FEDERAL COURT OF AUSTRALIA Louis Vuitton Malletier SA v Design Elegance Pty Ltd [2006] FCA 83 CONTEMPT – whether breach of a court order constitutes civil or criminal contempt – whether imposition of a fine is an appropriate penalty – whether a claim for contempt may be the subject of an offer for settlement – whether an offer by a solicitor for the aggrieved party to settle or compromise conduct constituting trade-mark re-infringement and contempt involves impropriety when the offer seeks more than the aggrieved party has a legal right to claim in respect of the re-infringement – whether such impropriety should result in the Court exercising its discretion as to costs adversely to the aggrieved party notwithstanding that it has succeeded in its claim of contempt SOLICITORS – consideration of the principles relevant to an offer by a solicitor for the aggrieved party to waive, settle or comprise a claim of contempt Australian Meat Industry Employees' Union v Mudginberri Station Pty Ltd (1986) 161 CLR 98 - cited Witham v Holloway (1995) 183 CLR 525 - applied Australian Competition and Consumer Commission v Leahy Petroleum Pty Ltd (No 2) (2005) 215 ALR 281 - cited Construction, Forestry, Mining and Energy Union v BHP Steel (AIS) Pty Ltd (2003) 196 ALR 350 – cited Rip Curl International Pty Ltd v Phone Lab Pty Ltd (2004) 63 IPR 496 – cited John Fairfax & Sons Pty Ltd v McRae (1955) 93 CLR 351 - cited Pojé v Attorney-General of British Columbia [1953] 1 SCR 516 – cited Gompers v Buck Stove & Range Co 221 US 418 (1911) – cited Attorney-General v Times Newspapers Ltd [1974] AC 273 - cited Harman v Secretary of State for the Home Department [1983] AC 280 - cited Kerridge v Simmonds (1906) 4 CLR 253 - cited LOUIS VUITTON MALLETIER SA v DESIGN ELEGANCE PTY LTD AND BARBARA ANNE MASKIELL VID 579 OF 2003 MERKEL J 14 FEBRUARY 2006 MELBOURNE IN THE FEDERAL COURT OF AUSTRALIA VICTORIA DISTRICT REGISTRY VID 579 OF 2003 BETWEEN: LOUIS VUITTON MALLETIER SA APPLICANT AND: DESIGN ELEGANCE PTY LTD ACN 083 361 755 FIRST RESPONDENT BARBARA ANNE MASKIELL SECOND RESPONDENT JUDGE: MERKEL J DATE OF ORDER: 14 FEBRUARY 2006 WHERE MADE: MELBOURNE THE COURT DECLARES AND ORDERS THAT: 1. The first respondent is guilty of contempt by its conduct in breaching the consent order made by the Court on 8 September 2003. 2. The second respondent is guilty of contempt by her conduct in breaching the consent order made by the Court on 8 September 2003. 3. The first respondent shall pay a fine of $20 000 to the District Registrar of this Court within 2 months or such further time and by such instalments as the District Registrar may allow. 4. The second respondent shall pay a fine of $20 000 to the District Registrar of this Court within 2 months or such further time and by such instalments as the District Registrar may allow. 5. In the event that there is default in payment of either of the fines the District Registrar shall apply to the Court for directions concerning enforcement. 6. The applicant shall bear its own costs of and incidental to its motion for contempt. 7. The applicant shall pay the costs, to be agreed or in default of an agreement to be fixed by a Registrar of the Court, of solicitors and counsel acting pro bono for the second respondent in so far as those costs related to charges 3(a), (b) and (c) of the Amended Statement of Charge or to the issue of whether there was any impropriety in the applicant's offers to compromise its claims in respect of the conduct the subject of the contempt charges. Note: Settlement and entry of orders is dealt with in Order 36 of the Federal Court Rules. IN THE FEDERAL COURT OF AUSTRALIA VICTORIA DISTRICT REGISTRY VID 579 OF 2003 BETWEEN: LOUIS VUITTON MALLETIER SA APPLICANT AND: DESIGN ELEGANCE PTY LTD ACN 083 361 755 FIRST RESPONDENT BARBARA ANNE MASKIELL SECOND RESPONDENT JUDGE: MERKEL J DATE: 14 FEBRUARY 2006 PLACE: MELBOURNE REASONS FOR JUDGMENT Introduction 1 The applicant ('Louis Vuitton') has moved the Court for orders that the first respondent ('Design Elegance') and the second respondent ('Maskiell') be punished for contempt for breaching consent orders made by the Court on 8 September 2003 ('the consent orders'). The consent orders, inter alia, restrained: (a) Design Elegance and Maskiell from infringing 'Louis Vuitton' trade marks in respect of specified classes of goods ('the Louis Vuitton Trade Marks'); (b) Maskiell from being in any way, directly or indirectly, knowingly concerned in or a party to an infringement of the Louis Vuitton Trade Marks. 2 The Amended Statement of Charge ('the Statement of Charge') alleges that the respondents breached the consent orders by reason of their importation for sale, offering for sale, keeping for sale or sale of products that bore one or more of the Louis Vuitton Trade Marks, which trade marks were not applied with the licence or authority of Louis Vuitton ('counterfeit products'). The charges can be summarised as follows: (a) Charge 3(a) - on 13 May 2004 the respondents sold a counterfeit product, being a hair clip; (b) Charge 3(b) - on 20 November 2004 the respondents sold a counterfeit product, being a jewellery pouch; (c) Charge 3(c) - on 20 November 2004 the respondents kept, displayed and offered for sale 107 counterfeit products; (d) Charge 3(d) - on 19 June 2005 the respondents sold a counterfeit product, being a shoulder bag in a dust bag; (e) Charge 3(e) - on 6 July 2005 the respondents sold a counterfeit product, being a wallet packaged in a cardboard box. (f) Charge 3(f) - on 6 July 2005 the respondents sold a counterfeit product, being a belt packaged in a cardboard box. (g) Charge 3(g) - on 7 July 2005 the respondents kept, displayed and offered for sale three counterfeit products, being a dog bag, a handbag and a wallet packaged in dust bags and a box; (h) Charge 4 - the respondents committed the conduct referred to in Charges 3(a) to (g) in wilful and contumacious disregard for the Court's orders; (i) Charge 5 - on 12 May 2005 Design Elegance sold a counterfeit product, being a diary packaged in a cardboard box; (j) Charge 6 – Design Elegance committed the conduct referred to in Charge 5 in wilful and contumacious disregard for the Court's orders; (k) Charge 7 - further or in the alternative to the allegations made in Charges 3(a) to (g) in relation to Maskiell, Maskiell aided, abetted, counselled, procured or was directly or indirectly knowingly concerned in or a party to the conduct the subject of those charges; (l) Charge 8 - on or about 4 May 2005 Maskiell imported 62 counterfeit products into Australia; (m) Charge 9 – Maskiell committed the conduct referred to in Charges 7 and 8 in wilful and contumacious disregard for the Court's orders. 3 The applicant relied on numerous affidavits from a number of private investigators to establish the offering for sale, keeping for sale, displaying for sale or sale of the counterfeit products. The evidence of the investigators was credible, was not cross examined upon and should be accepted. The same situation applies to the evidence establishing that the products in question were products that purported to be, but were not, Louis Vuitton products and were therefore counterfeit products. 