FEDERAL COURT OF AUSTRALIA

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

CORRIGENDUM

1                     On the cover sheet of the Judgment, the name of the matter on the MNC line should read:  “Deckers Outdoor Corporation Inc. v Farley (No 6) [2010] FCA 391”.

2                     On the cover sheet of the Judgment, the citation should read:  “Deckers Outdoor Corporation Inc. v Farley (No 6) [2010] FCA 391”.

3                     On page two of the cover sheet of the Judgment under “Cases cited” the matter Australian Securities Commission v Macleod (1003) 40 FCR 155, referred to should read:  “Australian Securities Commission v Macleod (1993) 40 FCR 155, referred to”.

Associate:

Dated:         23 April 2010

THE COURT ORDERS THAT:

1.                  The hearing of the contempt motion be adjourned to 10:15 am on 20 May 2010. 

2.                  On or before 5:00 pm on 7 May 2010 the Third, Fourth, Fifth, Sixth and Nineteenth Respondents and Vaysman Pty Ltd file and serve:

(a)                any affidavits on which he, she or it proposes to rely at the penalty hearing; and

(b)               an outline of his, her or its written submissions.

3.                  On or before 5:00 pm on 18 May 2010 the Applicant:

(a)                file and serve any answering affidavits on which it proposes to reply at the penalty hearing; and

(b)               an outline of its written submissions.

Note:Settlement and entry of orders is dealt with in Order 36 of the Federal Court Rules.
The text of entered orders can be located using Federal Law Search on the Court’s website.

REASONS FOR JUDGMENT

1                                             The Applicant designs and manufactures popular sheepskin footwear identifiable by the name “Ugg” and an “UGG” logo and fiercely guards its intellectual property.  These contempt proceedings arise out of proceedings brought by the Applicant’s predecessor in 2003 and a further proceeding against twenty-two respondents for alleged trade mark infringement, copyright infringement, passing off and breaches of the Trade Practices Act 1974 (Cth) (“the Trade Practices Act”) which was commenced by the Applicant in 2007:  see Deckers Outdoor Corporation Inc v Farley & Ors (No 5) (2009) 262 ALR 53.

2                                             The Applicant alleges that: 

(a)                Vladimir Vaysman and Victoria Vaysman breached an interlocutory injunction made by Merkel J on 22 December 2003 and/or a permanent injunction made by Merkel J on 12 March 2004 which restrained them and their agents from manufacturing or distributing sheepskin footwear which featured or had printed or embossed upon it any hang tags or care tags or sewn on labels or any printed materials accompanying such product, the names “Ugg Australia”, the “Ugg” logo, the word “Ugg” or any of Decker’s copyright works by:

(i)                  Making such sales themselves;

(ii)                Procuring and instructing others to act as their agents in making such sales; and

(iii)               (in Vladimir Vaysman’s case) by allowing a factory at 1 Roper Street Moorabbin (“the Roper Street Factory”) to be used for such manufacture and sales;

(b)                Vladimir Vaysman continued to engage in such conduct in breach of an undertaking he gave to the Court on 27 November 2007; and

(c)                Josef Vaysman, Polina Vaysman and Leonid Mykhalovskyi breached an interlocutory injunction I made on 27 November 2007 restraining them from manufacturing or distributing sheepskin footwear bearing the names “Ugg Australia”, “Ugg” or “Uggs”

3                                             The Applicant also alleges that Vladimir Vaysman, Josef Vaysman and Leonid Mykhalovskyi, and certain companies controlled by them, failed to comply with orders of this Court which required affidavits of assets to be filed and served.

4                                             Vladimir Vaysman and Victoria Vaysman are siblings.  Josef and Polina Vaysman are their parents.  Leonid Mykhalovskyi worked at the Roper Street Factory between 13 August 2007and 12 December 2007.

PROCEDURAL HISTORY

2003 Proceeding

5                                             In 2003, the Applicant’s predecessor (Ugg Holdings Inc.) commenced proceedings in this Court against Vaysman Pty Ltd, Hepbourne Pty Ltd, Vladimir Vaysman and Victoria Vaysman.  The Applicant alleged that those respondents had infringed its trade marks and copyright, had passed off their products as those of the Applicant and had breached ss 52, 53 and 75B of the Trade Practices Act.

6                                             The various orders and undertakings which it is alleged were contravened contain certain defined terms.  Those terms are derived from pleadings which were filed by the Applicant or its predecessor in this Court.  In the 2003 proceeding the term “Ugg Products” was defined in paragraph 6 of the Statement of Claim to mean:   

“… sheepskin footwear by reference to:

(a)        the name “Ugg”;

(b)        the name “Ugh”;

(c)        the name “Uggs”;

(d)        the name “Ugg Australia”;

(e)        a logo using the name “UGG” with the middle “G” being larger than the other letters (“the Ugg Logo”).”

The Applicant had “used a mark which features a sun device on its products (the Sun Device)”.  The Copyright Works were defined asthe“text, photographs, artistic works and layout of the Applicant’s website, the Applicant’s logos, swing tags, labels, and care labels”.

December 2003 Orders

7                                             On 23 December 2003, the Court ordered, by consent, that, until trial or further order, Vladimir Vaysman, Victoria Vaysman, Vaysman Pty Ltd and Hepbourne Pty Ltd, and their agents, be restrained from manufacturing or selling sheepskin footwear bearing the names “Ugg Australia”, “Ugg” or “Uggs” (“the December 2003 Orders”).  The December 2003 Orders were in the following terms:   

“1.        Until the trial of the proceeding or further order the First, Second, Third and Fourth Respondents, whether by themselves, their directors, or servants or agents or howsoever otherwise be restrained from:

(a)     manufacturing, promoting, advertising, distributing, offering for sale, selling or exhibiting in public, whether on the internet, to retailers, wholesalers, consumers or otherwise:

(i)         any sheepskin footwear or any other products which feature or which have printed or embossed upon them on any hang tags or care tags or sewn on labels or any printed material accompanying such products:

