State of Escape Accessories Pty Limited v Schwartz

3. The respondents be permanently restrained, whether by themselves, their officers, servants or agents or howsoever otherwise, in trade or commerce in Australia, from offering for sale, selling, distributing or promoting Chuchka Tote Bags under or by reference to or in conjunction with any one or more of the Promotional Statements including without limitation by, offering for sale, selling, distributing or promoting Chuchka Tote Bags on the website located at www.chuchka.com.au (Chuchka Website), and the social media accounts located at @chuchkahome on Facebook, @chuchkahome on Instagram and @chuchkahome on Pinterest, or any other website or social media account under the control of the respondents or either of them (Chuchka Social Media Channels).
4. The respondents are liable to pay the applicant damages pursuant to section 236(1) of the ACL, in an amount to be assessed.
5. The applicant's claim insofar as it relates to questions of liability is otherwise dismissed.
6. The cross-claimant's cross-claim is dismissed.
7. The applicant is to pay 80% of the respondents' costs of the proceeding to date.
8. There be an inquiry to assess the quantum of damages to be awarded to the applicant pursuant to s 236(1) of the ACL in respect of loss or damage suffered by the applicant because of the making of the Promotional Statements.
9. On or before 18 December 2020, the applicant file and serve particulars of paragraph 35 of the Amended Statement of Claim identifying the heads of damage to be claimed in the inquiry referred to in paragraph 8 above.
10. On or before 18 December 2020, the respondents are to give discovery by a verified list of documents comprising a report or reports of information contained in the second respondent's business records setting out: (a) the total number of Chuchka Tote Bags sold by the second respondent to retail customers in Australia on the Chuchka Website and the Chuchka Social Media Channels in the period up to 21 November 2019; (b) the year(s) in which the Chuchka Tote Bags referred to in sub-paragraph 10(a) were sold; and (c) the product line or style of the Chuchka Tote Bags referred to in sub-paragraph 10(a) above.
11. The matter be listed for a further case management hearing at 9.30 am on 22 December 2020. Note: Entry of orders is dealt with in Rule 39.32 of the Federal Court Rules 2011.

DAVIES J: 1 In issue between the parties are the orders that should be made to give effect to the judgment on liability: State of Escape Accessories Pty Limited v Schwartz [2020] FCA 1606 (liability judgment). The Court found that the applicant (State of Escape) had failed to establish its claims of copyright infringement, passing off and misleading and deceptive conduct based on the alleged similarities of the Escape Bag and the Chuchka bags, but had established its claims of misleading and deceptive conduct under the Australian Consumer Law (ACL), Sch 2 to the Competition and Consumer Act 2010 (Cth), in respect of promotional statements made by the second respondent regarding the Chuchka bags (contravening conduct), as well as accessorial liability of the first respondent (Ms Schwartz) in relation to that contravention. 2 The parties are agreed that State of Escape is entitled to declaratory relief in relation to the misleading and deceptive conduct claim on which it succeeded and Ms Schwartz's involvement in the contraventions of the ACL for the purposes of s 236(1) of the ACL. 3 In addition to the declaratory relief, State of Escape seeks an injunction in the following terms: The Respondents be permanently restrained, whether by themselves, their officers, servants or agents or howsoever otherwise, in trade or commerce in Australia, from offering for sale, selling, distributing or promoting Chuchka Tote Bags under or by reference to or in conjunction with any one or more of the Promotional Statements including without limitation by, offering for sale, selling, distributing or promoting Chuchka Tote Bags on the website located at www.chuchka.com.au (Chuchka Website), and the social media accounts located at @chuchkahome on Facebook, @chuchkahome on Instagram and @chuchkahome on Pinterest, or any other website or social media account under the control of the Respondents or either of them (Chuchka Social Media Channels). 4 The respondents oppose the grant of injunctive relief on the basis that State of Escape has enforceable undertakings from them which they gave in November 2019 in the terms of the document at annexure 3 to the liability judgment, which includes a mechanism for State of Escape to notify the respondents of any instances of non-compliance with the undertaking. The respondents argued that this mechanism is more appropriate to the circumstances of the present case than the prospect of contempt proceedings. The respondents also relied on the Court's findings in the liability judgment at [166] (that a consumer purchasing a Chuchka bag could be left in no doubt that it was a Chuchka product) and [167] (the price differential between the Escape Bag and a Chuchka bag is such that the parties have different target audiences) to argue that it is very unlikely that any substantial damage would occur to State of Escape in the event of non-compliance with the undertakings. 5 The giving of the undertakings is a relevant factor in determining whether or not to grant the injunctive relief that is sought, although the Court has power to grant the injunction whether or not it appears to the Court that there is a possibility of future misconduct: s 232(4) of the ACL. It is also relevant to take into account that the contravening conduct was both intentional and serious. Although there is nothing in the evidence to suggest there is a likelihood that the respondents might engage in the contravening conduct in the future unless restrained, it seems to me that it is appropriate to grant an injunction in the terms sought by State of Escape for the following reasons: (a) the injunction is specifically and clearly expressed and can be readily obeyed without a need for court supervision. It is a superior mechanism for protecting the rights of State of Escape than the undertakings, which were made on an inter partes basis without any admission of liability, pursuant to which the mechanism for enforcement puts the onus on State of Escape to notify the respondents of any potentially contravening conduct; (b) the grant of injunctive relief would serve the purpose of minimising the risk to State of Escape of harm caused by the repetition of the contravening conduct. Whether or not, as asserted by the respondents, it is "very unlikely" that any substantial damage would occur to State of Escape in the event of non-compliance with the undertakings, the potential for harm to State of Escape cannot be discounted as non-existent; and (c) the injunctive relief also serves the purpose of the protection of the public interest in circumstances where the contravening conduct constituted by the promotional statements was directed at the public at large. That public purpose is also served by the declaratory relief granted but, as the authorities show, there is no reason why an injunction should not be granted where it is otherwise appropriate, as I consider it is in this case: Samsung Electronics Australia Pty Ltd v LG Electronics Australia Pty Ltd (No 2) [2015] FCA 477 at [17] and the cases there cited. 