CATCHWORDS CONTRACT - Fabric design created by customer - Design left with printer for use only on fabric printed on benalf of customer - Use of design by printer on fabric printsd for other customers - Design including name of principal of applicant - Name reproduction on part of fabric pfin \ted for others - Clothing marketed by other customers inferior tc that of applicant - Measure of damages - Compensation for lost sales - Whether damages recoverable in contract for damage to reputation - Whether exemplary cr aggravated aamages should be awarded. TRADE PRACTICES - Passing off - Sale by respondents of clothzng containing design made by applicant - Whether misleading or deceptive conduct cr vassing off - Position 2 relation to garments containing mame of principal of applizant - Whether cepresentation of association - Claim for indemnity by cross-claimant upon basis that its misleading conduct causec by cross-cespondent's refraining from disclosing tnac design bore signatuce. CONFIDENTIAL INFORMATION - Design supplied to printer for use oniy on behair of applicant - Whether duty of confidences arose - Whether acticn for breach of duty available after sale by applicant to members of public of garments bearing the design. Trade Practices Act 1974 ss.4, 52, 82 Hornsby Building information Centre Pty Limited v Svdnev Building Information Centre Pty Limited (1977) 146 CLR 215, Parkdale Custom Built Furniture Pty Limited v Puxu Pty L-m-ced (1982) 149 CLR 191, Saltman Engineering Company Limited v Camobell Engineering Ccomrpany Limited (1948) 65 RPC 263, Coco v AN Clark (Enqingers) Limited £1969] RPC 41, O'Mustad & Son v Dosen €19643 1 WLR 109, C Czarnikow Limited v Koutos £1964] 1 AC 350, Enzed Holdings Limited v Wkythea Pty Limited (1984) 57 ALR 167, Yorke v Lucas (1985) 59 ALJR 776, Gates v The City Mutual Life Assurance Society Limited (High Court, 26 Pebruary 1986, not reported) applied. NSW G.13 of 1985 FLAMINGO PARK OTY LIMITED v DOLLY DOLLY CREATION POY LIMITED ORS ea] Wilcox J. Sydney 19 March 1986 CATCHWORDS CONTRACT - Fabric design created by customer - Design left with printer for use only on fabric printed on behalf of customer - Use of design by printer on fabric printed for other customers - Design including name of vorincipal of applicant - Name reproduction on part of fabric printed = others - Clothing marketed by other customers inferior <0 of applicant - Measure of damages - Comrensacticn for lost sales - Whether damages recoverable in contract foc damage to reputation - Whether exemplary or aggravated damages should be awarded. TRADE PRACTICES - Passing off - Sale by respondents of clathing containing design made by apolicant - Whether misleading or deceptive conduct sr vassing off - Position in relation to garments containing name ci principal of apoliicant - Whether representation of association ~- Ciaim foc indemnity by cross-claimant upon basis that 1ts misleading conduct caused by cross-respondent's refraining from disclosing that design bore signature. CONFIDENTIAL INFORMATION - Design supplied to printer for use only on behalf of applicant - Whether duty of confidence arose - Whether action for breach of duty available after sal2 py applicant to members of public of garments bearing the design. Trade Practices Act 1974 ss,4, 52, 92 Hornsby Building Information Centre Pty Limited v Sydnay Burlding Information Centre Pty Limised (1977) 146 CLR 215, Parkdale Custom Bulit Furniture Pty Limited v Puxu Pty Limited (1982) 145 CLR 191, Saltman Engineering Company Limited v Camobell Engineering Company Limited (1948) 65 RPC 263, Coco 7 AN Clark (Erqznesrs) Gimited £1969] RPC 41, O'Mustad & Son v Dosen £1964] 1 WLR 109, C Czarnikow Limited v Koufos £1964] i AC 350, Enzed Hoidings Lrmited v Whythea Pry Limited (1964) 57 ALR 167, Yorke v Lucas (1985) 59 ALUR 776, Gates v The Ciczv Mutual Life Assurance Society Limited (High Court, 26 February 1986, not reported) applied. NSW G.13 of 1985 FLAMINGO PARK PTY LIMITED v DOLUY DOLLY CREATION PTY LIMITED & ORS . Wilcox J. Sydney 19 March 1986 marae e i a a ne MINUTE OF ORDERS THE COURT ORDERS THAT: i, The existing interlocutory injunctions be dissolved. 2. The respondent, Mercedes Textiles Pty Limited, and its servants and agents be restrained, except in accordance with the prior instructions of the applicant: a) from using the design known as the "sexy print design", and being the design illustrated on ex.A herein, in the printing of any fabric; and b) from supplying or otherwise dealing with any fabric printed with that design. 3. Judgment be entered in favour of the applicant against the respondent Mercedes Textiles Pty Limited for damages in the sum of thirty-eight thousand seven hundred and sixty-two dollars ($38,762.00). Tr rn eran per es a rote PE ee ee Scere neers oe The respondent, Dolly Dolly Pty Limited, and its servants and agents be restrained from selling, offering for sale, supplying or otherwise in the course of trade dealing with any garment manufactured from fabric printed with the said design in which is included a facsimile of the Signature "J. Kee". Judgment be entered in favour of the applicant against the respondent Dolly Dolly Pty Limited for damages in the sum of one thousand nine hundred and fifty dollars ($1,950.00). To the extent that the judgment referred to in order 3 hereof is satisfied, beyond the sum of thirty-six thousand eight hundred and twelve dollars ($36,812.00), that satisfaction shall pro tanto satisfy the judgment referred to in order 5 hereof; and to the extent that the judgment referred to in order 5 hereof is satisfied, that satisfaction shall pro tanto satisfy the judgment referred to in order 3 hereof. The Application, insofar as it relates to Benny Spieser and Sipi Spieser, be dismissed. 10. wee he be ee a ee ene - + =n eo fh The respondents, Mercedes Textiles Pty Limited and Dolly Dolly Pty Limited, pay to the applicant its costs of this proceeding other than any costs incurred by it which were solely referable to the joinder as respondents of Benny Spieser or Sipi Spieser. The applicant pay to Benny Spieser and Sipi Spieser any costs incurred by them in respect of this proceeding, being costs which would not have been incurred but for the joinder of one or both of those respondents. It be declared that the cross-claimant Dolly Dolly Pty Limited is entitled: 1) to be imdemnified by the cross-respondent Mercedes Textiles Pty Limited against all costs and liabilities incurred by it under this order as against the applicant; and il) to recover damages against the cross-respondent Mercedes Textiles Pty Limited in respect of the cost incurred by it in the manufacture, distribution, collection and storage of the garments referred to in order 4 hereof. 11. 12. pre ae we ee ee tutne Liberty be reserved to the cross-claimant Dolly Dolly Pty Limited to make application to the Court upon seven (7) day's notice for an assessment of the amount of the damages referred to in order LO(ii). The cross~respondent, Mercedes Textiles Pty Limited, pay to the cross-claimant, Dolly Dolly Pty limited, the costs incurred by it in connection with the principal proceeding and with the cross-clain. Settlement and entry of orders is dealt with in Order 36 of the Federal Court Rules. a ee er ee IN THE FEDERAL COURT OF AUSTRALIA NEW SOUTH WALES DISTRICT REGISTRY GENERAL DIVISION CORAM: DATE: PLACE: WILCOX J. 19 MARCH 1986 SYDNEY BETWEEN : wee ww No. G.13 of 1985 FLAMINGO PARK PTY LIMITED Applicant DOLLY DOLLY CREATION PTY LIMITED First Respondent MERCEDES TEXTILES PTY LIMITED Second Respondent BENNY SPIESER Third Respondent SIPT SPIESER Fourth Respondent DOLLY DOLLY CREATION PTY LIMITED, BENNY SPIESER and SIPT_ S5PIESER Cross-Claimants MERCEDES TEXTILES Pry LIMITED Cross-Respondent =v REASONS FOR JUDGMENT This is the hearing of the substantive litigation between these parties; the previous proceedings -- reported at (1985) 59 ALR 247 -- being confined to allegations by the applicant that certain of the respondents had, in contempt of court, failed to comply with certain interlocutory injunctions. The case involves claims by the applicant, Flamingo Park Pty Limited, a company controlled by Jenny Kee, against the second respondent, Mercedes Textiles Pty Limited, a company carrying on business as a fabric printer which is controlled by Susan Banhegyi and her husband Laslo Szilvasi, and Dolly Dolly Creations Pty Limited, the first respondent, a clothing retailer controlled by the third and fourth respondents Benny and Sipi Spieser. The major complaint is against Mercedes Textiles, the applicant alleging conduct infringing s.52 of the Trade Practices Act 1974, breach of contract, breach of a duty of confidence and passing off. In respect of Dolly Dolly, the applicant relies upon s.52 of the Trade Practices Act -- claiming that Mr and Mrs Spieser were knowingly involved in the contravention -- and the law relating to passing off. ee ee er ee ee re ee ate -- - - + - cere ee — o- There are major issues between Flamingo Park and Mercedes as to the course of dealing between those companies and the authorship of a particular design, known to Flamingo Park as the "sexy print" design. This design was used upon fabric printed by Mercedes for other clients, including Dolly Dolly. The case for the applicant is that this design was created by Ms Kee and given to Mercedes upon the express basis that it would be used only in respect of fabric printed on behalf of Flamingo Park. Mercedes claims that the design, only loosely based upon an idea of Ms Kee, was created by either Jillian Clarke, a full time employee of the company, or Irene Diaz, a freelance designer retained by Ms Banhegyi for the purpose. Mercedes therefore asserts an entitlement to use the design for whomsoever it pleases. There is such a difference between the cases respectively presented on these matters on behalf of Flamingo Park and of Mercedes that it is preferable to summarize separately each case. The Flamingo Park version Ms Kee was initially trained in Australia but then spent some years working overseas. She returned to Australia late in 1972. In August 1973 Ms Kee opened a shop in the Strand Arcade, Sydney, trading under the firm name "Flamingo Park". The applicant company acquired that business, trading under the same business name, in 1980. In 1982 it took its present name. Although there has been at least one move in the meantime, the business has always operated a shop in the Strand Arcade. In addition, in more recent years, the business has included a small wholesale element. The trading strategy of Flamingo Park, both the firm and the company, has always been informed by two policies: to offer garments which are identifiably Australian; cut and finished to a high standard of quality; and to produce limited quantities of each particular design, so as to offer to purchasers a measure of exclusivity. Consistently with these objectives, the garments have been marketed at relatively high prices and in restricted locations: in the Strand Arcade shop in Sydney and through one independent retailer in each of several other Australian cities. In addition some sales have been made overseas. The undisputed evidence is that Ms Kee is now regarded, both in Australia and overseas, as one of Australia's leading fashion designers. Shortly after her return to Australia in 1972 Ms Kee formed a professional association with Linda Jackson, a person who is also now regarded as a leading designer. Ms Jackson designed the initial range of stock for the opening of the Strand Arcade shop and she continued to work with Ms Kee for some years. Shortly after the shop was opened, in 1974, Ms Kee designed a range of knitwear with Australian animal motifs but it was not until 1977 that she created her first fabric design. This design included references to aboriginal art. Ms Kee called it "Kee corroboree". Prior to this date Ms Banhegyi and Mr Szilvasi had commenced a business known as Mercedes Design Studio, a business which included the printing of fabrics. Ms Jackson suggested to Ms Kee that she should retain Mercedes Design Studio to print Kee corroboree onto fabrics. Sometime in 1978 Ms Kee and Ms Jackson went to the Mercedes factory at Marrickville. They took with them photostat copies of the @élements of the design, the originals of which were sketched in black ink applied by brush strokes to white paper. They spoke to Ms Banhegyi and Mr Szilvasi about the printing of the design. Both Ms Kee and Ms Jackson say that, during the course of this conversation, one of them pointed out that the design was original and that it was not to be used for anyone else. Fabric was in fact printed with the Kee corroboree design by Mercedes Design Studios in accordance with Ms Kee's instructions. This was made into garments sold by Flamingo Park. Sometime in 1979 Mercedes Textiles Pty Limited was incorporated to take over the business of Mercedes Design Studio. At about that time Ms Kee and Ms Jackson took another design, or a photostat copy thereof, which had been created by Ms Kee apparently in 1977 and which she called "handprint", to Ms Banhegyi and Mr Szilvasi for printing. This design was also reproduced