(A)          the name “Ugg Australia”; and/or

(B)          the name “Original Ugg Company”; and/or

(C)          the Ugg Logo as defined in the Statement of Claim; and/or

(D)          the Sun Device as defined in the Statement of Claim; and/or

(E)          the names “Ugg”, “Ug”, “Uggs” or “Ugh” and/or

(F)           any of the Copyright Works or any substantial reproduction of the Copyright Works as defined in the Statement of Claim;

(b)     reproducing, or substantially reproducing, the Copyright Works as defined in the Statement of Claim filed herein or authorising such conduct;

(c)     representing that the Respondents’ sheepskin footwear products are manufactured, advertised and/or promoted with the sponsorship or approval of the Applicant;

(d)     representing that any of the Respondents’ sheepskin footwear products are the Ugg Products (as defined in paragraph 6 of the Statement of Claim);

(e)     representing that any of the Respondents’ sheepskin footwear products emanate from the same trade source as the Ugg Products.

(f)      representing that any of the Respondents’ sheepskin footwear products are made by the Applicant;

(g)     passing off and/or enabling to be passed off their business and/or goods for the business and/or goods of the Applicant;

(h)     passing off and/or enabling to be passed off their business and/or goods as having the endorsement or approval of the Applicant;

(i)      registering or otherwise reserving any domain names that incorporate UG, UGG, or UGH or any word that is substantially identical or deceptively similar to those words.

2.         Until the trial of the proceeding or further order the First, Second, Third and/or Fourth Respondents, whether by themselves, their servants, employees or agents howsoever, be restrained from disposing or parting with possession of the Infringing Materials as defined in paragraph 17 of the Statement of Claim or any products which feature:

(a)     the name “Ugg Australia”; and/or

(b)     the name “Original Ugg Company”; and/or

(c)     the Ugg Logo as defined in the Statement of Claim; and/or

(d)     the Sun Device as defined in the Statement of Claim; and/or

(e)     the names “Ugg”, “Ugs” or “Ugh” and/or

(f)      any of the Copyright Works or any substantial reproduction of the Copyright Works as defined in the Statement of Claim.”

8                                             The December 2003 Orders bore the following notice:

“Notice of imprisonment or sequestration (pursuant to Order 37 Rule 2(2), (3)) –

VAYSMAN PTY LTD ACN 006 941 199

HEPBOURNE PTY LTD ACN 080 453 247

VLADIMIR VAYSMAN

VICTORIA VAYSMAN

are hereby notified that you may be liable to imprisonment or to sequestration of property if you disobey the Orders contained herein.”

9                                             By Notice of Motion dated 10 February 2004 the Applicant sought orders which empowered it to search four premises connected with Vladimir Vaysman and Victoria Vaysman:

·                        the Roper Street Factory;

·                        295 Hawthorn Road, Caulfield;

·                        11 Ellington Street, Caulfield; and 

·                        Factory 2, 7 Levanswell Road, Moorabbin (“the Levanswell Road Warehouse”).

10                                          Pursuant to Orders made by the Court on 10 February 2004 (“the February 2004 Orders”), on 11 February 2004 the Applicant’s representatives entered and searched the four premises and seized sheepskin footwear and related products which featured the Ugg Logo and the Sun Device and made copies of various records found at the premises.  The searches were conducted in the presence of independent solicitors. Mr Nigel Jones supervised the search of the Roper Street Factory, Miss Marie Wong supervised the search of the Levanswell Road Warehouse, Mr Andrew McRobert supervised the search of 11 Ellington Street, Caulfield and Mr David Wilson supervised the search of 295 Hawthorn Road, Caulfield.

11                                          On 27 February 2004, the Applicant filed a Notice of Motion and a Statement of Charge seeking declarations that the four Respondents were guilty of contempt because they had sold sheepskin footwear in breach of the December 2003 Orders and had obstructed the execution of the February 2004 Orders.  The Applicant sought a warrant for the arrest of Vladimir and Victoria Vaysman, and the imposition of a fine against each of the alleged contemnors.  

March 2004 Orders

12                                          On 12 March 2004 with the consent of Vladimir Vaysman, Victoria Vaysman, Hepbourne Pty Ltd and Vaysman Pty Ltd, the interlocutory injunction which formed part of the December 2003 Orders was made permanent (“the March 2004 Orders”).  The March 2004 Orders bore the same penal endorsement as appeared on the December 2003 Orders.

13                                          Terms of settlement were signed on 11 March 2004 by Middletons, Solicitors, on behalf of the Applicant’s predecessor, by Victoria Vaysman and by Vladimir Vaysman, on his own behalf and on behalf of Vaysman Pty Ltd and Hepbourne Pty Ltd.  The Applicant discontinued the 2003 proceeding.  No formal order of discontinuance was, however, made and no orders were made in relation to the motion for contempt.

14                                          Subsequently, the Applicant brought proceedings (proceeding VID 1129 of 2004) against the Respondents to the first proceeding alleging that they had breached the terms of settlement.  This proceeding was, in turn, settled on terms on 10 June 2005.  Middletons signed the terms of settlement on behalf of the Applicant.  Goldsmiths, Barristers and Solicitors, signed the terms of settlement on behalf of Vladimir Vaysman, Victoria Vaysman, Hepbourne Pty Ltd and Vaysman Pty Ltd and Josef Vaysman, who were collectively defined as “the Vaysmans”. 

2007 Proceeding 

15                                          On 9 November 2007, the Applicant commenced proceedings against Leah Jane Farley, Dusia Pty Ltd, Leonid Mykhalovskyi, Hepbourne Pty Ltd and Vladimir Vaysman alleging that those Respondents had infringed the Applicant’s trade marks and copyright, engaged in misleading and deceptive conduct in breach of the Trade Practices Act and had committed the tort of passing off.  As the proceeding progressed a further seventeen Respondents were added, including Victoria Vaysman, Josef Vaysman, Polina Vaysman, Leonid Mykhalovskyi and various companies controlled by members of the Vaysman family and Mr Mykhalovskyi.

