Cotton On at [32], the issue of damage to reputation was addressed as follows: … an award of general damages is to be that sum which will put the [applicant] in the same position as it would have been in if it had not suffered the wrong. There is no dispute that, subject to issues of causation and foreseeability, any secondary loss, including damage to reputation, caused by the infringement is recoverable [TS & B Retail Systems Pty Ltd v 3 Fold Resources Pty Ltd (No 3) (2007) 158 FCR 444 at] [207]-[208]. 90 Was there loss to the applicants' reputation in the circumstances? Where reputational damages are sought, evidence is usually led to establish: (a) the importance of singularity, distinctiveness, quality or some other commercially valuable aspect of reputation to the victim; and (b) how, and to what extent, the infringing product or conduct damaged that aspect of the victim's reputation: see Elwood v Cotton On at [33] - [34] and [39]; Paramount Pictures Corporation v Hasluck (2006) 70 IPR 293 at [55]; Review Australia Pty Ltd (ACN 122 295 836) v New Cover Group Pty Ltd (ACN 111 991 596) (2008) 79 IPR 236 at [44] - [46] and Review Australia Pty Ltd (ACN 067 634 360) v Innovative Lifestyles Pty Ltd (ACN 107 012 260) (2008) 246 ALR 119 at [29] - [31]. 91 The applicants relied on the evidence of Ms Harden and Mr Everett as to the reputation established in the Holden brand as a result of longstanding investment in creating exclusive designs. Authorities have often stated that mere difficulty in assessing damages does not relieve the Court of its responsibility of estimating them as best it can (Amann at 83). To this end, and as the cases cited in paragraph 90 above demonstrate, although damage to reputation may be difficult to quantify, it is compensable nonetheless. 92 In the present case, the applicants claim damage to reputation on the following facts: 1. the applicants have developed a substantial reputation in Australia for its innovative and exclusive wheel designs and the applicants only sell Holden wheels, Holden wheel centre caps and HSV wheel centre caps to select wholesalers within Australia; 2. the Holden wheels are sold for a retail price between $3,500 and $4,500 per set and the infringing products sell for a retail price between $700 and $1,000 per set (a considerably lower price); and 3. the presence of the infringing products in the marketplace has significantly diminished the reputation of the designs for the Holden wheels, diminished the exclusivity of the designs in the marketplace and tarnished the applicants' brands. 93 In the circumstances, particularly where the respondents have not provided a full explanation of their conduct, the applicants submitted and I accept that an appropriate award of damages to reputation is $20,000.

[49]