4 It is not in dispute, and I am satisfied, that Design Elegance and Maskiell were served with, were aware of and understood the consent orders and, in particular, they were aware of the consequences of a deliberate breach of those orders. It is also not in dispute, and I am satisfied, that Maskiell's conduct is also to be treated as conduct of Design Elegance of which she is the sole director and shareholder. 5 Maskiell, but not Design Elegance, was represented by counsel who appeared pro bono at the hearing of the contempt charges. The solicitors that instructed counsel appearing for Maskiell also represented Design Elegance and were content to adopt the submissions and pleas of counsel for Maskiell. One of the submissions, which I accepted, was that the issues of liability and penalty be heard and determined at the same hearing, rather than at separate hearings. Contempt 6 Deliberate conduct which is in breach of a court order will constitute wilful disobedience of the order, and therefore a civil contempt, unless the conduct be casual, accidental or unintentional: see Australian Meat Industry Employees' Union v Mudginberri Station Pty Ltd (1986) 161 CLR 98 at 106-107 ('Mudginberri') and 112-113. However, the disobedience will amount to a criminal contempt if it involves 'deliberate defiance or, as it is sometimes said, if it is contumacious': see Witham v Holloway (1995) 183 CLR 525 ('Witham') at 530. As is apparent from the Statement of Charge, Louis Vuitton is alleging both civil and criminal contempt. However, as all proceedings for contempt are now regarded as criminal in nature, all of the charges must be proved beyond reasonable doubt: see Witham at 534. 7 Charges 3(a), (b) and (c) relate to the sale or offering or keeping or displaying for sale on 13 May 2004 and 20 November 2004 of 109 counterfeit products. The respondents did not dispute the charges. However, after counsel for Maskiell claimed that Louis Vuitton had waived its entitlement to claim that those charges amounted to contempt, Louis Vuitton did not press the three charges although it indicated that it would rely on the evidence concerning them on the issue of penalty. Accordingly, charges 3(a), (b) and (c) are to be dismissed. 8 Charges 3(d) and 7 are to the effect that on 19 June 2005 the respondents sold a shoulder bag packaged in a protective dust bag, both of which bore one or more Louis Vuitton trademarks, which trademarks were not applied with the licence or authority of the applicant. Maskiell pleaded guilty to the charges and I am satisfied that they have been proved beyond reasonable doubt against both Maskiell and Design Elegance. 9 Charges 3(e) and 7 are to the effect that on 6 July 2005 the respondents sold a wallet packaged in a cardboard box, both of which bear one or more Louis Vuitton trademarks, which trademarks were not applied with the licence or authority of the Applicant. Maskiell pleaded guilty to the charges and I am satisfied that they have been proved beyond reasonable doubt against both Maskiell and Design Elegance. 10 Charges 3(f) and 7 are that on 6 July 2005 the respondents sold a belt packaged in a cardboard box, both of which bear one or more Louis Vuitton trademarks which trademarks were not applied with the licence or authority of the applicant. Although an issue arose at the hearing about whether a woman identified as 'Sandy' was authorised by the respondents to sell the belt, I am satisfied that the evidence establishes beyond reasonable doubt that she was authorised to do so. Maskiell pleaded guilty to the charges and I am satisfied that the applicant has established the charges beyond reasonable doubt against both Maskiell and Design Elegance. 11 Charges 3(g) and 7 are to the effect that on 7 July 2005 the respondents kept for sale, displayed for sale and offered for sale three products comprising one dog bag, one handbag and one wallet (two of which are accompanied by protective dust bags or a box) each bearing one or more Louis Vuitton trademarks, which trademarks were not applied with the licence or authority of the applicant. Maskiell pleaded not guilty to this charge. 12 On 7 July 2005, a licensed enquiry agent, Mr Bernard Delaney attended Maskiell's house in Gilston in Queensland. Mr Delaney handed a letter from Louis Vuitton's solicitors, Corrs Chambers Westgarth ('Corrs'), to a woman at the house who identified herself as Maskiell. The letter demanded that Maskiell immediately deliver up all counterfeit Louis Vuitton products in her possession. Maskiell told Mr Delaney that she did not have any counterfeit Louis Vuitton products in her possession and stated that if he wanted to search the premises he should come back with a search warrant. As Mr Delaney was leaving the premises Maskiell came out of the house, approached him and handed him a wallet contained in a box. Later that day, Maskiell telephoned Mr Delaney. She told him that she had just remembered that she had a dog carrier labelled Louis Vuitton and asked him to come back to her house to collect it. After a further conversation with Maskiell on 7 July 2005, Mr Delaney returned to Maskiell's house on 8 July 2005 and met with Maskiell. She handed to him a dog carry bag (in a dust bag), a handbag and a wallet (in a dust bag in a cardboard box) and said words to the effect of 'I have found some more items that are labelled "Louis Vuitton" and I want to surrender them to you.' There was expert evidence that the dog bag (and the accompanying dust bag), the handbag and the wallet (and the accompanying dust bag and cardboard box) bear Louis Vuitton trademarks, but are counterfeit products. Louis Vuitton's evidence in relation to the above matters was not challenged. 13 Although there was some evidence that the products the subject of charges 3(g) and 7 were displayed or offered for sale on 6 July 2005, there is no evidence that they were displayed or offered for sale on 7 July 2005. Accordingly, the issue is whether I am satisfied beyond reasonable doubt that the respondents 'kept' the goods in question for sale on 7 July 2005. Although it is likely that the goods were 'kept' for sale on 7 July 2005 because they were on display for sale on the previous day, I am not satisfied beyond reasonable doubt that that occurred. The reason for that is that, although the goods were being kept at Maskiell's house on 7 July, there is no evidence that there was any commercial activity or intent in relation to the goods on that day. In any event, having regard to Maskiell's voluntary delivery up of the items in question, I am of the view that the conduct the subject of these charges does not warrant punishment for contempt. Accordingly, charges 3(g) and 7 are to be dismissed. 14 Charge 5 is to the effect that on 12 May 2005 Design Elegance sold a diary packaged in a cardboard box, both of which bear one or more Louis Vuitton trademarks, which trademarks were not applied with the licence or authority of the applicant. Charge 5 contained no allegation against Maskiell. There was evidence from one of the investigators that a woman who identified herself as "Sandy" sold him a diary packaged in a cardboard box from Design Elegance's retail premises in Southport in Queensland. There was unchallenged evidence that the diary and the cardboard box bear Louis Vuitton trademarks, but are counterfeit products. I am satisfied that the applicant has established the charge beyond reasonable doubt against Design Elegance. 