FEDERAL COURT OF AUSTRALIA Magi Enterprises Pty Ltd v Luvalot Clothing Pty Ltd [2017] FCA 340 File number: VID 306 of 2016 Judge: MURPHY J Date of judgment: 31 March 2017 Catchwords: PRACTICE AND PROCEDURE – late application for adjournment of trial –unavailability of overseas witnesses to give evidence – alleged inability of overseas witnesses to travel because of pregnancy or lack of a passport and visa – application refused Cases cited: Aon Risk Services Australia Ltd v Australian National University (2009) 239 CLR 175; [2009] HCA 27 Date of hearing: 29 March 2017 Registry: Victoria Division: General Division National Practice Area: Intellectual Property Sub-area: Copyright and Industrial Designs Category: Catchwords Number of paragraphs: 48 Counsel for the Applicant / Cross Respondent: Ms S K Gatford Solicitor for the Applicant / Cross Respondent: K & L Gates Counsel for the Respondent / Cross Claimant: Mr A Sykes Solicitor for the Respondent / Cross Claimant: Actuate IP ORDERS VID 306 of 2016 BETWEEN: MAGI ENTERPRISES PTY LTD Applicant AND: LUVALOT CLOTHING PTY LTD Respondent AND BETWEEN: LUVALOT CLOTHING PTY LTD Cross-Claimant AND: MAGI ENTERPRISES PTY LTD Cross-Respondent JUDGE: MURPHY J DATE OF ORDER: 29 MARCH 2017 THE COURT ORDERS THAT: 1. The application for an adjournment of the trial is dismissed. 2. The Respondent/Cross Claimant pay the Applicant/Cross Respondent's costs of the application on an indemnity basis. 3. The proposed application by the Respondent/Cross Claimant for the evidence of one or other of its witnesses to be taken by video-link be listed for hearing at 9.30 am on 3 April 2017. 4. The matter be listed for mediation by Registrar Allaway on the afternoon of 3 April 2017 at the earliest time that the parties are available. The Registrar is authorised to give directions as to the conduct of the mediation including as to the attendance of any persons the Registrar considers necessary for an effective mediation, and the provision of appropriate documents and/or position papers. Note: Entry of orders is dealt with in Rule 39.32 of the Federal Court Rules 2011. REASONS FOR JUDGMENT MURPHY J: 1 Before the Court is an interlocutory application by the respondent/cross-claimant, Luvalot Clothing Pty Ltd (Luvalot) seeking orders to adjourn the trial of a proceeding which is listed to start in less than a week, based on the unavailability of two important witnesses. 2 For the reasons I set out below I refused the application. THE SUBSTANTIVE PROCEEDING Procedural history 3 The applicant/cross-respondent, Magi Enterprises Pty Ltd (Magi) has designed, manufactured, offered for sale and sold garments under the brand "Kookai" in Australia and New Zealand since 1992. The Kookai garments are all designed in-house by Magi's design team. One of the garment designs which Magi says it created is the Macy Tie Top. Magi filed an application to register that design on 22 June 2015, the design was registered on 3 November 2015 and the design was certified on 19 November 2015. 4 On 13 April 2016 Magi commenced the proceeding herein, which alleges that Luvalot infringed the registered design and it seeks compensatory and additional damages. The proceeding was initially brought against eight respondents but the case has been resolved against all respondents except Luvalot. 5 Luvalot is a designer, manufacturer and wholesaler of women's fashion supplying to retailers, boutiques and agencies across Australia and overseas. It is a sizeable business, with over 400 active accounts with various retail stockists who make purchase orders each week. It operates in both China and Australia. 6 Luvalot denies that it infringed the registered design. On 30 May 2016 Luvalot filed a Cross-Claim against Magi challenging the validity of the registered design. Luvalot alleges that the design is not validly registered because an image of a garment in the design was published on a Chinese website www.world.taobao.com (the Taobao website) on or earlier than 11 June 2015, before the priority date of 22 June 2015. Luvalot concedes that if the relevant design was validly registered then it has engaged in infringing conduct. 7 By orders made on 15 September 2016, by consent, the trial was listed for hearing on 4 April 2017. Pursuant to the orders the parties filed their evidence in chief by way of affidavit in early December 2016. 8 Luvalot filed affidavits by two non-English speaking Chinese witnesses: (a) Ms Huang Bi Zi, a production assistant then in the employ of Luvalot and working at its premises in Guangzhou, China, made on 8 December 2016; and (b) Mr Huang Wei Dong, the owner of Hong Rui Clothing Co Ltd (Hongrui), a company registered in China which operates a clothing distribution business through the Taobao website, made on 8 December 2016. The application for adjournment is based upon the unavailability of these two witnesses to give evidence. The application for Adjournment 9 On 23 March 2017 Luvalot filed the application now before the Court. The application sought orders that the trial date of 4 April 2007 be vacated and the matter be set down for trial on the first available date after 4 October 2017, and orders to vary the pre-trial timetable. 