FEDERAL COURT OF AUSTRALIA

GM Global Technology Operations LLC v S.S.S. Auto Parts Pty Ltd [2019] FCA 97

ORDERS

THE COURT ORDERS THAT:

1.    The matter be listed for case management hearing not before 10:15am on 8 March 2019.

2.    The parties confer and endeavour to agree as to the appropriate form of orders to be made reflecting the conclusions expressed in these reasons (including as to costs) and providing a timetable for the necessary steps required to determine the outstanding issues in the proceedings. Draft orders (marked up to show any areas of disagreement) are to be provided to the Associate of Justice Burley no later than two (2) working days before the case management hearing.

Note:    Entry of orders is dealt with in Rule 39.32 of the Federal Court Rules 2011.

REASONS FOR JUDGMENT

BURLEY J:

INTRODUCTION

1.    GENERAL

1.1    The dispute

1    Some car enthusiasts, particularly young men, like to upgrade, enhance or “up-spec” the appearance of their standard vehicles to make them look different and, in their view, better. Some buy lower specification Holden Commodores and upgrade them with parts designed for use on the top level Holden Special Vehicle (HSV) and certain sports models of the VE Commodores so that they appear more like these more expensive versions. Owners of genuine HSV or VE Commodores apparently object to such mutton dressed as lamb, and Holden implements controls over the sale of its HSV parts in part to try and discourage such practices.

2    In 2013, Holden learnt that someone was importing replica body parts for HSV and VE parts and selling them without any controls. It sent aggressive letters of demand to numerous spare parts suppliers that it perceived had offered these parts for sale. Subsequently, it identified the source of the replicas and commenced these proceedings against various entities that trade under the name “SSS Auto Parts”, alleging that the replicas infringe some of its designs registered under the Designs Act 2003 (Cth).

3    The respondents respond by accepting that the impugned parts fall within s 71 of the Designs Act, but contend that the terms of s 72, which provides that certain repairs do not infringe registered designs, provide a complete answer to the claim. As a result, the dispute on the claim concerns the application of this section and, in particular, whether the applicant has discharged the burden placed on it to prove that the respondents knew or ought reasonably to have known that the use of the impugned parts was not for the purpose of repair of a complex product (repair defence).

4    The dispute also involves a cross-claim. Aggrieved by the tone and aggression of the letters of demand sent to its customers, the cross-claimants advance a cross-claim for unjustified threats. The key to the success or failure of that claim also, in large part, turns on the operation of s 72 of the Designs Act and in particular whether before sending any such letters the applicant ought to have been in a position to establish that the recipients of the letters did not offer to sell the impugned parts for the purpose of repair.

5    Both parties were represented by able and experienced legal advisors who did their best to limit the issues. However, the operation of the repair defence has not been tested by the Court to date, and its terms open up rich opportunities for dispute. The applicants have advanced a very broad infringement case which alleges infringing conduct by three separate companies, by reason of the separate acts of importing, offering for sale, keeping and selling the impugned parts. In relation to selling, the applicants provided particulars of over 1,300 transactions. They commenced the hearing contending that the Court should make findings for each of these transactions. Through the good sense and co-operation of the parties, that eye watering prospect was reduced to a more manageable 26 representative sample transactions, but even so the task was extensive. Regrettably, it has led to a judgment on the claim that is longer than it might have been had only a handful of transactions been selected. In similar fashion, the cross-claim was advanced on the basis of allegations of unjustified threats under the Designs Act, unjustified threats under the Copyright Act 1968 (Cth) and ss 18 and 29(1)(m) of the Australian Consumer Law as contained in Schedule 2 of the Competition and Consumer Act 2010 (Cth) (ACL) for 10 separate demands. Again, addressing the extensively detailed case advanced for each of these demands has warranted fairly lengthy reasons.

1.2    The parties and relief sought

6    GM Holden Ltd sells and, until recently, made Holden Commodore vehicles in Australia. At the top of the range, are cars sold under the HSV brand. These are vehicles modified from a production Commodore platform (called a “donor vehicle”) by Premoso Pty Ltd, under licence from GM, by upgrading the engine and interior workings of the vehicle and, most relevantly for present purposes, altering the exterior using, amongst others, differently shaped bumper bars, lights, bonnets and grilles. Many of these parts are the subject of designs registered under the Designs Act and Designs Act 1906 (Cth) by GM Global Technical Operations LLC (GMGTO). Initially, relief was sought by GM, Premoso and GMGTO (collectively GMH), but by amendment made during the trial it is now only GMGTO that does so. It seeks, broadly, a declaration that the respondents have infringed its designs in breach of s 71 of the Designs Act, injunctions restraining the importation, offer for sale, sale or keeping of the impugned products or any product embodying the designs, pecuniary remedies and delivery up of the impugned products. In these reasons, where I refer to submissions, pleadings or contentions advanced by GMH, I do so because at the time the matters advanced were put by GMH collectively. In doing so, I do not intend to suggest that a party other than GMGTO is an applicant in the proceeding.

7    The claim is brought against S.S.S. Auto Parts Pty Ltd (SSS Melbourne), S.S.S. Auto Parts (Sydney) Pty Ltd (SSS Sydney) and S.S.S. Auto Parts (QLD) Pty Ltd (SSS Queensland) (collectively SSS or the SSS parties). SSS is an importer and wholesale distributor of aftermarket parts, original manufacturer parts and parallel imported automotive parts.

8    GMH initially also sued a further SSS company, SSS Auto Parts Adelaide (SSS Adelaide), and Mr Lim-S Ung, the sole shareholder, director and secretary of the SSS parties, but by amendment made during the hearing, GMH abandoned its claims against each.

9    The cross-claimants are the SSS parties and SSS Adelaide (SSS cross-claimants). The cross-respondents are GM, GMGTO and Premoso. The SSS cross-claimants seek, broadly; (a) declarations that threats made by GMGTO to SSS and to identified spare parts suppliers are unjustified within the meaning of s 77 of the Designs Act and injunctions restraining further conduct; (b) declaration that threats made to a particular spare parts supplier are unjustified within the meaning of s 202 of the Copyright Act and injunctions restraining further conduct; (c) declarations that the conduct by GMH towards each of the spare parts suppliers contravenes ss 18 and 29(1)(m) of the ACL and injunctions restraining further such conduct; (d) corrective advertising; (e) further orders in the form of a declaration that all undertakings or assurances provided by the parts suppliers in response to the GMH demands are “null and void” and that all information that GMH obtained from the parts suppliers be returned or destroyed; and (f) pecuniary relief or, alternatively, compensation pursuant to s 237 of the ACL.

10    By order dated 22 August 2017, issues of liability were to be heard separately and before issues concerning quantum of any relief.

1.3    Summary of the issues

1.3.1    Sections 71 and 72 of the Designs Act

11    Subsection 71(1) of the Designs Act provides:

(1)    A person infringes a registered design if, during the term of registration of the design, and without the licence or authority of the registered owner of the design, the person:

(a)    makes or offers to make a product, in relation to which the design is registered, which embodies a design that is identical to, or substantially similar in overall impression to, the registered design; or

(b)    imports such a product into Australia for sale, or for use for the purposes of any trade or business; or

(c)    sells, hires or otherwise disposes of, or offers to sell, hire or otherwise dispose of, such a product; or

(d)    uses such a product in any way for the purposes of any trade or business; or

(e)    keeps such a product for the purpose of doing any of the things mentioned in paragraph (c) or (d).

12    Subsection 71(2) provides that “despite subsection (1)” a person does not infringe a registered design if the person imports a product embodying a design that is identical to or substantially similar in overall impression to the registered design with the licence or authority of the registered owner of the design.

13    Subsection 71(3) provides for the factors to be taken into account in determining whether an allegedly infringing design is relevantly similar in overall impression to a registered design.

14    Subsection 71(4) provides that infringement proceedings must be started within 6 years from the day on which the alleged infringement occurred.

15    Section 72 of the Designs Act relevantly provides as follows:

72 Certain repairs do not infringe registered design

(1)    Despite subsection 71(1), a person does not infringe a registered design if:

(a)    the person uses, or authorises another person to use, a product:

(i)    in relation to which the design is registered; and

(ii)    which embodies a design that is identical to, or substantially similar in overall impression to, the registered design; and

(b)    the product is a component part of a complex product; and

(c)    the use or authorisation is for the purpose of the repair of the complex product so as to restore its overall appearance in whole or part.

(2)    If:

(a)    a person uses or authorises another person to use a product:

(i)    in relation to which a design is registered; and

(ii)    which embodies a design that is identical to, or substantially similar in overall impression to, the registered design; and

(b)    the person asserts in infringement proceedings that, because of the operation of subsection (1), the use or authorisation did not infringe the registered design;

the registered owner of the design bears the burden of proving that the person knew, or ought reasonably to have known, that the use or authorisation was not for the purpose mentioned in paragraph (1)(c).

(3)    For the purposes of subsection (1):

(a)    a repair is taken to be so as to restore the overall appearance of a complex product in whole if the overall appearance of the complex product immediately after the repair is not materially different from its original overall appearance; and

(b)    a repair is taken to be so as to restore the overall appearance of a complex product in part if any material difference between:

(i)    the original overall appearance of the complex product; and

(ii)    the overall appearance of the complex product immediately after the repair;

is solely attributable to the fact that only part of the complex product has been repaired.

16    Sub-section 72(4) provides that in applying sub-section 72(3) a Court must apply the standard of the informed user.

17    Sub-section 72(5) provides definitions of two presently relevant terms as follows (omitting the presently irrelevant definition of “standard of the informed user”):

repair, in relation to a complex product, includes the following:

(a)    restoring a decayed or damaged component part of the complex product to a good or sound condition;

(b)    replacing a decayed or damaged component part of the complex product with a component part in good or sound condition;

(c)    necessarily replacing incidental items when restoring or replacing a decayed or damaged component part of the complex product;

(d)    carrying out maintenance on the complex product.

use, in relation to a product, means:

(a)    to make or offer to make the product; or

(b)    to import the product into Australia for sale, or for use for the purposes of any trade or business; or

(c)    to sell, hire or otherwise dispose of, or offer to sell, hire or otherwise dispose of, the product; or

(d)    to use the product in any other way for the purposes of any trade or business; or

(e)    to keep the product for the purpose of doing any of the things mentioned in paragraph (c) or (d).

1.3.2    The GMGTO claim

18    There is no dispute that several of the qualifying requirements for the operation of the s 72 defence have been met. SSS accepts for the purposes of sub-section 72(1)(a) that it has used products (the impugned parts or the SSS parts identified in Table 2 at paragraph [27] below) in relation to which there is a registered design and that each impugned part embodies a design that is identical, or substantially similar in overall impression, to a GMGTO registered design. The parties also accept that each of the impugned parts is a component part of a complex product within the meaning of sub-section 72(1)(b). However, SSS contends that the use of each of the impugned parts is for the purpose of the repair of the complex product so as to restore its overall appearance in whole or part, in accordance with sub-section 72(1)(c) and has asserted in these proceedings that because of the operation of sub-section 72(1), it did not infringe the registered designs.

19    The consequence is that the bulk of the argument between the parties, and the consideration of the facts of the case, turn on whether or not GMGTO has discharged the onus placed on it by sub-section 72(2)(b) of the Designs Act, namely:

the burden of proving that the person [in this case, SSS] knew, or ought reasonably to have known, that the use or authorisation was not for the purpose mentioned in paragraph (1)(c).

20    The purpose mentioned in sub-section 72(1)(c) is that of repair of the complex product (in the present case a motor vehicle) so as to restore its overall appearance in whole or in part, which I refer to as the repair purpose.

21    In its Reply to the Defence to infringement and, more specifically, in its Amended Further and Better Particulars of the Reply dated 26 October 2017 (reply particulars), GMH sets out how it advances its case. It contends that one or other of the SSS parties has infringed by:

(1)    importing;

(2)    keeping for sale;

(3)    offering for sale; and

(4)    selling or otherwise disposing of,

the impugned parts. As I have mentioned, within their allegation of infringement by selling, GMH has pleaded transactions reflected in over 1,300 invoices issued by SSS to 17 of its customers. At trial, GMH initially contended that the Court should determine whether it had established that SSS did not hold the requisite repair purpose in respect of each transaction. That has been reduced to 26 representative sample transactions between one or other of the SSS parties and 9 of their customers.