15 Charge 8 is that on or about 4 May 2005 Maskiell imported into Australia from China sixty-two counterfeit products (comprising twenty handbags, one suitcase, two briefcases, three umbrellas, six cosmetics bags, two belts, two wallets, three caps, twenty-two pairs of shoes and a pair of sunglasses), many of which were accompanied by protective dust bags or boxes. As the charge is not pressed in respect of the sunglasses, I propose to treat the charge as relating to sixty-one counterfeit products. Maskiell pleaded guilty to this charge in respect of items she claimed to have purchased for herself and for her friends, but otherwise pleaded not guilty. I am satisfied beyond reasonable doubt, and it was not in dispute between the parties, that Maskiell imported the sixty-one relevant products into Australia and that the products are counterfeit products. Maskiell claimed that she purchased, imported and paid duty on the counterfeit products during March 2005 but they were seized by Australian Customs after a notice of seizure dated 4 May 2005 was served. Although the initial importation apparently occurred during March 2005, it is clear, and Maskiell did not dispute, that the importation continued until the notice of seizure of the products was given on 4 May 2005. On 9 May 2005, Maskiell consented to the forfeiture of the counterfeit products. 16 Maskiell gave evidence that some of the products were for herself and her friends who had agreed to reimburse her for them, but claimed that the remaining products were purchased by her in order to provide them to Corrs to assist Louis Vuitton in preventing the importation and sale in Australia of counterfeit products. The issue is whether Maskiell's evidence concerning the importation is sufficient to raise a reasonable doubt as to her guilt. The case against Maskiell is that she regularly acquired and imported counterfeit products, including counterfeit Louis Vuitton products, and that the importation that was formally seized on 4 May 2005 was no different to any other commercial importation by her or her company, Design Elegance. 17 However, Maskiell claimed that the importation the subject of this charge was different because on this occasion she was aware of the risks involved in importing counterfeit Louis Vuitton products and that she was only prepared to do so for herself, her friends (who agreed to pay for them) and for Corrs as Louis Vuitton's solicitors. I do not accept Maskiell's evidence for several reasons. Firstly, I do not accept that Maskiell would expend significant amounts on acquiring and paying duty on the counterfeit products without having received a request to do so from Corrs, an assurance by the solicitors to reimburse her for the costs of acquiring and importing the products and precise instructions on the information Corrs was seeking in relation to the products. Although Corrs had indicated to Maskiell that she might be rewarded for assisting them, the matter did not proceed beyond that by the time she left for China. I would add that, in so far as Maskiell's evidence conflicted with that given by Louis Vuitton's solicitor on this issue, I prefer the solicitor's evidence, which was based on his contemporaneous file notes of his communications with Maskiell, to Maskiell's evidence. 18 Second, Maskiell's version of the relevant events in the witness box was not consistent with the version of events she proffered at the time of the importation. If a significant number of the imported products were imported for the sole purpose of assisting Corrs, and therefore were not imported for any commercial purpose, I would have expected Maskiell to have clearly stated that at the relevant time to Australian Customs and to Corrs with whom she was in contact. Maskiell did not do so. 19 Third, Maskiell's evidence was imprecise as to the goods that were for herself, for her friends and for Corrs. If her version of events was correct, it is likely that she would have been able to identify with greater precision the products being imported in order to assist Louis Vuitton and the products she imported for herself and her friends. 20 Fourth, it is far from clear as to how the mere importation into Australia by Maskiell of counterfeit Louis Vuitton products, without more, would be of any utility to Louis Vuitton. There is therefore a high degree of unreality about Maskiell's current version of the relevant events. 21 Finally, I found Maskiell to be an unimpressive and unreliable witness and her evidence conflicted with that of other witnesses whose evidence I have found to be reliable and accurate. 22 Having regard to all of the evidence, I am satisfied that the importation of the sixty-one counterfeit products was for a commercial purpose, being their resale. While I accept that Maskiell might have been interested in some of the products for herself, that was a secondary purpose and would only arise if the products were not sold. Accordingly, I am satisfied that the applicant has established charge 8 beyond reasonable doubt against Maskiell and Design Elegance. 23 In respect of charges 4, 6 and 9 I am not satisfied beyond reasonable doubt that the respondents' conduct was defiant or contumacious. Although Maskiell's conduct was deliberate, it was driven by short sighted financial motives in the hope that she would not be detected. Having regard to all of the evidence, I entertain a reasonable doubt about whether her conduct was intended to be defiant or disrespectful of the Court. 24 It follows that charges 3(d), 3(e), 3(f) and 5 and charge 7 (in so far as it relates to the foregoing charges) and 8 have been established and charges 3(a), 3(b), 3(c), 3(g) and charges 4, 6, 7 (in so far as they relate to the foregoing charges) and 9 are to be dismissed. Penalty 25 It was common ground between the parties that the following factors, which were outlined in the written submissions of counsel for Maskiell, are relevant to penalty. '1.5 In deciding the appropriate penalty, a court should consider the following factors: (1) contemnor's personal circumstances; (2) nature and circumstances of the contempt: R v West Australian Newspapers Ltd; Ex Parte DPP (WA) (1996) 16 WAR 518; (3) effect of the contempt on the administration of justice: Durack v Gallagher (1982) 44 ALR 272 at 286-7; (4) contemnor's culpability: Durack v Gallagher (1982) 44 ALR 272 at 286-7; (5) need to deter the contemnor and others from repeating contempt: DPP v John Fairfax & Sons Ltd (1987) 8 NSWLR 732, Kirby P at 741; and (6) absence or presence of a prior conviction for contempt: Attorney-General (NSW) v Macquarie Publications Pty Ltd (1988) 40 A Crim R 405 at 410. However, other criminal history is irrelevant: R v Giscombe (1984) 79 Cr App R 79 at 84. 1.6 In deciding the amount of any fine the Court should take into account the contemnor's financial means: Smith v R (1991) 25 NSWLR 1. The court may also suspend the fine on terms. Contrition and apology 1.7 Genuine contrition and a full and ample apology may also reduce the penalty: R v Gray [1900] 2 QB 36 at 41-2; Superstar Australia Pty Ltd v Coonan & Denlay Pty Ltd (No 2) (1982) 65 FLR 432 at 436. Imprisonment 1.8 It is widely accepted that the court should only impose a term of imprisonment in the most serious criminal contempt cases: Keeley v Justice Brooking (1979) 143 CLR 162 at 179; Gallagher v Durack (1983) 152 CLR 238. 