by ink brush strokes on white paper but, according to Ms Jackson, on this occasion the drawing had been made to a size which would match that of the Mercedes printing screens, thus eliminating the need -- which had been experienced in the case of Kee corroboree -- to rearrange the elements of the design to fit the screen. According to both Ms Kee and Ms Jackson, there was, once again, a conversation about the design being original and an assurance was given that it would be used only for printing ordered by Ms Kee. Fabric was printed with the handprint design on behalf of Flamingo Park. Between that time and 1983 Ms Kee commissioned Mercedes -- by now certainly the company, not the firm -- to print at least two further original designs, the "shield" and the "Mali-oz" designs. Upon each occasion she took the design to Ms Banhegyi and Mr Szilvasi at Marrickville and, according to her, had a similar conversation about exclusivity. She was accompanied by Ms Jackson upon the occasion relating to the shield print but apparently not thereafter; the business association ceased in 1981 when Ms Jackson turned to other work. on ee ee en tenner een ee Se ree er - . - a According to Ms Kee, the sexy print design was created by her as an original design in August 1983. The design owes its name to its subtle incorporation of outlines of breasts and penises. Ms Kee says that, as with her earlier designs, she brushed the design in black ink on a sheet of white paper and took that sheet to Mercedes. At the trial she identified a drawing (ex.A) as being this sheet. According to Ms Kee, her evidence being based upon notes in an appointment diary, she telephoned Ms Banhegyi for an appointment on 22 August and she visited her at Marrickville on Wednesday 24 August 1983 at 10 am. She went alone and she saw Ms Banhegyl alone. The drawing had been made to a s31ze appropriate for the screen. Ms Kee showed Ms Banhegyi the drawing and asked her to print it for her. Once again, she says, she informed Ms Banhegy1 that this was an original design and must not he printed for anyone else. Ms Kee says that Mr Banhegy1 replied "as usual this is exclusively for you". Ms Kee left the drawing with Ms Banhegyi. Early in September there was delivered to the shop a parcel containing 12 metres of fabric printed with the sexy print, this being a sample for her approval. It was accompanied by an invoice dated 6 September 1983 claiming $159.20 being comprised of a charge of $125.00 for the manufacture of the screen used to print the design and $34.20 for printing the 12 metres of fabric. Ms Kee examined the sample but was unhappy at the existence of a blank area between the design repeats, created because of the position of the upper and lower extremities of the brush marks. She decided to fill the gap by adding to the design her signature, a practice she had followed when she had worked in Italy. Ms Kee telephoned Ms Banhegyi and told her that she wanted her signature inserted. Ms Banhegyi called a few days later and took away a signature, made with a brush and black ink ona sheet of white paper. In due course, lengths of fabric were printed with the amended design in accordance with various orders of Flamingo Park. The sexy print design has been used in respect of a total of 607 metres of fabric printed by Mercedes on behalf of Flamingo Park; from which 277 garments have so far been made. Between 1981 and February 1984 Ms Clarke was employed by Mercedes as a textile designer. Amongst her duties was the production of what she called "technical drawings", that is drawings made by tracing the original artwork onto a photographic film with a paint called schmicke opaque. This was then used to photograph the design onto the polyester screen used in the printing process. In the case of a design which was other than the exact size of the screen it was necessary, in the photographic process, to enlarge or reduce the size of the original design but this did not affect its substance. Moreover it was usual to adjust the extremities of the design so as to ensure that the repeats would join up upon printing. entre en ence cee tan te ee eee ere ee te ee wee Ms Clarke gave evidence that, on an unidentified date in August 1983, Ms Banhegyi brought to her an original drawing -- which she identified as being the same drawing as that which Ms Kee had claimed to have given to Ms Banhegyi (ex.A) -- and told her that it was "Jenny Kee's original design" and that it "was exclusive to her". They discussed it. At Ms Banhegy1's request Ms Clarke produced a technical drawing by tracing this design onto photographic film. She extended some of the lines to allow joining on repeats but there were still some gaps. A screen was made and a sample of fabric was printed up. A week or more later, Ms Clarke said, she was given a piece of paper by Ms Banhegyi bearing Ms Kee's brushed signature. She traced the signature into a gap in the technical drawing and a new screen was produced. The bottom left hand corner of ex.A is torn. Ms Clarke said that this tear occurred when she pulled up the sheet after tracing it. Being, as she put it, "a big fan" of Ms Kee, she put the drawing in a pink folder which she kept near her desk and which contained drawings, or photostat copies of drawings, which she admired. The folder was left in that position when she left Mercedes. Sally Orme was employed by Mercedes from February to December 1984, she replacing Ms Clarke, who, however, continued in a part time capacity until early April 1984. She 10. saw the pink folder, referred to by Ms Clarke, but did not look through it in detail. When she left Mercedes in December she collected some of her own sketches for her design portfolio. About a month before the trial of this matter, in looking through that portfolio, she discovered drawing ex.A, which, she said, had become mixed with her own drawings and taken in error. She mentioned the find at a conference with counsel a few days before the trial. The drawing was brought in to the applicant's solicitors and discovered to the respondents upon the Friday before the Monday on which the trial commenced. Ms Clarke described Ms Kee as being "neurotic about her designs". She said that Ms Kee had made comments to her more than once, such as "they are for nobody else; it is my original design and exclusive to me". Ms Clarke recounted an incident early in 1983 when she found the Mali-oz design being printed for a Queensland customer. Both Ms Banhegyi and Mr Szilvasi were present when she remarked: "You know, that printing there, one of these days you will get caught". One of them, she thought Mr Szilvasi, replied: "She will not see 1t. It is going you know to Queensland". On 27 December 1984 Ms Kee was walking past the Dolly Dolly shop in the Strand Arcade when she noticed garments bearing the sexy print design. She contacted her solicitor. A purchase was made and these proceedings were commenced during the following month. te ee ee ey eee mye eg sare = a re re nner eee ee - a ll. The Mercedes version Ms Banhegyi agreed that her initial contact wih Ms Kee had related to the Kee corroboree design, although she thought that the date was 1979, which means that the company Mercedes Textiles might then have been incorporated. She agreed that at this meeting there had been some shuffling of the elements of the design and a discussion about the technical processes involved. She said that Ms Jackson asked whether the screen would be available for use at a later time and that she replied that Mercedes' "normal custom was that if a screen is unused for three months and 1f we need the frame of the screen then we normally ring the customer and ask them if we can tear down the mesh if they are not going to use it any more". Ms Banhegyi denied that there was any claim made then, or at any other time, that the design was to be used exclusively for Flamingo Park. Ms Banhegyi was taken to the later commissions. In relation to each of them she denied any claim to, or promise of, exclusivity. On each of those occasions the drawings were brought to Mercedes by Ms Kee. Mr Szilvasi said that his main role in taking instructions from Ms Kee on each ocasion had been to discuss the technical aspects; but he denied hearing any claim to exclusivity. 12. The evidence for Mercedes in relation to the giving of instructions for the sexy print design differs considerably from that of Ms Kee. Ms Banhegyi said that she was not at work upon the day upon which Ms Kee said that she took to her the sexy print design, 24 August 1983, because she was unwell. She said that she visited her physician, Dr Elizabeth Heks, that morning, and then returned home and lay down. Her husband telephoned and told her that Ms Kee had a new design. She asked Mr Szilvasi if he and Mr Gyula Szabo, the factory manager, could call on Ms Kee and pick it up. Mr Szilvasi said in evidence that Ms Kee had telephoned the office and asked him to call in to see her in her shop. He told her that he and Mr Szabo would call in. "They did so, and met Ms Kee's mother who worked in the shop; a meeting denied by Mrs Kee who said that she had never seen the two men together. Ms Kee showed them a sheet of ruled paper, the size of a school note book, upon which there were marks made by a ballpoint pen. The marks on this paper bore a general resemblance to the drawing on ex.A, Mr Szilvasi said, but was different in layout, size, line and density. Mr Szilvasi said that Ms Kee asked him whether "we could print this idea?". He and Mr Szabo replied that they "could work on it, ... could turn it into a print". Mr Szabo took the paper home and he, Mr Szilvasi, never saw it again. inet ba nee ne tee eee ae ee wre ete tee ee ro 13. Mr Szabo also gave evidence about the visit to the shop. He said that Ms Kee showed Mr Szilvasi and himself a piece of lined paper about 10 inches by 7 inches with scribble on it. He took the paper and gave it to Ms Banhegyi the next morning. Ms Banhegyi said that, upon the following morning, Mr Szabo handed her the paper. She described it as a ballpoint scribble on ruled note book paper. The scribble meant nothing to her. She handed the paper to Ms Clarke with instructions that, as there was no specific direction on the paper, she should do two or three layout sketches with exact repeats "of the motives clearly specified"; by which she explained that Mr Szabo had said that Ms Kee "had requested tits and dicks". Ms Clarke, according to Ms Banhegyi, replied that she "would do them as goon as she could". Ms Clarke, in her evidence, denied that there was ever such a conversation and that she ever saw such a piece of paper. Ms Banhegyi said that, on an unidentified day, she contacted Ms Irene Diaz ~- now Mrs Lujan -~- a freelance artist who did occasional work for the company, and asked her to call at her home. There she gave her, not the sketch said to have been picked up by Mr Szabo from Ms Kee or a copy of it, but a dress which Ms Banhegyi had purchased overseas in 1981 and which was said to have "a brush stroke style very similar to what we were contemplating". Ms Diaz returned about three 14. days later with the dress and two layout sketches made on tracing paper in ballpoint pen and pencil. Ms Banhegyi gave these sketches to Ms Clarke, who then produced three sketches of her own, also on tracing paper. The five sketches were then, according to Ms Banhegyi, taken to Ms Kee who chose one, which was then traced onto the photographic negative by Ms Banhegyi and Ms Clarke. The sketches were all destroyed. Ms Banhegyi said that she took the printed sample to Ms Kee, who examined it in her presence and said "it looks great"; but then asked for her signature to be added. Ms Kee wrote out her signature with a pen on a piece of paper from a pad. Ms Banhegyi took this to the factory where she copied the signature in a brush stroke style onto the negative and then photographed a new screen. Mrs Lujan, who now works for Mercedes as a full-time employee, confirmed Ms Banhegyi's account of her being given the dress and preparing two sketches. The sketches used the basic idea of the dress; neither purported to copy it. Mrs Lujan did not charge for this service because she merely drew sketches, not full artwork. Each sketch represented about half an hour's work. She was firm in her recollection that the incident occurred in August 1983, although she was unable to give any explanation as to how she remembered the date. At the time Ms Banhegyi did not mention either Ms Kee or Flamingo Park. er eS 0 eens pene eee a SS renee ene Se Sete otter - we ee wee ee eee 15. The supply to Dolly Dolly and other retailers It was the practice of Mercedes to keep a portfolio in which were placed samples of prints made by it. A sample of the sexy print -- but without the signature "J. Kee" -- was included in the portfolio. From time to time that portfolio was shown to customers who were interested in selecting designs for their own use. In October 1984 Elizabeth Aprahamian, the shop and factory supervisor of Dolly Dolly, telephoned Ms Banhegyi and asked her to bring in the portfolio of samples. She did so. A few days later she had a further conversation