The Ugg-liness continues

The Ugg-liness continues

The Ugg-liness continues

Deckers Outdoor Corporation Pty Ltd v Farley (No 6) [2010] FCA 391

Background and summary

Since 2003, Deckers Outdoor Corporation Pty Ltd (Deckers) in a series of proceedings sought to restrain Vladamir and Victoria Vaysman and other individuals (including their parents) and companies associated with them from making or distributing footwear branded with the “UGG” trade mark. Deckers claimed that the use of the “UGG” mark by the respondents infringed Deckers’ trade marks and copyright, passed off the respondents’ products as those of Deckers and breached sections 52, 53 and 75B of the Trade Practices Act.

As we reported in December 2009, Deckers’ claims were upheld against Hepbourne Pty Ltd (of which Vladamir Vaysman was sole director and shareholder). The claims against the other 21 respondents to that proceeding had been settled or disposed of by way of summary judgment.

Between 2003 and 2007 the Court ordered interlocutory and permanent injunctions and received undertakings restraining the respondents from making or distributing “UGG” branded footwear. Deckers discovered multiple breaches of these orders and commenced proceedings for contempt, seeking the imposition of fines and imprisonment. On 23 April 2010, Justice Tracey handed down his decision upholding substantially all of the charges of contempt. The matter will next proceed to a hearing on penalty. The decision is significant given that contempt proceedings are not common in intellectual property cases, most of the respondents denied the allegations, and the applicant is seeking custodial sentences.

Liability for contempt

In support of its Statement of Charge, Deckers relied on voluminous evidence to establish that the respondents had continued to make and distribute “UGG” branded footwear since 2004 in breach of Court orders made between 2003 and 2007. The evidence established sales through eBay, using websites established by the respondents (using false personal details) and at Victoria Market in Melbourne. In its application for punishment for contempt, Deckers is seeking the imposition of fines as well as warrants for arrest and terms of imprisonment for Vladamir and Victoria Vaysman, their parents and another individual. While Victoria Vaysman admitted all charges, Vladamir Vaysman denied that he had possessed or supplied any “UGG” branded boots since 2005 and the Vaysman parents made general denials of the allegations.
In his decision Justice Tracey briefly referred to the authorities on contempt and the rationale underlying the Court’s power to punish contempt. A civil contempt is committed by wilful disobedience of a Court order (unless the conduct was casual, accidental or unintentional) whereas criminal contempt involves disobedience in the nature of deliberate defiance: Louis Vuitton Malletier SA v Design Elegance Pty Ltd (2006) 149 FCR 494. In the case of Witham Holloway (1995) 183 CLR 525 the High Court held that in all proceedings for contempt, whether civil or criminal, the charges must be proven beyond reasonable doubt.

Justice Tracey noted that each of the Court orders was clear, unambiguous and capable of being complied with. His Honour then considered whether Deckers had complied with the requirements of the Federal Court Rules by personally serving on each of the respondents the application for punishment for contempt along with the Statement of Charge and supporting affidavits (Order 40, rule 8) and the Court orders to be enforced (Order 37, rule 2(1)). His Honour noted that Order 1, rule 8 gives the Court a wide discretion to dispense with any of the requirements of the Rules either before or after the occasion for compliance arises. In contempt proceedings, the Court has held that the discretion should be exercised in limited circumstances and only where “there is no apparent injustice and the alleged error can only be one of procedure”. In this case Tracey J held that where the evidence did not establish that the documents had been personally served, the respondent nonetheless had adequate knowledge of the charges and the terms of the orders.

Justice Tracey found that almost all of the charges of contempt were proven beyond reasonable doubt. His Honour rejected the evidence of Vladamir Vaysman and found that he had deliberately and willingly manufactured and sold those products in breach of the Court orders. Where his Honour made findings of guilt based on inferences, he was satisfied beyond reasonable doubt that the inferences should be drawn and that the evidence did not support a finding that there was any reasonable or rational hypothesis consistent with the relevant respondents’ innocence of any of the charges.

Next step: penalty

The matter will next proceed to a hearing on penalty. Section 31 of the Federal Court of Australia Act 1976 (Cth) provides that the Federal Court has the same power to punish contempts of its power and authority as the High Court. The High Court Rules (rule 11.04.1(a)) provide that the High Court may order “that the contemnor pay a fine, be committed to prison, or both pay a fine and be committed to prison”.

The purpose of punishment for contempt is to vindicate the authority of the Court by punishing the contemnor and at the same time seeking to deter both the contemnor and other like-minded people from disobeying orders of the Court: Jones v Toben (No 2) [2009] FCA 477. The considerations relevant to the determination of an appropriate penalty for contempt of court were discussed by the High Court in Australasian Meat Industry Employees’ Union v Mudginberri Station Pty Ltd (1986) 161 CLR 98 at 115. Those considerations include:

  1. the nature and circumstances of the contempt;
  2. the effect of the contempt on the administration of justice;
  3. the contemnor’s culpability;
  4. the need to deter the contemnor and others from repeating contempt;
  5. the contemnor’s financial means; and
  6. whether the contemnor has exhibited general contrition and made a full and ample apology.

The Court will have regard to the above considerations to determine an appropriate penalty for the respondents and in particular, whether terms of imprisonment should be imposed as sought by Deckers. While the Court considers imprisonment to be a punishment of last resort, it will depend on the nature and seriousness of the conduct (Deputy Federal Commissioner of Taxation v Hickey [1999] FCA 259). His Honour’s findings as to the extent and deliberate nature of the contempts and attempts to hide dealings with the counterfeit products are likely to be particularly relevant. In turn the Court will also decide the question of costs which are often sought on an indemnity basis in contempt proceedings.