FEDERAL COURT OF AUSTRALIA Chanel Limited v Ayad [2005] FCA 820 CHANEL LIMITED AND CHANEL AUSTRALIA PTY LIMITED v MAHMOUD AYAD AND YOUSSEF ISSA N 506 of 2005 JACOBSON J 16 JUNE 2005 SYDNEY IN THE FEDERAL COURT OF AUSTRALIA NEW SOUTH WALES DISTRICT REGISTRY N 506 OF 2005 BETWEEN: CHANEL LIMITED FIRST APPLICANT CHANEL AUSTRALIA PTY LIMITED SECOND APPLICANT AND: MAHMOUD AYAD FIRST RESPONDENT YOUSSEF ISSA SECOND RESPONDENT JUDGE: JACOBSON J DATE OF ORDER: 16 JUNE 2005 WHERE MADE: SYDNEY THE COURT ORDERS THAT: 1. Pursuant to Order 35A(3)(d), judgment is entered in favour of the Applicants against the First and Second Respondents. 2. The orders be made as set out in [1] – [8] of the Application. 3. All goods currently in the possession of the Australian Customs Service, pursuant to seizure number V05/00255 and seizure number V05/0456, be forfeited to the Commonwealth, pursuant to s 137(3)(b) of the Trade Marks Act 1995 (Cth), so that the goods may be disposed of as the Customs CEO directs, pursuant to s 139(b) of the Trade Marks Act 1995 (Cth). 4. The First and Second Respondents pay the costs of the Applicants in this proceeding to date. 5. Liberty to apply is reserved on 72 hours notice for the applicants to inform the court as to whether they wish to proceed with a claim for damages. If the applicants do wish to proceed with a claim for damages, appropriate directions shall be made. However, if the applicants do not wish to proceed with a claim for damages, the proceedings will be otherwise discontinued or dismissed (the necessary order in that event to be made in chambers). Note: Settlement and entry of orders is dealt with in Order 36 of the Federal Court Rules. IN THE FEDERAL COURT OF AUSTRALIA NEW SOUTH WALES DISTRICT REGISTRY N 506 OF 2005 BETWEEN: CHANEL LIMITED FIRST APPLICANT CHANEL AUSTRALIA PTY LIMITED SECOND APPLICANT AND: MAHMOUD AYAD FIRST RESPONDENT YOUSSEF ISSA SECOND RESPONDENT JUDGE: JACOBSON J DATE: 16 JUNE 2005 PLACE: SYDNEY REASONS FOR JUDGMENT 1. This is an application for default judgment pursuant to order 35A of the Federal Court Rules. 2. The applicant seeks default judgment by reason of the failure of the respondents to enter an appearance and to file a defence as ordered by the court and also by reason of their failure to attend directions hearings on two occasions. The notice of motion seeking default judgment was filed on 14 June 2005. 3. I am satisfied on the evidence filed in support of the motion that the respondents have been served with the application and statement of claim. I am also satisfied that the first applicant is the proprietor of registered trademarks 525,736 and 525,737 as well as registered trademarks 852,545 and 852,546. The second applicant is the exclusive licensee in Australia of those trademarks. 4. The first applicant is a very well known company. The history of the trademarks is described in an affidavit of Mr David Blakely, the managing director of the second applicant. He traces the history and reputation of the first applicant from the time when Coco Chanel founded the Chanel label in Paris in 1910. It is plain from Mr Blakely's evidence that Chanel has a very substantial reputation worldwide for the goods which are the subject of the trademarks. 5. The present proceedings relate to the seizure of two consignments of goods which were seized by Australian Customs. The first consignment was a consignment of sunglasses. The second consignment was in respect of sunglass cases bearing the Chanel trademark, the well known crossed 'C' device, which is the subject of two of the trademarks to which I have referred above. The crossed Cs device appears as follows:- 6. Both consignments of sunglasses and cases were for goods which on the evidence before me were imported into Australia by the first and second respondents. The consignments in each instance were seized by the Australian Customs Service. 7. I am satisfied on the evidence of Ms Rebekah Gay, a solicitor in the employ of Shelston IP Lawyers that the goods which were seized on each occasion were goods which infringed the first applicant's registered trademarks for sunglasses and sunglass cases. History of the Proceedings 8. The history of the proceedings is set out in the affidavit of Ms Gay of 14 June 2005. The proceedings were commenced on 1 April 2005. The first and second respondents were served with the application and statement of claim in April 2005, the proceedings were listed for directions before me on 28 April 2005. Ms Gay appeared at the directions hearing but there was no appearance for either respondents and the matter was adjourned until 26 May 2005. 9. The respondents were notified in writing by the solicitors for the applicants that the proceedings had been adjourned to 26 May 2005 but they failed to attend the directions hearing on that date. On 26 May 2005 I made the following orders:- (1) Pursuant to Order 35A(3)(d), judgment is entered in favour of the Applicants against the First and Second Respondents. (2) The orders be made as set out in [1] – [8] of the Application. (3) All goods currently in the possession of the Australian Customs Service, pursuant to seizure number V05/00255 and seizure number V05/0456, be forfeited to the Commonwealth, pursuant to s 137(3)(b) of the Trade Marks Act 1995 (Cth), so that the goods may be disposed of as the Customs CEO directs, pursuant to s 139(b) of the Trade Marks Act 1995 (Cth). (4) The First and Second Respondents pay the costs of the Applicants in this proceeding to date. (5) Liberty to apply is reserved on 72 hours notice for the applicants to inform the court as to whether they wish to proceed with a claim for damages. If the applicants do wish to proceed with a claim for damages, appropriate directions shall be made. However, if the applicants do not wish to proceed with a claim for damages, the proceedings will be otherwise discontinued or dismissed (the necessary order in that event to be made in chambers). 10. Later on the same day, my associate sent a letter to the respondents advising them of the orders made on the morning of 26 May 2005, the letter attached a copy of the relevant portion of order 35A relating to judgment by default. 11. A copy of the letter of 26 May 2005 was sent to the applicant's solicitors. On the following day, 27 May 2005, the applicant's solicitors sent a further copy of the letter of 26 May 2005 to each of the respondents. 