FEDERAL COURT OF AUSTRALIA Australian Health Industry Co. Pty Ltd v VVS Australia Pty Ltd [2017] FCA 322 File number: VID 1165 of 2016 Judge: MURPHY J Date of judgment: 28 March 2017 Catchwords: PRACTICE & PROCEDURE – Application for default judgment under r 5.23(2) of the Federal Court Rules 2011 (Cth) – failure to comply with orders – application granted Legislation: Competition and Consumer Act 2010 (Cth) Trade Marks Act 1995 (Cth) Cases cited: Bitek Pty Ltd v IConnect Pty Ltd [2012] FCA 133 KerryJ Investment Pty Ltd v Xiamen Fengwei Energy Technology Co Ltd [2013] FCA 361 Speedo Holdings BV v Evans (No 2) [2011] FCA 1227 Date of hearing: Heard on the papers Date of last submissions: 2 February 2017 Registry: Victoria Division: General Division National Practice Area: Intellectual Property Sub-area: Trade Marks Category: Catchwords Number of paragraphs: 21 Counsel for the Applicants: I P Horak Solicitor for the Applicants: Davies Collison Cave Law Counsel for the Respondents: The Respondents did not appear ORDERS VID 1165 of 2016 BETWEEN: AUSTRALIAN HEALTH INDUSTRY CO. PTY LTD (ACN 164 971 331) First Applicant BRAND INTERNATIONAL PTY LTD Second Applicant AND: VVS AUSTRALIA PTY LTD First Respondent JING ZHANG Second Respondent JUDGE: MURPHY J DATE OF ORDER: 27 FEBRUARY 2017 THE COURT DECLARES THAT: 1. The Respondents have: (a) contravened section 120(1) of the Trade Marks Act 1995 (Cth) (the TMA) by infringing the First Applicant's registered trade mark number 1673158 for EAORON (the Trade Mark) registered in class 3, by using as a trade mark the sign EAORON in relation to goods in respect of which the Trade Mark is registered; and (b) by reason of the Respondents' use, without the First Applicant's consent, of the Trade Mark: (i) engaged in conduct that is misleading or deceptive or likely to mislead or deceive, in contravention of section 18 of the Australian Consumer Law (contained in Schedule 2 of the Competition and Consumer Act 2010 (Cth) (the ACL)); (ii) made false representations that goods are of a particular standard, quality, value, grade, composition, style or model or have had a particular history, in contravention of section 29(1)(a) of the ACL; (iii) made false or misleading representations that goods have the sponsorship or approval of the Applicants, in contravention of section 29(1)(g) of the ACL; (iv) made false or misleading representations that the Respondents have the sponsorship or approval of, or an affiliation with, the Applicants, in contravention of section 29(1)(h) of the ACL; and (v) engaged in the tort of passing off. THE COURT ORDERS THAT: 2. Default judgment be given against the Respondents. 3. The Respondents and each of them, whether by themselves, their servants, agents or howsoever otherwise, be forever restrained from infringing the Trade Mark by using as a trade mark the sign EAORON or any sign that is substantially identical with, or deceptively similar to, the Trade Mark, in relation to goods or related services in respect of which the Trade Mark is registered without the consent of the Applicants. 4. The Respondents, including whether by their officers, servants or agents or howsoever otherwise, be permanently restrained from: (a) falsely representing that any goods sold by the Respondents are sponsored or approved by the Applicants, and/or are genuine goods; (b) falsely representing that the Respondents are sponsored or approved by or affiliated with the Applicants; (c) passing off, or enabling to be passed off, their goods and/or business as the goods and/or business of the Applicants. 5. On or before 10 March 2017, the Respondents deliver up to the Applicants' solicitors all goods that use the Trade Mark or any mark substantially identical with or deceptively similar thereto and any other merchandise, packaging, signboards, advertisements, circulars, notepaper, business cards, letter heads, stationery labels, invoices, articles, materials or other printed matter now or subsequently in the possession, custody, power or control of the Respondents or any of them (wheresoever such articles may be located in Australia or elsewhere), the continued use or possession of or otherwise howsoever dealing in or with by the Respondents or any of them would offend against any of the aforesaid injunctions. 6. On or before 17 March 2017, the Respondents file and serve an affidavit sworn by the Second Respondent or a director of the First Respondent confirming compliance with the orders in paragraph 5 above and deposing to the matters referred to in paragraph 2 of the Orders made on 4 November 2016. 7. The Respondents pay the Applicants' costs of and incidental to the Interlocutory Application filed by the Applicants dated 23 December 2016. 