1.3.3    The cross-claim

22    The final form of the cross-claim was filed (with leave) after the conclusion of the trial, on 24 April 2018. It is brought in relation to 11 specific threats, 10 to spare parts suppliers who have obtained products from SSS, and 1 to SSS itself. The cross-claim relies on correspondence between GMH and the parts suppliers as reflected in Exhibit B. Little time was spent in closing submissions addressing the particular courses of conduct, although it has been necessary in these reasons to go through each.

1.4    Summary of conclusions

23    I have concluded that, in relation to the GMGTO claim, GMGTO has failed to establish that the importation, keeping for sale or offer for sale of the impugned SSS parts was not for a repair purpose within the meaning of s 72 of the Designs Act. It has also failed in respect of all representative transactions nominated for the purpose of considering infringement by selling the impugned parts with the exception of; transactions 1, 6, 7 and 8 (in relation to W & G Smash Repairs only) involving SSS Sydney; transactions 15 and 17 (in relation to sales (1), (2), (3) and (5) only) involving SSS Melbourne; and transactions 25 and 26 involving SSS Queensland.

24    As a broad observation, I note that the case as presented by GMGTO in relation to its claim tended to be based on what I consider to be unrealistic expectations as to what individuals (whose knowledge could be attributed to an SSS party) knew or ought reasonably to have known about a transaction. As a result of legitimate concerns that GMH would commence lengthy, detailed and expensive proceedings against it, SSS introduced a series of policies designed to ensure and demonstrate that sales made were for a repair purpose. This ultimately led to SSS implementing controls on the sale of the impugned parts that appear to be similar to the controls implemented by GMH itself. It is difficult to imagine that the legislators had this in mind when s 72 was enacted. Nevertheless, in order to consider the application of the s 72 defence, it has been necessary to consider each transaction, and the purpose of SSS in the context of each alleged act of infringement. Ultimately, GMGTO has succeeded in respect of a relatively small number of representative transactions, the value of which (seen in the context of this litigation) is likely to be small compared to the costs involved.

25    In relation to the cross-claim, I have found that the SSS cross-claimants have succeeded in only very limited respects. Although the GMH correspondence was undoubtedly aggressive and, in some respects, inaccurate, I have concluded that in the main it did not involve unlawful conduct in the manner contended. I have concluded that there were unjustified threats to bring design infringement proceedings in relation to the Panel House, CarParts and Torq parts suppliers by reason of the fact that Designs 7 and 12 were never certified. Further, an unjustified threat to bring copyright infringement proceedings was made in relation to the relevant letters of demand to Holmart. I will hear submissions from the parties as to the appropriate relief to grant, if any.

2.    THE REGISTERED DESIGNS AND THE SSS PRODUCTS

26    GMGTO is the registered owner of the designs set out in Table 1 below (Registered Designs). It is necessary for consideration of the cross-claim to identify the filing date, expiry date and date of certification of each design. Design numbers 1, 2, 3, 4, 8, 9, 10, 11, 13 are asserted by GMGTO in its infringement claim.

Table 1: The relevant GMGTO registered designs

27    The impugned parts that have been imported and sold by SSS are described below. The bolded abbreviations in the second column are used later in these reasons to identify particular SSS parts.

Table 2: the impugned parts

28    It will be seen from Table 2 that the SSS part numbers in rows 1, 2 and 13 above concern VE model Commodores (impugned VE parts), and those in rows 3 – 12 relate to HSV parts (impugned HSV parts).

3.    THE WITNESSES

3.1    Introduction

29    I generally found that the witnesses who were cross-examined did their best to assist the Court and to tell the truth. GMH submits that there is a common theme of divergence in crucial respects between the written evidence of the SSS witnesses and their oral evidence. I reject that as a blanket criticism. Where GMH otherwise makes specific criticism of a witness, I address it, if relevant, in the context of the particular issue to which it relates. As a general point, I observe that a number of the witnesses for SSS did not speak English as their first language and one (Mr Chuah) required the assistance of an interpreter. On occasion, email and other written communications use truncated, abbreviated or stilted English. In the main part, it is relatively easily understood. Often concerns relating to the registered design rights are referred to as “design patents”, “patents”, “patent rights” or the like. Nevertheless, it is usually clear that the reference is to rights under the Designs Act.

3.2    GMH witnesses

30    Michael Dennis Finn has, since 1997, been the National Parts and Accessories Manager of Premoso. Premoso is a niche designer, manufacturer and distributor of high performance road vehicles catering to performance car enthusiasts under the brand “Holden Special Vehicles” or “HSV”. Mr Finn gives evidence about the background and history of HSV vehicles, the replacement of HSV parts and the manufacturer of HSV vehicles. He also gives evidence of the practice of “upspeccing” which he describes as an aftermarket industry catering to vehicle owners wanting to customise or upgrade the appearance and performance of their vehicles. Mr Finn gives evidence that he believes that there is a significant demand amongst car enthusiasts to fit HSV unique parts, or an authorised replica version of those parts, to lower specification vehicles in order to customise their appearance. Mr Finn gave three affidavits and was cross-examined.

31    Emmanuel Vlontakis has, since January 2015, been the Engineering Group Manager in the Warranty and Quality Team of GM and in that role has been responsible for the management of tracking and the resolution of warranty issues. In earlier roles with the company he has managed various engineering teams responsible for the design and development of automative body and seating systems for certain vehicles including the VE Commodore. He has been employed at GM Holden since 1987. Mr Vlontakis gives evidence in reply about the Pontiac G8, VE Chevrolet grilles and VE LED headlamps. Mr Vlontakis gave one affidavit and was cross-examined.

32    Peter William Hughes has, since 2006, been the Design Manager - Exteriors for General Motors Australia Design, which is a business division of GM. He gives evidence about the design process at GM and provides details of the visual and design differences amongst different Holden models with particular emphasis on the VE Holden Commodore range. He also gives evidence of the cross-compatibility of parts, observing that a major objective of his design team since about 2006 has been to increase the interchangeability of parts that can go on to a basic car frame. Mr Hughes gave one affidavit and was cross-examined.

33    Robert Bruce McDonald is a mechanical engineer who obtained a Diploma of Mechanical Engineering in 1977 from Granville TAFE, and a Bachelor of Engineering (Mechanical) from the University of Technology Sydney in 1990. He has had an extensive career in the automotive industry which has included, from 1986 until April 2017, working for NRMA Insurance and its successor following demutualisation, Insurance Australia Group. He was responsible for a variety of public programs that concerned vehicle damageability and repairability, anti-theft resistance and insurance assessor technical advice and training. Mr McDonald gives opinion evidence concerning the way in which genuine and aftermarket parts are distributed, sold and fitted in the automotive panel repair industry and the process by which the owner of the vehicle ordinarily would go about repairing the body of their car, whether by claiming through an insurance policy or otherwise. Mr McDonald gave one affidavit and was cross-examined.

34    Gregory Michael Pieris is a solicitor employed by K&L Gates, the solicitors representing GMH. He gives evidence about the chain of custody of certain product parts and, in an affidavit served in reply, gives evidence in answer to affidavits given by 5 SSS witnesses. Mr Pieris gave two affidavits and was cross-examined.

35    Bradley Daryll Searle has, since around 2010, been the manager of Brad Kimberley Cars, a car customisation and second-hand car sales business conducted by NathanPark Pty Ltd, which was supplied parts by a related company, Brad Kimberley Wheels and Tyres Pty Ltd (BKWT). Mr Searle gave one affidavit and was cross-examined.

36    Fiona Elizabeth Harden was General Counsel of GM, from 2007 until 2017, after which she was the Lead Counsel. She exhibits the registered designs in suit. Ms Harden gave one affidavit and was cross-examined.

37    Mark Wakeman has, since October 2014, held the position of Leader Specialist Engineer in the Product Investigations Group of GM. He has been employed by that company since 1998. He gives evidence that the role of the Product Investigations Group includes the investigation of safety and performance issues arising from Holden vehicles. Mr Wakeman particularly addresses the role of vehicle identification numbers, or VINs, to identify vehicles affected by a particular fault or defect. Mr Wakeman gave one affidavit and was cross-examined.

38    Simon Ranjitan Casinader is a solicitor employed by K& L Gates. His evidence concerns various eBay listings and websites and the results of various searches of identified companies. Mr Casinader gave one affidavit and was not cross-examined.

39    Timothy Michael Guy was a solicitor employed by K&L Gates. He gives evidence of a similar nature to that of Mr Casinader. Mr Guy gave one affidavit and was not cross-examined.

3.3    SSS witnesses

40    Lim-S Ung is the sole director of SSS Melbourne, SSS Sydney, SSS Queensland and SSS Adelaide. Mr Ung (who is also referred to in the evidence as Mr Lim) arrived in Australia in the early 1980s. Before coming to Australia he had worked in Japan dismantling cars for spare parts that would then be shipped back to Thailand. In the mid-1980s he started importing second-hand spare auto parts, initially for the supply to wrecking yards which bought the parts and on sold them. In about 1987 he hired a warehouse and started selling spare parts directly. Mr Ung gives evidence about the history and structure of the SSS businesses and the nature of their activities. He refers to his companies’ past dealings with GMH, his knowledge of the right of repair under section 72 of the Designs Act and his responses to various matters raised by GMH. Mr Ung gave one affidavit and was cross-examined. His first language is Mandarin. My impression was that Mr Ung spoke reasonably fluent English, but did not have the nuanced appreciation of language of a native English speaker. I have made allowances for this in considering his evidence.

41    Kun Chuah has, since about 2009, been the National Product Development Manager at SSS. Mr Chuah immigrated to Australia in January 2000 with the assistance of his uncle, Mr Ung. Since then he has worked in various positions in SSS Melbourne before his promotion to his current role. In his affidavit he identifies that he has day-to-day responsibility for the development and purchasing of new products for each of the SSS parties, as well as SSS Adelaide. Mr Chuah gives evidence about the general process that he engages in when purchasing parts for SSS, its inventory, the acquisition of the parts that are the subject of the present proceedings and the measures that SSS took to respond to demands made by GMH. Mr Chuah provided one affidavit and was cross-examined. He was by no means fluent in English, and gave the bulk of his oral evidence with the assistance of an interpreter.

42    Laurie Alan Wills has, since 1995, worked in the automotive industry. He joined SSS Melbourne in about 2004 and since about 2006 has held the position of Sales Manager for that company. In that role, 5 Sales Executives report to him. He reports to the SSS Melbourne Branch Manager, Chai Lim. He gives evidence about his role at SSS Melbourne, a general overview of its sales processes and details of the operations of SSS relevant to the claim by GMH. Mr Wills gave one affidavit and was cross-examined.

43    Richard Morton King has been employed by SSS Queensland since 2007 and has been a Sales Manager since 2012. Mr King reports to Mr Alan Lee, who is the Branch Manager for SSS Queensland. Mr King gives evidence that he has day-to-day responsibility for supporting a team of sales executives for SSS Queensland. He gives a general overview of SSS Queensland’s sales and gives evidence broadly in response to the case advanced by GMH. In this regard he directly responds to the evidence of Mr Searle regarding the business of BKWT. Mr King gave one affidavit and was cross-examined.

44    Kee Yeong Neoh has, since late 2008, been an employee of SSS Melbourne, initially as a systems engineer responsible for the upgrade and migration of its computer-based accounting system and subsequently in the role of Information Technology Manager. He is Mr Ung’s nephew and his sister is Ms Teng Neoh, whom I discuss in paragraph [45] below. Mr Neoh identifies that each of the SSS parties and SSS Adelaide use a centralised computer software system in the management of their inventory, customers, accounts and sales information. He also gives evidence in relation to certain invoice reprints that were produced for the litigation, the implementation of compliance measures in response to demands made by GMH and the location of customers referred to in the GMH particulars. Mr Neoh gave one affidavit and was not cross-examined.

45    Teng Neoh is an employee of SSS Sydney and has, since 2007, occupied the role of National Operation Manager. In that role she has day-to-day responsibility for managing the operations of each of the SSS parties and SSS Adelaide. Ms Neoh is the niece of Mr Ung and the sister of Mr Kee Neoh. She was awarded a Bachelor of Applied Science from RMIT University, Melbourne in 1996; a Master of Management from Macquarie University, Sydney in 2004; and a Master of Business Administration from Macquarie University in 2005. She gives evidence about her management role at SSS Sydney, the senior management structure of SSS, the way in which SSS sources parts and various other aspects of the SSS business. Ms Neoh gave two affidavits and was cross-examined.