12. The respondents have not filed their defences. They did not appear when the matter was called on for directions and on the motion this morning and accordingly the applicant's counsel moved for default judgment pursuant to order 35A. 13. It is plain that the respondents are in default under order 35A rule 2(2). There is default in accordance with subparagraphs (a), (b), (c), (d) and (g) of that rule. I therefore have power under order 35A rule 3(2)(d) to give judgment or make other orders against the respondents. 14. The orders which the applicants seek are firstly, that there be judgment against the first and second respondents and, secondly, that the orders set out in [1]-[9] of the application be made against each of the respondents. 15. The first five orders are for declarations of trademark infringement, passing off and misleading and deceptive conduct in contravention of sections 42 and 44 of the Fair Trading Act 1987 (NSW). Orders 6 and 7 seek injunctions; order 8 seeks delivery up of infringing goods and order 9 seeks the filing of statutory declarations by the respondents setting out details of the goods obtained by them and the sources from which they obtained those goods. 16. On discussion of the need for order 9 with counsel for the applicants, I was informed that order 9 was no longer sought. 17. The next order which the applicants seek in the notice of motion is that goods in the possession of the Australian Customs Service be destroyed. However, the applicants' counsel sought to amend the relief sought. He seeks an order pursuant to section 137(3) of the Trade Marks Act 1995 (Cth) ("Trade Marks Act") that the seized goods be forfeited to the Commonwealth. 18. There is evidence before me on today's application that notices to Customs were given pursuant to section 132 of the Trade Marks Act. Accordingly, I have power under section 137(3)(b) to order that the seized goods be forfeited to the Commonwealth. If an order is made under section 137 of the Trade Marks Act, section 139 is then enlivened and section 139(b) provides that: "If an order is made under section 137 that goods be forfeited to the Commonwealth the goods are to be disposed of as the Customs CEO directs." 19. The next orders which the applicants seek are set out in [4] and [5] of the notice of motion. They are for the applicants to pay damages in an amount to be determined by the court and an order for costs of the applicants in these proceedings. Discussion 20. The principles which apply where an applicant seeks default judgment against a respondent were considered recently by Justice R.D. Nicholson in Grey v Mango Prepaid Calling Cards Pty Limited [2004] FCA 1664 at [50]. His Honour was there referring to a predecessor of the present order 35A. However, it seems to me that the same principles apply. His Honour referred to a decision of Drummond J in Australian Securities Commission v MacLeod (1994) 54 FCR 309. 21. In that case Drummond J held that where judgment was sought pursuant to the default rules then in force, an applicant must support the motion with evidence sufficient to prove that the court has jurisdiction in the matter, the facts upon which the cause of action is based and also that the circumstances are such as to justify the grant of the remedy. 22. The evidence which has been filed on the motion satisfies me that I have jurisdiction to grant the relief which is sought and that the necessary facts have been proved which give rise to the causes of action upon which the application is based. 23. I am also satisfied that the applicants have proved the necessary circumstances to justify the grant of the remedy. In Zomba Production Music Australia Pty Limited v Roadhouse Productions Pty Limited (2001) 190 ALR 288 at [6], Stone J considered it was appropriate to proceed with a trial on liability in the absence of appearance by the respondents. 24. Her Honour was satisfied that the respondents were notified of the proposal to invoke the relevant rules of court. Her Honour had considered that the applicants were entitled to have the claims dealt with notwithstanding the respondents' refusal to acknowledge the proceeding and that no apparent purpose would be served by further delay. 25. In my view the same considerations apply with full force in the present matter. It is clear that the respondents have not only been served with the proceedings but have been informed of today's application and a proposal to seek default judgment. However, by their failure to attend they refuse to acknowledge the proceeding. There is no purpose served by delay. The power to enter judgment by default under the various paragraphs of order 35A to which I have referred is plainly enlivened and it is appropriate that I exercise my discretion to make the orders which are sought. 26. Dealing firstly with the declarations that are sought in [1] to [5] of the application there is no reason why those orders should not be made and I propose to make them. It is also appropriate that I grant the injunctive relief sought in [6] and [7] of the application and that there be an order for delivery up in accordance with [8] of the application. 27. I have dealt above with the provisions of the Trade Marks Act which relate to forfeiture of the goods to the Commonwealth of Australia. I am satisfied that there is the necessary evidence before me and the power to make an order pursuant to section 137(3)(b) of the Trade Marks Act and I propose to do so. 28. It is also appropriate that there be an order for the respondents to pay damages in an amount to be determined by the court and there will need to be a further hearing on the issue of quantum. I will make directions for the determination of that issue. It is also appropriate that the first and second respondents be ordered to pay the costs of the proceeding to date which, of course, include the costs of the notice of motion and I will so order. 29. I make an order reserving liberty to apply to the applicants on 72 hours notice to inform the court whether they wish to proceed on a claim for damages. If the applicants do wish to proceed with the claim for damages I will then make directions for the filing of evidence but if the applicants do not wish to seek damages the appropriate order would be for the balance of the proceedings to be either discontinued or dismissed and I would make the necessary order in chambers. I certify that the preceding twenty nine (29) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Jacobson. Associate: Dated: 20 June 2005 Counsel for Applicants: Mr H Altan Solicitor for Applicants: Shelston IP Lawyers No appearance by the Respondents Date of Hearing: 16 June 2005 Date of Judgment: 16 June 2005