with Ms Aprahamian and Mrs Spieser in which three designs were chosen from the portfolio, including the sexy print. Ms Banhegyi claimed in evidence that she told Mrs Spieser and Ms Aprahamian that this design "had been used by Jenny Kee except with the inclusion of her signature on it"; this claim was denied by both Mrs Spieser and Ms Aprahamian, both of whom say that there was no mention of Jenny Kee or anyone else. The evidence shows that Mercedes used the sexy print design on 3048.1 metres of fabric supplied to customers other than Flamingo Park. Of this total the quantity supplied to Dolly Dolly was 251 metres. Of the 3048.1 metres, 527 metres of fabric included Ms Kee's full signature; 24 metres of this went to Dolly Dolly. The inclusion of the signature on part of the fabric supplied to those other customers was apparently te ee ra ne ete ee et cree Pe pire eee re eee ee et - a awe 16. accidental. Ms Banhegyi said that she instructed Mr Szabo to mask the signature so as to exclude it from the print. He did so but the tape came away; first partly -- with the result that a large proportion of the print includes the letters "ee" ~- and then totally. The applicant was apparently unaware of the supply to retailers other than Dolly Dolly until the discovery of documents in connection with these proceedings. No doubt for that reason, these other retailers are not parties to this proceeding. In relation to the claim brought by Flamingo Park against it there is a claim by Dolly Dolly against Mercedes for indemnification. Dolly Dolly also claims damages in respect of the loss allegedly suffered by it in being precluded, since the interlocutory order made in these proceedings, from selling those garments made from sexy print fabric which it still retains. Findings as to the nature of the transaction and the authorship of the design ' The applicant contends that the Court should find that an oral agreement was made on 24 August 1983 between Ms Kee on behalf of Flamingo Park and Ms Banhegyi on behalf of Mercedes that Mercedes would print onto fabric the design contained in ex.A and that it would not print the design onto > ate fabric for anyone else. Reliance is placed upon the evidence 17. of Ms Kee as to the conversation upon that occasion but the applicant seeks support for that evidence from the evidence of Ms Kee and Ms Jackson regarding conversations in respect of earlier designs and from the evidence of Ms Clarke as to statements about exclusivity made by Ms Banhegyi. Implicit in the contention is that the Court should accept that the design was created by Ms Kee rather than, as claimed by Mercedes, by one of Ms Clarke or Mrs Lujan. The case made by Flamingo Park is at variance, in numerous respects, with that presented on behalf of Mercedes. The discrepancies relate not only to matters of detail, in respect of which there might be room for honest differences in recollection. The respective versions are fundamentally inconsistent. Moreover, more than one witness supports the version of each side. For example, and to take a critical matter, each of Ms Kee, Ms Clarke and Ms Orme gave evidence pointing to the existence, before the copying which gave rise to this case, of ex.A. That existence is inconsistent with the evidence of Ms Banhegyi, Mr Szilvasi and Mr Szabo that Ms Kee merely delivered a rough biro sketch, leaving Mercedes to work this up into a design. It is apparent that, on one side or the other, there has been an agreement to fabricate evidence. "4 ' 18. As a matter of logic, of course, it would be possible to accept the evidence of one side in relation to ex.A and that of the other on the conversation between Ms Banhegyi and Ms Kee. But both of those women are intimately involved in the ex.A evidence. It would be difficult to reject the evidence of one of them concerning ex.A as being fabricated and simultaneously to regard that person as being reliable in relation to the conversation. Recognizing this, counsel on each side have argued the question of credibility broadly. In determining which version of the critical events should be accepted I have no hesitation in preferring that of the applicant. There are several reasons for that choice. The first stems from the nature of Ms Kee's work and reputation. As I have said, the respondents accept that Ms Kee was by 1983 one of the leading fashion designers in the country. Indeed counsel for Mercedes sought in cross-examination to obtain evidence that her standing was so high that it could not possibly be diminished by infertor reproductions of her work. Under those circumstances it is curious to observe the same party putting the case that she contented herself with handing over a squiggle so meaningless that Ms Banhegyi did not even give a copy to Mrs Lujan; supplemented only by a request that someone else design "tits and dicks". a ee al NL TR Me FN Eee OY ne fee ree ne ettennene swat uae eae a meee es mek we 19. Secondly, the Mercedes' version suffers from the embarrassment that no author is proved. In its filed Defence, Mercedes pleaded that it was the author of the sexy print design "by its employee Jill Clarke". When called by the applicant Ms Clarke firmly denied this allegation, although accepting the suggestion as a compliment. It then emerged that the case for Mercedes was that the author was either Ms Clarke or Mrs Lujan but when the latter was called she made no claim to the authorship of the design; indeed counsel for Mercedes did not even show her any one of the examples of the sexy print design which were in evidence. It is not suggested that the dress lent by Ms Banhegyi to Mrs Lujan bears more than the most superficial similarity to the sexy print deaign. Thirdly there are a number of improbabilities about the Mercedes' version. The evidence of Ms Kee as to the form of the sketch handed over by her, that 1s made in black ink with brush on white drawing paper, 15 consistent not only with the evidence of Ms Jackson as to the form of the earlier designs which she saw but with those amongst them which were tendered in evidence. It appears to me unlikely that, upon this occasion, Ms Kee would depart from her practice of delivering to the printers fully developed and highly crafted drawings. Moreover, the circumstances of the delivery of the sketch, as asserted by Mr Szilvasi and Mr Szabo, are rather odd. On each previous occasion upon which she desired to instruct Mercedes relating to a new design, Ms Kee had taken the sketch to the Mercedes premises at Marrickville, dealing primarily with Ms Banhegyi. On this occasion she is suggested to have called for Mr Szilvasi to pick it up from her; she knowing that Mr Szilvasi had nothing to do with design creation, and this in relation to a design which was only in an embryonic state. Then, according to this version, both Mr Szilvasi and Mr Szabo went to the shop on their way home from work. I thought at first that this may have been because they travelled home together but it turned out that this was not so, that they lived in different suburbs -- Mr Szilvasi at Edgecliff and Mr Szabo at Eastlakes -- and drove separate cars. It was never explained why it was necessary for both men to go out of their way ~- in the case of Mr Szabo, well out of his way -- to travel into the city and to find parking spaces at a busy time of day to pick up one sketch. Then a further oddity appears. It was not then known, according to Mr Szabo, whether Ms Banhegyi would be fit for work next day. The drawing they were given -- according to them -- clearly required considerable creative effort before it was ready for printing. Under those circumstances it might have been expected that Mr Szilvasi would take the sketch home to Ms Banhegyi; but he did not. Mr Szabo took the sketch, so that it would be available for Ms Banhegyi if she came in upon the following morning. a ateadnteshetteeneta ace on Seenaementinapenainan tedaennta dren-ecnmelonmanteea amnesia sanmaieinmeememate aalidemaann tae -tediadeemaldie pttetiaaietiaa ati ie oe rns oe . et onget - - - aoe - Cs Bes vis ~ 21. Fourthly, the case for Mercedes involves the proposition that both Ms Clarke and Ms Orme have connived with Ms Kee in identifying ex.A as a document in their charge whilst working for Mercedes. It is true that Ms Clarke left Mercedes' employment under circumstances of some strain -- she complained that Mercedes had failed to pay her some moneys which were owing -- but no reason was suggested for either of these women to engage in such gross deception of the Court. Each of these witnesses obviously feels that what Mercedes did to Ms Kee was reprehensible; but each is independent of Ms Kee, having no other disclosed motive for assisting her. Ms Clarke and Ms Orme both gave their evidence in a careful, straightforward and apparently honest manner. Ms Clarke's recollection was shown to be imperfect in one respect: whether the drawing from which she worked was an original or a photostat. But this is not significant. I thought that both Ms Clarke and Ms Orme were generally reliable witnesses. The same comment may be made about Ms Kee. She is, of course, an interested party with an intense, some might say almost obsessional, concern for the integrity of her reputation and of her designs but there was never any point in her evidence when it appeared that she was doing otherwise than speaking the truth as she remembered it. Her evidence was not totally free of blemish. There was some confusion as to what she meant by her claim for ownership of the "screen". Her recollection was shown to be faulty in: regard to whether she handed over original drawings or photostats on some occasions 22. and as to whether the repeats were already shown on a drawing identified as "Chanel". But these are matters of peripheral detail. They do not go to her reliability upon critical matters. I see no reason to doubt her honesty. The very intensity of her attitude to her designs perhaps supports the likelihood that she did, as she claims, make repeated stipulations about exclusivity. My opinion about the credibility of Ms Banhegyi, Mr Szilvasi and Mr Szabo contrasts starkly with the view I have just expressed regarding Ms Kee, Ms Clarke and Ms Orme. I found the evidence of Ms Banhegyi and Mr Szilvasi evasive, contradictory and tendentious. For example, Ms Banhegyi said that she was sure that the sheet of paper given to her by Ms Kee was A4 size yet in an answer to interrogatories she had described it.as a "foolscap piece of paper". Ms Banhegyi conceded that she knew the difference between these descriptions and the importance of her description of the paper. She agreed that she read the answers carefully before signing them and then explained the erroneous reference to foolscap as being occasioned variously by an oversight on her part and by the failure of her solicitor to change the answer in accordance with specific instructions to that effect. There were occasions in Ms Banhegyi's evidence when, as it seemed to me, she simply gave the answer that best seemed to meet the needs of the moment. At a relatively early stage of her cross-examination she was being pressed to concede Sa mere errr ey ge pe me ene er ee er em ne cree re eee we oe coop. we ee ne ee ere ett tnt on - ~ wae 23. awareness of the exclusive nature of the garments sold by Flamingo Park. Asked the number of occasions before 1983 that she had visited the Strand Arcade shop, she replied: "Before 1983 I do not think I ever had been in the Flamingo Park shop". When asked whether she was sure of this she said: "Before 1983, maybe in '82, maybe once". Later on she conceded that she had, before that time, purchased a number of garments at the shop commencing in 1980. Mr Szilvasi also had difficulty in specifying his initial visit to the shop. He first said that the visit on 24 August 1983, with Mr Szabo to pick up the sketch, was the first occasion upon which he had ever been to the shop. Shortly afterwards he said that he had been there "a few times" before that day, to deliver fabric. Taxed about this inconsistency, he said that he did not know the position. But the evidence of Ms Banhegyi and Mr Szilvasi was unsatisfactory in respects more important than matters of detail. Both witnesses claimed that there was exhibited in the Mercedes' office at all material times, in a conspicuous position, a notice signed by them, dated 3 June 1980 and reading as follows: "NO CLAIMS WILL BE MET AFTER 7 DAYS AND UNDER NO CIRCUMSTANCES AFTER FABRIC HAS BEEN CUT. AS CUSTOMERS FABRIC IS NOT COVERED BY OUR INSURANCE POLICY, NO RESPONSABILITY (sic) ACCEPTED FOR DAMAGES WHILE ON OUR PREMISES. Poa ene ened o _~- ve twee me Rm ee eee -— =n et te = 24. UP TO 2.5% LOSS DUE TO HANDLING AND UP TO 5% SECOND GRADE PRINTING WILL BE CHARGED FULL PRICE. ANY DESIGNS PRODUCED BY THIS COMPANY REMAIN OUR SOLE PROPERTY UNLESS: A) EXCLUSIVITY AGREED TO IN WRITING B) STAMPED, SIGNED AND DATED "MASTERSKETCH" IS PROVIDED, WHICH IS AN EXACT COPY TO BE PRINTED C) THE ARTWORK HAS BEEN REGISTERED." Counsel for Mercedes asked most of the witnesses who had visited the Marrickville premises whether she or he had seen this notice. Only Mr Szabo said that he