10 Luvalot relied upon the following evidence in support of the application: (a) three affidavits of Mr Colin Cheung, a principal of the legal firm Actuate IP with the carriage of the proceeding for Luvalot, sworn 23 March 2017, 29 March 2017 and 29 March 2017; (b) an affidavit of Mr Yong Peng, a lawyer trading under the business name Australian International Lawyers and Associates, sworn 23 March 2017; and (c) an affidavit of Mr Cameron Lang, a lawyer employed by Actuate IP, sworn 28 March 2017. Magi opposed the application and relied on the affidavit of Ms Lisa Egan, a partner in the legal firm K&L Gates, its solicitors, sworn 27 March 2017. 11 Mr Cheung's affidavits contain most of the evidence on which Luvalot relied. His evidence is based on information provided to him by Ms Hian Luan Khor (Cecilia) Bucoy, the sole director of Luvalot. He did not refer to any conversations he had with Ms Bi Zi or Mr Wei Dong or to any information directly provided by them. 12 In relation to Ms Bi Zi, Mr Cheung deposed (on the basis of information provided by Ms Bucoy) that: (a) Ms Bi Zi is in the late stages of pregnancy, is due to give birth in late April, and is therefore unwilling to travel to Australia to give evidence. This is corroborated by Mr Lang whose affidavit annexed an ultrasound report dated 23 March 2017 which states that Ms Bi Zi is in the late stages of pregnancy; (b) due to Ms Bi Zi's condition she is also unwilling to travel by train for four and a half hours to Guangzhou to give evidence by video link. Mr Cheung stated that Guangzhou is the nearest appropriate video link facility; (c) Ms Bi Zi does not have a Chinese passport or a visa which would allow her to travel to Australia to give evidence for the trial. Mr Peng deposed that it is likely to take a Chinese national one to two months to obtain a passport and then a minimum of three months to obtain a visa for business travel to Australia. That is, approximately four to five months; and (d) she resigned her employment with Luvalot on 10 December 2016 (two days after she made her witness affidavit). 13 In an affidavit sworn on the morning of the hearing, Mr Cheung attached an email from Ms Bucoy of 29 March 2017 which said that she had spoken to Ms Bi Zi "before" and that Ms Bi Zi: (a) is not willing to come to Australia to give evidence (it appears at any time); and (b) is willing to travel to Guangzhou to give evidence by video link but is not willing to do so for 10 months (that is, until February 2018). The latter information was somewhat surprising in light of the fact that the application only sought an adjournment to 4 October 2017. 14 In relation to Mr Wei Dong, Mr Cheung deposed (again, on the basis of information provided by Ms Bucoy) that Mr Wei Dong also does not have a Chinese passport or a visa which would allow him to travel to Australia. He said that Mr Wei Dong is willing to come to Australia to give evidence, but on the basis of Mr Peng's affidavit it would take some four to five months before he could obtain a passport and visa. 15 Luvalot submitted that the principal need for the adjournment is the inability of Ms Bi Zi, a crucial witness: (a) to travel to Australia to give evidence and face cross examination, and alternatively; (b) to travel four and a half hours to Guangzhou by train to give evidence by video link. It argued that, as a former employee (Ms Bi Zi having resigned from Luvalot on 10 December 2016) her inability to give evidence by any means was outside Luvalot's control and forcing it to trial without her evidence would give rise to a significant injustice. 16 Mr Cheung said that he was first informed on 22 March 2017 of Ms Bi Zi's asserted inability to attend a video link facility in Guangzhou, and that he filed the application for an adjournment one day later. Luvalot submitted that the information that Ms Bi Zi was unwilling to travel to Guangzhou resulted in the application for an adjournment instead of an application for witnesses to give evidence by video link. 17 As a secondary reason, Luvalot argued that an adjournment was justified because Ms Bi Zi and Mr Wei Dong do not have a Chinese passport or visa and are unable to travel to Australia to give evidence and face cross examination. 18 It is common ground between the parties that Ms Bi Zi and Mr Wei Dong are important witnesses. In her affidavit Ms Bi Zi says that she worked in Luvalot's product development department in Guangzhou and was responsible for, amongst other things, sourcing designs and fabric from local shops, local websites and local markets. She says that on 11 June 2015 while browsing the Taobao website she saw three images of a garment and she made an online purchase of the garment, which garment was then delivered to her on 14 June 2015. She annexes a number of documents: (a) an (apparently) undated screenshot from the Taobao website showing the relevant garment; (b) a screenshot of her online chat with the garment vendor dated 11 June 2015; (c) a confirmation of the shipping of the garment dated 11 June 2015; (d) an invoice for the purchase of the garment dated 12 June 2015; (e) a copy of the consignment note for the garment from Hongrui to Luvalot showing delivery on 14 June; and (f) photographs of the garment that she stated she received on 14 June 2015. 