6 Next in dispute is whether an order should be made that the respondents are liable to pay State of Escape damages pursuant to s 236(1) of the ACL in an amount to be assessed. It was contended for the respondents that such an order is premature as State of Escape is yet to show that it has in fact suffered loss and damage or particularise the heads of damages claimed, and the proposed orders, in any event, in paragraph 8 provide for an inquiry to assess the quantum of the damages to be awarded to State of Escape pursuant to s 236(1) of the ACL. In my view, neither submission carries force against making the order sought. State of Escape is entitled to such an order on the findings made in the liability judgment. The amount of the damages payable, if any, which is yet to be assessed, is a separate matter to the establishment of liability, which the order reflects. 7 The proposed orders also contain the procedure to set up the inquiry to assess the quantum of damages to be awarded. Proposed paragraph 10 provides for discovery to be given by the respondents. The discovery order sought by the applicant includes: a verified list of documents comprising a report or reports of information contained in the second respondent's business records setting out: (a) the quantity of Chuchka Tote Bags sold by the Second Respondent to retail customers in Australia, categorised as follows: (i) the total number of Chuchka Tote Bags sold on the Chuchka Website and the Chuchka Social Media Channels in the period up to 21 November 2019; and (ii) the total number of Chuchka Tote Bags sold in-store in the period up to 21 November 2019; 8 The respondents sought to confine paragraph 10(a)(i) to the total number of Chuchka tote bags sold on the Chuchka website and the Chuchka Facebook account, arguing that at trial State of Escape had confined its case to the promotional statements being made through those two mediums, not social media channels more broadly. I do not accept the respondents' characterisation of the case put against it, which I think is too limiting, and I do not think it goes beyond the case as presented at trial to make an order in the terms of paragraph 10(a)(i) as sought by State of Escape. There is, however, substance in the respondents' complaint about paragraph 10(a)(ii) as it is difficult to see the relevance of that category to the case as presented by State of Escape, which did not include a claim that the promotional statements were ever used in store. 9 Finally, whilst the parties are in agreement that there should be one costs order only, with an apportionment reflecting the success and lack of success of each of the parties on the issues, they are in dispute as to the appropriate apportionment. State of Escape seeks an order that it pay 0%-30% of the respondents' costs of the proceeding insofar as it relates to questions of liability, whereas the respondents seek an order that State of Escape pay 90% of their costs of the proceeding to date. 10 Generally the cost of a trial follows the event: Foots v Southern Cross Mine Management Pty Ltd [2007] HCA 56; 234 CLR 52 at 62-3 [25] per Gleeson CJ, Gummow, Hayne and Crennan JJ. Where there is a mixed outcome in a proceeding, the Court can apportion costs between the parties by taking into account the success, or lack of success, of the parties on an issues bases so as to do substantial justice between the parties, reflecting the compensatory purpose of a cost order. Such an apportionment is done on a broad basis as a matter of impression and evaluation rather than arithmetic precision. 11 In my view, State of Escape's assessment of the costs it should pay is way too low. State of Escape's copyright case was the main claim pursued in the proceeding and failed entirely. A very substantial portion of the evidence adduced by the parties went to this issue and the issue occupied by far the greatest part of the parties' submissions, both written and oral. State of Escape's parallel case based on alleged similarities in overall appearance of the Chuchka bags and the Escape Bag, framed under the ACL and by reference to the tort of passing off, also failed entirely. Again, a great deal of the evidence, as well as the written and oral submissions, was directed to those claims. It was submitted for State of Escape that it should be taken into account, nonetheless, that the evidence which supported those causes of action overlapped considerably with the evidence needed to provide the foundation for relief for the misleading and deceptive conduct claim based on the promotional statements and accessorial liability, as well as causation on damages. That may be so but I do not think it is a consideration in the making of the costs order on the liability judgment, as such evidence had to be led in any event. State of Escape did, however, have success on the factual issue as to whether Ms Schwartz had knowledge of the State of Escape brand and its range of perforated neoprene bags at the time she fixed upon the design and specifications for the Chuchka bags. Having regard to the amount of evidence directed at, and time taken up at trial with, that issue, the respondents' lack of success on that issue should be taken into account on the question of costs, reflecting State of Escape's success on that issue. Some further reduction to the percentage of costs that State of Escape should pay is warranted, reflecting the abandonment by the respondents of their cross-claim and Ms Schwartz's lack of success on the accessorial liability claim against her. Those matters are not as significant in determining the appropriate apportionment as the cross-claim was abandoned prior to trial and involved no evidence being adduced by State of Escape, and the accessorial claim took up a relatively modest amount of time. In all the circumstances, doing justice between the parties, I am of the view that the respondents should have 80% of their costs of the proceeding to date paid by State of Escape. I certify that the preceding eleven (11) numbered paragraphs are a true copy of the Reasons for Judgment of the Honourable Justice Davies.