1.9 In Deputy Commissioner of Taxation v Hickey [1999] FCA 259, Carr J held that imprisonment is a "last resort": see also R v Vasin (1985) 39 SASR 45; James (1985) 14 A Crim R 364; Skipper (1992) 64 A Crim R 260.' 26 The present case warrants the imposition of a significant penalty. It is clear that the respondents have deliberately breached the consent orders on a number of occasions in respect of a significant number of products. There are no extenuating circumstances that adequately explain the breaches which, in my view, are serious. In particular, a significant penalty is necessary to vindicate the authority of the Court and to deter others from engaging in similar contravening conduct. 27 There are, however, some special circumstances that have led me to conclude that fines, rather than a term of imprisonment, albeit suspended, are appropriate. First, it is clear that Maskiell is a disturbed individual who was having a number of personal problems during the period in which the contempt occurred. Second, as explained above, although the breaches were deliberate they were not defiant or contumacious. Third, the respondents have no prior convictions for contempt or any other analogous conduct. Fourth, the respondents have unreservedly apologised to the Court for the breaches. Finally, I am satisfied that the trauma Maskiell has gone through in respect of the charges makes it highly unlikely that she would engage in similar conduct in the future. 28 I have taken into account the limited financial means of the respondents but have concluded that that should not prevent the imposition of significant fines as the penalties in the present case should be those that are necessary to vindicate the Court's authority and to deter others from engaging in similar conduct: cf Australian Competition and Consumer Commission v Leahy Petroleum Pty Ltd (No 2) (2005) 215 ALR 281 at 284-285 ([9]-[10]). I have also concluded that the totality principle should be applied with the consequence that a total amount should be fixed by way of penalty for each of the respondents. 29 In all the circumstances I have determined that the imposition of a fine of $20 000 on each of the respondents is appropriate. Costs 30 While the power to award costs in all proceedings is discretionary, it is common for costs, and on some occasions indemnity costs, to be awarded in favour of a successful applicant in contempt proceedings: see generally Construction, Forestry, Mining and Energy Union v BHP Steel (AIS) Pty Ltd (2003) 196 ALR 350 at 351-353 and Rip Curl International Pty Ltd v Phone Lab Pty Ltd (2004) 63 IPR 496 at 509 [53]. 31 However, there are special circumstances in the present case that raise a serious issue as to whether the conduct of this matter by Corrs on behalf of Louis Vuitton is such that Louis Vuitton should not receive an order for any of its costs but rather, should be ordered to pay part of the costs of the solicitors and counsel acting pro bono for Maskiell who drew the Court's attention to, and made submissions about, that conduct. 32 The conduct in question concerns the offers made by Louis Vuitton, through Corrs, to Maskiell to 'settle' the legal claims Louis Vuitton was entitled to make as a result of the re-infringing conduct that breached the consent orders. As that re-infringing conduct entitled Louis Vuitton to bring proceedings, inter alia, for civil and criminal contempt, a question arises as to the propriety of any offer to compromise or settle the contempt claims. 33 Criminal contempt is an indictable offence at common law: see John Fairfax & Sons Pty Ltd v McRae (1955) 93 CLR 351 at 364. However, civil contempt constituted by the mere failure to comply with an order or a deliberate, but not contumacious, breach of an order was traditionally regarded as a matter for the parties, rather than for the courts. Thus, traditionally, the dichotomy between civil and criminal contempt claims had the consequence that civil, but not criminal, contempt may be waived by the aggrieved party: see Witham at 533 and 540, Pojé v Attorney-General of British Columbia [1953] 1 SCR 516 ('Pojé') and Gompers v Buck Stove & Range Co 221 US 418 (1911) ('Gompers'). 34 The rationale for waiver in respect of a civil contempt was explained by Lord Diplock in Attorney-General v Times Newspapers Ltd [1974] AC 273 at 307: 'One may leave aside for the purposes of the present appeal the mere disobedience by a party to a civil action of a specific order of the court made on him in that action. This is classified as a "civil contempt". The order is made at the request and for the sole benefit of the other party to the civil action. There is an element of public policy in punishing civil contempt, since the administration of justice would be undermined if the order of any court of law could be disregarded with impunity; but no sufficient public interest is served by punishing the offender if the only person for whose benefit the order was made chooses not to insist on its enforcement.' 35 In Harman v Secretary of State for the Home Department [1983] AC 280 at 310 Lord Scarman observed: 'The distinction between "civil" and "criminal" contempt is no longer of much importance, but it does draw attention to the differences between on the one hand contempts such as "scandalising the court," physically interfering with the course of justice, or publishing matter likely to prejudice fair trial, and on the other those contempts which arise from non-compliance with an order made, or undertaking required, in legal proceedings. The former are usually the business of the Attorney-General to prosecute by committal proceedings (or otherwise): the latter, constituting as they do an injury to the private rights of a litigant, are usually left to him to bring to the notice of the court. And he may decide not to act: he may waive, or consent to, the non-compliance.' 36 Accordingly, on the basis of the traditional approach a claim for civil contempt that involved injury to the private rights of a litigant was able to be the subject of a settlement or compromise between the parties. Indeed, in both Pojé and Gompers the courts accepted that a private civil contempt claim or prosecution arising as a result of breaches of a court order could be settled between the parties, but held that the settlement could not have any impact or consequence for a criminal contempt claim or prosecution in respect of the same conduct. 