19 In his affidavit Mr Wei Dong says that he is the owner of Hongrui, a clothing distribution business which trades through the Taobao website. He says that he is responsible for ensuring that the orders received from the Taobao website are followed up and sent out. He says that Ms Bucoy had provided him with a copy of a document which appeared to be a copy of a screenshot taken from the Taobao website showing a garment for sale. He annexed that document (which appears to be the same as the screenshot which Ms Bi Zi said she took on 11 June 2015). He confirms that the copy screenshot is from an online advertisement published on the Taobao website by his company, and said that based on his review of his business records, the copy screenshot was an accurate representation of the advertisement as it existed on 11 June 2015. He says that the shipping confirmation, invoice and consignment note annexed to Ms Bi Zi's affidavit were consistent with the business records of his company relating to the shipment, invoicing and delivery of the garment referred to. 20 Ms Bi Zi and Mr Wei Dong's evidence is crucial because they are the only witnesses that provide first-hand evidence of having viewed the alleged prior publication of Magi's registered design. Luvalot concedes that without their evidence, or some exception to hearsay, Luvalot's cross-claim and defence on the question of liability must fail. 21 Luvalot argues that if an adjournment is granted there are no adverse consequences for Magi that cannot be cured by an award of costs, other than a delay in reaching finality in litigation. The conduct that forms the substance of Magi's complaint is not ongoing and there is therefore no alleged ongoing damage. It submits that Mr Cromb, the Managing Director of Magi, resides in Melbourne and will have no particular difficulty in attending a three day trial on the adjourned date. 22 Luvalot seeks an adjournment to the first available date after 4 October 2017 to accommodate Magi's preference to cross-examine Mr Wei Dong in person, as an adjournment of that duration would allow him to obtain a passport and visa. 23 Initially, Luvalot submitted that Ms Bi Zi had expressed a "strong preference to not travel internationally" until her child is 12 months old, but before me counsel for Luvalot accepted that a 12 month adjournment was too long. That submission was, however, overtaken by Ms Bucoy's email of 29 March 2017 which said that Ms Bi Zi was unwilling to come to Australia at all. Before me, counsel conceded that it was highly unlikely that Ms Bi Zi would attend Australia to give evidence. Ultimately counsel could only argue that Ms Bi Zi might be able to be persuaded to give evidence by video link on some date before February 2018. 24 Luvalot also argued that an adjournment was appropriate because it was contrary to the administration of justice to refuse an adjournment when it would have the effect that an invalid garment design would remain registered and could be enforced against others. Consideration No application to take evidence by video link 25 I commence by noting that there was no application before the Court for the evidence of either witness to be taken by video link. It was open to Luvalot to make its application for an adjournment in the alternative, by applying for the Court to hear Mr Wei Dong's and Ms Bi Zi's evidence by video link and, if that application was refused, to seek an adjournment to allow the witnesses to obtain a passport and visa. Luvalot did not take that course. 26 Magi objected to any backdoor attempt to convert the adjournment application into an application for evidence by video link, and indicated that it would oppose any such application on the basis that the witnesses' credit will be attacked. In the absence of an application to take evidence by video link Magi was not required to put on any material in that regard, and there was insufficient material to allow the Court deal with that issue (had it properly arisen). 27 After I refused the application for an adjournment counsel for Luvalot said that it would make an application for the Court to hear Mr Wei Dong's evidence by video link. If the application for evidence by video link is successful, then the prejudice that Luvalot would suffer if the case was to proceed without his evidence disappears. I have listed the application for hearing on 3 April 2017 at 9.30 am. 28 If the application to hear evidence by video link is refused, it will be open to Luvalot to renew its application for an adjournment. In any such application it will be required to provide further material which addresses the concerns I express below. The grounds for refusal of the adjournment application 29 It was for Luvalot to persuade the Court, on sufficient material, that an adjournment is appropriate. As the plurality of the High Court said in Aon Risk Services Australia Ltd v Australian National University (2009) 239 CLR 175; [2009] HCA 27 (Aon) at [103], [106]-[107] if an application that would result in adjournment is sought and no, or no sufficient, explanation is given then the application should be refused. French CJ said (at [4]), that where an application is made "late in the day", without adequate explanation and necessitating the vacation of a trial date, the applicant bears a heavy burden to show that the exercise of the Court's discretion should be in its favour. 