16                                          The terms “Ugg Logo”, “Trade Marks”, “Sun Device” and “Copyright Works” were defined in the Applicant’s Statement of Claim as follows: 

•        Ugg Logo – “a logo using the name “UGG” with the middle “G” being larger than the other letters”;

•        Trade Marks – “Australia Trade Mark No. 785466” and “Australian Trade Mark No. 1077762”; 

•        Sun Device – “theSun Device Logo … as depicted in Australian Trade Mark No. 785466.”    

•        Copyright Works – “the original literary and/or artistic works in the Sun Device logo as depicted in Australian Trade Mark No. 785466 and the text and artistic works on the Applicant’s marks, tags, labels, packaging, care instruction card and information booklet on or enclosed with its sheepskin footwear.””

12 November 2007 Orders

17                                          On 12 November 2007 I made Orders permitting the Applicant’s representatives to enter and search:

·                    the Roper Street Factory;

·                    the Levanswell Road Warehouse;  and

·                    30 Gareth Avenue, Beaumaris. 

Independent solicitors were authorised to remove and keep in their custody any sheepskin footwear and related products and documents related to the manufacture, distribution, purchase or sale of such products (“the 12 November 2007 Orders”).  Searches of the relevant premises were carried out the following day.  The 12 November 2007 Orders bore the endorsement required by O 37 r 2(2), (3).

18                                          Paragraph 23 of the 12 November 2007 Orders provided:

“Subject to paragraph 24 below, you must:

(a)       at or before the further hearing on the Return Date (or within such further time as the Court may allow) to the best of your ability inform the applicant in writing as to:

(i)         the location of the listed things;

(ii)        the name and address of everyone who has supplied you, or offered to supply you, with any listed thing;

(iii)       the name and address of every person to whom you have supplied, or offered to supply, any listed thing; and

(iv)       details of the dates and quantities of every such supply and offer.

(b)       within 10 working days after being served with this order, make and serve on the applicant an affidavit setting out the above information.”

19                                          The “listed things” were specified in Schedule A of the 12 November 2007 Orders as:

“1.       Sheepskin footwear or any other products or other documents including but not limited to promotional material which feature of which have printed or embossed on them or on any hang tags, care tags, sewn in labels or any printed products:

(a)       the name "Ugg";

(b)       the name "Ugg Australia";

(c)       the Ugg Logo (as defined in the Statement of Claim filed in this proceeding);

(d)       the Sun Device (as defined in the Statement of Claim filed in this proceeding)

(e)       the Trade Marks (as defined in the Statement of Claim filed in this            proceeding); and/or

(f)        the Copyright Works (as defined in the Statement of Claim filed in this      proceeding).

2.         Books, accounts, dockets, invoices, receipts, orders, vouchers, emails or any other correspondence, shipping documents and any other documents in tangible and/or electronic form which relate to the manufacture, distribution or any purchase or sale of the items listed in item (1) above.

3.         Any items or materials used in the manufacture of the products listed in item (1) above.”

20                                          Paragraph 24 of the 12 November 2007 Orders enabled an individual or a corporation to object to complying with paragraph 23 of the Orders if compliance might tend to incriminate him, her or it, or make him, her or it liable to a civil penalty.  The Return Date was fixed as 26 November 2007.  

21                                          On 12 November 2007, the Applicant applied to the Court for interlocutory injunctions against the Respondents then on the record.  The application was listed for hearing on 27 November 2007. 

26 November 2007 Orders

22                                          By paragraph 6 of Orders made on 26 November 2007, Leonid Mykhalovski, Dusia Pty Ltd, Josef Vaysman, Polina Vaysman, Millhouse Pty Ltd, HGU Pty Ltd, Fedia Pty Ltd, Taskinc Pty Ltd and OTK International Pty Ltd were each ordered to swear an affidavit as to their assets (“the 26 November 2007 Orders”).  Paragraph 6 provided:

“Subject to paragraph 7, within 10 working days after being served with this order, each Respondent must swear and serve on the Applicant an affidavit setting out the to the best of his, her or its ability of all his, her or its assets world wide, giving their value, location and details (including any mortgages, charges or other encumbrances to which they are subject) and the extent of his, her or its interest in the assets.”

Paragraph 7 of the 26 November 2007 Orders enabled a Respondent to object to complying with paragraph 6 of those orders if compliance might tend to incriminate him, her or it or to make him, her or it liable to a civil penalty.

November 2007 Undertaking and 27 November 2007 Orders

23                                          On 27 November 2007, Hepbourne Pty Ltd and Vladimir Vaysman, by their counsel, gave the following undertaking to the Court, without admission of liability:

“that they and each of them will refrain from, whether by themselves, their directors, officers, partners, employees, agents, spouses, family members or others acting on their behalf or on their instructions or with their encouragement or in any other way from, until trial or further order:

i.                importing, exporting, manufacturing, promoting, advertising, distributing, offering for sale, selling or exhibiting in public, sheepskin footwear or any other products  which feature or which have printed or embossed on them or on any hang tags, care tags, sewn in labels or any printed products:

1.       the name "Ugg";

2.       the name "Ugg Australia";

3.       the Ugg Logo (as defined in paragraph 7(c) of the Statement of Claim filed in this proceeding);

4.       the Sun Device (as defined in paragraph 10(a) of the Statement of Claim filed in this proceeding)

5.       the Trade Marks (as defined in paragraph 9 of the Statement of Claim filed in this proceeding); and/or

6.       the Copyright Works (as defined in paragraph 10 of the Statement of Claim filed in this proceeding)

(collectively the Enjoined Products): 

ii.              disposing or dealing with the Enjoined Products;

iii.             authorising, procuring or inducing any person to do any act which would be an infringement of the injunction referred to in paragraph (a) above;

iv.            representing that the EnjoinedProducts are imported, exported, manufactured, advertised, promoted, offered for sale and/or sold with the sponsorship or approval of the Applicant;

v.              representing that the EnjoinedProducts are the Ugg Products (as defined in paragraph 7 of the Statement of Claim);

vi.            representing the EnjoinedProducts emanate from the same trade source as the Ugg Products;

vii.           representing that the  EnjoinedProducts are made by the Applicant;

viii.         representing that the businesses of the Respondents are licensed, authorised, sponsored, approved or endorsed by the Applicant;

ix.            representing that the EnjoinedProducts are worth AUD$50; and/or

x.              representing that the EnjoinedProducts are "gifts" and/or “of no commercial value” if exported.”