37 However, the traditional approach that enabled that outcome may need to be revisited in the light of Witham in which Brennan, Deane, Toohey and Gaudron JJ (at 532-534) observed: 'At best, the distinction between proceedings in the public interest and proceedings which are coercive or remedial in the interest of the private individual supports a separate category of civil contempt to the extent that it clearly appears that the proceedings are remedial or coercive in nature. … However, in our view, there are fundamental problems even with that approach. One problem is that there is not a true dichotomy between proceedings in the public interest and proceedings in the interest of the individual. Even when proceedings are taken by the individual to secure the benefit of an order or undertaking that has not been complied with, there is also a public interest aspect in the sense that the proceedings also vindicate the court's authority. Moreover, the public interest in the administration of justice requires compliance with all orders and undertakings, whether or not compliance also serves individual or private interests. Nor can the dichotomy between proceedings in the public interest and proceedings in the interest of the individual be maintained on the basis that some cases involve an interference with the administration of justice and others merely involve an interference with individual rights. All orders, whether they be Mareva injunctions, injunctions relating to the subject matter of the suit, or, simply, procedural orders, are made in the interests of justice. Non-compliance necessarily constitutes an interference with the administration of justice even if the position can be remedied as between the parties. Moreover, there is considerable difficulty with the notion that, in some cases, the purpose or object of the proceedings is punitive and, in others, the purpose or object is remedial or coercive. It should at once be noted that the purpose of the proceedings is not the same as the purpose or object of the individual bringing the proceedings and it is well recognised that, notwithstanding that proceedings are brought by an individual to secure the benefit of an order or undertaking, a "penal or disciplinary jurisdiction" may also be called into play. It has been held that the "penal or disciplinary" jurisdiction may be exercised even when the parties have settled their differences and do not wish to proceed further. Thus, in Canadian Transport v Alsbury, Sidney Smith JA rejected the submission that settlement precluded further proceedings saying: "Are we to be told that after a party has defied a court, the court can still do nothing because the other party is willing to swallow the contempt? Nothing short of the clearest authority would convince me that that is the law; and there is no such authority and no such law." And as already indicated, proceedings for breach of an order or undertaking have the effect of vindicating judicial authority as well as a remedial or coercive effect. Indeed, if the person in breach refuses to remedy the position, as is not unknown, their only effect will be the vindication of judicial authority. Given that purpose or object cannot readily be disentangled from effect and given, also, that a penal or disciplinary jurisdiction may be called into play in proceedings alleging breach of an order or undertaking, it is necessary to acknowledge, as it was in Mudginberri, that punitive and remedial objects are, in the words of Salmon LJ "inextricably intermixed". Moreover and, perhaps, of more importance, nothing is achieved by describing some proceedings as "punitive" and others as "remedial or coercive". Punishment is punishment, whether it is imposed in vindication or for remedial or coercive purposes. And there can be no doubt that imprisonment and the imposition of fines, the usual sanctions for contempt, constitute punishment. And the same is true of a sequestration made in consequence of a company's failure to comply with an order or undertaking. The differences upon which the distinction between civil and criminal contempt is based are, in significant respects, illusory. They certainly do not justify the allocation of different standards of proof for civil and criminal contempt. Rather, the illusory nature of those differences and the fact that the usual outcome of successful proceedings is punishment, no matter whether primarily for the vindication of judicial authority or primarily for the purpose of coercing obedience in the interest of the individual, make it clear as Deane J said in Hinch, that all proceedings for contempt "must realistically be seen as criminal in nature". The consequence is that all charges of contempt must be proved beyond reasonable doubt.' (footnotes and citations omitted) See also McHugh J at 539-541 and 549. 38 Witham did not go so far as to decide that the distinction between civil and criminal contempt no longer existed, although McHugh J observed (at 549) that the 'case for abolishing the distinction between civil and criminal contempt is a strong one'. However, the conclusion that all contempts arising from a breach of a court order are criminal in nature, involve punishment and necessarily involve the public interest in the administration of justice by vindication of the court's authority, plainly undermines the traditional rationale for allowing civil contempt cases to be settled, that rationale being that contempt cases may be settled because they are proceedings in the interest of the aggrieved party that are remedial or coercive, rather than punitive, in nature. 39 The distinction drawn in the majority judgment in Witham between the purpose of a contempt proceeding and an aggrieved party's purpose in bringing a contempt proceeding is significant. It was in that context that their Honours referred to the observation in Canadian Transport v Alsbury (1952) 7 WWR (NS) 49 (which was affirmed on appeal in Pojé) that it is not the law that a party's willingness to 'swallow the contempt' has the consequence that the court can do nothing about it. As was observed in Pojé at 520 a contempt may be civil or criminal 'depending upon the nature and quality of the conduct in question in any particular case'. It must follow that, as a claim based inter alia on a breach of a court order has the potential to be a claim of both civil and a criminal contempt, there is some difficulty in purporting to offer to settle, or in settling, the 'contempt' claim. 40 A further difficulty with settlement of a claim of 'a criminal nature' that is in the public interest, rather than merely just in the private interest of the parties, is that it may be contrary to public policy. In Kerridge v Simmonds (1906) 4 CLR 253, the High Court held that a settlement which involved the withdrawal of a private prosecution for unlawful publication of defamatory matter was not contrary to public policy, and therefore void, because the offence was not of a public nature but, rather, was one for which the injured persons could sue and recover damages. The principle stated by Griffith CJ (at 258) was that: '... there is no objection to compromising a claim for private injury resulting from an act which amounts to an indictable offence provided that it is not a matter of public concern.' And (at 260) '… I am of opinion that it is not unlawful for a person defamed, or who has sustained purely personal injury, to withdraw a prosecution already instituted for such an offence, or to agree not to institute such a prosecution. Where a person is entitled to recover pecuniary damages, the suggestion that there is a social duty incumbent upon him to prosecute is untenable. The law allows him either to prosecute or to sue for damages, and I can see nothing to prevent him from agreeing to receive an indemnity for the personal injury he has sustained, leaving the representatives of the public to prosecute if they think fit. If, as in some cases, he is the only person entitled to institute the prosecution, then â fortiori it is a matter of private, and not of public, concern.' 