8. The Respondents pay the Applicants' costs of this proceeding. 9. The Applicants have leave to tax their costs forthwith. 10. Within 14 days of compliance by the Respondents with the orders in paragraph 6 above, the Applicants elect, by notice in writing to the Respondents, whether to seek damages or an account of profits or whether they will forgo any inquiry into damages or an account of profits. 11. The case management conference listed for 10 March 2017 be vacated. 12. The mediation listed for 17 March 2017 be vacated. Note: Entry of orders is dealt with in Rule 39.32 of the Federal Court Rules 2011. REASONS FOR JUDGMENT MURPHY J: 1 The application before the Court is an application for default judgment against the respondents. The applicants, Australian Health Industry Co. Pty Ltd and Brand International Pty Ltd, are the owners of a registered EAORON trade mark and a reputation in respect of that trade mark (being the word "EAORON" and the EAORON logo) for skin care products. In the substantive proceeding the applicants allege that the first respondent, VVS Australia Pty Ltd (VVS) and the second respondent, Ms Jing Zhang, the sole director and secretary of VVS, infringed the EAORON trade mark by trading in counterfeit products bearing that mark or a mark which was substantially identical. The Procedural history 2 On 3 October 2016 the applicants commenced the proceeding by Originating Application and Statement of Claim. The proceeding was returnable before the Court at a first case management hearing on 4 November 2016. 3 At the first case management hearing Ms Zhang appeared in person, and also sought to represent VVS. Neither VVS or Ms Zhang had engaged legal representation. I ordered that the respondents file and serve notices of address for service by 7 November 2016. I also ordered that by 18 November 2016 the respondents file and serve an affidavit providing information to the applicants as to the total number of the impugned goods: (a) that have been manufactured, imported or exported by the respondents together with the name and contact information of any manufacturer, overseas supplier, or party to whom they sent goods; (b) purchased by the respondents together with the dates of purchase, the purchase price, and the name and contact information of the persons from whom they were purchased; (c) sold by the respondents to any party together with the dates of sale, the sale price and the name and contact information of the persons to whom the goods were sold; and (d) annexing business documents from the respondents which evidence the information referred to; (the Required Affidavit). The Required Affidavit was aimed at ensuring that sufficient information was provided to facilitate a mediation which I ordered should take place as soon as possible after 18 November 2016. 4 On 8 November 2016 Ms Zhang filed a notice of address for service, but VVS did not do so. This had particular significance because pursuant to r 4.01(2) of the Federal Court Rules 2011 (Cth) (the Rules), unless it obtained leave of the Court, VVS could only appear in the proceeding through a lawyer. 5 The following information is derived from affidavits filed by Ms Jessica Sapountsis, a lawyer employed by the solicitor for the applicants: (a) on 11 November 2016, and again on 22 November 2016, Ms Sapountsis sent emails to the respondents which, amongst other things, noted that VVS had not filed a notice of address for service. In the email of 22 November 2016 Ms Sapountsis noted that the respondents had not filed the Required Affidavit and that the respondents were in breach of the orders made on 4 November 2016. Ms Sapountsis requested the respondents to file and serve a notice of address for service for VVS and the Required Affidavit by 24 November 2016; (b) on the same day, Ms Zhang replied by email stating that she had already faxed and emailed the notice of address for service to the Court two weeks earlier and forwarded a copy of the notice. She said that she would forward the Required Affidavit by the next afternoon; (c) on 24 November 2016 Ms Zhang sent an email to Ms Sapountsis in which she reiterated that the respondents had emailed the notice for address for service within the time required by the orders and that they had an email record of this; (d) on 25 November 2016 Ms Sapountsis sent an email to the respondents enquiring whether VVS had as yet engaged a lawyer and asking the respondents to forward the Required Affidavit. She received no reply to either request; 6 It is apparent from the Court file that VVS has not filed a notice of address for service and the respondents have not filed the Required Affidavit. 