Muscat v Best Direction Pty Ltd [2004] FCA 88 | Case summary

2 By way of interlocutory relief the applicant seeks injunctions in the form referred to above and orders for delivery up. The application for such relief was heard on 9 February 2004. Sixteen of the respondents were represented or attended in person. There was no appearance for the sixth and eleventh respondents. Only the third respondent (Krishna) filed affidavits in answer to the applicant's affidavits. Some of the respondents handed up invoices, and one handed up an unsworn statement together with some invoices. 3 The applicant's evidence can be summarised as follows. Karen Muscat, the applicant's partner in the Mytiko business, deposed that the partners create all designs for Mytiko and produce their garments in Melbourne. They retail their merchandise from their shop in Chapel Street, Prahran. Ms Muscat described Mytiko pants designed and made by the applicant as V fronted flared ladies stretch fashion pants. These pants represent a large percentage of the total sales of stock from the shop. They sell for $55 each. In August 2003 Ms Muscat noticed a substantial decrease in the sales of the Mytiko pants. In December 2003 judgment was delivered in Muscat v Le [2003] FCA 1540 in which the present applicant was held, amongst other things, to be the owner of the copyright in the dressmaking pattern for the Mytiko pants. Ms Muscat deposed to making various purchases of the "offending products" after the delivery of the judgment. 4 The applicant herself swore an affidavit in which she repeated some of the matters in her partner's affidavit. She produced a pair of the Mytiko pants and the cardboard dressmaking pattern for them. In August 2003 she became aware of the sale throughout Australia of offending products. Sales of Mytiko pants were significantly reduced during October to December 2003. She identified the three labels under which the offending products were sold: Carisma, Xcepsion and Face Off. By means of a schedule for each label, she identified the respondents' stores where the offending products had been purchased by Mytiko employees. The applicant said that the market for Mytiko pants consists of teenage schoolgirls who mainly purchase them to wear to school. The December/January period is the peak period for purchases for the start of the school year. 5 Glenys Jardine, the applicant's solicitor, gave evidence about the despatch to each respondent of a letter of demand dated 16 January 2004, and of her conversations with some of the respondents who contacted her after receiving their letters. She deposed to her instructions that there has been a fall off in sales of Mytiko pants since January 2004, describing it as a "significant decrease". She spoke also of "serious irreparable damage" likely to result from the sale of the offending products because a significant proportion of the sales occur in the early part of the school year. 6 There was evidence from four Mytiko employees about their purchases of offending products from the respondents' stores. The stores and the products purchased there were identified. 7 Kumi Malcolm, a self employed pattern maker, gave evidence that in January 2004 she was asked by the applicant to make copy patterns of Carisma, Face Off and Xcepsion pants that had been purchased by the applicant as aforesaid. She took these pants and Mytiko pants apart and made cardboard patterns of each of them. The patterns were in evidence. She compared the patterns and expressed the opinion that dress making patterns used to create the offending products were essentially the same as the patterns used to create the Mytiko pants. She said: "If two designers set out to independently create a pair of flared pants with a low waist by reference to the same picture or drawing, the chances of the resulting patterns being close to identical is so remote as to be almost impossible."