46    Martin Junia Nikic has, since January 1996, been employed by SSS Sydney and, since 2005, has held the position of Sales Manager. He reports to Ms Neoh in her capacity as the Branch Manager for SSS Sydney. He gives evidence relevant to the operations of SSS Sydney and responds to aspects of the evidence relied upon by GMH. Mr Nikic gave one affidavit and was cross-examined.

47    Soon Hooi Lee (Alan Lee) has, since around 2000, been employed by SSS Queensland in the role of Branch Manager. Prior to that, from 1991 he was employed by SSS Melbourne in various positions. Mr Lee received a Diploma in Electrical Engineering from the Institute of Technology Jaya in Kuala Lumpur in 1988. He immigrated to Australia in 1990 and is related to Mr Ung by marriage. Mr Lee gives evidence about his role at SSS Queensland, about the implementation of the “repair only” policy by SSS Queensland, in response to Mr Searle concerning BKWT and in response to the case advanced by GMH more generally. Mr Lee gave one affidavit and was cross-examined.

48    Christopher Khalil is a paralegal in the employ of Benjamin Lawyers, the solicitors for SSS. He put into evidence various search results and website materials. Mr Khalil gave one affidavit and was not cross-examined.

THE GMGTO CLAIM – DESIGN INFRINGEMENT

4.    LEGAL FRAMEWORK OF THE GMGTO CLAIM

4.1    The claim as set out in the reply particulars and the “Knowledge Factors”

49    The s 72 defence requires GMH to establish that a relevant SSS party knew or ought reasonably to have known that the “use” of the impugned part in question was not for the repair purpose. In the interlocutory stages of the proceeding, SSS contended that GMH had failed to meet its obligations to provide particulars pursuant to r 16.43 of the Federal Court Rules 2011 (Cth) (FCR). That was resolved by the reply particulars provided by GMH in August 2017 (they were later amended and took their final form on 26 October 2017). Subsequently, SSS filed its evidence in answer to the claim. The case was accordingly conducted on the basis of the case as articulated in the reply particulars and SSS made forensic decisions on the basis of their content, including as to which witnesses to call.

50    It is a central part of the case advanced by GMH that the knowledge of various named individuals is to be attributed to the knowledge of the relevant SSS entity accused of infringing the GMH designs. I consider the legal requirements for the imputing of knowledge to a corporation in the next section of these reasons.

51    A party who pleads a condition of mind must state in the pleading the particulars of the facts on which the party relies; r 16.43(1) of the FCR. In this regard, “condition of mind” includes “knowledge”; r 16.43(3)(a) of the FCR. When pleading that a party ought to have known something, particulars of the facts and circumstances from which the party ought to have acquired the knowledge must be given; r 16.43(2) of the FCR.

52    In Lee v Westpac Banking Corporation [2015] FCA 467, Dowsett J said:

[25]    It follows that a party pleading the imputed knowledge of a company must identify in its pleadings:

•    any agent, officer, employee or other person whose relevant knowledge the pleader seeks to attribute to the company, identifying such knowledge and otherwise complying with the requirements of r 16.43 of the Rules;

•    the basis for imputing such knowledge to the company by reference to each person’s “closeness” and “relevance” to the company in question, again complying with r 16.43; and

•    if the party seeks to aggregate the knowledge of two or more employees, the basis for so doing.

[26]    The questions of closeness and relevance will frequently involve an examination of the relevant person’s duties and functions within and/or on behalf of the company, including reporting and supervisory responsibilities and inter-relationships with other agents, officers or employees and, possibly, with external persons or entities. Such an enquiry may be further complicated by informal variations of formal arrangements.

53    These observations are apposite in the present case. As the SSS parties are corporations, the knowledge necessary to establish the repair purpose must be attributed to the relevant corporation via a human actor. The reply particulars identify the specific individuals whose knowledge GMH relies upon. On occasion, the case as advanced in closing submissions strayed from the particulars. In particular, on a number of occasions GMH sought to rely on the actual or imputed knowledge of individuals who had not been identified in the reply particulars. It also submitted that the knowledge of certain individuals should be aggregated with the knowledge of another. In the case of both, SSS complains that GMH has deviated from its pleaded case. These matters are addressed in more detail later in these reasons. However, for present purposes I note that the complaint is well founded.

54    In relation to the alleged infringement by importation and keeping, in its Reply Particulars GMH contends that Mr Ung, Mr Chuah and Mr Lee had actual knowledge that such use was not for the repair purpose. In the alternative, GMH contends that Mr Ung, Ms Neoh and various sales managers for SSS Queensland, SSS Sydney and SSS Melbourne ought reasonably to have known that the said importation and keeping was not for the repair purpose. In closing submissions GMH’s case was confined to the actual knowledge of Mr Ung and Mr Chuah, with a fleeting reference to Mr Lee and to the constructive knowledge of Mr Ung alone.

55    The reply particulars set out 9 matters by reason of which GMH contends that the named individuals ought reasonably to have known that the importation and keeping was not for the repair purpose, which I refer to below as the Knowledge Factors, namely that:

(1)    There was consumer demand for the impugned parts to be used for the purposes of customisation and enhancement amongst owners of Holden vehicles;

(2)    There was limited consumer demand for the impugned parts to be used for the purpose of repairing the vehicle models to which the parts were originally fitted;

(3)    Having regard to (1) and (2) above, the number of the impugned parts imported and supplied by SSS was higher than SSS could have reasonably expected would be used for a repair purpose;

(4)    The nature or name of the businesses to which SSS offered for sale or sold the impugned parts (as set out in the reply annexure) was indicative that the customer had not used and would not in the future use all or some of the impugned parts for the repair purpose;

(5)    The high number of impugned parts acquired by a particular customer in a single order listed in the reply annexure made it likely that some or all of the impugned parts were not being used by that person for the repair purpose;

(6)    The high frequency of the acquisition by the SSS customer of the impugned parts was such that it was likely that some or all of the impugned parts were not being used by that person for the repair purpose;

(7)    The combination, number and relationship of the parts to the overall appearance of the vehicle were such that it was likely that some or all of the impugned parts were not being used by that person for the repair purpose. This includes where:

(a)    one or more contemporaneous transactions to a single customer included one or more "kits" comprising a set of individual fascia components that fit into the front fascia;

(b)    a single transaction included one or more pairs of corresponding left and right hand parts in a single transaction; and

(c)    one or more contemporaneous transactions included a bonnet moulding together with a front fascia or bonnet or both;

(8)    The conduct of the customer when required to supply a Vehicle Identification Number (VIN) or otherwise to authenticate that a sale was for repair was such that it was likely that some or all of the SSS parts were not being used for a repair purpose (for example, where the customer supplied an incorrect VIN, incorrect registration number or abused the SSS staff when asked to supply such details);

(9)    Having imported, offered to sell and sold the impugned parts since May 2011, SSS later implemented various measures to restrict the use of those parts for purposes other than repair, such as using disclaimers on invoices or product labelling and requiring the provision of VINs.

56    In relation to alleged infringement by offering for sale, GMH has provided no detail in its reply particulars. In a single page of closing submissions it appears that the case is based on the actual knowledge of either Mr Nikic, the NSW sales manager, or Ms Neoh.

57    The bulk of the case advanced by GMH is based on alleged infringement by selling. It relies on the knowledge of Mr Wills for SSS Melbourne, Mr Kevin Woolfe and Mr Nikic for SSS Sydney and Mr King for SSS Queensland. In addition, the reply particulars identify Ms Neoh and Mr Ung as having the relevant actual knowledge. By paragraph 1(e) of its reply particulars, GMH contends that actual knowledge is to be inferred by having regard to the Knowledge Factors. Alternatively, GMH contends that the same individuals ought reasonably to have known that the use of the impugned parts was not for the repair purpose by reason of the Knowledge Factors.

58    The case as advanced in closing submissions by the parties focuses on the 4 alleged overarching infringing uses by SSS, being importation, keeping, offering for sale and selling the impugned parts. The first and last of these are the most extensive. Before turning to each of these, it is convenient to consider the scope, purpose and requirements of ss 71 and 72 of the Designs Act, and the legal requirements for the attribution of corporate knowledge to one or more individuals. I address these matters in the balance of this section. I then turn to make findings in relation to some relevant Background Facts (section 5) concerning GMH vehicles and the SSS businesses, before setting out a chronology of relevant events. These matters inform later consideration of factual issues raised, including the Knowledge Factors. I then turn to consider separately the alleged infringing uses.

4.2    Secondary materials

59    The Designs Act was introduced into Parliament on 11 December 2002. In the second reading speech delivered on that day, the Parliamentary Secretary to the Minister for Industry, Tourism and Resources, the Hon. Warren Entsch MP, indicated that the new Act would repeal the Designs Act 1906 and implement a new registration system for industrial designs. He said that this represented a fundamental change to the registration and protection of industrial designs and was the culmination of many years of review and consultation.

60    After discussing various aspects of the new Act, the speech relevantly said of the new section 72 (emphasis added):

Another important aspect of this bill is the exclusion of spare parts from protection under the new designs system. The government recognises that whether or not spare parts should be eligible for design protection is a complex issue, and after careful consideration believes that this exclusion is warranted. In reaching this decision, the government was concerned to ensure effective competition in the spare parts market leading to lower prices for consumers, for example, motorists in the case of spare parts for motor vehicles. An exclusion should give consumers greater choice and lower prices when they are looking to purchase spare parts to repair or restore complex products to their original appearance.

The bill implements the spare parts exclusion by a `right of repair' exemption. This will still allow the design registration of component parts of a complex product but use of design registered parts for repair purposes, for example, as spare parts, will provide a complete defence against infringement. The use of design registered parts for non-repair purposes will be an infringement of the registered design but the onus will be on the design owner to prove that parts were being used for non-repair purposes. This approach recognises that component parts of a complex product can either be used as original equipment or as spare parts, and seeks to strike a balance between providing an incentive for creative activity in design and enabling competition in the spare parts market. It will provide protection for original equipment use by allowing new and distinctive designs of component parts of complex products to be registrable. However, where design registered component parts are used as spare parts for repair or replacement purposes there would not be an infringement.

61    It may be noted from these paragraphs that the purpose of the s 72 defence balances competing interests. On the one hand, there is a desire to provide incentive for creative activity in design by retaining the protection of a design registration for spare parts for complex products and on the other, there is a desire to strike a balance to enable competition in the spare parts market by placing the onus on the design owner to prove that the parts were being used for non-repair purposes. It is plain that the interests of the motor vehicle industry were particularly taken into account in considering s 72.

62    The Explanatory Memorandum (EM) to sub-sections 72(1) and (2) provides as follows (emphasis added):

Subclause 72(1)

107.    This subclause provides a complete defence against infringement where a component part embodying a registered design is used for repair purposes without the authorisation of the design owner. It includes the use of a component part embodying a design that is substantially similar in overall impression to a registered design. To satisfy this subclause, the complex product needs to be repaired (as defined in subclause 72(5)), and to have its overall appearance restored in whole or in part (as defined in subclause 72(3)). However, this subclause does not provide a defence against infringement where the use of a component part embodying a design results in the enhancement of the appearance of the complex product. This approach preserves the incentive to innovate by allowing all designs of component parts of complex products to be registered if they meet the innovation threshold, without introducing any risk of subsequent anti-competitive behaviour. This enables original component parts to be protected, while the same or substantially similar component parts may be used for repairs without the risk of infringement.

Subclause 72(2)

108.    This subclause provides that the onus is placed on the owner of the registered design to prove that parts were being made, supplied or used for non-repair purposes. To place the onus on the suppliers or manufacturers of spare parts would act as a disincentive for new participants to enter the spare parts market. It would force suppliers and manufacturers of spare parts to track their entire inventory to see whether they all are being used for genuine repair purposes.

109.    Nevertheless, if suppliers or manufacturers are knowingly participating in using parts for non-repair purposes, or should have reasonably known that they are doing so, then they should not be able to hide behind the right of repair defence.