7 On 23 December 2016 the applicants filed an interlocutory application seeking default judgment against the respondents for failure to comply with the orders of 4 November 2016. The application was supported by an affidavit affirmed by Ms Sapountsis the same day. The application and affidavit in support was served on the respondents on 23 January 2017. 8 The application for default judgment was listed for hearing on 3 February 2017. The respondents did not put on any material in opposition or appear at the hearing. At the hearing the applicant sought orders for default judgment against the respondents for non-compliance with the orders of 4 November 2016. I refused to grant default judgment and instead made orders that allowed the respondents further time to comply with the orders of 4 November 2016, including the following self-executing orders: 1. By 4.00 pm on 24 February 2017: (a) the First Respondent must: (i) appoint a lawyer and file and serve a notice of acting in accordance with r 4.03 of the Federal Court Rules 2011 (Cth) (the Rules); and (ii) file a notice of address for service in accordance with r 11.02 of the Rules; (b) the Respondents must file and serve an affidavit deposing to the matters required by Order 2(a)-(f) of the orders of Murphy J dated 4 November 2016… … 3. In the event that the Respondents do not comply with Order 1 herein: (a) judgment be entered for the Applicants against the Respondents pursuant to r 5.23 of the Rules in terms the Court shall direct; (b) the Applicants submit a minute of the terms of judgment and any consequential orders on or before 10 March 2017. 9 In an affidavit affirmed on 27 February 2017 Ms Sapountsis deposed that the orders made on 3 February 2017 were served on the first and second respondents on 6 February 2017. Ms Sapountsis also deposed that Ms Zhang contacted her by email on 14 February 2017 seeking an explanation as to the status of the proceeding. Ms Sapountsis replied by email that day in which she briefly summarised the steps that the respondents were required to take to avoid default judgment being ordered against them. Ms Sapountsis deposed that, as at the date of her affidavit, she had not received any further communication from the respondents and the respondents had not complied with the self-executing orders. 10 On 27 February 2017 I made orders for default judgment in favour of the applicants. The following are my reasons for doing so. Relevant legislation and principles 11 Rule 5.22 of the Rules provides: A party is in default if the party fails to: (a) do an act required to be done, or to do an act in the time required, by these Rules; or (b) comply with an order of the Court; or (c) attend a hearing in the proceeding; or (d) prosecute or defend the proceeding with due diligence. 12 Rule 5.23(2) relevantly provides: If a respondent is in default, an applicant may apply to the Court for: … (c) if the proceeding was started by an originating application supported by a statement of claim, or if the Court has ordered that the proceeding continue on pleadings – an order giving judgment against the respondent for the relief claimed in the statement of claim to which the Court is satisfied that the applicant is entitled; or (d) an order giving judgment against the respondent for damages to be assessed, or any other order… … Note 1 The Court may make any order that the Court considers appropriate in the interests of justice – see rule 1.32. 13 The power in r 5.23(2) to order default judgment is discretionary and is to be exercised cautiously: KerryJ Investment Pty Ltd v Xiamen Fengwei Energy Technology Co Ltd [2013] FCA 361 at [25] (Kenny J). The relevant principles are well established (as set out in Speedo Holdings BV v Evans (No 2) [2011] FCA 1227 (Speedo) (Flick J); and in Bitek Pty Ltd v IConnect Pty Ltd [2012] FCA 133 (Kenny J)) and I need not reiterate them. 14 I am satisfied that the respondents are in default pursuant to: (a) r 5.22(b), for failing to comply with the orders of 4 November 2016 and 3 February 2017; (b) r 5.22(c), for failing to attend the hearing of 3 February 2017; and (c) r 5.22(d), for failing to defend the proceeding with due diligence. 