had. Both Ms Clarke and Ms Orme denied any knowledge of it. Mrs Lujan was not asked. It is conceded by Mercedes that this notice had never come to the attention of Ms Kee and that it forms no part of any contract ever made between her company and Mercedes. Notwithstanding that concession, it was a major burden of the evidence of Mr Szilvasi and, to a lesser extent, Ms Banhegyi that Ms Kee could have no entitlement to exclusivity of the sexy print design because she did not deliver a mastersketch; as referred to in the notice. Mr Szilvasi explained that by the word "mastersketch" he meant a signed and dated design which was precisely suitable for reproduction; a design which did not require any adjustment whatever, as for example by photographic enlargement or 25. reduction or by the addition of lines to link up repeats. This convenient line of argument meant, as he conceded, that few clients would be entitled to claim an agreement as to exclusivity. "Not very many times" he said, had a mastersketch been delivered. However, even on-the occasions on which this had occurred, there had not been a written agreement as to exclusivity; thus leaving Mercedes in the happy position, on its reasoning, of being entitled to copy any customer's design at any time. Ms Banhegyi also said that there had never been any arrangement for exclusivity with any customer and that Mercedes had always regarded itself as entitled to use any screen prepared for a customer for the printing of work on behalf of a subsequent customer, without reference to the original customer. It was not claimed that Ms Kee was ever told of this attitude. Leaving aside any express discussion about exclusivity, the contrary attitude might have been inferred from the fact that Flamingo Park was charged a lump sum fee for the production of the screen and that, on Ms Banhegyi's own version, Ms Kee was told that the customer for whom the screen was made was always consulted before the mesh was torn down and the screen reused. Nor is it easy to reconcile the brave assertion of an entitlement to use the design generally with the fact that the sample of the sexy print design which was included in the portfolio was one which omitted Ms Kee's signature or the evidence, which dine ~ 26. emerged in the cross-examination of Mr Szilvasi, of an incident involving Standard Knitwear, another Mercedes customer. Apparently a Mr Mears, a representative of Standard Knitwear, happened to notice that the factory was printing a design provided by his company upon fabric to be supplied to someone else. He complained. Notwithstanding that Standard Knitwear had not delivered a "mastersketch", Mr Szilvasi agreed not to deliver the fabric to the second customer. Instead, at cost to Mercedes, he kept it in stock for Standard Knitwear for the following season. The elaborate evidence of Mr Szilvasi and Ms Banhegyi regarding exclusivity seems to me to be mere sophistry, designed to justify the company's actions in relation to this case and to disguise the fact that the only principle on which it acted was commercial expediency. I need say little about Mr Szabo's credit. He has been employed by Mercedes since 1980 and has been manager of the factory since 1983. He was still in that position at the trial. It is apparent, from numerous references in the evidence, that he has a close relationship with Ms Banhegy1 and Mr Szilvasi. I do not regard him as an independent witness. I have no sense of assurance that his account of the visit to the shop to pick up the sketch from Ms Kee springs from independent recollection rather than from suggestion by someone else. wt ek a ce te te ee ee ee tee ate et —~ ae oe eat 27. I should refer to four specific matters which loomed large in the debate as to which version should be accepted. The first relates to Ms Kee's evidence. It was a matter which was described by counsel as "the most telling reason to reject Flamingo Park's case on an express term as to exclusivity". The point arises out of the circumstance that when the claim was initially pleaded, in a Statement of Claim dated 12 February 1985, the allegation was made that, by a contract made in about 1978, it was agreed for reward that Mercedes would print onto fabric designs supplied to it by the applicant. Paragraph 6 of that Statement of Claim then alleged that it was an implied term of the contract that Mercedes would not otherwise make use of designs supplied to it by the applicant. Paragraph 7 alleged that "in about August 1983" Ms Kee made the sexy print design and, in para.9, it was alleged that "in August 1983" the design was delivered to Mercedes. In cross-examination Ms Kee agreed that she saw the Statement of Claim at the time and she is now criticised for not pointing out to her lawyers that it failed to allege the express agreement which she claimed to have negotiated. There 1s nothing in that point. Few lay-people understand pleadings. They trust their lawyers adequately to plead their cases. Sometimes they are let down, either through incompetence or -- perhaps rather more frequently -- because the lawyers have not at that stage obtained sufficient instructions. It is not insignificant that para.6 does allege a term -- albeit an nn a 28. implied term -- regarding exclusivity. I think that the distinction between that allegation and the allegation of 'an express term would not readily occur to most lay-people. However, the matter goes a little further because interrogatories were administered upon the basis of the original Statement of Claim in which, inter alia, the applicant was asked what precisely was agreed in 1978. The reply reads: "It was agreed that the second respondent would print onto fabric designs supplied to it by the applicant. This agreement was entered into in or about May 1983". The reference to May 1983 is wrong; its inclusion reflects carelessness on the part of both Ms Kee and the solicitor who filed the answer to interrogatories. More importantly, consistently with the case now led, reference should have been made to the claim for exclusivity. But I do not think that the failure to make that reference requires that I now reject Ms Kee's account of her various conversations with Ms Banhegyi on that subject. On any view the answer was not a complete statement of the contractual arrangement and the answers to interrogatories go on -- admittedly in the context of an implied term -- to deal with exclusivity. It should be said that, by an amendment to the Statement of Claim made immediately before the hearing, an allegation of an express term as to exclusivity was made. eee oe vans eae, * * ont a ote - ad As always, it would have been better for the matter to have been properly pleaded in the first place but I do not think that what has occurred is destructive of Ms Kee's evidence on this matter. Secondly, Mercedes argues that Ms Kee's evidence must be rejected because Ms Banhegyi was off sick on 24 August 1983 and therefore unable, as claimed, to have received the drawing at Marrickville upon that day. In particular, 1t is said, Ms Banhegyi saw Dr Heks in Bondi Junction at about the very time when she was supposed to have been receiving Ms Kee at Marrickville. My first comment is that it may be erroneous to put a lot of weight upon the date. Ms Kee did not pretend to have any independent recollection of the date. She fixed the date by reference to her appointments diary. It is not inconceivable -- especially if Ms Banhegyi became indisposed for a day -- that the appointment was varied by a day or so without there being an amendment in the diary. But, even if the date be taken as definite, there is nothing in the evidence of Dr Heks to justify the conclusion that Ms Kee's story is false. It is true that, in an affidavit filed during the course of the hearing, Dr Heks said that she saw Ms Banhegyi at her surgery in Bondi Junction at about 10.30 am on 24 August 1983 for about 20 minutes. But in cross-examination it emerged that the only record which assisted in fixing the date was a clinical note which read a 2 ee ee eR ee 30. "24/8/83 130/80". The appointment book had been destroyed at the end of 1983. At one stage in her evidence, Dr Hecks claimed to have an independent recollection of the date but she then became confused as to whether it was 23 or 24 August. Eventually she conceded that -- as one would expect -- she was dependent upon her note. That note made no reference to the time of the consultation but Dr Heks fixed it as being 10.30 am because this was the first appointment made each day for ordinary consultations, emergency calls normally extending until about that time. Dr Heks said that she remembered that Ms Banhegyi was the first patient she saw that day after emergencies. She claimed to remember this fact; indeed she said that she remembered "the first or the last" patient for every day. I do not believe her, either in relation to that general claim or in relation to Ms Banhegyi. This consultation, according to Dr Heks, was a very ordinary one. The only clinical note relates to a blood pressure reading. The complaint, according to Dr Hek's recollection, was of "feeling dizzy and unwell that day". No medication was prescribed. No extraordinary event occurred at the time of, or in association with, the visit. I cannot conceive that any doctor, being first asked to recall such a consultation over 2 years later, would have any idea of the position which it occupied in her or his working day. It may be that ml wi ee aun Ya e ee Bee we re ed ee ae et ee eh ee ne tee ee od 31. Ms Banhegyi saw Dr Heks sometime on 24 August 1983 but that does not negate the possibility of her having received the drawing from Ms Kee during that morning. The third matter relates to ex.A, the drawing said by Ms Kee to have been delivered by her to Ms Banhegyi. This design conforms exactly with the sexy print design as printed ~-- subject to the addition to the latter of the signature and markings for the repeats -- and with the transparency from which that print was made. Plainly one was copied from the other. I have already referred to the evidence as to the subsequent history of this drawing and the fact that the document was not produced to the solicitors for the respondents until the eve of the trial. Understandably, under such circumstances, the solicitors for Mercedes adopted a sceptical attitude to its authenticity. They made two separate applications for leave to uplift the drawing, on each occasion in order to submit it to a person skilled in the examination of documents. As I understand the position, the hope was that these experts would be ina position to offer opinions as to the age of the paper and/or the ink used in the drawing. Notwithstanding some {nconventence to the progress of the trial, but having regard to the circumstances under which the document had appeared and its importance to a critical issue, I acceded to both these applications. I understand that the document 32. was in fact inspected by both the experts selected by Mercedes' solicitors; but neither of those persons was called to give evidence. It would be wrong to draw from the fact that no expert was called a conclusion that expert evidence would have established that the paper and the ink were of an age consistent with Ms Kee's evidence. It may be that, fora reason of which I am unaware, it was not possible for either of the experts to reach a conclusion one way or the other. And, of course, there is no necessary inconsistency between a conclusion that the drawing was made late in 1985 and a finding that the paper on which it was made, and the ink used in the making, were each manufactured in 1983 or @arlier; although an inconsistency might appear if scientific analysis could and did reveal how long the ink had been applied to the paper. Having regard to the lack of evidence on these questions, it is possible only to say that there 18 no scientific evidence to suggest that the conclusion to which the evidence otherwise points is inappropriate. Finally, in relation to the fundamental contest between Flamingo Park and Mercedes, it is submitted on behalf of the latter that the mere fact that Mercedes did print the sexy print design for others without Flamingo Park's consent is itself powerful evidence that those L} ee et ete felt an ee ee cee te ee es - oe ewe 7 33. N controlling Mercedes believed themselves to be free to do so and is, therefore, evidence inconsistent with the conversations alleged by Ms Kee. Counsel concedes that printing for others does not of itself gainsay the existence of a contractual term prohibiting such conduct but he says that the acceptance of such a contractual term requires a finding against Mercedes "of gross carelessness or even blatant knowing disregard of the exceptional contractual prohibition". I accept that the view I have expressed carries the consequence that Mercedes has acted in blatant disregard of Flamingo Park's rights but, in my opinion, no other conclusion is open. In mitigation, perhaps, it may be noted that the evidence suggests that Ms Kee's position was unique. Each of the witnesses asked about the matter agreed that she or he knew of no other customer