63    Earlier in the EM, it is noted that the Designs Act was prepared after extensive consultation with designers and manufacturers, as well as legal practitioners in the field. The EM describes a key issue as being the competition concern relating to spare parts, which had been the subject of much policy debate over recent years. The concern identified is that when spare parts are protected under design legislation, producers who may not have market power in a primary market for the complete goods may be able to charge a monopoly price for spare parts in the after-market in which spare parts are sold. Apart from consumers being charged higher prices for parts, competition may be restricted for the repair and servicing of original equipment.

64    The EM sets out an assessment of the costs and benefits of several options for addressing the balance between competing interests. It accepted “Option 2”, the ultimate right of repair provision, over “Option 1” which was an exclusion of ‘must fit’ or ‘must match’ parts. In [61] the EM conducts an assessment of the benefits of each by reference to the interests of the Government, industry and consumers. It says in respect of the benefits for industry in adopting Option 2, the right of repair provision:

Component suppliers would be protected in their dealings with larger manufacturers of original equipment, such as motor vehicle manufacturers (without design protection there would be nothing to stop the larger manufacturers from free-riding on the design innovations of the independent suppliers). Items that show innovation in design and do not, in practice, give rise to competition concerns (such as the specialised parts associated with the Holden HSV and Ford Tickford range of vehicles) would also be protected, where they are used in the practice of ‘fitting-up’ a standard model (but not when they are used for genuine repair). This overcomes one of the major shortcomings of Option 1.

65    The reference to “fitting-up” a standard model is a reference to what has been referred to in the present case as “up-speccing” which includes the practise of acquiring spare parts for a base model vehicle and then up-grading its appearance to make it look different, quite often to make it appear like a more expensive model.

66    SSS tendered a 30 April 2003 letter from a senior executive of GMH to the Secretary of the Senate Economics Legislation Committee, providing GMH’s comments on the Designs Bill 2002 (Cth) and Designs (Consequential Amendments) Bill 2002 (Cth). However, in my view, particular comments of industry participants do not represent a suitable means for interpreting the current legislation, and I set it to one side; see s 15AB of the Acts Interpretation Act 1901 (Cth); Australian Communications and Media Authority v Clarity1 Pty Ltd [2006] FCA 410 at [47].

4.3    Consideration of s 72(2)(b)

67    Sub-section 72(2)(b) quite deliberately places the onus on the registered owner to establish that the alleged infringer did not have the repair purpose. This is significant, and reflects one means by which Parliament intended to achieve the balance between the interests to which the secondary materials refer. Clearly enough, it was the legislative intent that s 72 should provide a significant degree of protection to the alleged infringer. See, by analogy, Nintendo Company Limited v Centronics Systems Pty Ltd [1994] HCA 27; (1994) 181 CLR 134, at [19].

68    GMH’s reply particulars rely upon actual or constructive knowledge. The existence of actual knowledge is a question of fact, the proof of which, in the absence of an admission by a party, is always a matter of inference; RCA Corporation v Custom Cleared Sales Pty Ltd (1978) 19 ALR 123 (NSWCA, Hope, Reynolds, Hutley JJA) at 125. The materials from which the inference may be drawn will vary, according to the particular facts and circumstances of the case. In inferring knowledge, the Court is entitled to assume that the person concerned has the ordinary understanding expected of persons in his or her line of business, unless by evidence it is convinced otherwise.

69    In RCA Corporation, the NSW Court of Appeal said at 126:

In other words, the true position is that the court is not concerned with the knowledge of a reasonable man but is concerned with reasonable inferences to be drawn from a concrete situation as disclosed in the evidence as it affects the particular person whose knowledge is in issue. In inferring knowledge, a court is entitled to approach the matter in two stages; where opportunities for knowledge on the part of the particular person are proved and there is nothing to indicate that there are obstacles to the particular person acquiring the relevant knowledge, there is some evidence from which the court can conclude that such a person has the knowledge. However, this conclusion may be easily overturned by a denial on his part of the knowledge which the court accepts, or by a demonstration that he is properly excused from giving evidence of his actual knowledge.

70    GMH relies on a passage from the decision of Burchett J in Richardson and Wrench (Holdings) Pty Ltd v Ligon No 174 Pty Ltd [1994] FCA 488; (1994) 123 ALR 681, where his Honour summarised the principles pertaining to whether shutting one’s eyes to the obvious, or being wilfully blind, may amount to actual knowledge. His Honour said at 693-694:

It is because a reference to a person's shutting his eyes to the obvious, or being wilfully blind, is ambiguous, in so far as it suggests a possible view that something less than actual knowledge will do, that Gibbs CJ (at CLR 487) made it clear a jury should not normally be directed in terms that involve the expression “wilful blindness”...

…

The case is Pereira v Director of Public Prosecutions (1988) 82 ALR 217; 63 ALJR 1. (See also Kural v R (1987) 162 CLR 502 at 507; 70 ALR 658.) Their Honours said in Pereira (at ALR 219–20; ALJR 3):

Even where … actual knowledge is either a specified element of the offence charged or a necessary element of the guilty mind required for the offence, it may be established as a matter of inference from the circumstances surrounding the commission of the alleged offence. However, three matters should be noted. First, in such cases the question remains one of actual knowledge: Giorgianni v R (1985) 156 CLR 473 at 504–7; 58 ALR 641; He Kaw Teh v R (1985) 157 CLR 523 at 570; 60 ALR 449. It is never the case that something less than knowledge may be treated as satisfying a requirement of actual knowledge … All that having been said, the fact remains that a combination of suspicious circumstances and failure to make inquiry may sustain an inference of knowledge of the actual or likely existence of the relevant matter.

The effect of Kural and Pereira has been stated extra-curially by Dawson J in an article, “Recent Common Law Developments in Criminal Law”, in (1991) 15 Crim LJ 5 at 15:

It was made clear in those two cases that, whilst knowledge as an ingredient of an offence may be established by inference, it must be established as a fact. If the term “wilful blindness” is used merely as a shorthand expression to indicate circumstances which warrant the drawing of the necessary inference, then it is acceptable. But it is unacceptable if it is used as a basis for imputing knowledge where actual knowledge is not proved.

71    By contrast with actual knowledge, constructive knowledge is notice which an agent either received or should have received had he or she made proper enquiries, which is imputed to the principal whether the notice is communicated by the agent to his principal or not: Heydon JD, Leeming MJ, Turner PG, Meagher, Gummow and Lehane’s Equity Doctrines and Remedies (5th ed, LexisNexis Butterworths, 2014) at [8-265]; Wyllie v Pollen (1863) 3 De G J & Sm 596; 46 ER 767; Sargent v ASL Developments Ltd [1974] HCA 40; (1974) 131 CLR 634 at 649; In the matter of NL Mercantile Group Pty Ltd [2018] NSWSC 1337 (Gleeson J) at [80].

72    In NL Mercantile the Court noted at [78] that actual knowledge is to be distinguished from “notice” (or constructive knowledge) and has a positive connotation of awareness; citing In Re Montagu’s Settlement Trusts [1987] 2 WLR 1192 at 1199. In inferring knowledge, for the purposes of determining actual knowledge, it is necessary to consider first, the opportunities for knowledge and lack of obstacles to the particular person acquiring the relevant knowledge and second, the credibility of any denial by the person of such knowledge: RCA Corporation at 126. For constructive notice, a person is deemed to have constructive notice of all matters of which the person would have received notice if the person had made the investigations usually made in similar transactions and of which the person would have received notice had the person investigated a relevant fact which had come to that person’s notice and into which a reasonable person ought to have enquired: Equity Doctrines and Remedies at [8-270]; NL Mercantile at [82].

73    The requirement of proof of constructive knowledge was considered by the Full Court in Raben Footwear Pty Ltd v Polygram Records Inc & Anor [1997] FCA 370; (1997) 75 FCR 88, in the context of the knowledge requirements under ss 102 and 103 of the Copyright Act. Under s 102 of the Copyright Act, there will be an infringement of copyright if an article is imported into Australia without the licence of the copyright owner, for one of the specified purposes, “if the importer knew, or ought reasonably to have known, that the making of the article would, if the article had been made in Australia, have constituted an infringement of the copyright”. Section 103 of the Copyright Act has a similar knowledge requirement.

74    Burchett J (Lehane J agreeing at 104), after quoting ss 102 and 103 of the Copyright Act, said at 91 (emphasis added):

It will be observed that each of these sections involves an element of actual or constructive knowledge. The alternative, “or ought reasonably to have known,” was inserted into the sections by the Copyright Amendment Act 1991 (Cth), which commenced on 23 December 1991. The amendment reflects an expression that had been inserted, in 1986, into s 132, a section creating various copyright offences. In that section, Pontello v Giannotis (1989) 16 IPR 174, a decision of Sheppard J, treats the same words, in accordance with their literal effect, as setting up an objective test.

The language in which, since 1991, the objective test stated in ss 102 and 103 has been expressed quite closely parallels language which is also relatively new in ss 22 and 23 of the Copyright, Designs and Patents Act 1988 (UK). In s 23, the expression is "which he knows or has reason to believe is, an infringing copy of the work". Nourse LJ said of these words, in LA Gear Inc v Hi-Tec Sports plc [1992] 19 FSR 121 at 139: "Since the test is an objective one ... " His Lordship regarded it as clear that it would be sufficient to show "the defendant had knowledge of facts from which a reasonable man would have believed [the item in question to be an infringing copy]". Staughton LJ and Sir Michael Kerr agreed. But, in my opinion, the expression used in the Australian Act does nevertheless allow regard to be had to the knowledge, capacity and circumstances of the particular defendant. An objective assessment is to be made as to whether he, not some other person, "ought reasonably to have known". I note that a similar qualification seems to have been intended to be conveyed by the drafting even of the United Kingdom provision: Laddie, Prescott and Vitoria on The Modern Law of Copyright and Designs (2nd ed, 1995), vol 1, section 10.3.

75    His Honour considered it important to draw attention to these aspects of the construction of the objective aspect of the test which permitted the reliance on less than actual knowledge, because of the change introduced in 1991. His Honour went on to say (at 91):

The change is perhaps not as great as might at first glance be thought, since the authorities I have cited gave a rather special meaning to knowledge in this context; but the express adoption by the legislature of the objective language in question requires a new weight to be attached to the circumstances of each case.

76    The emphasised passages in the two quotations above draw attention to the relevance of the knowledge of a person in the position of the individual concerned and the particular facts of the case. In my view, that is the appropriate approach to take in relation to the application of s 72(1). This in turn draws attention in the present case to the allegations of knowledge as pleaded. As the question of constructive knowledge is objectively addressed, in my view, the appropriate question is what the relevant person, or a person in the same position, ought reasonably to have known having regard to that person’s knowledge, capacity and circumstances.

4.4    The scope of the repair purpose under s 72

77    There was significant debate between the parties as to the operation of s 72 of the Designs Act and the meaning of “purpose” in the context of s 72. GMH submitted in closing submissions that there need only be an overriding, significant, substantial, predominant purpose of repair. It contended that the term “purpose” in s 72 is used together with “use” and should be understood as “purpose” in the sense of “intent”. In this regard GMH submits that if the registered owner proves that the alleged infringer knew or ought reasonably to have known that the product might (rather than would) be used for a non-repair purpose, then the s 72 defence will fail. This, GMH submits, will also be the case if the alleged infringer considers that the product might be used either for repair or for another purpose such as enhancing the appearance of the vehicle. As GMH puts it, the defence will only arise where the alleged infringer “considers that the product will only be used for repair… albeit it would also be intended to make a profit”. GMH gives an example where a customer of the alleged infringer promotes a part as being suitable for both repair and alteration of the vehicle, or the alleged infringer implicitly or actually accepts that the purchaser can do whatever it chooses with the part. It submits that in those circumstances the “purpose” of repair will not be met. The alleged infringer cannot avoid infringement by having a mixed purpose where one purpose derogates from the purpose of repair.

78    In my view GMH’s submissions put the obligation too high. Section 72 contemplates that a part may have a dual purpose – either for a permitted repair purpose or a non-permitted purpose. That is why the knowledge component is required. The secondary materials also contemplate a dual use. On the basis of the GMH argument, any act of manufacture (one form of infringing “use”) would be likely to fail to benefit from s 72 because at the time of manufacture the part could be used for either purpose unless parts are only made to order. That cannot have been the intention of parliament. For instance, it would prevent manufacturers, importers and suppliers from maintaining an inventory of parts which can be sold, which would be impractical and also contrary to the apparent intention of the legislation.