24                                          On that day, the Court ordered that Leonid Mykhalovskyi, Josef Vaysman and Polina Vaysman, and a number of corporate respondents controlled by one or more of the individual respondents and each of them be restrained:

“1.        … whether by themselves, their directors, officers, partners, employees, agents, spouses, family members or others acting on their behalf or on their instructions or with their encouragement or in any other way from, until trial or further order:

(a)               importing, exporting, manufacturing, promoting, advertising, distributing, offering for sale, selling or exhibiting in public the Enjoined Products;

(b)               disposing or dealing with the EnjoinedProducts;

(c)               authorising, procuring or inducing any person to do any act which would be an infringement of the injunction referred to in paragraph (a) above;

(d)               representing that the EnjoinedProducts are imported, exported, manufactured, advertised, promoted, offered for sale and/or sold with the sponsorship or approval of the Applicant;

(e)               representing that the EnjoinedProducts are the Ugg Products (as defined in paragraph 7 of the Statement of Claim);

(f)                representing the EnjoinedProducts emanate from the same trade source as the Ugg Products;

(g)               representing that the EnjoinedProducts are made by the Applicant;

(h)               representing that the businesses of the Respondents are licensed, authorised, sponsored, approved or endorsed by the Applicant;

(i)                 representing that the EnjoinedProducts are worth AUD$50; and/or

(j)                 representing that the EnjoinedProducts are "gifts" and/or “of no commercial value” if exported.”

(“the 27 November 2007 Orders”).

25                                          The November 2007 Undertaking was recorded in the 27 November 2007 Orders.

26                                          By paragraph 5 of the 27 November 2007 Orders, each Respondent was to:

“make and serve on the Applicant an affidavit setting out the full name and address of each of the persons described by the following aliases to whom that Respondent has supplied or offered to supply the Respondents’ Products:

·         “Oliver D”;

·         “Gihan Ezzat”;

·         “Joanne of Designer Comfort”

·         “Angie Potter”; and

·         “Jonathan Kobs”.

27                                          On 4 December 2007 I ordered that the 2003 proceeding be reinstated and consolidated with the 2007 proceeding.  Importantly, the Notice of Motion and the Statement of Charge filed on 26 February 2004 were reinstated as against Vladimir Vaysman, Vaysman Pty Ltd, Hepbourne Pty Ltd and Victoria Vaysman.  The Applicant was granted leave to file and serve any further Notice of Motion and Statement of Charge for contempt of court against any of the Respondents and leave to use any documents which had been filed in the 2003 proceeding.

28                                          The Applicant’s solicitors were subsequently informed by the solicitors acting for Ms Sommer and Ms Farley that Vladimir Vaysman, Josef Vaysman, Polina Vaysman and Leonid Mykhalovskyi, had, since 13 November 2007, continued to manufacture the counterfeit footwear, in breach of undertakings given to the Court and the November 2007 Orders.  On 11 December 2007 I made a further search Order.  On 12 December 2007 the Applicant’s solicitors again searched the Roper Street factory and also searched 303 Balaclava Road, Caulfield, the home of Vladimir Vaysman.  The search order was extended to include a warehouse at 4/350 Lower Dandenong Road, Braeside (“the Braeside Warehouse”).

14 December 2007 Orders

29                                          On 14 December 2007, I ordered Vernon Co Pty Ltd (the Seventeenth Respondent) and Rastov Pty Ltd (the Eighteenth Respondent) to swear affidavits setting out their assets (“the 14 December 2007 Orders”).  Paragraph 10 of the 14 December 2007 Orders provided:

“Subject to paragraph 11, within 10 working days after being served with this order, Vernon Co Pty Ltd and Rastov Pty Ltd must swear and serve on the Applicant an affidavit setting out to the best of its ability all its assets world wide, giving their value, location and details (including any mortgages, charges or other encumbrances to which they are subject) and the extent of its interest in the assets.”

Paragraph 11 of the 14 December 2007 Orders enabled Vernon Co Pty Ltd and Rastov Pty Ltd to object to complying with paragraph 10 of those orders if compliance might tend to incriminate them or to make them liable to a civil penalty.

THE COURSE OF THE TRIAL

30                                          The hearing of these charges took place on 8, 9, 10 April, 2, 3, 5, 11 and 12 June and 10 July 2008. 

31                                          The date for the commencement of the hearing (8 April 2008) was fixed on 14 December 2007.  Goldsmiths solicitors were the solicitors on the record for Vladimir Vaysman, Hepbourne Pty Ltd, Josef Vaysman and Polina Vaysman at that time.  Counsel appeared on behalf of those respondents on 14 December 2007 and at various hearings at which directions were given in relation to the contempt hearing.

32                                          Although Victoria Vaysman was not joined as a Respondent to the 2007 proceeding until 20 December 2007, she was a respondent to the 27 February 2004 motion for contempt and was, therefore, a Respondent to the consolidated proceedings from 4 December 2007.  On 4 December 2007 I ordered that:

“5.          Insofar as proceeding no V1114 of 2003 was discontinued by consent on 12 March 2004 and insofar as Victoria Vaysman (the Fourth Respondent in proceeding no V1114 of 2003) is no longer deemed to be presently served and on notice of proceeding no V1114 of 2003, that personal service of the Applicant’s Notice of Motion dated 29 November 2007 was effected on 3 December 2007 by leaving it under cover of a letter marked to her attention at the home of her parents Josef and Polina Vaysman, 11 Ellington Street, South Caulfield, Victoria.