"In my opinion, due to the fact that the patterns I have created from the Offending Products are virtually identical to the dress‑making patterns I created from each of the Mytiko Pants in exhibit KM8, the Respondent's garments must have been created by pulling apart the Applicant's Mytiko Pants and creating the patterns in the same way that I have done from the Offending Products as outlined above." 8 I will deal first with the respondents other than Krishna. As I have said, only Krishna filed answering material. The other respondents who appeared or were represented adopted the submissions made by counsel for Krishna. To a large extent Krishna's submissions were founded on its answering affidavit material, so that the adoption of its arguments by other respondents does not greatly assist them. To the extent that Krishna's submissions were independent of its evidence, the other respondents have not persuaded me that interlocutory relief should not be granted to the applicant. Counsel for the ninth and eighteenth respondents made submissions additional to adopting Krishna's submissions. His submissions have not persuaded me that interlocutory relief should not be granted against the respondents for whom he appeared. There is a serious question to be tried as to the applicant's ownership of copyright in the patterns. That was not an issue before Finkelstein J in Muscat v Le. It is in issue in the present case. There is a serious question as to infringement, assuming the applicant is the copyright owner. There is a serious question as to applicability of Muscat v Le to the present case, a matter that will require careful examination. 9 The balance of convenience favours the grant of interim relief. The offending garments sell much more cheaply than the Mytiko pants. The applicant's evidence is that her business has suffered and is suffering a loss of sales in the busiest part of the year when schoolgirls are going back to school. Although the evidence about loss and damage is not satisfactory, because of its lack of particularity, I am satisfied that the applicant is likely to suffer loss as a result of the activities of the respondents, and that it will be difficult, if not impossible, to quantify that loss should she ultimately succeed at trial. On the other hand, if injunctions are granted and the respondents succeed at trial, their loss should be readily ascertainable and will be covered by the applicant's undertaking as to damages. Although Krishna made submissions about the worth of the undertaking, no evidence was adduced as to the applicant's inability to support its undertaking. 10 In order to deal with the case against Krishna, it is necessary to record in summary form the evidence it filed in answer to the applicant's case. Krishna's principal affidavit is that of Bob Uppal, the sole director of the company. He deposes that about half of Krishna's sales are made through its own retail stores trading as "Deborah K". The other half are made by wholesale to stores in Perth and South Australia. Krishna does not manufacture the goods it sells. All clothing is imported from overseas, mainly from China. Krishna is not involved in the design of the clothes it sells. Its direct competitors include Carisma Collection and Face Off. Mr Uppal described the way Krishna goes about acquiring the goods it sells. He goes overseas to the United States and London and buys samples of garments that appeal to him. He takes them to Shanghai and shows them to manufacturers there. They show him samples of their clothing. In relation to the Xcepsion pants sold by Krishna, what happened was this. In September 2003 Mr Uppal purchased samples in Los Angeles, New York and London. None of them were pants such as those in question. He then went to Shanghai. One of the manufacturers there, Changshu, showed him a flared V pant. He purchased a quantity. He was not shown any patterns on this or any other occasion in Shanghai. He did not have a sample V pant with him when he made the purchase from Changshu. He has never had any dressmaking patterns for the Changshu pants. The pants arrived in mid December 2003 and sales commenced late that month. They sold for $20 each. They did not sell well, and Mr Uppal reduced the price to $12 in order to clear the stock. He now holds about 500 Changshu pants. He has no intention of ordering any more. 11 Mr Uppal says that prior to the receipt of the applicant's letter of demand he had never heard of Mytiko or its pants. He says that retailers of young women's clothes in Chapel Street, "South Yarra" operate in a different market from those in which the Deborah K stores operate, and this is reflected in the much lower price Krishna charges for the Xcepsion pants. 12 Mr Uppal says that in 1993/1994 he ordered from China flared V pants the same as the Mytiko pants, and that V pants are widely sold throughout the world. He concludes by saying that Krishna keeps accurate records of all sales made by it (including of the Changshu pants) and will continue to do so. 13 Vanessa Carey, a buyer employed by Krishna, made a diagram of size 10 Mytiko and Xcepsion pants, and pointed out the difference in many of the measurements of the two garments. 14 Andrew Samuel, Krishna's accountant since 1994, confirmed Mr Uppal's story that about ten years ago Krishna had imported pants that were the same as the Mytiko pants. Clarita Delatorre, a Krishna employee, said she had sold pants of the same style as the Mytiko pants some time between 1993 and 1996. Alla Papava, a wholesaler of Xcepsion pants purchased from Krishna, deposed that there was nothing special or distinctive about them. She had seen many pants of the same style over the last fifteen years. About ten to twelve years ago she had sold pants of the same style as the Xcepsion pants. 15 Katherine Gove, Krishna's solicitor, said she and an assistant had traced Mytiko, Xcepsion, Carisma and Face Off patterns on cardboard and cut out a pattern of each garment. Each pattern was accorded a different colour. This was done in order to point up differences between the shapes and measurements of the patterns. 16 By reference to this material Krishna's counsel made a spirited attack on the applicant's case. It was contended, amongst other things, that for want of originality the applicant was not the owner of copyright in the pattern, and that if she was, there was no infringement because there had been no copying on Krishna's part. It was also submitted that Muscat v Le was distinguishable, and it was pointed out, as I have said, that the existence of copyright was conceded in that case. Krishna relied on s 77 of the Act as a defence. That is a difficult section in its application to this case. The evidence as to copying in [7], although disputed by Mr Uppal, gives rise to a serious question as to whether the section is available to Krishna. Although counsel's submissions disclosed several hurdles that the applicant will have to surmount in order to succeed at trial, the force of the submissions has not dispelled my impression that there exist the serious questions identified earlier. A serious question remains a serious question even though a serious case can be mounted against it. That I think is the position here. The Krishna material is impressive and persuasive. But, as the applicant's counsel pointed out, it has yet to be tested by cross‑examination. I must consider the whole of the material. Having done so, I think the applicant is entitled to interlocutory injunctive relief against Krishna as well as the other respondents. On the balance of convenience I refer to what I have said at [9]. In order to reflect my concern about the ultimate viability of the case against Krishna, in the exercise of my discretion I will not grant the delivery up relief sought by the applicant against Krishna. I certify that the preceding sixteen (16) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Sundberg.

Muscat v Best Direction Pty Ltd

At a glance

Court

Decision date

Before

Source

Judgment (31 paragraphs)

Parties

Legislation Cited (1)

Cases Cited (1)