79    This and similar arguments tend to distract from the enquiry required by the section. The starting point is that a product that falls within sub-sections 72(1)(a) and (b) will be capable of being used for more than one purpose; a permitted repair purpose within sub-section 72(1)(c), and a prohibited purpose, such as that alleged in the present context, the enhancement of a vehicle. It is the knowledge of the person who has imported, offered for sale or sold the product that separates the two. If in infringement proceedings an alleged infringer asserts that it had the repair purpose within sub-section 72(1)(c), then it is to be assumed that it had that purpose, unless the registered owner proves otherwise.

80    In the present case, witnesses for SSS asserted on oath that SSS has a policy of selling parts for repair only and that its conduct in importing, keeping, offering for sale and selling the parts was guided by that purpose. GMH seeks to dislodge that evidence by pointing to factors which, it submits, indicate that the evidence of the witnesses is not to be accepted.

81    The parties agreed that the following formula assists in considering the question (emphasis added):

At the point just prior to the relevant use, the Customer’s non-repair use was actually known or a reasonable person in [SSS’] position would consider that the circumstances were such as to create in that person’s mind a belief that he or she knew that the Customer’s intended use was not for repair, such that if [SSS] proceeds with the proposed use, its use became that of the Customer.

82    GMH submits that the concession by some of the SSS witnesses in cross-examination that some parts that they sell might not be used for repair is decisive. However, s 72 focuses on the intention of SSS. It does not require that SSS maintain control over the part after its importation, sale or keeping to make sure that it is ultimately applied to a vehicle for repair or to track the progress of goods it sells through the supply chain. The task that the Court is asked to determine is whether, on the basis of all of the evidence, including the positive evidence that SSS did have the repair purpose, GMH has established that SSS knew or ought reasonably to have known that the importation, sale or keeping was not for that purpose. The concession that a part may ultimately not be used for that purpose was, in most cases, an acknowledgement of the simple fact that SSS did not retain control over its parts and that, being a part that might be used for two purposes, there is a prospect that it will not be used for a repair purpose.

83    In this regard, the immediate question is the purpose of the importer or seller, not of the person who acquires the part from them. The language of s 72 of the Designs Act may be seen as a contrast to sub-sections 117(1) and (2)(b) of the Patents Act 1990 (Cth), which provides (emphasis added):

(1)    If the use of a product by a person would infringe a patent, the supply of that product by one person to another is an infringement of the patent by the supplier unless the supplier is the patentee or licensee of the patent.

(2)     A reference in subsection (1) to the use of a product by a person is a reference to:

…

(b)     if the product is not a staple commercial product—any use of the product, if the supplier had reason to believe that the person would put it to that use; …

84    Pursuant to s 117(2)(b) of the Patents Act, the question is; can it be shown or inferred that the supplier had reason to believe that the product, which it proposes to supply, would be used by recipients in accordance with the patented invention (in that case) contrary to the indications in the approved product information document?; Apotex Pty Ltd v Sanofi-Aventis Australia Pty Ltd [2013] HCA 50; (2013) 253 CLR 284 at [304] per Crennan and Kiefel JJ (as the Chief Justice then was). It has been recognised that it is insufficient for the purposes of sub-section 117(2)(b) of the Patents Act for the patentee to show that the supplier had reason to believe that there is a risk that the recipient will put it to an infringing use. Rather, the supplier must have reason to believe that the recipient would put it to an infringing use. As Jagot J said in Apotex Pty Ltd v AstraZeneca AB (No 4) [2013] FCA 162; (2013) 100 IPR 285 at:

[512]     I do not accept that s 117(1) and (2)(b) requires AZ to prove that any particular person will split a 20 mg tablet into two 10 mg doses. In the present case the evidence is sufficient to infer that whatever the instructions the generic parties give to medical practitioners and pharmacists there remains a risk that some people will obtain the 20 mg dose of the generic tablets for the purpose of dividing them into two 10 mg doses. Risk, however, is one thing. Proof on the balance of probabilities that any person “would” infringe the 051 or low dose patent is another. Given the steps proposed by the generic parties to instruct medical practitioners and pharmacists not to endorse or encourage tablet splitting, it is a long stretch on the currently available evidence to conclude that any person would split the tablets into 10 mg doses and thereby infringe the patent. I accept that AZ has proved a real risk that it might occur, given the economic incentives. But in terms of proof that is insufficient.

85    Whilst on appeal the Full Court disagreed with her Honour’s factual finding on this issue, her summation of the legal test was not in dispute; see AstraZeneca AB v Apotex Pty Ltd [2014] FCAFC 99; (2014) 226 FCR 324 at [432]-[444], in particular at [434], [438] and [439]. Similar reasoning may be applied to sub-section 72(2) of the Designs Act in that (in this instance) GMH must establish on the balance of probabilities that SSS must have known or ought reasonably to have known that the use was not for the repair purpose. Proof that SSS knew it “might not” will be insufficient.

86    A manufacturer is highly unlikely to know, at the point that the part comes off the production line, what will ultimately become of it. In the normal flow of commerce, the manufacturer will no doubt sell to a wholesaler, which in turn will sell to a retailer, which in turn will sell to a user. There is no direct link between the infringing act and its ultimate use (the remoteness problem). When the act of making is complete, the manufacturer is unlikely to have any real idea of its ultimate fate. But that is unimportant. The defence is not concerned with the actual use of the part, but the purpose of the manufacture (or other use). What did the manufacturer intend by manufacturing the part? The same observations may be made in relation to other acts of use, although the remoteness problem is more acute at the point of manufacture of a part, and less acute at the retail sale point when the seller is more likely to be dealing directly with the ultimate user.

87    A question raised in the debate between the parties is whether an alleged infringer has a duty to enquire as to what a purchaser may use a product for. This, it seems to me, also distracts from the statutory question. The question is really; on the existing facts, what do the circumstances indicate the alleged infringer knew or ought reasonably to have known based on the facts as proved? In the present case, GMH provides particulars of the Knowledge Factors which form the basis for its contention that SSS knew (for the purpose of its case of actual knowledge) or ought reasonably to have known (for constructive knowledge) that its use was not for the repair purpose. It is by reference to these, in the context of the circumstances of the individuals named, that the question of repair purpose is to be considered.

4.5    Corporate knowledge

88    The SSS parties being corporations, the requisite knowledge is that of a human actor within each relevant SSS company alleged in the reply particulars to infringe. In this regard the following propositions may be regarded to be relevant.

89    First, when beliefs or opinions or states of mind are attributed to a company it is necessary to specify some person or persons so closely and relevantly connected with the company that the state of mind of that person or those persons can be treated as being identified with the company so that their state of mind can be treated as being the state of mind of the company; Krakowski v Eurolynx Properties Ltd [1995] HCA 68; (1995) 183 CLR 563 at 582-3 per Brennan, Deane, Gaudron and McHugh JJ (approving a passage of reasoning of Bright J said in Brambles Holdings Ltd v Carey (1976) 15 SASR 270 at 279). In Krakowski, the knowledge of certain individuals was found to be the knowledge of the company because they were the persons who were responsible for the initial negotiations and who had set the scene in which the representation had been made and proffered the contract of sale.

90    Secondly, the attribution of knowledge to a company in the manner identified above is not a universal rule. In Commonwealth Bank of Australia v Kojic [2016] FCAFC 186; (2016) 249 FCR 421 (Kojic) (Allsop CJ, Besanko, Edelman JJ), Edelman J said:

[96]    Although the “directing mind and will” rule of attribution involves an anthropomorphism which can be misleading, in many cases it presents no difficulty. However, as a rule of attribution it was never intended to be a universal rule. In Lennard’s Carrying itself, the House of Lords was concerned with the construction of the Merchant Shipping Act 1894 and the rule of attribution in that context. In any event, whether or not that rule was intended to be a universal rule, it could never have survived as such. Legislation might expressly provide for a very different rule of attribution. And even if it did not, in a statutory context, rules of attribution must be shaped by the text and context of the statute. The task of statutory construction begins and ends with a consideration of the text itself: Alcan Alumina v Commissioner of Territory Revenue (2009) HCA 41; (2009) 239 CLR 27, 46 [47] (Hayne, Heydon, Crennan and Kiefel JJ); and Commissioner of Taxation of the Commonwealth of Australia v Consolidated Media Holdings Ltd [2012] HCA 55; (2012) 250 CLR 503, 519 [39] (French CJ, Hayne, Crennan, Bell and Gageler JJ).

91    Beach J has recently in ASIC v Westpac Banking Corp (No 2) [2018] FCA 751; (2018) 357 ALR 240 considered whether or not the knowledge of certain individuals can be attributed to a bank, which was alleged to have acted in breach of provisions of the Corporations Act 2001 (Cth). He said:

[1660]    I have said elsewhere that the conventional approach has been to identify the individual who was the "directing mind and will" of the corporation in relation to the relevant act or conduct and to attribute that person's state of mind to the corporation. But after the injection of flexibility into that concept by Lord Hoffmann in Meridian Global Funds Management Asia Ltd v Securities Commission [1995] 2 AC 500 at 506 to 511, metaphors and metaphysics have had diminished utility. First, there are no longer the rigid categories for identifying the "directing mind and will" that may be perceived to have existed after Viscount Haldane LC's use of the phrase in Lennard's Carrying Co Ltd v Asiatic Petroleum Co Ltd [1915] AC 705 at 713 and indeed after Tesco Supermarkets Ltd v Nattrass [1972] AC 153 until Meridian. Second, and relatedly, the appropriate test is more one of the interpretation of the relevant rule of responsibility, liability or proscription to be applied to the corporate entity. One has to consider the context and purpose of that rule. If the relevant rule was intended to apply to a corporation, how was it intended to apply? Assuming that a particular state of mind of the corporation was required to be established by the rule, the question becomes: whose state of mind was for the purpose of the relevant rule of responsibility to count as the knowledge or state of mind of the corporation? see Bilta (UK) Ltd (in liquidation) v Nazir (No 2) [2015] 2 WLR 1168 at [41] per Lord Mance)…

[1661]    In the present context, the relevant rule of proscription that I have to consider is that enshrined, inter-alia, in ss 1041A and 1041B. Now, of course, they do not directly refer to questions of purpose let alone dominant purpose. Moreover no mens rea concepts need to be imported from elsewhere (see generally Australian Securities and Investments Commission v Whitebox Trading Pty Ltd (2017) 251 FCR 448). Nevertheless, given the observations in Director of Public Prosecutions (Cth) v JM (2013) 250 CLR 135, concepts of dominant purpose loom large at least concerning s 1041A and in the way ASIC has framed its case.

[1662]    It is sufficient to say for present purposes that in terms of s 1041A and given its focus on a transaction(s), the relevant state of mind is that of the individual person who instigated and carried out the particular trade. Given the freedom of choice and discretion given to Westpac's traders, it seems to me that relevantly for present purposes it is the state of mind of each of Mr Roden and Ms Johnston in relation to their respective trading that should be so attributed to Westpac in relation to the trading in the Bank Bill Market on the contravention dates.

92    The above passages indicate that attribution of knowledge to a corporation will be shaped by the relevant statute. At [1662] of Beach J’s reasons in ASIC v Westpac, his Honour focused on the degree of “freedom of choice and discretion” given to Westpac’s traders as a factor counting towards the finding that the knowledge of those traders was attributable to Westpac. This was because the relevant provision of the Corporations Act (s 1041A) focused on particular transactions that had or were likely to have market manipulation effects. His Honour considered that there were good policy reasons for finding that where the statute focuses on a particular action or transaction, a corporation should not be permitted to claim ignorance merely by giving employees a high degree of discretion to carry out that transaction.

93    I have identified in section 4.1 above the way that GMH has advanced its case in the reply particulars. In some instances SSS disputes whether the knowledge of the person or persons nominated in the reply particulars are capable of having knowledge attributable to the company. However, more often the dispute concerns whether the identified individuals could be said to possess the actual or constructive knowledge alleged. This is no doubt because most of the individuals named are in positions of senior management within the relevant SSS company.