6.            That personal service of further documents on Victoria Vaysman may be effected by posting the same by pre-paid express post to her at 11 Ellington Street, South Caulfield, Victoria.”

The first appearance filed on behalf of Victoria Vaysman was filed on 5 February 2008 by Norton White solicitors.  A notice of withdrawal of solicitors was filed by that firm in Court on 7 March 2008.  From 7 March 2008 until 7 April 2008 there was no solicitor on the record for Victoria Vaysman.

33                                          On 7 April 2008, the day before the contempt hearing was due to commence, Ray Abrahams & Associates filed a notice of appearance for Victoria Vaysman and wrote to the Court indicating that an adjournment of the contempt hearing would be sought because the firm had been retained on 6 April 2008 and did not have instructions to prepare for the contempt hearing.  On 8 April 2008 counsel appeared on behalf of Victoria Vaysman and sought the foreshadowed adjournment.  He advised the Court that, if the adjournment application was unsuccessful, he and his instructing solicitor would seek leave to withdraw.  Counsel informed the court that his instructions were that Victoria Vaysman wished to participate in the trial of the proceeding and wished to participate through lawyers.  Counsel for the Applicant indicated that he could proceed with his opening and call witnesses who were to give evidence against respondents other than Victoria Vaysman.  The adjournment application was granted subject to Victoria Vaysman’s right subsequently to object to the admission of any evidence given against her and to recall any of the witnesses.

34                                          Leonid Mykhalovskyi played no part in the contempt proceeding.  No appearance was ever filed on his behalf.  He did not attend and did not file any affidavits.  There was no appearance by Dusia Pty Ltd, Fedia Pty Ltd, OTK International Pty Ltd, Millhouse Pty Ltd, HGU Pty Ltd or Taskinc Pty Ltd.

35                                          The hearing proceeded on 8, 9 and 10 April 2008.  On those days senior and junior counsel appeared on behalf of Vladimir Vaysman, Hepbourne Pty Ltd, Josef Vaysman and Polina Vaysman.  The proceeding was then adjourned to 2 June 2008.

36                                          On 27 May 2008 Victoria Vaysman wrote to the Court and sought the appointment of pro bono counsel pursuant to O 80 of the Federal Court Rules.  Mr Malcolm Strang and Ms Sue Thompson of counsel accepted the Court’s referral on 28 May 2008 and appeared on behalf of Victoria Vaysman for the remainder of the contempt hearing.  

37                                          Mr Moshinsky QC appeared on behalf of Josef and Polina Vaysman at the contempt hearing on 11 and 12 June 2008 and 10 July 2008.  A Russian interpreter was provided by the Court on each of those days to assist Josef and Polina Vaysman.

38                                          Vladimir Vaysman and Hepbourne Pty Ltd did not appear at the hearing on any of the five hearing dates in June or on 10 July 2008.  Goldsmiths remained as the solicitors on the record for Vladimir Vaysman, Hepbourne Pty Ltd, Josef Vaysman and Polina Vaysman until 17 June 2008.

RESPONDENTS in Liquidation

39                                          Dusia Pty Ltd, Millhouse Pty Ltd, HGU Pty Ltd, Fedia Pty Ltd, Taskinc Pty Ltd, OTK International Pty Ltd were placed in liquidation on 21 December 2007. 

40                                          Vaysman Pty Ltd was placed in liquidation on 22 November 2005 and was dissolved on 21 March 2007.

41                                          On 21 January 2008, Mr Watson wrote to Sam Richwol of O’Keeffe Walton Richwol, the liquidator for Dusia Pty Ltd, Millhouse Pty Ltd, HGU Pty Ltd, Fedia Pty Ltd, Taskinc Pty Ltd, OTK International Pty Ltd seeking his consent to the Applicant continuing with this proceeding.  By letter dated 29 January 2008, Mr Richwol provided his consent to the proceeding, in which the contempt charges are brought, continuing against those Respondents.

THE EVIDENCE

42                                          The evidence relied on by the Applicant was contained in a series of affidavits (together with the exhibits referred to in those affidavits) and reports.  A list of those affidavits and reports are set out in Annexure A to these reasons.  The Applicant also called evidence from Tanya Vaysman, the wife of Vladimir Vaysman.  She attended following service on her of a subpoena.

43                                          Mr Anthony Watson is a partner in the firm Middletons who is acting on behalf of the Applicant.  Mr Watson was involved in the 2003 proceeding and the 2007 proceeding.  He has sworn a total of 28 affidavits in the consolidated proceeding.  His evidence was not challenged.

44                                          Ms Farley, Ms Strickland, Ms Sommer, Ms Ezzart, Mr Douglas and Mr Fitzsimons, the Applicant’s lawyer in the USA, were cross-examined by senior counsel for Vladimir Vaysman, Hepbourne Pty Ltd, Josef Vaysman and Polina Vaysman. 

45                                          None of the Applicant’s other witnesses was required for cross-examination. 

46                                          Josef and Polina Vaysman relied on an affidavit of Josef Vaysman sworn 1 April 2008 and an affidavit of Polina Vaysman also sworn on 1 April 2008.  Counsel for Josef and Polina Vaysman also tendered the terms of settlement between the Applicant and each of Ms Sommer and Ms Ezzat, and the confidential settlement amounts which were paid to the Applicant by Leah Jane Farley and Joanne Strickland.  Josef Vaysman and Polina Vaysman were cross-examined by counsel for the Applicant, with the assistance of an interpreter.

Reliability of the Evidence of Ms Farley, Ms Strickland, Ms Sommer and Ms Ezzat

47                                          Each of Ms Farley, Ms Sommer, Ms Strickland and Ms Ezzat was a Respondent in the proceeding.  Each had entered into an agreement with the Applicant pursuant to which she had agreed to pay compensation to the Applicant and the Applicant agreed to discontinue the proceeding against her.  It was suggested to each witness during cross-examination that she had implicated Josef and Polina Vaysman in the production and distribution of Ugg footwear in order to secure favourable terms of settlement.  Each of these four witnesses gave evidence confidently.  The details of their accounts were not seriously challenged.  Indeed, most of it was corroborated by photographic evidence, by the observations made by others, and by material found at the Roper Street Factory and at a stall conducted by Josef Vaysman at the Victoria Market.  I consider each of these witnesses to be a truthful witness and I accept the evidence given by them.