41 Barton J agreed and observed (at 262) that the propriety in suppressing a prosecution by a private bargain may depend on whether: 'any interest of a public character could be involved in [the] prosecution.' 42 When regard is had to Witham there is some difficulty in contending that a contempt claim is not of public concern and does not involve any interest of a public character. 43 In the present case, I need not go so far as to find that claims of contempt resulting from breach of a court order cannot be compromised or settled; there was no compromise or settlement of the contempt claims that were pressed by Louis Vuitton at the hearing. However, Louis Vuitton made offers to Maskiell to compromise or settle the claims it was entitled to pursue as a result of her re-infringing conduct in breach of the Court's orders. The issue is whether Louis Vuitton's conduct in relation to those offers ought to result in it not receiving any orders for costs and being required to pay for any costs incurred by the respondents in raising issues concerning the propriety of that conduct. 44 Plainly, where conduct is in breach of a court order, but also gives rise to private claims for relief, the private claims may be compromised or settled. However, in the light of Witham, an aggrieved party and its solicitors should exercise prudence and caution when offering to settle claims arising out of the contravening conduct. That is particularly so when they are dealing with a litigant in person. The reason for that is that breach of a court order is criminal in nature, may result in fines and imprisonment and has the potential to constitute a criminal contempt. Accordingly, there is a real risk of impropriety, and possibly illegality, if an offer to compromise or settle the claims of the aggrieved party in respect of the contravening conduct is not reasonably and fairly based on the legal right to relief the aggrieved party has, or may have, in respect of that conduct. In other words, if the threat or prospect of contempt proceedings is used to obtain a compromise or settlement beyond that to which the aggrieved party would be entitled as a matter of law, the threat may amount to improper pressure, duress or even extortion. 45 While the law may be in an uncertain state on this issue, it is plainly prudent that any offer of a settlement or compromise of private claims, which arise out of conduct in breach of a court order, should clearly specify the private claims that are being settled and make quite clear what is intended, or not intended in respect of the contempt claim. For example, a private litigant is not under a duty to prosecute a contempt claim. Therefore, provided that there is still a distinction between civil and criminal contempt, it may not be improper for a party to indicate that, if that party's non-contempt claim is resolved, that party does not intend to prosecute the contempt claim. Further, even if a prosecution has commenced, it may not be improper for the prosecuting party to agree to seek to discontinue the contempt claim provided an adequate disclosure is made to the Court. However, it is clear that, save where the issue of contempt is entirely excluded from the offer, the offer should be limited to matters that fall within, and do not travel beyond, the legal entitlement of the aggrieved party. At the least, the offer should be based on a reasonable and reliable estimate of that entitlement. 46 In that context, I turn to consider the offers made by Louis Vuitton to compromise or settle its claims against Maskiell and Design Elegance arising as a result of their breaches of the consent orders. 47 The initial re-infringing conduct of Maskiell and Design Elegance (which was the subject of charges 3(b) and (c)) was discovered by Louis Vuitton during November 2004 after its investigators ascertained that the respondents were continuing to display and sell counterfeit Louis Vuitton products. Corrs corresponded with Maskiell about the re-infringing conduct by an open letter dated 22 December 2004, by a 'without prejudice' letter dated 22 December 2004 and by two further 'without prejudice' letters dated 11 January 2005 and 7 February 2005. Maskiell's accountant and Maskiell respectively sent responding letters dated 10 January 2005 and 27 January 2005. In the result, Louis Vuitton, acting through Corrs, settled its claims against Maskiell in respect of the re-infringements by, inter alia, Maskiell paying $15 000 pursuant to a Deed dated 28 February 2005. The Deed recorded the payment as being for damages and costs in respect of the 'Re-infringing Conduct', which was defined as the offering for sale and the sale of the 'Infringing products'. The infringing products appear to be the counterfeit products offered for sale and sold by Maskiell at the Australian Unity Hall on 20 November 2004 and 107 counterfeit products delivered up by her to an investigator on that date. 48 The first offer to compromise was made by Louis Vuitton in an open letter dated 22 December 2005 by Corrs to Maskiell, who had no legal representation. The letter stated that Maskiell's 'blatant' re-infringing conduct in November 2004 entitled Louis Vuitton to sue her for trade mark infringement, passing off and misleading conduct. However, Maskiell was also informed that: 'Additionally, your conduct in continuing to deal with Infringing Products is a breach of the [consent] Orders. Our client is currently considering whether it is appropriate to institute legal proceedings against you for contempt of court in relation to this breach. Our client is willing to consider resolving this matter on a commercial basis (avoiding the need for the parties to engage in expensive legal proceedings), provided that it receives your full cooperation. However, if such cooperation is not forthcoming, we expect that our client will instruct us to immediately commence legal proceedings against you in the Federal Court of Australia. As a direct result of investigating your infringing activities and protecting its rights in this matter, our client has incurred various costs and expenses. Our client will only accept a commercial resolution of this matter on the basis that it includes a contribution by you to our client's costs and expenses. Your full cooperation in resolving this matter will ensure that the contribution is kept to a minimum, and we will advise you of the amount of this contribution in due course.' 49 In its accompanying 'without prejudice' letter of 22 December 2005 Corrs made a 'compromise' offer to settle for Louis Vuitton's claims for 'damages and costs fixed in the sum of $30,000'. The settlement offered by Corrs in this correspondence was represented to Maskiell, who was not legally represented, to be a settlement that would resolve 'this matter' and avoid 'the need for expensive court proceedings' in respect of Maskiell's re-infringing conduct. In Maskiell's subsequent responding letter she offered to pay $15 000 'in full and final settlement of the matter'. Maskiell's counter-offer was accepted and the settlement was recorded in the Deed referred to above. 