30 Luvalot sought an adjournment of more than six months, to the earliest available date after 4 October 2017. Because of my existing listings and counsels' availability that may mean that the case would be adjourned to early 2018. The length of the adjournment goes to the sufficiency of the material put forward in support of the application. 31 Further, in the exercise of its discretion it is appropriate for the Court to also consider the position of other litigants and confidence in the judicial system generally: see Aon at [5] per French CJ, at [111] per Gummow, Hayne, Crennan, Kiefel and Bell JJ. The hearing date has been listed for more than six and a half months and the application was only made three clear days before the hearing date. Because of the lateness of the application if an adjournment is allowed it will be impossible to move another litigant's case into the vacated period. 32 I have refused the application for adjournment for the following reasons. 33 First, because the application was advanced on the principal basis that Ms Bi Zi's advanced pregnancy meant that she was unable to travel to Australia to give evidence, and alternatively was unable to travel to Guangzhou to give evidence by video link. I doubt that her condition is indeed the reason why she will not give evidence in the pending trial. It emerged from Ms Bucoy's email of 29 March 2017 that: (a) even if the hearing is adjourned to the date sought in the application, Ms Bi Zi is unwilling to come to Australia to give evidence. In the finish, Luvalot ran the application on the basis that Ms Bi Zi was highly unlikely to travel to Australia to give evidence at any time; (b) even if the hearing is adjourned to the date sought, six months after Ms Bi Zi will have given birth, she remains unwilling to travel to Guangzhou to give evidence by video link. She states that she is not prepared to do so until February 2018; and (c) even if Ms Bi Zi was not pregnant she was unable to travel to Australia to give evidence in any event. She did not have a Chinese passport or a visa for travel to Australia. There is no evidence of her making any attempt to obtain a passport or visa. 34 I have no difficulty in accepting that it would not be appropriate for Ms Bi Zi to travel to Australia when she is heavily pregnant. However, it seems that she is unwilling to travel to Australia whenever the trial is heard, and for the next 10 months is unwilling to take a four and a half hour train trip to give evidence via video link. On the basis of the material before the Court it seems more accurate to describe Ms Bi Zi's position as one of unwillingness rather than inability. She cannot be compelled to give evidence in Australian proceedings and if she is unwilling to do so that is the end of the matter, an adjournment on that basis is pointless. 35 Second, and relatedly, there is a critical gap in the evidence in relation to when Luvalot (through Ms Bucoy) or its lawyers knew about Ms Bi Zi's pregnancy and the possibility or likelihood that it would affect her ability to give evidence at the trial. The evidence is that Mr Cheung took over the carriage of the proceeding on 23 December 2016, doing so from Mr Andrew Petale, a former principal of Actuate IP. 36 It appears that when Ms Bi Zi made her affidavit on 8 December 2016 she was about four to five months pregnant. She must have known that she was pregnant and it seems likely that she told her employer, Luvalot. It seems likely that Ms Bucoy knew of her pregnancy because she told Mr Cheung of it on 23 February 2017, when Ms Bi Zi had left Luvalot on 10 December 2016. 37 Yet there is no evidence from Ms Bi Zi as to whether and if so when Ms Bucoy or Mr Petale informed her that she may be required to give evidence at the trial, whether and if so when she informed Ms Bucoy or Mr Petale that she was pregnant and would be unable to give evidence at the trial, or whether and if so when she informed Ms Bucoy or Mr Petale that she did not have a passport or visa which would allow her to travel to Australia to give evidence. 38 Third, there are critical gaps in the evidence relating to the steps taken by Luvalot or Actuate IP to arrange or secure the evidence of Ms Bi Zi and Mr Wei Dong for the hearing. Luvalot says, and I accept, that their evidence is crucial to Luvalot's defence of the proceeding and to its cross-claim. Yet it put on no evidence from Ms Bucoy or from any current or previous lawyer at Actuate IP, as to any steps taken in the following periods to arrange or secure their attendance for the trial: (a) as at 15 September 2016 when Actuate IP consented to listing the matter for hearing on 4 April 2017; (b) in the period preceding 8 December 2016 when Mr Petale assisted Ms Bi Zi and Mr Wei Dong in preparing their affidavits; or (c) at any point prior to 23 February 2017. 