(B) EXEMPLARY DAMAGES 94 In XL Petroleum (NSW) Pty Ltd v Caltex Oil (Australia) Pty Ltd (1985) 155 CLR 448 at 471, cited with approval by the Full Court in Lamb v Cotogno (1987) 164 CLR 1 at 9: As an award of exemplary damages is intended to punish the defendant for conduct showing a conscious and contumelious disregard for the plaintiff's rights and to deter him from committing like conduct again, the considerations that enter into the assessment of exemplary damages are quite different from the considerations that govern the assessment of compensatory damages. There is no necessary proportionality between the assessment of the two categories. In Merest v. Harvey (1814) 5 Taunt 442 [128 ER 761] substantial exemplary damages were awarded for a trespass of a high-handed kind which occasioned minimal damage, Gibbs C.J. saying: "I wish to know, in a case where a man disregards every principle which actuates the conduct of gentlemen, what is to restrain him except large damages?" The social purpose to be served by an award of exemplary damages is, as Lord Diplock said in Broome v. Cassell & Co. [1972] AC, at p 1130, "to teach a wrong-doer that tort does not pay". 95 In Sanders v Snell (1997) 73 FCR 569 at 451 Wilcox, O'Loughlin and Lindgren JJ expressed the view that exemplary damages: … can apply only where the conduct of the defendant merits punishment, which is only considered to be so where his conduct is wanton, as where it discloses fraud, malice, violence, cruelty, insolence or the like; or as it is sometimes put, where he acts in contumelious disregard of the plaintiff's rights. 96 The applicants submitted that the respondents' passing off has been wanton and has disclosed fraud, malice and/or insolence in the relevant sense to found an order for exemplary damages based on the following facts: 1. the flagrancy of the copying by the respondents given that the features of pattern and ornamentation on the respondents' products are a close copy of the Holden wheels and wheel centre caps - this is a passing off case in the counterfeiting category; 2. the respondents did not have to incur the significant design costs that the applicants had to incur in order to create the Holden Wheels; 3. the respondents' products continued to be offered for sale well after the applicants' solicitors first wrote to them; 4. the letters of demand sent by the applicants' solicitors were ignored completely; 5. there is a need to deter similar infringements to protect consumers from being misled that they are purchasing authorised products when in fact they are not; and 6. there is a public interest in deterring unauthorised copying in circumstances where design is at the heart of a business such as the applicants'. I agree. As I have noted earlier, the conduct of the respondents showed a complete and continual disregard of their legal obligations and, in particular, the rights of the applicants. This was particularly brought into focus by the deliberate destruction of documents orchestrated by Mohamed Taleb (see [64] above): Mohamed Taleb admitted during cross examination that he was "happy to destroy as many records" of Taleb Tyres "as quickly as possible" following the first meeting of the company's creditors. It is likely that this conduct of Mr Taleb had a direct bearing on the fact that the liquidators of Taleb Tyres were unable to produce any documents in response to subpoenas served on them by the applicants. This conduct constituted a contumelious disregard of the applicants' rights, and requires exemplary damages to be calculated accordingly. 97 The amount of such exemplary damages is entirely in the Court's discretion and, as noted by Brennan J in XL Petroleum at 471, there is no necessary proportionality between the assessment of compensatory damages and exemplary damages, and indeed, the latter may be many times greater than the former. 98 In the circumstances of the present case, I consider that an appropriate award of exemplary damages for passing off is $200,000.

[52]

Associate: Dated: 30 May 2011 ANNEXURE A: PARA [23(1)] Transaction Date Supplier Code 17/8/2009 TALEB 8/09/2009 TALEB 9/09/2009 TALEB 31/10/2009 TALEB 9/11/2009 TALEB 17/12/2009 TALEB 12/01/2010 TALEB 10/11/2008 TALEB 11/11/2008 TALEB 27/11/2008 TALEB 29/11/2008 TALEB 18/03/2009 TALEB 25/03/2009 TALEB 30/03/2009 TALEB 1/05/2009 TALEB 28/05/2009 TALEB 6/07/2009 TALEB 6/07/2009 TALEB 25/07/2009 TALEB 1/08/2009 1 Supplier Name Reference Quantity Value Product Code Description Taleb Tyre Service 32488 20 $3,636.40 SUPERSPORT 20x8 5/120 Taleb Tyre Service 32914 20 $3,636.20 SUPERSPORT 20x8 5/120 VE Taleb Tyre Service 32951 20 $3,636.40 SUPERSPORT 20x8 5/120 VE Taleb Tyre Service 34086 2 $363.62 SUPERSPORT 20x8 5/120 VE Taleb Tyre Service 34196 20 $3,636.20 SUPERSPORT 20xx8 5/120 VE Taleb Tyre Service 34718 20 $3,636.20 SUPERSPORT 20x8 5/120 VE Taleb Tyre Service 35389 20 $3,636.20 SUPERSPORT 20x8 5/120 Taleb Tyre Service 27133 4 $818.16 SUPERSPORT 20x8.5 5/120 Taleb Tyre Service 27119 16 $3,272.64 20x8 SUPERSPORT ALLOY Taleb Tyre Service 28760 4 $818.16 HOLDEN 20x8.5 SUPERSPORT Taleb Tyre Service 28770 4 $818.16 HOLDEN 20x8.5 SUPERSPORT Taleb Tyre Service 29895 8 $1,115.12 SUPERSPORT 20x8 5/120 Taleb Tyre Service 30014 8 $1,672.72 SUPERSPORT 20x8 5/120 Taleb Tyre Service 30078 4 $836.36 SUPERSPORT 20x8 5/120 Taleb Tyre Service 30558 8 $1,443.00 SUPERSPORT 20x8 5/120 Taleb Tyre Service 30964 4 $836.36 SUPERSPORT 20x8 5/120 HYPER Taleb Tyre Service 31663 4 $818.16 PENTAGON 20x8 5/120 Taleb Tyre Service 31663 1 $209.11 SUPERSPORT 20x8 5/120 Taleb Tyre Service 32064 20 $3,636.20 SUPERSPORT 20x8 5/120 VE Cash Purchases TALEB 32214 20 $3,636.20 SUPERSPORT 20x8 5/120