50 It was contended on behalf of Louis Vuitton that, by the correspondence and the Deed, Louis Vuitton only agreed to settle its civil claims for trade mark infringement, passing off and misleading conduct and did not agree to settle the contempt claim. While that is a reasonable contention given the Deed executed by Maskiell, the contention ignores the fact that Corrs' correspondence with Maskiell was plainly calculated, and was likely, to induce her to comply with Louis Vuitton's demands on the basis that if she did so contempt proceedings would not be pursued. It is difficult to perceive of any other reason for the reference to the contempt claim in the letter of 22 December 2004. Therefore, it was not surprising that, after Maskiell's counsel complained to the Court that Louis Vuitton had 'waived' its entitlement to claim contempt in respect of the conduct the subject of the settlement, Louis Vuitton indicated it no longer pressed the charges in respect of that conduct. 51 As explained above, there are difficulties about an offer to settle or compromise a contempt proceeding. I also explained why, irrespective of those difficulties, where the offer is to compromise private claims in respect of conduct that is also capable of giving rise to a contempt claim, then the party entitled to pursue the contempt claims should ensure that the offer does not travel beyond the legal entitlement of the aggrieved party or, at the least, beyond a reasonable and reliable estimation of that entitlement. That is particularly so where the offer is being made to an unrepresented litigant. In that way, the offeror can avoid exposing itself to claims of improper pressure, duress or extortion in respect of the contempt claims. Of course, the situation is different if the offer clearly states that it only relates to the civil claims and that acceptance of it would not preclude contempt proceedings from being brought. 52 In the present case the above requirements were not satisfied. The initial demand made by Louis Vuitton was for $30 000 to be paid for its damages and costs in respect of the re-infringements. Although an attempt was made to justify that claim I am satisfied that the claim travelled well beyond Louis Vuitton's legal entitlement and beyond any reasonable or reliable estimate of that entitlement. In particular, I am not satisfied that Louis Vuitton had any legal right to receive an amount approximating $30 000 as a result of the re-infringing conduct. Also, the offer did not clearly state that settlement would not preclude a contempt proceeding. Rather, on any fair reading of the correspondence to Maskiell as a litigant without legal representation, she was entitled to expect that the contempt claim would not be pursued if she settled with Louis Vuitton. 53 However, the conduct in question of Corrs and Louis Vuitton did not cease with the compromise of Louis Vuitton's claims in respect of the November 2004 re-infringements. On 8 June 2005, after Maskiell's further and, plainly, very serious re-infringements, Corrs sent a letter to Maskiell marked 'without prejudice'. Omitting formal parts, it read: 'We refer to your telephone conversation with Liam Nankervis of 1 June 2005. As discussed, our client is extremely concerned that, notwithstanding the Orders of Justice Merkel dates 8 September 2003 and your Deed dated 28 February 2005, you have continued to infringe our client's trade mark rights by importing and selling products bearing one or more of the Louis Vuitton Trade Marks (as defined in the Orders of Justice Merkel dated 8 September 2003) or a sign which is substantially identical or misleadingly or deceptively similar thereto (Infringing Products). We acknowledge that you have provided to the Australian Customs Service (Customs) a signed Notice of Consent to Forfeit Goods in respect of the 58 Infringing Products consigned to you that were seized by Customs on or about 4 May 2005 (the May Customs Seizure). However, our client is aware that, in addition to your infringement of its trade marks by your importation of goods contained in the May Customs Seizure, you have also infringed its trade marks (and related rights) by importing and selling other Infringing Products. As discussed, our client will only be prepared to refrain from taking immediate action against you in respect of your repeated and blatant re-infringements of its rights on the following basis. 1. Within seven days of the date of this letter, you provide to our client a Statutory Declaration detailing: (a) all sales made by you or on your behalf since 28 February 2005 of Infringing Products; and (b) the identity of all importers and/or sellers of Infringing Products of which you are aware, whether in Australia or elsewhere. 2. Within seven days of the date of this letter you provide to us a written undertaking that, within 12 months of your acceptance of this offer, you will provide to our client information regarding people dealing in Infringing Products which leads to: (a) our client obtaining from any such people identified by you: (i) payments for damages totalling no less than $250,000; (ii) delivery up of Infringing Products valued at a total of no less than $250,000 (subject to our comments in paragraph 3 below regarding the valuation of such goods). (b) Customs seizing Infringing Products valued at a total of no less than $250,000 (subject to our comments in paragraph 3 below regarding the valuation of such goods. 3. The value of any Infringing Products delivered up to our client or seized by Customs is to be determined by our client based on its assessment of any invoices or other documents relating to the actual price paid for the Infringing Products by the person from whom they were delivered up or seized by Customs and, where no such documents are available to our client, as is reasonably estimated by our client. 4. In pursuance of compliance with the undertaking required in paragraph 2 above, by no later than the last day of each calendar month (for a period of 12 months commencing from the date of your acceptance of this offer), you must provide to our client a report which details your progress in obtaining information and, in particular, includes the following details: (a) the identity of any people you have become aware of dealing in Infringing Products; (b) the location at which any of the people covered by paragraph 4(a) above are operating their businesses and/or residing; (c) the means by which any such people are importing and/or selling Infringing Products including, without limitation, shipping and/or flight details of consignments of Infringing Products; and (d) any documents which evidence the dealings in Infringing Products by the people you identify including, but not limited to, all invoices or receipts for orders or trap purchases of Infringing Products made by [you] from those people. 5. Within seven days of the date of this letter you provide to us a written undertaking that, if court proceedings (whether civil or criminal) are commenced against any people identified by you pursuant to the undertaking in paragraph 2 above in respect of their dealings in Infringing Products, you will give evidence in any such proceedings, if you are requested to do so by our client. 