of Mercedes who had created her or his own original designs. I suspect that not enough attention was given to that circumstance and of Ms Kee's insistence upon maintaining exclusive rights over her work. Instead, Mercedes' directors acted in accordance with their normal practice. The claims against Mercedes: liability It follows from the above findings that the applicant has established the existence of a contract between it and Mercedes relating to the printing of the sexy re , Nt 34. print design, which contract contained an express term that Mercedes would not use that design except in accordance with the instructions of the applicant. That term has been breached. It is not necessary to consider the arguments of - -counsel relating to an implied term. As mentioned, the applicant also contends that, irrespective of contract, the conduct of Mercedes infringes s.52 of the Trade Practices Act, amounts to a passing off and constitutes a breach of a duty of confidence. Under some circumstances, having regard to my conclusion upon the claim for breach of contract, it would be unnecessary to deal with those claims. However, several issues have been raised in relation to the proper computation of damages ina case such as this; including the questions whether exemplary or aggravated damages should be awarded. Under those circumstances, it is desirable to deal with the other claims. I have referred in two recent cases to the principles governing the question whether the use by one party of a name resembling, or identical with, the name of another constitutes misleading or deceptive conduct within the meaning of s.52 of the Trade Practices Act: see Chase Manhattan Overseas Corporation v Chase Corporation Limited (1986) ATPR 40-661, Hutchence v South Sea Bubble Company Pty Limited (28 February 1986, not reported). Where a person 35. deliberately adopts a concocted or fancy name which is identical with, or similar to, that of another person, not being a name merely descriptive of the relevant business, it will readily be concluded that he or she is thereby representing his or her business or goods to be that of the other: see the comments, made in passing off cases, of Lord Simonds in Office Cleaning Services Limited v Westminster Window and General Cleaners Limited (1946) 63 RPC 39 at p.42 and of Dixon and McTiernan JJ. in Australian Woollen Mills Limited v FS Walton & Company Limited (1937) 58 CLR 641 at p.657. It is conceded by Mercedes, in an answer to interrogatories admitted into evidence in this case, that it delivered to customers other than the applicant 527 metres of fabric printed with the sexy print design and containing the signature "J. Kee". Leaving aside a small test sample printed on lycra for Ronmax, the fabric was admittedly delivered with the understanding that it would be made into garments for retail sale. The evidence shows that Ms Kee has enjoyed considerable publicity during recent years. It must be inferred that her name would be known widely amongst members of the public interested in the fashion industry or in the purchase of attractive clothing of contemporary design. The delivery, therefore, of the signed fabric constituted a representation likely to mislead such of those people who might see the signature that the resultant 36. garments were those of, or associated with, Ms Kee. It is, of course, true that the manufacturer of the garments would be likely to attach its own label to those garments -- as the evidence shows that Dolly Dolly did in fact -- but this does not remove the likelihood that at least a significant portion of purchasers of a garment would be misled. Not all would look for the label but, even if a particular person - did appreciate that a garment was made up by a manufacturer other than Flamingo Park, this would not necessarily negative a belief that the garment -- as distinct from the print -- was designed by, or otherwise associated with, Ms Kee. An intention to mislead 1s not, of course, a necessary ingredient of conduct falling within s.52: see Hornsby Building Information Centre Pty Limited v Sydney Building Information Centre Pty Limited (1977) 140 CLR 216 at p.228. Neither is it material to inquire whether the defendant has taken reasonable care -- see Parkdale Custom Built Furniture Pty Limited v Puxu Pty Limited (1982) 149 CLR 191 at p.197 -~ although, in the present case, it may he noted that Mr Szabo became aware during the process of printing some of this fabric that the tape had come away but that he took no steps to check the material printed or to recall any fabric already delivered. I conclude, in relation to the 527 metres containing the signature, that the conduct of Mercedes infringed s.52 of the Act. we me a ae me ett pon ae eaten none et ne eee eee eee ee see eh et a ee 37. The position in respect of the remaining 2521 metres delivered to customers other than Flamingo Park raises different considerations. As Parkdale demonstrates, the mere sale by one manufacturer of goods similar to, or even identical with, those of another will not usually constitute misleading or deceptive conduct. The question must be whether there is anything in the design used on garments made from those 2521 metres of fabric which proclaims an association with Ms Kee. Despite a submission to the contrary, I do not think that members of the relevant section of the public would associate the material containing merely the partial signature "ee" -- as distinct from the full "J. Kee" -- with Ms Kee. The "ee" marking is unobtrusive. It is not obviously part of a person's name. Whilst it appears that the full name "Kee" is well known, there is no evidence to suggest a public awareness of Ms Kee's calligraphy so as to make likely the recognition of a partial signature, even as part of a design of her creation. It is true that Margaret McCallum, the editor-in-chief of the Vogue magazines and a person with some 25 years experience in the fashion industry, gave evidence as to certain characteristics of Ms Kee's style, characteristics which are present in the sexy print design. Ms McCallum did not go so far as to say that, if she had seen this design without the full signature, she would have recognized it as a Jenny Kee design or otherwise mene may or 36. associated it with Ms Kee or Flamingo Park; but, even if that position may be inferred from her evidence, it is another matter to conclude that there would be such a recognition or association amongst members of the relevant section of the general-public. Ms McCallum is especially expert upon such subjects. There is no evidence to lead me to the conclusion that the design itself -- with or without the "ee" -- would convey any relevant representation to the public.- It is a fair comment, as stated by counsel for Mercedes, that Ms Kee''s image and reputation are generally associated with the use of recognisably Australian motifs. The motifs used in this design are not peculiarly Australian. The s.52 claim in relation to the 2521 metres must fail. The elements necessary to establish the tort of passing off differ from those required to make out a claim under s.52 of the Trade Practices Act; but in a case such as the present -it is unlikely that there will be a difference in result. In order to succeed in its passing off claim, the applicant must establish that there was a misrepresentation by Mercedes concerning Mercedes' product, that is the fabric, resulting in a likelihood of damage to Flamingo Park; as for example causing confusion adversely affecting its goodwill -- see Erven Warnink Besloten Vennootschap v_ J Townend & Sons (Hull) Limited £19791 AC 731, Leqo System Aktieselskab v Lego M Lemelstrich Limited ne ne re mee on en a 39. £19831 FSR 155 -- or wrongfully appropriating its name and reputation -- see Henderson v Radio Corporation Pty Limited (19601 SR (NSW) 576, Totalizator Agency Board v Turf News Pty Limited [1967] VR 605. There is, in the present case, no doubt that, to the extent to which they are apparently associated with Ms Kee, garments distributed upon the mass market, being of inferior cut and finish to those of the applicant, are likely to cause confusion adversely affecting the goodwill of the applicant and appropriating its name and reputation. It is no answer to say, as does counsel for Mercedes, that inferior garments will not be attractive to Flamingo Park's usual clientele. That circumstance does not remove the confusion; rather, by causing people to think that Ms Kee has lowered her standards, it exacerbates the damage. The magazine clippings tendered in evidence demonstrate that the reputations of the applicant and of Ms Kee are closely related. The applicant predominantly sells garments designed by Ms Kee; so the goodwill and reputation of the applicant are largely dependent upon the reputation attaching to Ms Kee personally. Insofar as the applicant has shown a misrepresentation of association -- as in my view it has in relation to the 527 metres of fabric printed with the full signature -- the claim in passing off is made out. Insofar as it has failed to show such a misrepresentation, that is in respect of the remaining 2521 metres, the passing off claim must fail. , t ' a ¥ t ua t ' ! . a Pie ee 40. Finally, I turn to the claim based upon alleged breach of a duty of confidentiality. In Commonwealth of Australia v_ John Fairfax & Sons Limited (1980) 147 CLR 39 at p.50, Mason J. adopted the principle, stated by Swinfen Eady Ld in Lord Ashburton v Pape [£1913] 2 Ch 469 at p.475, that a court exercising equitable jurisdiction will "restrain the publication of confidential information improperly or surreptitiously obtained or of information imparted in confidence which ought not to be divulged". The principle is generally traced back to three 19th century decisions, Abernethy v Hutchinson (1824) 3 L J Ch 209, Prince Albert v Strange (1849) 18 L J Ch 120 and Morison v Moat (1851) 20 L J Ch 513, (1852) 21 L J Ch 248, although -- as is pointed out by Meagher, Gummow and Lehane in "Equity - Doctrines and Remedies" (2nd ed.) para.4106 -- those were each cases in which the plaintiff had rights under contract or the law of copyright; and the modern doctrine is clearly independent of any such limitation: see Saltman Engineering Company Limited v Campbell Engineering Company Limited (1948) 65 RPC 203 at pp.211-212, Seager v Copydex Limited (19671 1 WLR 923 at p.93l. : In Coco v AN Clark (Engineers) Limited £19691 RPC 41 at p.47 Megarry J itemised three elements which "are normally required if, apart from contract, a case of breach of confidence is to succeed": first, that the information must be of a confidential nature, secondly, that 1t must 41. have been imported in circumstances importing an obligation of confidence and, thirdly, there must be an unauthorised use of that information to the detriment of the party communicating it. There is, in the present case, little doubt that the second and third elements are_proved but, from the viewpoint of the applicant, there is a difficulty about the first requirement. In Saltman Engineering Lord Greene MR at p.215 said that the information "must not be something which is public property and public knowledge ... However confidential the circumstances of communication, there can be no breach of confidence in revealing to others something which is already common knowledge". What constitutes "common knowledge" is sometimes a matter of degree -- see Commonwealth v John Fairfax at p.54, Ansell Rubber Co Pty Limited v Allied Rubber Industries Pty Limited £1967] VR 37 at pp.44-51, Interfirm Comparison (Australia) Pty Limited v Law Society of New South Wales £19751 2 NSWLR 104 at pp.117-118, Gv Day C1982] 1 NSWLR 24 at pp.37-41 -- but there will also be cases in which the disclosure 1s so complete that there is no longer a secret to protect: see O'Mustad & Son v Dosen £19641 1 WLR 109 at p.1lll. That is the present case. This case is not one where an article is put upon the market which must be analysed if information is to be procured as to its design: compare Conveyor Co of Australia Pty Limited v Cameron Bros Engineering Co Limited £1973] NZLR 38 and Yates Circuit Foil 42. Company v Electrofoils Limited £19761 FSR 345. This is a case where the applicant had itself published the design, displayed for all to see on every sexy print garment which it sold. The evidence establishes that a design printed on fabric may be reproduced, for printing on other fabric, by a simple photocopying process. The situation 1s the same as if a person published a document and then sought, in reliance upon the law relating to breach of confidentiality, to restrain the further publication of that document by another. It is understandable that the applicant should feel aggrieved that a design developed by it for its own use should be taken by others, for their own purposes, without its permission. This 15 a situation against which it would be usual to look for protection to the law of copyright. However, although breach of copyright was pleaded, the applicant does not press that claim; no doubt because of the circumstance that the design was not registered under the Designs Act 1906 and of the