94    Thirdly, the attribution of knowledge to a company based on the knowledge of an individual is often dependent on whether or not the person has been granted authority to act on behalf of the company in question. The parties accept as a statement of correct law the following passage from the decision of Owen J in The Bell Group Ltd (in liq) v Westpac Banking Corporation (No 9) [2008] WASC 239; (2008) WAR 1:

[6144]     … Persons will often be treated as the directing mind and will of the company if they have been granted authority to act on behalf of the company in relation to the transaction, or have been vested with autonomy, control, discretion or a significant degree of responsibility in relation to the transaction (or similar transactions): El Ajou (at ALLER 705-6; BCLC 482-4); Re Morris v Bank of India [2005] 2BCLC 328 at [126]; Highwater Nominees Pty Ltd v Mead [2006] WASC 17 at [49].

95    Fourthly, I have noted in section 4.1 that, in its closing submissions, GMH advances several submissions to the effect that the knowledge of one person should be aggregated with that of another. That allegation was not pleaded; cf Lee v Westpac at [25].

96    The question of aggregation was considered in Kojic. Edelman J said at [101] that there has been scant support for a doctrine which permits attribution to a corporation of an aggregate of the knowledge of various different agents. His Honour concluded at [118] that the primary judge in Kojic had erred by aggregating the knowledge of two bank officers to conclude that the bank had acted unconscionably under ss 51 AB or 51AC of the Trade Practices Act 1974 (Cth) (TPA). In considering the authorities applicable, Edelman J rejected the proposition that Krakowski endorsed a general notion of aggregation of knowledge (see [127] – [142]) and at [143] quoted with approval the following passage of Tadgell JA of the Victorian Court of Appeal in Macquarie Bank Ltd v Sixty-Fourth Throne [1998] 3 VR 133 at 144-145:

Neither that passage in Krakowski nor any other principle justifies the simple aggregation of the knowledge of a number of persons individually unaware of fraud, or facts which ought to disclose it, to create a notional person with a dishonest intent. The High Court in Krakowski was not purporting in the passage relied on to lay down any such principle but to authorise a consideration of the knowledge and circumstances of all relevant persons - including what may properly be inferred - in order to ascertain the mind of the corporation. The argument for the respondent in reliance on Krakowski should therefore be rejected.

97    Edelman J also referred to the decision in Australian Competition and Consumer Commission v Radio Rentals Ltd [2005] FCA 1133; (2005) 146 FCR 292, 325-326 [176], where Finn J considered a submission by the ACCC that Radio Rentals could be liable for contravention of ss 51AA and 51AB of the Trade Practices Act by aggregating the knowledge of different call centre operators. The ACCC relied upon Krakowski in support of this submission. Finn J described the submission as “startling”, but preserved the possibility that in other situations, such as where there was a duty to communicate information, the knowledge might be aggregated.

98    In Kojic, Allsop CJ generally agreed with the analysis by Edelman J of Krakowski (at [31] and [65]) and added:

[66]     Depending upon the relevant statutory context or substantive rule, it may be that separate information held by an officer or agent may be aggregated with information held by another if there is a duty and opportunity to communicate it to the other: Re Chisum Services Pty Ltd (1982) 7 ACLR 641 at 649-650; Macquarie Bank Ltd v Sixty-Fourth Throne Pty Ltd [1998] 3 VR 133 at 161-62; and Australian Competition and Consumer Commission v Radio Rentals Ltd [2005] FCA 1133; 146 FCR 292 at 327 [182]. The relevance and legitimacy of any such approach may well depend upon the statutory context or the relevant substantive rule. In any event, here, neither Mr Coombe nor Mr Barnden was under a duty to inform the other, or anyone else, of what he knew.

99    GMH submits that there are cases in which mere knowledge of facts held by separate officers are aggregated to determine the total knowledge held by the company as a legal entity. It also submits that there are other cases in which a particular state of mind is sought to be attributed to the company and that this is based on an aggregation of the knowledge of separate officers, none of whom necessarily hold that state of mind. Each of these propositions would appear to run contrary to the observations in these cases to which I have referred. Each provides a basis whereby a registered owner of rights such as in the present case could mosaic the knowledge of individuals in a corporation to produce a result. In Kojic, Edelman J said, of a similar submission:

[116]    This case is a good example of the near-strict nature of the liability that aggregation of knowledge could impose on a respondent. Senior counsel for the Kojics conceded that this was not a case in which there was any duty between Messrs Coombe and Barnden to communicate to each other the information that each possessed. So, how could the Bank have acted differently in order to avoid liability for unconscionable conduct?

100    In my view, the defence in s 72 does not contemplate the aggregation of knowledge from discrete individuals in order to piece together, as if in a mosaic, a picture of knowledge. To do so would tend to put the enquiry too broadly, and to expose traders in spare parts to the type of litigation that Parliament attempted to avoid. The reasons given by Allsop CJ at [66] and Edelman J at [116] provide a compelling basis for the Court to be slow to consider that aggregation of knowledge was within the contemplation of Parliament when the s 72 defence was enacted.

101    I accept that the policy, scope and purpose of the repair defence provisions in s 72 of the Designs Act do contemplate that the knowledge of individuals to whom actual and ostensible authority has been delegated for the entry into particular transactions will be relevant for the consideration of the repair purpose of the corporation. As I have noted, that is largely not a matter of contest. However, I do not consider that the legislative purpose reflects a Parliamentary intention that the knowledge of such individuals may be aggregated. In this regard, I note that various aspects of the legislative scheme and background that indicate that Parliament intended the scope of the purpose enquiry to be relatively narrow. Namely, that under the s 72 defence:

(1)    the onus of proof is reversed;

(2)    a company can conduct a sale involving a part that is capable of a dual purpose without necessarily losing the benefit of the defence;

(3)    it was not the intention of Parliament for a trader in repair parts to be required to track inventory (this is explicitly set out in [108] of the EM); and

(4)    one intention of Parliament was to avoid exposing spare part traders to expensive litigation that might deter them from selling dual-purpose parts.

102    Furthermore, as I have noted, if aggregation of knowledge were to be permitted, the intention of a registered design owner to rely on it ought to have been pleaded as a particular in accordance with r 16.43 of the FCR, including details of the manner in which it arose. GMH did not do so. Nor has it pleaded a duty on the part of one person to communicate the information to another. For these reasons I do not consider that this approach is available to GMH, either as a matter of law, or as a matter of its pleaded case.

103    It will be seen below that senior management within SSS implemented a number of policies over time for the purpose of ensuring that sales by its staff were made only for the purposes of the repair of motor vehicles. A number of impugned transactions, and in particular sales, took place after these policies were put in place. Where those transactions were conducted by sales staff in breach of those policies, but in relation to matters in respect of which they have been vested with the autonomy to conduct the transaction, a question arises as to whether their knowledge of a non-repair purpose can properly be attributed to the company. This is addressed further below in the context of the particular transactions upon which GMH relies.

5.    BACKGROUND FACTS

104    In this section I make findings of fact relevant to the consideration of the claims (unless otherwise apparent from the context).

5.1    The GMH vehicles

105    GM designs and sells for distribution various models of the well-known Holden Commodore vehicle in Australia. These included the VE Commodore model, which was sold from 2006 – 2013 in various styles and at various levels of specification, including; a base model; entry level V6 sports package “SV-6” models; standard and upgraded V8 sports package “SS” and “SS-V” models; a luxury “Berlina” model; and a luxury sports “Calais” model. Three of the registered designs in suit owned by GMGTO are embodied in parts used in the VE series sports variants and related special editions of the VE Commodores, being design numbers 2, 3 and 4 (see Table 1 above). I refer to the relevant parts covered by these designs as the VE parts. GMGTO’s claim for design infringement relates to the impugned VE parts identified in paragraph [27] above.

106    Since 1987, GM has produced high performance HSV vehicles modified from the Holden Commodore. GM supplies Premoso with Holden vehicles to be modified using HSV parts. The HSV model based on the VE Commodore donor vehicle has been marketed by Premoso as the “E series” since August 2006. This series includes the vehicles marketed as; the Clubsport R8, a sports sedan built using a VE Calais as its donor vehicle; the Clubsport R8 Tourer, a sports wagon built using a VE Calais Wagon; the Maloo R8, a sports utility vehicle built using a VE SS-V Ute; the GTS, a high performance sports sedan, built using a VE Calais-V; the Senator Signature, a luxury sports sedan built using a VE Calais; the Grange, a luxury larger size sedan built using a Holden WM Caprice (a longer wheel-base vehicle similar to the VE Commodore); and the W427, HSV's limited edition flagship high performance sports sedan.

107    Design numbers 1, 8, 9, 11 and 13 embody parts on the front end of the E2 and E3 Series HSV Clubsport R8 (sedan), Clubsport R8 Tourer (wagon), Maloo (ute) and GTS (sedan). I refer below to these models as HSV vehicles and the relevant parts covered by the designs as HSV parts. GMH’s claim for design infringement relates to SSS’ impugned HSV parts defined in paragraph [27] above.

108    The evidence indicates that there exists a niche market for the acquisition of parts by owners of lower specification Holden vehicles who wish to customise or enhance the appearance of their vehicles using HSV parts or VE parts. Mr Finn refers in evidence to one kind of upgrade being for vehicle owners to install what he calls “bodykits”, which he says can consist of any combination of front bumpers, rear bumpers, side skirts and front or rear spoilers. However, there was a divergence of view among the witnesses as to whether other parts such as side wings may be included.

109    Mr Finn states that the business of HSV is built around offering niche performance oriented cars that are of a unique and distinctive appearance. He gives evidence that there is a “significant demand” amongst car enthusiasts to fit HSV parts to lower-specification vehicles. There is some controversy about what amounts to a significant demand and, more particularly in the context of the repair purpose, whether individuals within SSS were aware of the size or scope of that demand. I address this in the context of Knowledge Factors (1)-(3) below.

110    In order to protect the HSV brand, GMH takes steps to ensure that HSV parts are not sold for purposes “other than replacement on genuine HSV Vehicles”. These steps involve what Mr Finn terms the “HSV Captive Parts Policy”. This policy requires HSV dealers and HSV distributors to ensure that such parts are only supplied to a verified owner of a HSV vehicle and for replacement purposes only. In cross-examination Mr Finn accepted that the Captive Parts Policy applies, regardless of whether or not the replacement parts are the subject of a registered design. This policy is enforced by requiring the distributors and vendors of HSV parts to refuse to sell such parts unless the customer has supplied to the seller the HSV build number, the VIN and the HSV part number, to ensure that the customer requires the part for replacement purposes only. If not so satisfied, the vendor may refuse supply. The Captive Parts Policy generally ceases when a model is superseded by at least two subsequent HSV models.

111    Part of the Captive Parts Policy involves a requirement that HSV dealers obtain from customers a matching HSV build and VIN number. All road vehicles built or sold in Australia since 1989 must carry a VIN, which follows an internationally standardised format set by the International Standards Organisation. It consists of a structured 17 alphanumeric character string using standardised coding to signify various aspects relevant to the vehicle. Mr Wakeman gives evidence that the National Exchange of Vehicle and Driver Information System (NEVDIS) maintains a database that registers every vehicle’s VIN, which enables vehicle manufacturers who are members of the Federal Chamber of Automotive Industries’ Code of Practice for the Conduct of an Automotive Safety Recall to obtain consumer contact details for the purpose of carrying out safety recalls.

5.2    The SSS businesses

5.2.1    General

112    SSS Melbourne commenced business in around October 1987, SSS Sydney in around January 1995 and SSS Queensland in around June 2001. Mr Ung is the sole director and ultimate shareholder of each. They are referred to internally as “branches”, and SSS Melbourne is referred to as “head office”, but each operates as a separate business. SSS Adelaide and Kenji Auto Pty Ltd (SSS Perth) also use the ‘SSS’ trading name and have access to SSS support such as the IT system, but SSS Perth is not owned or operated by Mr Ung.

113    As at 30 June 2017, there were 95 employees overall, with 37 in Melbourne, 28 in Sydney, 22 in Queensland and 8 in Adelaide.