THE CHARGES

48                                          By Notice of Motion dated 11 January 2008 and an Amended Statement of Charge dated 14 March 2008 (which included the charges which were preferred in the Statement of Charge dated 26 February 2004), the Applicant alleged that each of Victoria Vaysman, Vladimir Vaysman, Vaysman Pty Ltd, Hepbourne Pty Ltd, Josef Vaysman, Polina Vaysman and Leonid Mykhalovskyi, were guilty of contempt.  The charges and a summary of the evidence relied on by the Applicant in respect of each charge are set out below.   Some of the charges, contained in the Amended Statement of Charge, allege contempt on the part of other respondents.  Where this has occurred I have not considered the allegations in so far as they relate to those additional respondents.  To a large extent the evidence on which the Applicant relied was uncontradicted.  In the few instances where particular allegations were challenged I will make the necessary findings after setting out the evidence.  I should also record at this point that Josef and Polina Vaysman made general denials of the allegations against them and that the Applicant did not press all the charges which appeared in the statement of charge.

Victoria Vaysman

49                                          The Applicant alleged that Victoria Vaysman committed a number of breaches of the December 2003 Orders and the March 2004 Orders.  In an Agreed Statement of Facts between Victoria Vaysman and the Applicant filed on 11 July 2008 (“Agreed Statement of Facts”), Victoria Vaysman admitted most of the charges that were levelled against her.  

·                    Charge 7

In breach of the December 2003 Orders, Victoria Vaysman deliberately and voluntarily sold sheepskin footwear bearing labels and accompanying printed materials bearing the words “Ugg Australia” and/or the Ugg Logo as defined in the Statement of Claim and/or the Sun Device as defined in the Statement of Claim by selling six pairs of boots on 4 January 2004 to an eBay dealer named Richelle Miller with dealer id “i only want the best”.

This charge was admitted by Victoria Vaysman.

·                    Charge 11 

In breach of the December 2003 Orders, since 22 December 2003 Victoria Vaysman has deliberately and voluntarily advertised, promoted and offered for sale, sheepskin footwear bearing labels and accompanying printed materials bearing the words “Ugg Australia” and/or the Ugg Logo as defined in the Statement of Claim and/or the Sun Device as defined in the Statement of Claim via a website at the domain name www.vikstarboots.com.

This charge was admitted by Victoria Vaysman.

·                    Charge 12

In breach of the December 2003 Orders, Victoria Vaysman deliberately and voluntarily represented to Vicki Wallis on 21 January 2004 and/or 3 February 2004, that the sheepskin footwear products sold by her to Ms Wallis:

(a)        were the Ugg Products (as defined in paragraph 6 of the Statement of Claim filed in the 2003 Proceeding); and/or

(b)     were manufactured, advertised and/or promoted with the sponsorship or approval of the Applicant; and/or

(c)        emanated from the same trade source as the Ugg Products; and/or

(d)        were made by the Applicant.

This charge was admitted by Victoria Vaysman.

·                    Charge 14

In breach of the February 2004 Orders, Victoria Vaysman deliberately and voluntarily:

(a)          allowed, assisted, aided or abetted the removal of a folder permitted to be seized under the February 2004 Order to be removed from the premises at 11 Ellington Street Caulfield before such document could be seized;

(b)          refused entry [to] the Applicant’s solicitor to the Caulfield Premises for a period of approximately two hours; and

(c)           refused to provide the password to email account uggs0409@hotmail.com.

Victoria Vaysman admitted that she had deliberately and voluntarily refused to provide the password to email account uggs0409@hotmail.com. 

·                    Charge 23

In breach of the March 2004 Orders, from about January to March 2006, Victoria Vaysman deliberately and voluntarily procured, aided, abetted, assisted and/or instructed each of Dianne Sommer, Gihan Ezzat, and Oliver Doederlein, to act as her agents in promoting, advertising, offering for sale and selling on the internet sheepskin footwear under or by reference to the names “Ugg” and/or “Ugg Australia” and/or the Ugg Logo as defined in the Statement of Claim and/or the Sun Device as defined in the Statement of Claim and personally delivered such footwear to them.

This charge was admitted by Victoria Vaysman.

·                    Charge 25

In breach of the March 2004 Orders, in about December 2005, Victoria Vaysman deliberately and voluntarily represented to Gihan Ezzat that the Respondents’ sheepskin footwear products were manufactured, advertised and/or promoted with the sponsorship or approval of the Applicant.

This charge was admitted by Victoria Vaysman.

·                    Charge 26

In breach of the March 2004 Orders, from time to time in the period July 2005 December 2007, Victoria Vaysman deliberately and voluntarily offered for sale and sold “UGG Australia” sheepskin footwear by internet on eBay under the trading names “Viksbazaar” and “megadeals111”, including sales of such “UGG Australia” sheepskin footwear:

(a)               on 29 November 2007 to Andrew Watson; and

(b)               on 7 December 2007 to Jessilyn Chen. 

This charge was admitted by Victoria Vaysman. She admitted that the total value of the sales referred to in Charges 23 and 26 was in the vicinity of AUD$300,000.

Vladimir Vaysman, Vaysman Pty Ltd and Hepbourne Pty Ltd 

50                                          At all material times, Vladimir Vaysman was the sole director and sole shareholder of Vaysman Pty Ltd and of Hepbourne Pty Ltd.      