provisions of s.77 of the Copyright Act 1968. This case constitutes a further example of the injustice of those provisions, upon which I commented in Hutchence at pp.29-31. As there was a contractual relationship between the applicant and Mercedes, there is a question whether the law of confidéntial information could, in any event, have any oe re nr ne ee ee ne Ee Lire ee Se Rm sr ee meee 43. application to this case: see Meagher, Gummow and Lehane para.4104. But that is a matter which I need not consider. It is my view that, even if that law did apply at the time when the design was delivered to Mercedes, it ceased to have any relevance once Flamingo Park published the design by selling its garments. The claims against Mercedes: relief The conclusions I have reached, upon issues of liability, in relation to the applicant's claim against Mercedes are that Mercedes has acted in breach of contract with the applicant in respect of the whole of the 3048 metres of fabric supplied to others, that in respect of 525 metres the conduct of Mercedes infringed s.52 of the Trade Practices Act and constituted a passing off and that Mercedes is not liable to the applicant in respect of breach of a duty of confidence. Having regard to my conclusions as regards breach of contract, it is appropriate to grant to the applicant an injunction restraining the use of the design, and the sale or supply of fabric printed with that design, other than in accordance with the instructions of the applicant. That order will encompass any dealing in fabric containing the name "J. Kee" so that there 13 no need to make the injunction which I would otherwise make, to give effect to my conclusions on the s.52 and passing off claims, concerning material bearing that name. 44, The applicant also seeks damages. In relation to that claim, having regard to my conclusions and the submissions of counsel, four questions emerge: in the light of the facts that the quantity of sexy print fabric put onto the market by reason of the action of Mercedes exceeds that which would have been likely to have been distributed by Flamingo Park and that Flamingo Park serves a segment of the market different from that served by the other manufacturers for whom Mercedes printed the sexy print design, whether Flamingo Park has suffered damage and, if so, how the general damages for breach of contract should be assessed; whether the applicant is entitled to have included in its award of damages for breach of contract any amount representing compensation for loss of reputation; whether any amount, additional to the damages for breach of contract, should be added to reflect the applicant's limited success in respect of the claims under s.52 and the law of passing off; and whether exemplary or aggravated damages may, or should, be awarded. Dolly Dolly operates a chain of 15 shops in Sydney, Melbourne and Adelaide, selling relatively inexpensive female garments. The fabric printed with the sexy print design for that company by Mercedes was used to make up 113 two-piece suits -- representing two different garment cuts -- and 18 dresses. These garments -- in texture, cut and mt OES a an hee . a nr 45. finish -- were markedly inferior to those produced by the applicant out of the fabric which it had printed with the same design. Reflecting that fact, the Dolly Dolly garments were offered at a considerably lower price -- something like a third of the comparable Flamingo Park price. There is no evidence as to the garments produced by the other manufacturers on whose behalf Mercedes used the sexy print design; but it is accepted that they were in the same segment of the market as Dolly Dolly and that their prices -- and no doubt their quality standard -- were likely to be comparable to those of Dolly Dolly rather than those of Flamingo Park. Under those circumstances it is contended on behalf of Mercedes that no damage has been sustained by Flamingo Park by reason of any breach by Mercedes of a term of its contract relating to exclusivity. It is said that it is unlikely that Flamingo Park has lost any sales by reason of the fact that the sexy print design 1s available through other retailers; and, therefore, that -- leaving aside for the moment the matter of reputation -- no damage has been sustained. I accept that Flamingo Park serves a different section of the market from that supplied by the other retailers who have used the sexy print and that it is unlikely that any significant number of potential purchasers of a Flamingo Park sexy print garment have satisfied their needs by purchasing a sexy print garment from one of the wee Le oe - + ~o4 - - . eo ses we eee ee ee a oe a . ve 2 = pet ne mere nnn na en renee engines Rent neat onan ati a need Sep Hn a Re EAT ES yee os 46. other retailers; but I do not think that it follows that no damage has been sustained by the putting onto the market of these additional garments. One of Ms Kee's policies has been to so regulate her sales as to give to her customers confidence that they are unlikely to be confronted by another person wearing a closely similar garment. And if there is anything worse, from a wearer's point of view, than the knowledge that the print used on one's own expensive garment is being worn by great numbers of people, it 1s the realisation that that print is more usually associated with garments of inferior quality. The practical effect of the release onto the market of large quantities of inferior quality sexy print garments must be to diminish the market for Flamingo Park's sexy print garments. Some portion of the benefit which Flamingo Park was entitled to gain from Ms Kee's design is thus lost to it. It is true that the volume of sales of Flamingo Park sexy print garments in the year immediately following the supply of this design to Dolly Dolly and others was not markedly different from the preceding year. However, this does not demonstrate that sales were not lost; there may have been a substantial increase absent the unauthorised use of the print. And, there may be losses in the future. It does not appear how many of the garments made from fabric printed for others than Dolly Dolly have yet been sold. The applicant may re fe we a er ee me een tee ee a eee ee eee eee 47. have, to a considerable extent, "over-hanging (its) market «+. &@ quantity of deceptive goods which are liable to be sold at any moment": see Draper v Twist €19391 3 All ER 513 at p.519. ' Counsel for the applicant led evidence from the company's accountant, Mr Jd D Thomas, relating to a calculation made by him as to the profit which would have been earned if Flamingo Park had manufactured into garments 3048 metres of fabric printed with the sexy print design. The assumption was that the distribution of the fabric -- as between different garment types -- would be in the same . proportions as for the sexy print garments already manufactured by Flamingo Park, that the garments would achieve the usual Flamingo Park standard and that unit costs and prices would be the same as for the actual sexy print sales. However, differing from the actual experience and because of the greater volume involved, the assumption was that only one-third of the garments would be sold at the Strand Arcade shop, the remaining two-thirds being wholesaled through selected retailers. The analysis showed a total of 541 garments for retail sale, yielding a gross profit of $42,720, and 1082 garments for wholesale sale, yielding a gross profit of $18,235. The resultant total, $60,955, was then reduced by tax of 46% giving a final figure of $32,916. This amount is claimed by the applicant under this head of damages. 48. Mercedes does not dispute the accuracy of the computation made by Mr Thomas but it attacks its major assumption: that, absent Mercedes' conduct, the applicant would have been likely to sell an additional 1623 garments. Mercedes points out that, in the period of two years from the first printing of the sexy print design until the trial, Flamingo Park made up only 280 sexy print garments. The fundamental principle of the common law, in the words of Parke B in Robinson v Harman (1848) 1 Exch 850 at p.855 is that "where a party sustains a loss by reason of a breach of contract, he 1s, so far as money can do it, to be placed in the same situation with respect to damages, as if the contract had been performed". But the literal application of that principle in all cases would be unfair, fixing some contract breakers with liability beyond any possible contemplation. Accordingly, in Hadley v Baxendale (1854) 9 Ex 341 -- to which Parke B was himself a party -- the Court of Exchequer at p.354 modified the principle by postulating that: "Where two parties have made a contract which one of them has broken, the damages which the other party ought to receive in respect of such breach of contract should be such as may fairly and reasonably be considered as either arising naturally i.e. according to the usual course of things, from such breach of contract itself, or such as may reasonably be supposed to have been in the contemplation of both parties, at the time they made the contract, as the probable result of the breach of it". tw 49. The effect of these rules, as refined in subsequent cases, was analysed and summarized by the English Court of Appeal in Victoria Laundry (Windsor) Limited v Newman Industries Limited [19491 2 KB 528 at pp.539-540; it being observed that, in order that the contract breaker may be held liable, it is not necessary that he should actually have asked himself what loss is liable to result from the breach. It is enough that, if he had considered the question, he would as a reasonable man have concluded that the loss in question was liable to result: using the phrase "liable to result" as meaning that such a loss was "a serious possibility" or a "real danger". In C Czarnikow Limited v Koufos £19641 1 AC 350 the House of Lords considered the application of the rule in Hadley v Baxendale to a claim for damages for breach of a charterparty. At p.385 Lord Reid said: "I am satisfied that the court did not intend that every type of damage which was reasonably foreseeable by the parties when the contract was made should either be considered as arising naturally, i.e., in the usual course of things, or be supposed to have been in the contemplation of the parties. Indeed the decision makes it clear that a type of damage which was plainly foreseeable as a real possibility but which would only occur ina small minority of cases cannot be regarded as arising in the usual course of things or he supposed to have been in the contemplation of the parties: the parties are not supposed to contemplate as grounds for the recovery of damage any type of loss or damage which on the knowledge available to the defendant would appear to him as only likely to occur ina small minority of cases. 50. >». it is not enough that in fact the plaintiff's loss was directly caused by the defendant's breach of contract. ... The crucial question is whether, on the information available to the defendant when the contract was made, he should, or the reasonable man in his position would, have realised that such loss was sufficiently likely to result from the breach of contract to make it proper to hold that the loss flowed naturally from the breach or that loss of that kind should have been within his contemplation." In Czarnikow a variety of tests were adopted to describe the requisite degree of predictability of damage: that 1t was "not unlikely" -- Lord Reid at p.388, Lord Morris of Borth-y-Gest at p.406 -- "liable to result" -- Lord Hodson at pp.410-411 -- "serious possibility or real danger" -- Lord Pearce at pp.414-415, Lord Upjohn at p.425. In the present case, when she entered into the contract to print the sexy print design, Ms Banhegyi was aware that the fabric was required for the purpose of being made into garments for sale by Flamingo Park. She knew the nature of the business of Flamingo Park. She knew Ms Kee's reputation as a designer. Applying the approach of Lord Reid in Czarnikow, and adopting the most onerous of the suggested degrees of predictability, 1t must be held that, when the contract was made, a reasonable person in the position of Ms Banhegyi would have realised that, if the term of exclusivity was breached and others put onto the markets garments of sexy print design, it was not unlikely that Flamingo Park would lose sales. I think that the loss 51. arises out of the first rule in Hadley v Baxendale, that is according to the usual course of things from such a contract, but if this is erroneous the loss must certainly be taken to have been in the contemplation of the parties. I have in mind the evidence of Ms Kee, which I accept, of her reference to originality and of her requirement that "you must not print this for anyone else". It may be that Ms Banhegyi did not contemplate, and that a reasonable person in her position would not have contemplated, the extent of the loss claimed by the applicant in the present proceedings; but this does not appear to be material. Provided that there is the requisite degree of likelihood of the relevant kind of damage, it is not