114    Mr Ung is the ultimate head of the companies and Ms Neoh and Ms Dorothy Jackson (who is responsible for all IT and finance aspects of the SSS business) are at the next level of management. Ms Neoh is responsible for supply chains, warehouse distribution, sales and to a lesser extent marketing. The next in the hierarchy are the National IT Manager, Mr Neoh, the National Product Development Manager, Mr Chuah, and the State Branch Managers (being Mr Chai Lim (Melbourne), Mr Lee (Brisbane), Mr Jet Ooi (Adelaide) and Ms Neoh also in that role in Sydney), who report either to Ms Neoh or Mr Ung, with the exception of Mr Neoh, who reports to Ms Jackson.

115    Each branch has a large warehouse, a sales team, a sales manager, an operations team, and a Branch Manager who also acts as managing buyer for that branch. Each branch makes its own purchasing decisions, based on the needs of its customers. Each branch generally imports its own containers of stock. The customer base is generally State-based and so one branch will have different customers to another. There is no requirement for each branch to report to SSS Melbourne and they do not, although each reports in a general way to Mr Ung, who gave evidence that he has been “basically semi-retired” since 2012.

116    There is a single information technology system for the branches, which is based in Melbourne. This ensures a degree of uniformity between the branches in that staff order products using the preferred suppliers listed in the system. There is also uniformity of branding, training and procedures.

117    Mr Chuah has oversight over inventory and buying parts from overseas.

118    The focus of the SSS business is the sale of body parts for crash repair. It carries car body parts for most major brands and models. Mr Ung estimates, and I accept, that as at around 30 June 2017, the SSS business had on their books over 206,000 items across more than 32,000 product lines, and 14,000 listed customers. From 1 July 2016 until 30 June 2017 it sold 470,000 items in transactions involving over 213,000 invoices and generating approximately $40,000,000 in revenue.

119    Mr Ung gives evidence that the customer base and market of SSS is the wholesale mass market repair industry and that it does not sell parts designed to customise cars, such as mag or alloy wheels, skirts and spoilers. He says that the entire business focus of SSS has always been directed to crash repair customers such as insurers, wreckers and panel beaters. He observed that with the rise of the internet for commerce many sellers, including wreckers, have in the last 10 to 15 years conducted their sales on eBay. He has observed a change in his clients in that originally panel beaters would source their spare parts from wreckers and SSS would supply parts to wreckers. Now, wreckers’ businesses are dying out and panel beaters go directly to SSS for the parts that they need. Today, the main customers of SSS are panel beaters, but it also sells to parts retailers, car dealers, wreckers and direct to the public.

120    In response to the evidence of Mr McDonald, Mr Ung agrees that the people most likely to “hot up” or enhance their cars are young men. Mr Ung considers that they generally do not have very much money and are often “P-Platers”. He contends that such people are not the target market of SSS. This evidence reflects an area of contention between the parties, to which I return below, however, the relative insignificance of the impugned parts to the overall business of SSS is not in dispute. The total sales that are presently in dispute as set out in the schedule to the reply particulars amount to 4,509 impugned HSV parts which were sold by SSS for a total of $122,250 and 665 VE Commodore impugned parts sold by SSS for a total of $33,859. Together, these represent 0.9% of all units sold in the SSS business in the FY 16-17; and 0.10% of total revenue of the SSS business in the FY 16-17, across the SSS branches (including SSS Adelaide).

5.2.2    Marketing

121    There was some controversy about the extent of marketing undertaken by SSS. I am satisfied that SSS does not undertake traditional forms of promotion by print media, television, radio or posters. The business relies primarily on word of mouth and also has a website. It has sent corporate introduction packs to potential new customers, but has only created two of these since 2010, one in 2012 and another in 2016. Both were tendered in evidence. The introductory language in each states that SSS is a leader in “quality replacement automotive parts in Australia”. The 2012 edition goes on to emphasise that it is a major supplier of “crash replacement parts”. The 2016 edition does not have these words. GMH in its submissions, and during cross-examination, suggested that the word “replacement” also encompasses parts for the enhancement of vehicles. However, whilst the word “replacement” is broad enough to cover the acquisition of parts for that purpose, I do not consider that this usage is particularly helpful to GMH in establishing a non-repair purpose in respect of the impugned parts. “Replacement” is certainly a term apposite to be used if an original has been damaged in a crash or deteriorated over time. As I note above in [110], in his affidavit Mr Finn uses the word “replacement” to convey that a part is purchased in compliance with the Captive Parts Policy, that is, for a suitable repair purpose. Mr Ung gave evidence that he understood it in that sense. The context of use in the 2012 brochure makes plain that this is so, and I would not read the 2016 brochure (which was in any event produced after most of the alleged acts of infringement in the present case) differently.

122    Mr Ung gave evidence in cross-examination that SSS did not take active steps to promote SSS products. If a customer wants a part, they can telephone and ask if it is available. In more recent times, they can register online and check what is available.

123    The evidence of the Sales and Branch Manager for SSS Melbourne, Mr Wills, is that his business development role involves collecting information about panel beaters and wreckers that have recently opened up in the area and contacting them, updating customer lists and visiting some customers at their businesses. A similar approach is taken by the Sales Manager of SSS Sydney, Mr Nikic. The Sales Manager of SSS Queensland, Mr King, is less proactive in researching new opportunities, but may be informed by sales staff when they learn of new customers and then conduct research about them. This may include locating a telephone number to enable Mr King or one of the sales team to telephone the new customer by way of introduction (however, new businesses generally contact SSS Queensland first). Mr King gives evidence that with thousands of customers to service, he is too busy to conduct investigations for more.

124    The typical customers of the various branches include; panel beating businesses; wrecking yards; tyre shops; mechanical repairers; parts reseller businesses which sell directly to the public such as “Super-Cheap Auto”; taxi based repairers; auto electrics businesses; and radiator/cooling specialist businesses. The evidence indicates that panel beating businesses are the best customers for SSS. For example, for SSS Queensland they account for over 50% of sales. The evidence indicates that wrecking yards are the next best customer, at least for SSS Queensland (which account for approximately 32% of their sales) and SSS Sydney.

125    Sales volumes per month per customer vary. For SSS Melbourne and SSS Sydney, sales of over $10,000 per month would be for an excellent customer; $6,000 - $9,000 for a very good customer; $4,000 - $5,000 per month for a good customer; $1,000 to $3,000 for an average customer; and below $1,000 for an occasional customer. For SSS Queensland, sales of over $10,000 would be for an excellent customer; $5,000 - $10,000 for a very good customer; $3,000 - $5,000 for a good customer; $1,000 - $3,000 for an average customer; and below $1,000 for an occasional customer.

126    Sales orders may be placed in several ways. This includes sales conducted by; telephone; email and fax; the SSS online portal for trade sales; the “Parts Check” system; and walk-ins to the warehouses. For example, in SSS Melbourne sales conducted by telephone account for 70% of its sales and are particularly encouraged because sales staff can establish a relationship with the customer. In SSS Queensland many enquiries, quotes and sales are initiated by customers through the “Parts Check” system, which is an estimating software tool that enables a repairer to send vehicle descriptions and images to multiple suppliers at the same time in order to receive a quote. SSS Queensland receives an estimated 400 – 500 enquiries via this system each day along with telephone enquiries, which are then divided between sales staff, filtered for orders that SSS is not interested in (because it does not stock the part, or does not deal with the customer and so on) and then a quote is provided.

127    The evidence suggests, and I find, that there is a high level of activity in the offices of the SSS branches, with the phone ringing constantly and sales staff dealing with many enquiries a day from various sources.

128    Having regard to the whole of the evidence, I accept that the primary means of promotion by SSS is via word of mouth, usually over the telephone. In this regard I note that the customer base of the business consists to a large degree of specialist customers who are in the automobile industry, being panel beaters (or smash repairers), wrecking yards, mechanical repairers and the like. These are businesses that can be expected to have a good knowledge of the vehicles for which they require parts.

129    I accept that, after many years of selling a high volume of spare parts into this industry, many customers know to go to SSS if they want a spare part. It is not necessary for the customer to have seen the part promoted for an enquiry to be made as to whether or not SSS has one available. Rather, the customer’s assumption will be that SSS, as a high volume supplier, would have the part that the customer wants and so a phone call is warranted to make an enquiry and obtain a quote for the part. The evidence given by the sales managers for each of the SSS parties tends to support this view. An analogy may be where a fisherperson goes into a large fishing tackle shop, on the assumption that the shop is likely to stock the hook or sinker that she or he wants. I accept that this is the approach taken by customers of SSS and that it engages in minimal promotional activity for that reason. The correspondence from SSS customers to GMH in response to the demands the subject of the cross-claim supports this conclusion.

130    It is further supported by the evidence given by Mr King of the “Parts Check” system, which enables repairers to send out blanket requests for quotes for parts to suppliers, including SSS Queensland and SSS Sydney, in the expectation that the supplier has and will supply the parts in respect of which a quote is sought.

131    GMH submits that there is a conspicuous absence of evidence about how SSS customers ever found out about the impugned parts. It submits that this reflects as a “dominant theme” of lack of candour in the evidence on the subject. It submits that the evidence given by various witnesses to the effect that customers knew about SSS and would call up and ask for a part if they wanted it should be rejected as not credible. For the reasons that I have given, I reject that submission. In fact there was consistency amongst the seven witnesses called by SSS as to the nature of its business activities, which indicates to me that the evidence given in this respect is to be accepted.

5.2.3    The “focus” of the SSS businesses

132    GMH submits that the evidence suggesting that the focus of the SSS business was to supply parts for repair should be rejected in light of the absence of evidence of promotional efforts to that end (which I address above) and four aspects of the evidence as follows.

133    The first aspect is the reference in the 2012 and 2016 corporate brochures to the word “replacement” rather than repair. It is the 2012 brochure that is more relevant to the consideration of the non-repair purpose, given that only it pre-dates most of the impugned uses by the SSS parties. I have addressed its relevance above.

134    The second aspect is that the SSS business sold and promoted some non-GMH parts, being “Altezza lights” and Chevrolet “bowtie” grilles that are used for the customisation of vehicles as opposed to repair. There is no doubt that such parts were sold and promoted for sale by SSS and that in cross-examination each of Mr Ung, Ms Neoh, Mr Nikic and Mr Wills accepted that they were not used by customers for repair purposes. However, some caution must be exercised in considering the conclusion that might be drawn from this evidence. It is perhaps worth observing that despite conducting a very thorough analysis of the business of SSS, it is only these examples to which GMH was able to emphasise. They represent a minute fraction of the 32,000 products made available by SSS and none of them is apparently the subject of any design registration. The highest this evidence goes is to indicate that senior management within the SSS parties knew that those products would not be used for the repair purpose. I am not prepared to find, on the basis of these limited examples, that this reflected a general view on the part of SSS that its business was not for the supply of parts for repair.

135    The third aspect is that Mr Nikic, on 31 January 2013, provided to Penrith Auto Recyclers an email with a “performance list” attached to it of over 350 parts carried within SSS’ inventory, including Chevrolet grilles for a VE Commodore. Mr Nikic accepted that the items in the performance list would be described as “customisation items” and agreed that the items listed – some 350 – were offered for that purpose. GMH does not as assert that any of these products are covered by its registered designs. Rather, it asserts that this is evidence that Mr Nikic actively promoted sales for non-replacement purposes. I accept that this is to be taken into account, particularly given that this was after the implementation of the first repair only notice, but in my view Mr Nikic in this context is to be regarded as an outlier. There is no evidence that any member of senior management was aware of or condoned his activity, particularly having regard to the repair only policies implemented by SSS, to which I refer below. My observations made in the previous paragraph also apply.

136    The fourth aspect is evidence that a SSS Melbourne salesperson, Laura Hill, in 2011 emailed a customer a list of prices for head lamps and tail lights for VE Commodores with the notations that those parts can also fit other, lower specification vehicles. A single example, in 2011, of conduct by a person in a junior role within SSS Melbourne provides little assistance in considering the “focus” of the company as a whole. There is no evidence that Mr Ung or Ms Neoh were aware of this sale or that they, as the senior executives responsible for policy, endorsed this approach to sales. The document was not put to any of the SSS witnesses in the case.

137    In view of my findings above, I accept the evidence that the business model of SSS has at all material times been to sell aftermarket parts for use in the repair of motor vehicles.