51                                          The Applicant preferred the following charges against Vladimir Vaysman, Vaysman Pty Ltd and Hepbourne Pty Ltd:

·                    Charge 8

In breach of the December 2003 Orders, Vladimir Vaysman and Vaysman Pty Ltd deliberately and voluntarily sold sheepskin footwear bearing labels and accompanying printed materials bearing the word “Ugg” and/or “Ugg Australia” and/or the “Sun Device” and/or the “Ugg Logo” as follows:

(a)          on 25 January 2004, Vladimir Vaysman processed an order via the website www.moneyorderdirect.net for one pair of “tall ugg boots” to Mari Stuppy, and payment for this order was received by Vaysman Pty Ltd on 28 January 2004;

(b)          on 25 January 2004, Vladimir Vaysman processed an order via the website www.moneyorderdirect.net for one pair of “tall ugg boots” to Josef R. Castagnola, and payment for this order was received by Vaysman Pty Ltd on 28 January 2004;

(c)           on 27 January 2004, Vladimir Vaysman processed an order via the website www.moneyorderdirect.net for one pair of “short ugg boots” to Dara Miles;

(d)          on 29 January 2004, Vladimir Vaysman processed an order via the website www.moneyorderdirect.net for eight pairs of “tall UGG boots” and one pair of “classic short ugg boots” to “Sabine from Germany”, and payment for this order was received by Vaysman Pty Ltd on 3 February 2004;

(e)               on 4 February 2004, Vladimir Vaysman processed an order via the website www.moneyorderdirect.net for one pair of “tall uggs” colour black size 8, one pair “tall ugg boots” colour black size 9, two pairs “tall” colour pink size 8, two pairs “tall uggs” colour pink size 9, one pair “tall” colour chestnut size 9, one pair “short boots” colour pink size 8, one pair short boots colour pink size 9 to Sabine Weinstock and payment for this order was received by Vaysman Pty Ltd on 10 February 2004;

(f)                on 7 February 2004, Vladimir Vaysman processed an order via the website www.moneyorderdirect.net for one pair of “classic tall UGG boots” to “Ani”;

(g)               on 24, 30, 31 December 2003, 5, 7, 10, 12, 13, 14, 16, 18, 21, 22, 23, 30 January 2004 and 1, 3, 4, 6, 10 February 2004, Vladimir Vaysman processed orders via the website www.moneyorderdirect.net for various “boots” to “Jamie” and payments for these orders were received by Vaysman Pty Ltd on 10, 19, 22, 28, 31 January 2003, 3, 4, 10 February 2004;

(h)              on a date unknown to the Applicant, but which was after 22 December 2003, Vladimir Vaysman sent “Sue” a pair of boots which had been ordered on 10 December 2003; and

(i)                on 9 February 2004 and 10 February 2004, Vladimir Vaysman processed an order via the website www.ikonaustralia.com for two pairs of “tall boots” to “Vicki Wallis”.  

52                                          The Applicant relied on evidence given by Mr Anthony Watson, a solicitor acting on its behalf, in affidavits sworn by him on 15 December 2003 and 26 February 2004.  Mr Watson executed the search order at the Roper Street Factory on 11 February 2004.  During the search, numerous orders for “ugg” boots were found. The orders were placed by email.  Twenty-one orders for “ugg” boots were emailed to “John” between 25 January 2004 and 4 February 2004.  These orders were processed via a website www.moneyorderdirect.net.  Vladimir Vaysman is the registrant of the domain name www.moneyorderdirect.net.  Eftpos receipts indicate that payment for sales was received by Vaysman Pty Ltd.

53                                          “Sue” and “Vicki Wallis” each confirmed that they had purchased boots from the website www.moneyorderdirect.net and www.ikonaustralia.com in late 2003.  The boots that were sent to them in early 2004 bore the words “Ugg Australia” and the soles featured a “sun” and the word “ugg”.  The registrant of the domain name www.ikonaustralia.com was “John Vay” of “22 Apple Street, Melbourne 3000”.  There was, at relevant times, no “Apple Street” in Melbourne.  Vladimir Vaysman was the registrant of domain name www.ikonaustralia.com.  The evidence supports the inference that Vladimir Vaysman used a pseudonym and a false address in an effort to disguise this fact.

54                                          “Catherine Dye” emailed “John” at a1boots@ikonaustralia.com and queried the authenticity of the ugg boots which she had purchased on 10 December 2003.  “John” advised her that “[t]hey are genuine ugg brand boots” and provided his details as “Hapbourne [sic] Pty. Ltd 1 Roper st, Moorabbin 3189”.  This is the address of the Roper Street Factory. Ms Dye’s boots were shipped on 27 December 2003 and received by Ms Dye on 20 January 2004.  Ms Dye confirmed in an email to Mr Watson that the boots she received were marked “Ugg”.

55                                          Mr Watson also found copies of emails which evidenced sales of 76 pairs of boots to “Jamie” between 24 December 2003 and 10 February 2004 via the website www.moneyorderdirect.net.  In an email to the Applicant’s solicitor “Jamie” confirmed that the footwear he purchased on 10 January 2004 was branded “UGG australia”.

·                    Charge 9

In breach of the December 2003 Orders, Vladimir Vaysman and/or Hepbourne Pty Ltd deliberately and voluntarily sold sheepskin footwear bearing labels and accompanying printed materials bearing the word “Ugg” and/or “Ugg Australia” and/or the “Sun Device” and/or the “Ugg Logo” as follows:

(a)          on or about 27 December 2003, in response to an order made by Catherine Dye via the internet on 10 December 2003, Hepbourne Pty Ltd and/or Vladimir Vaysman sent a pair of boots to “Catherine Dye”. 

56                                          The Applicant relies on the sale to Ms Dye outlined above under Charge 9 and Ms Dye’s email to Mr Watson in which she stated that the boots she received from “John” of Hepbourne Pty. Ltd 1 Roper Street, Moorabbin 3189 were marked with the word “Ugg”. Hepbourne Pty Ltd was the registered proprietor of the Roper Street factory.

·                    Charge 10

In breach of the December 2003 Orders, after 22 December 2003, Vaysman Pty Ltd and/or Hepbourne Pty Ltd deliberately and voluntarily manufactured and supplied Victoria Vaysman and Vladimir Vaysman with sheepskin footwear bearing labels and accompanying printed materials bearing the word “Ugg”.