6. In order to facilitate your compliance with the requirements of paragraph 2 above, our client will release you from liability for infringement of its trade mark related rights that may arise from your conduct in obtaining any trap purchases of Infringing Products for the purpose of gaining information about other people dealing in Infringing Products, on the condition that you deliver up all such Infringing Products purchased by you to our client within seven days of purchasing the Infringing Products. For the avoidance of doubt, this release would not allow you to continue trading in Infringing Products, but merely enable you to function properly as an informant. 7. Upon the satisfaction of any one of the criteria listed in paragraph 2(a) and 2(b), our client will release you from your liability arising from any infringing conduct disclosed by you in the statutory declaration to be provided pursuant to paragraph 1(a) above. 8. If you fail to comply with any of the obligations that would arise upon your acceptance of our client's offer within the time frames provided above, our client reserves its right to commence court proceedings without further notice to you and any releases granted to you in accordance with the terms set out above will be null and void ab initio. Our client's offer will remain open until 5:000 pm on Wednesday 15 June 2005. If you do not accept this offer by this deadline, we expect that our client will instruct us to commence proceedings against you without further notice to you. We await your prompt response.' 54 The letter referred to a telephone conversation which related to the importation the subject of the Customs seizure notice dated 4 May 2005 and to other matters, including the possibility of Maskiell assisting Corrs. The conversation concluded with the statement that Corrs will be sending 'a letter', which turned out to be the letter of 8 June 2005. When that letter was sent, Corrs was aware that Maskiell still had no legal representation and it was also clear to Corrs and Maskiell that the 'repeated and blatant re-infringements' referred to in the letter were capable of amounting to a very serious contempt. Indeed, the only 'proceedings' which were commenced by Louis Vuitton after its offer was rejected alleged both civil and criminal contempt in respect of the re-infringements complained of in the letter. Maskiell's response to the offer was that it was 'not possible to accept' and that she thought it was 'blackmail'. 55 Corrs letter of 8 June 2005 is indefensible. It plainly failed to meet the requirements discussed earlier in that its demands went far beyond any demands Louis Vuitton had a legal right to make. Indeed, it made demands far beyond any remedy known to law. Further, the letter not only failed to make it clear that it was not settling or otherwise resolving the contempt claim but, having regard to the earlier correspondence, I am satisfied that it purported, and was calculated, to be an offer which, if accepted, would involve resolution of the contempt claim. It is difficult to find any reasonable basis for construing the threatened court 'proceedings' as being limited to Louis Vuitton's trade mark infringement claims. I do not accept Louis Vuitton's submissions to the contrary. 56 In my view, by 8 June 2005 it was, or ought to have been, clear to Corrs that the primary claim of Louis Vuitton in respect of Maskiell's 'repeated and blatant re-infringements' of Louis Vuitton's rights was the right of Louis Vuitton to allege civil and criminal contempt. The letter did not purport to confine the claims the subject of the offer to trade mark infringement, passing off or misleading conduct. Rather, the offer was to 'refrain from taking immediate action against [Maskiell] in respect of [her] repeated and blatant infringement of [Louis Vuitton's] rights' unless the offer contained in sub-paras 1-8 was accepted. As was stated in the concluding paragraph of the letter, if the offer was not accepted it was expected that instructions would be given to commence 'proceedings' without further notice. On 4 August 2005 proceedings for civil and criminal contempt were commenced. 57 A further disturbing aspect of the letter is that its demands were unreasonable. In order to avoid the threatened proceedings, Maskiell was required to undertake in writing that the information provided by her will lead to one of the outcomes in sub-para 3, each of which had a value of $250 000. There was no basis for Corrs to expect that Maskiell had the capacity to achieve any of those outcomes. Further, but more importantly, the demands were for remedies not known to the law. While that may not be unconscionable in a commercial bargain between equals, a quite different situation arises when such a demand is made in the context of a threat to prosecute an unrepresented litigant for contempt. 58 In my view, the conduct of Louis Vuitton and Corrs outlined above is a serious misuse of the entitlement of Louis Vuitton to threaten and bring contempt proceedings in respect of the respondents' conduct in breach of the consent orders. That conduct does not in any way excuse the respondents' contempt of court, which I have found has been established. It is also not relevant to the penalties I regard as appropriate in respect of that contempt. However, it is appropriate that the Court express its disapproval of the conduct by refusing to make orders for the payment by the respondents of Louis Vuitton's costs of its contempt proceeding. 59 It is also appropriate to order Louis Vuitton to pay the costs of counsel and solicitors acting pro bono for the respondents in so far as those costs are related, directly or indirectly, to the conduct the subject of the criticism set out in these reasons. Those costs include the costs in connection with charges 3(a), (b) and (c) and in connection with the extensive and helpful written submissions of counsel concerning whether the entitlement of Louis Vuitton to threaten and bring contempt proceedings may have been misused. 60 I would add that the solicitor responsible for drafting the correspondence (under the supervision of a partner) gave evidence that he didn't intend to offer to compromise the contempt claim. While I accept that the solicitor may not have specifically turned his mind to that question, I have acted on the basis of the content of the correspondence, rather than on the basis of the solicitor's recall of his intent when he was drafting the correspondence. In any event, the correspondence was sent on the instructions of Louis Vuitton. In the circumstances, it is appropriate that Louis Vuitton bear the burden of the costs orders. Conclusion 61 In the result, I propose to impose a penalty of $20 000 on each of the respondents and order that Louis Vuitton bear its own costs of the contempt proceeding. Louis Vuitton is also to pay the costs of counsel and solicitors acting pro bono for the respondents, in so far as those costs are in connection with charges 3(a), (b) and (c) and with the issue of whether Louis Vuitton misused its entitlement to threaten and bring contempt proceeding in the present matter. I certify that the preceding sixty-one (61) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Merkel. Associate: Dated: 14 February 2006 Counsel for the Applicant: MTH Barker (on 16 December 2005) E Strong SC (on 6 February 2006) Solicitor for the Applicant: Corrs Chambers Westgarth Counsel for the Respondent: RBC Wilson Solicitor for the Respondent: Deacons Date of Hearing: 16 December 2005 and 6 February 2006 Date of Judgment: 14 February 2006