39 The evidence rose no higher than Mr Cheung's statement that, having worked with Mr Petale for over seven years, he expected that Mr Petale would have raised the issue of witness attendance with the witnesses at the time he was preparing their affidavits. However, as counsel frankly conceded, there is no file note of any conversation which shows that Mr Petale or any other solicitor with Actuate IP attempted to arrange or secure their attendance. 40 Mr Cheung says that he first informed Ms Bucoy that Ms Bi Zi and Mr Wei Dong would be required to attend the trial on 23 February 2017. That was only five weeks before the trial. He again informed Ms Bucoy on 16 March 2017, although at that point he also said that he would explore whether it would be possible for them to give evidence by video link. 41 It is noteworthy that there is no evidence that any lawyer at Actuate IP sought any assurance from either of the witnesses as to whether they were willing and available to attend on the hearing date, or whether they were willing and available to attend on some alternative date if the hearing is adjourned. The Court is left with evidence, on a double hearsay basis, as to what the witnesses told Ms Bucoy and she told Mr Cheung. 42 Fourth, another gap in the evidence relates to when Luvalot first knew that Ms Bi Zi and Mr Wei Dong did not have a Chinese passport or a visa for travel to Australia. Mr Cheung says that Ms Bucoy did not tell him that Ms Bi Zi and Mr Wei Dong did not have passports until 21 March 2017, but the evidence does not show when Ms Bucoy first knew that. Luvalot operates in both China and Australia and it seems that Ms Bucoy is a frequent traveller between the two countries. She knew that Ms Bi Zi's and Mr Wei Dong's evidence was critical to Luvalot's defence and cross-claim and she must have known that a Chinese national requires a Chinese passport and a visa in order to travel to Australia. Yet Luvalot did not put on any evidence from Ms Bucoy as to when she first made an enquiry of the witnesses whether they had a passport and a visa, and when she first knew that they did not. 43 Nor is there any evidence, prior to 21 March 2017, that any lawyer at Actuate IP made enquiries as to whether the witnesses had a passport or a visa. 44 Luvalot did not explain the various gaps in the evidence and it offered no proper explanation for the failure, until shortly before the trial, to attempt to procure Ms Bi Zi's and Mr Wei Dong's attendance to give evidence. It is possible that Ms Bucoy failed to provide proper instructions to Actuate IP, or that Actuate IP failed to properly prepare the case for hearing, but the Court is not required to speculate. There is little to illuminate what steps were taken (or what steps were not taken which should have been) from 15 September 2016 when the case was listed for trial, from about November and early December 2016 when Actuate IP assisted the witnesses to prepare their affidavits, or from 23 December 2016 when Mr Cheung took over the file until 23 February 2017 when he first raised the issue of the witnesses' attendance at Court. 45 In the absence of a proper explanation it is appropriate to refuse the application. Would costs be a sufficient remedy 46 In passing I note that, had Luvalot provided a sufficient explanation for the adjournment, I would not accept Magi's contention that it would suffer irreparable and unfair prejudice by the proposed adjournment. Luvalot's alleged conduct is not ongoing and in my view, an order for costs thrown away on an indemnity basis would substantially address the prejudice to Magi. Magi has made arrangements for its witnesses to attend the trial next week, one of whom has extensive future travel commitments, but it did not suggest that it would be impossible to select a new trial date which accommodates their availability and the availability of counsel. 47 In terms of the interests of other litigants, although no hearing will fill the vacated period, there are reserved judgments to write in such a period. Costs of the application 48 Magi sought an order for the costs of the application on an indemnity basis. Luvalot does not oppose an order for costs but contends that they should be ordered on a party-party basis. In my view an indemnity costs order is appropriate. The circumstances leading to the application for adjournment were entirely the fault of Luvalot or its lawyers, the application was made very late, there are substantial deficiencies in the material, and the application was, as counsel for Magi put it, a "moveable feast". Magi has incurred substantial extra expense in order to deal with the changing basis of the application and it is likely to suffer significant irrecoverable costs if costs are ordered on a party-party basis only. I certify that the preceding forty-eight (48) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Murphy. Associate: Dated: 31 March 2017