necessary that the extent of that damage also be predictable: see Vacwell Engineering Co Limited v_ B DH Chemicals Pty Limited (£1971) 1 QB 88 at p.107, H Parsons (Livestock) Limited v Uttley Ingham & Co. Limited £19783 1 QB 791 at p.813. It follows that Mercedes is liable for damages in respect of whatever loss was suffered by the applicant as a result of its breach of contract. The parties have argued the matter of loss on an "all or nothing" basis, the applicant relying upon Mr Thomas' calculation and Mercedes contending that there was no loss. But I do not find the matter so simple. I think that, as a matter of commonsense and the for the reasons already indicated, it is probable that the use by others of tee ee mee ~ ' " om 8 52. the sexy print design has and will cost Flamingo Park sales. However, I see no reason to believe that the loss equals the amount which would have been earned if Flamingo Park had chosen to have printed for its own use the same quantity of fabric. The applicant's approach involves assumptions that the only limitation upon the sales potential of Flamingo Park sexy print garments is the volume of sexy print garments already available to, or being worn by, purchasers and that each metre of inferior sexy print fabric displaces a metre of Flamingo Park sexy print fabric. I do not think that those assumptions are justified. It is true that Ms McCallum spoke of the lasting quality of Ms Kee's designs. She said that they "are not ephemeral. I believe they endure". I take from this an opinion that, in contrast perhaps with some fashion designs, it might normally have been expected that the sexy print design would go on selling over a substantial period of time. But no witness gave an estimate of the sales life of the design or of the total volume which might have been achieved. Ms McCallum did refer to the increasing overseas interest in Australian design -- and in particular in Ms Kee's designs -- and Ms _Kee indicated that she was moving to expand her overseas sales; but 3,048 metres represents about six times the volume of sexy print fabric which Flamingo Park in fact sold over a period of two years. I find it difficult to believe that the actions of the respondent have cost Flamingo Park sales equal to 12 years' supply at the rate actually 53. achieved. It may be accepted that, if Ms Kee were faced with the necessity of getting rid of 3,048 metres of this fabric, she would take the marketing steps outlined in her evidence, and assumed for his calculation by Mr Thomas, but I do not think that, absent the respondent's breach, there would ever have been any question of sales of that order. As Ms Kee herself said, the sale of 3,048 metres would be a very different type of marketing operation from that to which she is accustomed. It is not possible to demonstrate by reference to the evidence or by calculation the correctness of any particular figure for lost sales; nonetheless some estimate must be made: see Enzed Holdings Limited v Wynthea Pty Limited (1984) 57 ALR 167 at pp.183-184. All that one can do is to make a judgment about the probable situation and to select a figure which reflects that judgment. According to Ms Kee''s calculation, in the two years to the trial 277 garments were manufactured from the sexy print fabric supplied to the applicant. Of the 277 garments, 160 were sold at the Strand Arcade shop and 107 were sold wholesale. Provided the resultant figure is not unrealistic in terms of the sales capacity of the shop, in estimating the loss of profits this same ratio of retail to wholesale sales -- rounded out it is 3:2 -- should be used, rather than the 1:2 ratio assumed by Mr Thomas and which has no basis in fact. I think that, in lieu of the 1623 garments, representing 54, 3,048 metres, assumed by Mr Thomas, it is more realistic to assume a sales loss over the life of the design of about two years' sales, 300 garments, representing roughly 560 metres. At a ratio of 3:2 this assumes 180 garments sold in the Strand Arcade -- a figure well within the capacity of the shop -- and 120 garments sold in the wholesale trade. Applying these sales volumes to Mr Thomas' calculation, but adopting it in all other respects, yields gross profits as follow: retail $14,208, wholesale $2,018, total $16,226. This total produces a net figure, after deducting tax at 46%, of $8,762. The next question is whether there ought to be any addition to this figure to compensate the applicant for damage to goodwill and reputation. There 18 no doubt that the action of Mercedes in releasing onto the market, for use in inferior quality garments, a fabric design bearing the name of Ms Kee has adversely affected her reputation as a designer and the goodwill and reputation of Flamingo Park. Both Ms Kee and Ms McCallum gave evidence to this effect and pointed out the close relationship between the control of the guality of garments and the reputation of a leading fashion designer. There was no evidence to the contrary. But counsel for Mercedes contends that, in an action in contract, damages for loss of reputation may not be awarded. He refers to Addis v Gramophone Company Limited 55. C1909] AC 488 in which the House of Lords held that, in an action for wrongful dismissal, compensation may not be awarded for the injured feelings of the plaintiff or because the fact of the dismissal makes more difficult the obtaining of new employment. That decision was for a long time generally treated as excluding compensation in contract cases for non-pecuniary damage. But in the 12th edition of "McGregor on Damages" it was argued that there was no reason why it should be so. It was said that, just as a failure to pay money will generally not attract damages, other than interest, because no more is in the contemplation of the parties, mental distress does not, for the same reason, usually form a head of damage; but that the basic criterion is the parties' contemplation and the scope of the contract and that there may be cases in which it is within the contemplation of the parties that breach will result in mental suffering. Following upon that suggestion, there were a number of awards of damages for mental distress and inconvenience arising out of spoiled holidays -- Jarvis v Swans Tours Limited £19733 1 QB 233, Jackson v Horizon Holidays Limited (19753 1 WLR 1468, Athens - Macdonald Travel Service Pty Limited v Kazis [19701 SASR 264 -- incompetent legal representation -~ Heywood v Wellers £19761 1 9B 446 -- or breach of a contractual term as to the responsibilities to be allocated to an employee -- Cox v Philips Industries Limited £19763 1 WLR 638. It is not yet clear how far the courts will be prepared to go in this MET preening cer renee seer ann ee een pe ere eee cee ee ee ee ee eee 56. direction. As is pointed out in the 14th edition of McGregor (para.72), the cases in which damages have been awarded for mental distress are all cases in which a purpose of the breached term was to provide mental satisfaction, in one form or the other. Thus the distress was not merely an incidental result of the breach; it represented a denial of the purpose of the promise. There is one area of law in which, notwithstanding the influence of Addis, damages have been awarded, in contract, for loss of reputation. In Marbe v George Edwardes (Daily's Theatre) Limited £19283 1 KB 269 the English Court of Appeal held that an actress, whose contract of engagement in a play was breached, was entitled to recover damages, including compensation for loss of reputation; that is, loss both of the further reputation which she would have acquired had the contract been honoured and damage to the reputation she already had. This was all referred to as "loss of publicity". In a similar case shortly afterwards, Herbert Clayton and Jack Waller Limited v_ Oliver [19303 AC 209, the House of Lords held that damages were recoverable for "loss of publicity". That term was not defined but it is noteworthy that Viscount Dunedin, who agreed with the principal speech -- that of Lord Buckmaster -- specifically held that Marbe was rightly decided. Puzzlingly, notwithstanding that fact, in Withers v General Theatre Corporation Limited £19331 2 KB 536 at p.547, : Let * 2 tam ee ogee et Ra ar ek a re —_ Cast a a ee ee Ft ee el te ne me tee ew ene ee ee —- - - 57. Scrutton Ld interpreted Oliver as permitting recovery only in respect of the loss of prospective advantage, not of existing reputation. Whether or not Scrutton Ld was correct in his understanding of the intention of the House of Lords in Marbe, there appears to be no reason why, especially in the light of the recent authorities which depart from what was once thought to be a strict general rule against permitting recovery for non-pecuniary damage, awards of damage should not in all appropriate cases include compensation for loss of reputation; at least in a case where the purpose of the breached term was to enhance or to safeguard reputation. As McGregor points out, at para.74, the proposition that damages are not recoverable for injury to the reputation is "closely connected with, and established by the same authorities as, the proposition, now largely eroded, that no damages are recoverable for injury to the feelings". Although, no doubt, Addis remains authoritative in relation to the precise question there decided and arising out of wrongful dismissal, there appears to be no reason why, in other situations, reputation should not be treated in the same manner as mental distress; or, to put the matter in another way, why the approach taken in Marbe should not be applied to all relevant cases. I am encouraged in this opinion by the fact that in Brabazon v Western Mail Limited (1985) 58 ALR 712 at p.718 Toohey J expressed the view that . tat * 58. s.82 of the Trade Practices Act permits the recovery of damages in respect of loss of reputation; his Honour drawing on the contract cases I have mentioned in which damages have been awarded for mental distress. Any assessment of damages for loss of reputation must necessarily be made with a broad brush; as ina defamation case a court can do no more than fix a sum of money which, in the whole of the circumstances, appears to be proportionate to the damage which has been incurred. The greater the reputation, the more vulnerable it is to damage. In the present case the damage was in the area of greatest sensitivity; the applicant's reputation for excellence and for limitation of output. I think that the damage was likely to have been considerable and that an appropriate sum of money to allow for damage to reputation is $30,000. The third question, in relation to damages, is whether any additional allowance should be made in respect of the claims under s.52 and the law of passing off, to the extent that they are successful. I think not. The High Court of Australia, in Gates v The City Mutual Life Assurance Society Limited (26 February 1986, not reported) has recently approved a line of decisions in this Court to the effect that the proper approach to the assessment of damages under s.82 of the Trade Practices Act, for infringements of s.52 of that Act, is to compare the SE rn tere eerie - peprennn pepe enn eet oe ee ree re te oe ee -- tea ge ete ee Ita, a aye aw hy were 8 59. position of the applicant with the position in which he or she would have been if the misleading or deceptive conduct had not occurred: see Brown v Jam Factory Pty Limited (1981) 53 FLR 340 at p.351, Mister Figgins Pty Limited v Centrepoint Freeholds Pty Limited (1981) 36 ALR 23 at p.59, Hubbards Pty Limited v Simpson Limited (1982) 41 ALR 509 at pp.517-518, Yorke v Ross Lucas Pty Limited (1982) 45 ALR 299 at p.315, Gates v City Mutual Life Assurance Society Limited (1983) 68 FLR 101 at p.104. The High Court confirms that, as held in Frith v Gold Coast Mineral Springs Pty Limited (1983) 47 ALR 547 at pp.565-566, consequential losses may be recovered. These may extend to opportunity costs: see per Mason, Wilson and Dawson JJ at p.12. The High Court was not concerned with the matter of damage to reputation but the approach taken 1s consistent with the view expressed in Brabazon that, in a proper case, damages under s.82 may extend to damage to reputation. The position in relation to the assessment of damages for passing off will usually be the same as for conduct falling within s.52: see Prince Manufacturing Inc v Abac Corporation Australia Pty Limited (1984) 57 ALR 159 at p.165. In the present case the damage suffered in relation to these two causes of action -- loss of sales and loss of reputation -- is the damage flowing from Mercedes' breach of contract. To add any extra amount in respect of s.52 and passing off would be to duplicate compensation. 