[53]

ANNEXURE B - PARA [23(2)] Transaction Date Supplier Code Supplier Name Reference Quantity Value Product Code Description 10/11/2008 TALEB Taleb Tyre Service 27113 4 $818.16 SUPERSPORT 20x8.5 5/120 11/11/2008 TALEB Taleb Tyre Service 27119 16 $3,272.64 20x8 SUPERSPORT ALLOY 27/11/2008 TALEB Taleb Tyre Service 28760 4 $818.16 HOLDEN 20x8.5 SUPERSPORT 29/11/2008 TALEB Taleb Tyre Service 28770 4 $818.16 HOLDEN 20x8.5 SUPERSPORT 18/03/2009 TALEB Taleb Tyre Service 29895 8 $1,115.12 SUPERSPORT 20x8 5/120 25/03/2009 TALEB Taleb Tyre Service 30014 8 $1,672.72 SUPERSPORT 20x8 5/120 30/03/2009 TALEB Taleb Tyre Service 30078 4 $836.36 SUPERSPORT 20x8 5/120 1/05/2009 TALEB Taleb Tyre Service 30558 8 $1,443.60 SUPERSPORT 20x8 5/120 28/05/2009 TALEB Taleb Tyre Service 30964 4 $836.36 SUPERSPORT 20x8 5/120 HYPER 5/06/2009 TALEB Taleb Tyre Service 31102 4 $700.00 SUPERSPORT 20x8 5/120 6/07/2009 TALEB Taleb Tyre Service 31663 4 $818.16 PENTAGON 20x8 5/120 6/07/2009 TALEB Taleb Tyre Service 31663 1 $209.11 SUPERSPORT 20x8 5/120 25/07/2009 TALEB Taleb Tyre Service 32064 20 $3,636.20 SUPERSPORT 20x8 5/120 VE 17/08/2009 TALEB Taleb Tyre Service 32488 20 $3,636.40 SUPERSPORT 20x8 5/120 8/09/2009 TALEB Taleb Tyre Service 32914 20 $3,636.20 SUPERSPORT 20x8 5/120 VE 9/09/2009 TALEB Taleb Tyre Service 32951 20 $3,636.40 SUPERSPORT 20x8 5/120 VE 31/10/2009 TALEB Taleb Tyre Service 34086 2 $363.62 SUPERSPORT 20x85 5/120 VE 9/11/2009 TALEB Taleb Tyre Service 34196 20 $3,636.20 SUPERSPORT 20xx8 5/120 VE 17/12/2009 TALEB Taleb Tyre Service 34718 20 $3,636.20 SUPERSPORT 20x8 5/120 VE 12/01/2010 TALEB Taleb Tyre Service 35389 20 $3,636.20 SUPERSPORT 20x8 5/120 11/03/2010 TALEB Taleb Tyre Service 1 -16 -$2,908.96 SUPERSPORT 20x8 5/120

At a glance

Court

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Before

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Judgment (54 paragraphs)

Parties

Legislation Cited (5)

Cases Cited (19)

Cited By (8)