5.2.4    Obtaining parts from suppliers

138    SSS buys parts direct from factories and trading houses overseas, usually without formal contracts. Mr Chuah manages the overall inventory and is the contact point for most suppliers. His approach is to consult with the Branch Managers to reach agreement on the allocated quantity of a product before placing an order. It was Mr Chuah who identified the opportunity to import aftermarket HSV parts into Australia, which was then approved by Mr Ung. Aftermarket parts are parts that have been manufactured by someone other than the original manufacturer, in this case someone other than GMH. They are in contrast to parallel import parts, which are parts made by the original manufacturer, imported from overseas.

139    Mr Chuah gives evidence that in sourcing aftermarket and parallel imported parts, he gathers information about future demand by visiting factories and trade shows, regularly speaking and meeting with overseas trade representatives, receiving online updates from manufacturers about new products that are available, reading automotive magazines and conducting online research. In relation to aftermarket parts, he also undertakes searches of the Designs Register. He determines on this basis which parts to source. Having decided on a suitable part to import, Mr Chuah will try to source it as a parallel import.

140    After importing the products for the SSS branches, Mr Chuah also monitors the overall inventory of SSS and tracks parts as they are sold by the branches to ensure that parts are purchased in an efficient manner (e.g. by filling a single container imported into Australia rather than small quantities in multiple containers). In this regard, he does no analysis of the inventory in the sense of understanding whether more of one particular type of part is sold by SSS businesses, nor does he track the activity of particular customers. Rather, the extent to which he tracks sales is generally limited to looking at the sales history for a particular part to see whether it is moving well. If it is not, he will decide whether SSS should discount it as a “special”.

141    GMH submits that it should be found that Mr Chuah had an appreciation, before taking steps to order the impugned HSV parts for importation, that there would be a low demand for them for the purpose of repairs but a relatively high level of demand for them for the purpose of vehicle enhancement. However, I accept Mr Chuah’s denial of that proposition. In my view, SSS’ process in ordering parts was more rustic and less sophisticated than GMH submits. I return to this point in the context of importation.

5.3    Chronology of relevant events

142    In order to impart an understanding of the events to which the parties have referred in their submissions, it is necessary to set out a fairly detailed chronology of events. These include references to letters of demand sent by GMH to SSS and also to third party customers of SSS as well as to stages in the conduct of the proceedings.

143    On 14 July 2010, GM and GMGTO commenced proceedings against SSS Melbourne and some unrelated parties for alleged design infringement under the Designs Act 1906. This litigation was ultimately settled in February 2011. Mr Ung and Ms Neoh give evidence that this was the first time that the practical relevance of designs law came to their attention and that it alerted them to design infringement issues.

144    On 17 January 2011, Mr Chuah created a spreadsheet relating to certain HSV parts that he wished to have manufactured. The spreadsheet set out “PART REQUIRE” [sic] identifying each of the HSV unique parts making up the front external assembly of the cars. The spreadsheet compared the genuine Holden/HSV prices of the parts against Mr Chuah’s estimated SSS pricing for those parts for the Clubsport and gave an estimated total pricing for each of the SSS HSV Parts.

145    In May 2011, SSS Melbourne received 10 of the SSS 540NBB parts from supplier 1 (the suppliers’ names are confidential), SSS Sydney received 20 of the parts and SSS Queensland (in June 2011) received 15 of the parts. Also in May 2011, SSS sold 540NBB parts to Holmart Pty Ltd (Holmart), a company that is one of the parts suppliers identified in the cross-claim.

146    On 22 December 2011, supplier 4 emailed Mr Chuah asking for details of the LED bumper lamp that Mr Chuah wished it to manufacture for SSS. Supplier 4 was responsible for manufacturing the HSV left and right hand daytime running lamps (DRL) to which design number 8 applies.

147    On 5 January 2012, Mr Chuah supplied photographs of the DRL to supplier 4 because it was necessary for tools to be made for the production of those lamps.

148    In March 2012, Mr Chuah conducted searches of the Australian Designs Register to see if the impugned HSV parts were the subject of registered designs.

149    Around this time, Mr Chuah also raised for the first time the importation of the HSV parts with Mr Ung, who remarked that there would be a design infringement risk if that were to occur and that the lawyers should be consulted. GMH contests that this accurately reflects the timing of the conversation, a matter to which I return below.

150    On 29 March 2012, Ms Neoh sent an email to Mr Rickards, a solicitor who provided regular legal advice to the SSS companies, informing him about SSS’ plans to import HSV parts, which were the subject of registered designs, and saying that SSS will “hold on the importation”. The evidence indicates that Mr Ung, Ms Neoh and others in senior management, which include the State Branch Managers and Mr Chuah, relied heavily on Mr Rickards for advice.

151    Mr Rickards responded to Ms Neoh’s request, on 27 April 2012, with a copy of an advice that he prepared when the Designs Act came into force in 2004. That advice relevantly states:

To ensure effective competition in the spare parts market, the Government is excluding spare parts from design protection.

The Act will still allow registration of designs of component parts of complex products, but this will be subject to a ‘right of repair’ exemption that provides a complete defence against infringement when design registered parts are used (including manufacture and supply) for repair purposes.

…it will provide protection for original equipment use by allowing new and distinctive designs of component parts of complex products to be registrable. However, where design registered component parts are used as spare parts for repair or replacement purposes there would not be an infringement.

152    In April or May 2012, Mr Chuah provided original HSV parts to supplier 3 as samples for the reverse engineering of the following impugned parts; 540NAA (front bumper); 560NAA (lower grille); 500NAL (upper grille left); 500NAR (upper grille, right); 500NEL (fog lamp cover, left); and 500NER (fog lamp cover right). He also subsequently sent supplier 3 original HSV parts as samples for the reverse engineering of the following impugned parts; 560NBH (bonnet moulding in satin black); and 560NCC (bonnet moulding in chrome).

153    In May 2012, supplier 3 informed Mr Chuah that they would produce aftermarket parts for the HSV bumper bars.

154    In mid-2012, Mr Chuah was informed by supplier 2 that aftermarket VE Commodore series II SS front and rear bumper bars were available for sale. These ultimately became impugned parts 545NBB and 540NBB.

155    Some time in 2012, the State Managers for each of the SSS companies, other than SSS Adelaide who did not have a representative at that time, agreed to the acquisition of the proposed HSV parts that Mr Chuah was investigating. After this time, Mr Chuah tested the parts before making a final commitment to purchase them from the relevant suppliers.

156    On 2 July 2012, Mr Chuah committed to purchasing 600 units of each of impugned parts 540NAA, 560NAA, 500NAL, 500NAR, 500NEL, 500NER from supplier 3, provided they were of a satisfactory standard. The supplier was to start development of part 540NAA first, with development of the remaining parts to start 3-4 months later. Mr Chuah provided supplier 3 with final confirmation of the quantities of these impugned parts on 22 April 2013, after successfully testing them in March 2013.

157    In early- to mid-2012, SSS was considering measures that it could take to ensure customers were aware that the impugned parts were to be used only for repair. This included putting notices on invoices and products. On 17 July 2012, Mr Rickards sent an email to Ms Neoh setting out his advice concerning s 72 of the Designs Act. In it he stated:

To confirm, s 72 of the Designs Act 2003 says that selling a product (ie a part) the same as a product subject to a registered design will not infringe the design if it is used to repair a bigger product (ie a car) to restore its overall appearance.

…

We discussed this some time ago with Tim and we agreed it would be a good idea to specify that products we sold relying on this provision carried a notice to the effect that the part was sold for repairs only.

That notice should be as follows:

“Sold only for use in repairs. Other use may infringe registered Design rights”

It should be printed clearly visible on the container that the part comes in. I would like to see an example of it.

But I’ve noticed another clause –

(2)     If:

(a)     a person uses or authorises another person to use a product:

(i)     in relation to which a design is registered; and

(ii)     which embodies a design that is identical to, or substantially similar in overall impression to, the registered design: and

(b)     the person asserts in infringement proceedings that, because of the operation of subsection (1), the use or authorisation did not infringe the registered design;

the registered owner of the design bears the burden of proving that the person knew, or ought reasonably to have known, that the use or authorisation was not for the purpose mentioned in paragraph (l)(c).

This means that if you sold a part and the registered design owner (RDO) sued you for breach and, if you claimed you sold it for repair, the RDO would have to prove you know or should have known it was not for repair.

And, if they could prove that, then, the fact it had a notice on it wouldn’t make any difference.

I’m raising this because it may be that, in real life, the risk of the RDO proving you knew or should have known a part you sold was not for repair is so small as not to justify the trouble of printing the notice.

158    On 25 July 2012, Ms Neoh sent an email to Mr Ung and Mr Chuah (copied to Mr Rickards) saying that, after meeting with Mr Rickards, a decision had been made only to print the notice on invoices, that notice being (first repair only notice):

All parts authorised only for use in repairs

159    There is no suggestion by SSS that this notice, or the subsequent repair only notices identified below, have any contractual force.

160    On 31 July 2012, Mr Rickards sent an email to Ms Neoh, Mr Ung and Mr Chuah recording their agreement that the first repair only notice would be included on all invoices and other documents setting out or evidencing terms of trade. The email also suggests that sales staff have some training to reiterate that parts can only be used for repairs, even when the fittings are the same. In his affidavit Mr Ung gives evidence that at around that time there was some initial informal training given, although no evidence indicates what training was given or to whom.

161    From 1 August 2012, SSS implemented a system whereby the first repair only notice was printed on all invoices. There were some exceptions because of a glitch in the software that was repaired in late February 2013.

162    On 30 October 2012, SSS Queensland received the first invoice from supplier 2 for the impugned 545NBB and 540 NBB parts.

163    In December 2012 and January 2013, the impugned parts 545NBB and 540NBB were first imported; 40 and 30 units respectively to SSS Queensland; 50 and 30 units respectively to SSS Melbourne; and 60 and 100 units respectively to SSS Sydney. Invoices to SSS Sydney and SSS Melbourne followed shortly thereafter.

164    On 19 April 2013, Mr Chuah sent an email to SSS Sydney, SSS Queensland and SSS Perth informing them that SSS had committed to the acquisition of 600 parts in the first batch production for the HSV products and that he had allocated the branch quantities. The email says (as written):

…Also, please host a sales meeting about the patent issue, our HSV parts are for repiars purpose only, customer are not allow install in other car (we all know it will fit on commodore), but just incase HSV/HOLDEN people call us ask if your parts fit for commdore or not…

165    On 22 April 2013, Mr Chuah instructed supplier 3 to ship a first order of 600 units of each of the 540NAA, 560NAA, 500NAL, 500 NAR, 500NEL and 500NER parts, with a total of 200 units each to go to SSS Melbourne and SSS Sydney and a total of 100 units to each of SSS Queensland and SSS Perth.

166    On 30 July 2013, the first sale of HSV parts is made to Sydney Special Vehicles (SSV) being 10 units each of 6 impugned parts.

167    On 31 July 2013, impugned HSV parts numbered; 540NAA, 560NAA, 500NAL, 500NAR, 500NEL and 500NER parts are first imported from supplier 3 (the 31 July 2013 parts).

168    On 19 September 2013, an SSS Melbourne invoice records a sale of 2 units of 6 SSS Parts and 1 unit of another SSS Part to JHP Vehicle Enhancement (JHP) in Victoria. The salesperson is noted as Mr Chuah.

169    On 2 October 2013, Mr Chuah was contacted by a representative of JHP in relation to a notice issued by eBay that a product listing by his company on eBay of a VE Commodore HSV bumper bar acquired from SSS had been withdrawn (an eBay “takedown notice”).

170    On 3 October 2013, Ms Neoh informed Mr Rickards of the JHP eBay takedown notice and asked for his advice.

171    On 7 October 2013, Mr Chuah circulates an email stating that he has put a “D flag” on the HSV parts in the system to cease their sale until “we come out with a better solution to sell it”. Mr Ung’s evidence is that this notice meant that the items were removed from the electronic SSS parts list and therefore could not be sold.

172    On 17 December 2013, Ms Neoh, Mr Chuah and Mr Lee are informed by a staff member that GMH has sent a letter of demand to Holmart.

173    In January 2014, Mr Chuah placed an order for 1,200 (total) left and right DRLs (impugned parts 500NJL and 500NJR) from supplier 4, which were to be distributed to the SSS parties.