15 I am satisfied that this case warrants the exercise of my discretion to award default judgment in favour of the applicants. I say this because: (a) at a prima facie level the case against the respondents appears to be strong. The available material indicates that the relevant products are counterfeit and not produced by the applicants; (b) the respondents have failed to comply with orders of the Court requiring the provision of a notice of address for service and the information in the Required Affidavit. The entry of default judgment is in accordance with the overarching purpose for just resolution of disputes according to law, as quickly, inexpensively and efficiently as possible: see s 37M, Federal Court of Australia Act 1976 (Cth); (c) a mediation was scheduled for 17 March 2017 but the respondents did not provide financial figures which would have made that mediation fruitful. It was necessary to cancel a mediation; (d) the respondents did not attend the return of the interlocutory application for default judgment, and it may be inferred they are no longer interested in defending the proceedings; (e) upon the respondents' failure to attend the interlocutory application for default judgment, the Court gave them another opportunity to comply with the orders, doing so by way of a self-executing order. The respondents' non-compliance continued notwithstanding that further opportunity. 16 The alleged wrongs are properly and discretely pleaded in the Statement of Claim, namely: (a) trade mark infringement under s 120 of the Trade Marks Act 1995 (Cth); (b) misleading and deceptive conduct under s 18, and making false or misleading representations about goods or services under s 29 of the Australian Consumer Law, in Schedule 2 of the Competition and Consumer Act 2010 (Cth); and (c) passing off. 17 I have considered the pleadings herein and I am satisfied that the applicants have a valid claim for relief and that the Court has jurisdiction to grant that relief. Rule 5.23(2) does not require the applicants to prove their claim by evidence. The Court need only be satisfied on the face of the Statement of Claim that the applicants are entitled to the relief claimed and that the Court has jurisdiction: Speedo at [23]. 18 The Statement of Claim alleges that the respondents infringed the applicants' registered trade marks by manufacturing, importing into Australia, exporting out of Australia, distributing, promoting the sale, offering or displaying or advertising for sale, and selling skincare products in Australia bearing the EAORON trade mark. The Statement of Claim particularises the infringement by reference to an allegation that the Australian Border Force seized 835 boxes of EAORON branded products imported into Australia which designated Ms Zhang as the owner of the shipments. The Statement of Claim also particularises the purchase and resale of at least 3,000 boxes of EAORON branded products in around January 2016 by the respondents, and about 3,200 boxes of EAORON branded products in about July 2016, and the export to China of an unknown number of EAORON branded products. 19 It is alleged that this conduct, including the use of the EAORON trade mark, occurred without the license or authority of the applicants. The pleadings make out the elements of the alleged wrongs. 20 The evidence in support of the application further confirms that the applicants are entitled to the relief sought. In her affidavit affirmed 23 December 2016 Ms Sapountsis deposed that she is informed by Mr Randy Winston, the Creative Director of the second applicant and believes, that he inspected the goods seized by the Australian Border Force and in his opinion they were not genuine EAORON products. She also deposed to testing of samples taken from the shipments, conducted by the second applicant, which further supports the opinion of Mr Winston that the seized goods are not genuine EAORON products. 21 On 27 February 2017 I made orders that default judgment be given against the respondents. I also made orders for: (a) declarations to reflect the contraventions found; (b) injunctions to permanently restrain the respondents from: (i) infringing the EAORON trade mark by using as a trade mark the sign EAORON or any sign that the substantially identical with or deceptive similar to it in relation to skincare products; (ii) making false representations that any goods sold by the respondents are sponsored or approved by or affiliated with the applicants and/or a genuine goods, or passing off their goods as the goods of the applicants; (c) the respondents to deliver up to the applicants' solicitors all goods bearing the applicants' trade mark by 10 March 2017; (d) the respondents to file and serve an affidavit confirming compliance with these orders by 17 March 2017; (e) the respondents to pay the costs of the proceeding including the costs of and incidental to the interlocutory application. I certify that the preceding twenty-one (21) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Murphy. Associate: Dated: 28 March 2017