60. Finally, the applicant seeks exemplary or aggravated damages. The distinction between the two was adverted to by Hunt J in Bickel v John Fairfax and Sons Pty Limited £19813 2 NSWLR 47 at p.496; aggravated damages being given to compensate a plaintiff for aggravated damage occasioned by the defendant's conduct or subsequent behaviour and exemplary damages being given to punish the defendant, not to compensate the plaintiff. The damages which I have already assessed are intended to provide for the applicant full compensation for the conduct of Mercedes attracting liability whether in breach of contract or in tort. There is no relevant subsequent behaviour. There is, therefore, no occasion for the award of aggravated damages; assuming this to bea course open to the Court. The High Court has rejected, for Australia, the limitations upon the circumstances in which exemplary damages may be awarded which were suggested by Lord Devlin in Rookes v Barnard £1964] AC 1129 at pp.1226-1228: see Uren v John Fairfax & Sons Pty Limited (1966) 117 CLR 118. This rejection was accepted by the Privy Council in Australian Consolidated Press v Uren £19691 1 AC 590. The traditional view, which thus remains the law in Australia, is that exemplary damages may be awarded, without rigid 61. limitation as to categories, to punish a defendant whose conduct has been high-handed, insolent, vindictive, malicious or in contumelious disregard of the plaintiff's rights. According to McGregor (14th ed. para.323) there has never been an award of exemplary damages for breach of contract; although the learned author suggests that, in the wake of Rookes v Barnard, this may now be possible in England. It is not impossible to conceive of circumstances in which a defendant's conduct, in relation to a breach of contract, will be conduct of the type attracting exemplary damages in tort. However, that would probably be a rare event; and if it arose it would be a matter of policy for the courts to determine whether it was appropriate to extend what some see as an anomaly -- punishment in a civil action -- from tort into contract law. The question does not arise in the present case. Although the circumstances of Mercedes' breach of contract reflect no credit upon that company, its behaviour does not merit the epithets necessary, upon the traditional view, to attract exemplary damages. The argument for the award of exemplary damages in a passing off action is perhaps easier to make than is the argument in respect of breach of contract. Passing off isa tort and 1t 1s not difficult to think of circumstances in which a passing off may be in contumelious disregard of a plaintiff's rights. But this is not such a situation. The 62. passing off in this case is limited to those lengths of fabric which were printed with Ms Kee's name. This was accidental. There is no occasion for the award of exemplary or aggravated damages. I award to the applicant damages against Mercedes in the sum of $38,762; being $8,762 for loss of sales and $30,000 for damage to reputation. The applicant's claims against Dolly Dolly and Mr and Mrs Spieser I have already indicated that the applicant alleges that Dolly Dolly has acted in contravention of s.52 of the Trade Practices Act -- Mr and Mrs Spieser being knowingly concerned in that contravention -- and that it has passed off its garments as being those of the applicant. Having regard to the matters already discussd I can deal shortly with these claims. I am not satisfied that Dolly Dolly was made aware of the connection between the applicant and the sexy print design at the time when Mrs Spieser selected this design for printing. On this issue I prefer the evidence of Mrs Spieser and Ms Aprahamian to that of Ms Banhegyi, whose evidence I regard as generally unreliable. It is true that some of the garments sold by Dolly Dolly bear the name "J. Lem ne ey ee eccrine ny me toes Se Te mae enn pape Dy tree ew reg ay eee an ee eee eee eee Be SN Te wots a wee res Po ais - vee 9 —_ 63. Kee", but there is no evidence that anyone in authority in Dolly Dolly was aware of that fact until after the commencement of these proceedings. So far as the evidence indicates, the first occasion upon which the connection with Ms Kee was drawn to the attention of any such person was when Mr Spieser was served with the Application in these proceedings and with notice of the ex parte order which had been made by Fox J on 29 January 1985. The circumstances of that service, and Mr Spieser's subsequent actions, are set out in my reasons for judgment in the contempt proceedings, which reasons were by consent tendered in this proceeding upon the basis that the findings of fact' there contained -- to the extent that they are presently relevant -- should be regarded as admitted facts in this proceeding. Notwithstanding the lack of actual knowledge of the position by persons in authority in Dolly Dolly and for reasons already stated, the sale by that company of garments bearing the name "J. Kee" constituted a contravention of s.52 of the Trade Practices Act and a passing off. The sale of such garments was brought to a halt only by the injunction made by Fox J and the applicant is entitled toa permanent injunction restraining any further sales. The applicant is also entitled to recover damages against Dolly Dolly. These must be limited to the 24 metres of fabric printed with the full signature of Ms Kee. I have 64. referred to the measure of damages appropriate in relation to the claims under s.52 and for passing off. In the present case they will not, in practice, differ from those in respect of breach of contract; but, of course, bearing in mind that Dolly Dolly sold only about 5% of the fabric containing the full signature. I think that substantial justice would be done by assessing the damages as between the applicant and Dolly at about 5% of the amount allowed against Mercedes, say $1,950. In order to avoid duplication it should be provided that satisfaction of one award of damages will pro tanto satisfy the other. There is evidence that Mr Spieser was aware of the position in relation to the sexy print design as from the evening of 30 January 1985 and there is room for criticism of the manner in which he handled the matter after that time: see 59 ALR at p.263. However, there is no evidence that, at any relevant time, Mr Spieser was aware of the continued sale -- if, in fact, sales did occur ~-- of garments bearing the full signature. It cannot be said that Mr Spieser was knowingly concerned in the breach by the company of s.52. Consequently he is not liable under the Act: see Yorke v_ Lucas (1985) 59 ALJR 776. In relation to Mrs Spieser the position is even Clearer. During the critical first few days after the proceedings were commenced and before sales terminated -- ewe 65. except apparently in the Penrith shop -- Mrs Spieser was absent interstate. The claim against Mr and Mrs Spieser personally must be dismissed. The cross-claim by Dolly Dolly against Mercedes Dolly Dolly contends that, in relation to the supply to it of fabric bearing the sexy print design, Mercedes contravened s.52 of the Trade Practices Act. Counsel points out that s.4(2) of that Act provides that a reference in the Act to engaging in conduct is to be read as a reference, inter alia, to "refusing to do any act" and that this term is, in turn, defined to include a reference to "refraining (otherwise than inadvertently) from doing any act". The submission is that Mercedes, being under an obligation of fair dealing so to do, deliberately refrained from telling Dolly Dolly of the connection between Ms Kee and the design and in particular -- as was admitted by Ms Banhegyi -- that nobody revealed to Dolly Dolly Mr Szabo's knowledge that some of the fabric printed for that company bore Ms Kee's full signature. Under those circumstances it is submitted that, if Dolly Dolly has by selling garments made from the sexy print design engaged in misleading and deceptive conduct, that conduct was the direct result of the failure of Mercedes to inform it of the position, so that Dolly Dolly is entitled to be indemnified against its liability to the applicant. This submission is sound and a declaration ought to be made accordingly. SO er en ee moar eg Se re ree ee re on ae toncw ce hed - ? 4% 7), a o - . ee Kr ae Sey > ie tai ODL Ta eye E 277] 66. In addition Dolly Dolly claims damages from Mercedes; being the costs of manufacture and the loss of profits on the garments made by it from sexy print fabric which remain unsold. Of the 131 garments ~-- counting sets as a single garment -- manufactured from the fabric only 39 have been sold, leaving 92 in stock. For the purpose of analysis they have been broken down into 179 individual units; treating, for example, a top and a skirt in a set as separate units. Of these units, 18 contain the full signature of Ms Kee. Dolly Dolly is entitled to recover from Mercedes the cost incurred by it in relation to the manufacture -- including costs of distribution, collection and storage -- of the units which it is to be permanently restrained from selling; after giving credit for an allowance of $93.60 made by Mercedes in respect of the 24 metres of fabric containing a full signature of Ms Kee. However, there is not sufficient evidence to enable me to determine the extent of that cost. It will be necessary to analyse the garments still held, having regard to the fact that many consist of two units, to determine what is saleable, consistently with the orders made in this case. It will then be necessary to determine what costs have been incurred in connection with those garments which are not saleable, either because they are directly affected by the order or because they are a 67. saleable only in conjunction with another unit which is so affected. Dolly Dolly and Mercedes probably can reach agreement on these matters. I will make a declaration of entitlement to damages and reserve leave to Dolly Dolly to apply for an assessment of the amount of damages if necessary. I do not propose to make any declaration of entitlement to damages for loss of profits upon the garments which are not able to be sold. The approach taken in respect of the assessment of damages under s.52 is to make such assessment as will put the applicant in the same position, financially, as if he or she had never entered into the transaction which flowed from the misrepresentation. As was said by the Full Court in Gates at p.104 "the question is not how much better off" (Mr Gates) "would have been if the statements had been true but how much worse off he is by reason of having taken the steps which he did in reliance on the statements". Of course, if Dolly Dolly could show that, as a result of having invested capital in the sexy print garments, it had precluded itself from obtaining other stock which, upon the probabilities, could have been sold at a profit, it would be "worse off" to the extent of that loss. But nothing of that nature has been suggested. 68. Orders I propose to dissolve the existing injunctions and make orders, summarily stated, as follows: I) Restrain Mercedes, except in accordance with the prior instructions of the applicant, from using the sexy print design in the printing of any fabric and from supplying fabric printed with that design. II) Enter judgment for the applicant against Mercedes for damages assessed in the sum of $38,762.00. TIT) Restrain Dolly Dolly from selling, offering for sale, supplying or otherwise in trade or commerce dealing with any garment manufactured from fabric containing the sexy print design and including c therein the signature "J. Kee". IV) Enter judgment for the applicant against Dolly Dolly for damages assessed in the sum of $1,950.00. Vv) Provide that satisfaction of the judgment under order (ITI) or under (IV) shall operate as a pro tanto satisfaction of the judgment under the other order. ee Wyre ew er pee ee VI) VII) VIII) TX) Dismiss the proceedings against Mr and Mrs Spieser. 69. In the cross-claim declare that Dolly Dolly is entitled: (a) (b) . to be indemnified by Mercedes against all costs and liabilities incurred by it under this order as against the applicant; and to recover damages against Mercedes in respect of the cost incurred by it in the manufacture, distribution, collection and storage of all garments unable to be sold by it as a result of the order (III) above. Reserve liberty to apply on 7 day's notice for an assessment of the damages payable under order (VIT) (bd). The applicant should have orders for costs against Mercedes and Dolly Dolly; Dolly Dolly to be indemnified by Mercedes in respect of that order and, in addition, to have from Mercedes its costs of the principal proceeding and the cross-claim. ya at ee erere Stony ee hanna le » 70. The applicant must pay any costs incurred by Mr and Mrs Spieser in relation to the proceedings against them personally which would not have been incurred but for the joinder of one or both of them. I certify that this and the sixty-nine (69) preceding pages are a true copy of the Reasons for Judgment herein of his Honour Mr Justice Wilcox. ; Ort' Associate: Woot rle A : Het Date: 19 March 1986 Counsel for the applicant: Mr A Martin Solicitors for the applicant: Messrs Parish Patience Counsel for the first, third and fourth respondents: Mr F G Lever Solicitors for the first, third and fourth respondents: Messrs Pozniak & Mane Counsel for the second respondent: Mr B Walker Solicitors for the second respondent: Messrs Allen Allen & Hemsley Dates of hearing: 2, 3, 4, 5, 16, 17, 18 December 1985. YY Soo RESET eek seins os he TR, whet > oe ne '