57                                          As I understand this charge it alleges that Vaysman Pty Ltd and/or Hepbourne Pty Ltd manufactured sheepskin footwear which purported to be genuine “Ugg” footwear and then supplied both Victoria and Vladimir Vaysman with that footwear.  The Applicant relies principally on electronic records which were found at 11 Ellington Street Caulfield on 11 February 2004.  Those records related to the sale, by Victoria Vaysman, of footwear which bore labels and accompanying printed materials bearing the words “Ugg Australia” and the “Ugg logo”.  The Applicant invites the Court to infer that this footwear “was sourced” from Vaysman Pty Ltd and/or Hepbourne Pty Ltd.  It does so on the basis of the following evidence of Mr Watson:

“(a)      the return address and the address given for [Victoria Vaysman in the sales records] was 11 Ellington Street, Caulfield, which is a private residence and does not have the facilities to manufacture sheepskin boots;

(b)        amongst the footwear seized … during [the] execution of the orders at 1 Roper Street Moorabbin [on the same day], was new and partly constructed footwear and component parts therefore [sic] for footwear which featured the Ugg Logo and the Sun Device and which fits the description of the footwear being sold by [Victoria Vaysman];

(c)        an electronic document which was on Ms Vaysman’s computer states “Order Now!” … [in] that document:

(i)      the contact telephone details are listed are (sic) “By Phone 03 9553 6607” which is the phone number for 1 Roper Street Moorabbin, “or 0405 095 926” which is Victoria Vaysman’s mobile phone number;

(ii)     the contact mail details are listed as “Post 1 Roper Street, Moorabbin” which is the factory address of [the two companies];

(iii)     the contact email details are listed as “By email vitaway@hotmail.com” which is one of Victoria Vaysman’s email addresses.

A further document downloaded from Ms Vaysman’s computer at the Caulfield Premises titled “Please check out our Winter Clearance Range” is signed off by “Vita Weisman, Director, Vikstarr”. … I believe Vita Weisman is an alias used by Victoria Vaysman for internet and other trading; and

(d)        From electronic records seized at the Caulfield premises …. there are a number of photographs labelled with the Applicant’s Ugg Logo and “Ugg Australia” trade mark.  These photographs have a date in the corner which is 27 January 2004. …  The footwear depicted is the same as the footwear seized … at 1 Roper Street Moorabbin and is the same footwear which was the subject of trap purchases made from websites operated by the [two companies].”

58                                          This evidence does not support the allegation that any of the footwear was supplied to Vladimir Vaysman.  Insofar as the allegations of manufacture and supply to Victoria Vaysman are concerned I am unable to conclude, beyond reasonable doubt that the two companies which he controlled manufactured counterfeit footwear and supplied it to Ms Vaysman in the period between 22 December 2003 and 11 February 2004.  The documentary evidence is consistent with the footwear referred to in the documents having been manufactured and supplied prior to the making of the December 2003 orders.

·                    Charge 18

In breach of the March 2004 Order, from about December 2005 and continuing as at 12 November 2007, Hepbourne Pty Ltd and/or Vladimir Vaysman deliberately and voluntarily permitted, directed, procured, caused and/or encouraged the Roper Street Factory to be used for manufacturing and selling sheepskin footwear which featured (either on the footwear or the accompanying care material) one or more of the names “Ugg”, “Ug”, “Uggs”, “Ugh”, “Ugg Australia”, and the “Original Ugg Company”, the “Ugg Logo”, the “Sun Device” and/or the Copyright Works. 

59                                          The Applicant relies on the reports of Andrew McRobert and David Wilson, the independent solicitors who supervised the searches of the Roper Street Factory on 13 November 2007 and 12 December 2007 respectively, and the affidavits of Mr Watson who carried out those searches. Craig Douglas, an investigative agent from Nationwide Research Group Pty Ltd, and a computer consultant from Ernst & Young assisted Mr Watson with the searches.   

60                                           The Applicant also relied on affidavits sworn by each of Leah Jane Farley, Dianne Sommer, Joanne Strickland, Gihan Ezzat and Oliver Doederlein. 

61                                          Mr Watson’s evidence was that, on 13 November 2007, when the Applicant’s solicitors and Mr Wilson arrived at the Roper Street Factory, a man who identified himself to Mr Watson as Josef Vaysman was present at the premises and answered the door.  Sometime later, a woman who Josef Vaysman identified as his wife, Polina Vaysman, arrived at the Roper Street Factory.  Josef Vaysman would not permit the search of the premises to commence until Vladimir Vaysman arrived.  Until then, no person other than Josef and Polina Vaysman was apparently in control of the factory.

62                                          Mr Watson observed the following material at the Roper Street Factory on 13 November 2007:

·                    many pairs of finished and partly constructed sheepskin footwear marked with the UGG Logo, the Sun Device and the Trade Marks;

·                    a substantial amount of materials used to manufacture sheepskin footwear marked with the UGG Logo, the Sun Device and the Trade Marks, sheets of sole material, cut out soles, sheepskin uppers and parts of sheepskin uppers and labels;

·                    boxes of packaging, information booklets, care instruction cards and brochures bearing the UGG Logo, the Sun Device and the Trade Marks;

·                         items of sheepskin footwear which appeared to have been made by or with the licence of the Applicant and which had been pulled apart; and

·                         numerous pieces of correspondence addressed to Bobby Vaysman, some of which was addressed to “Bobby Vaysman” at 11 Ellington Street, Caulfield, which Mr Watson believed to be an alias used by Vladimir Vaysman.

Photographs of this material were taken by Mr McRobert.  The material was listed in the inventory attached to his report and was retained in his custody. 

63                                          Mr Watson also observed that many of the boxes containing partially made sheepskin footwear had printed on them “Millhouse Pty Ltd.”  From 11 November 2004 to at least 16 November 2007 Josef Vaysman was the sole director and shareholder of Millhouse Pty Ltd. Vladimir Vaysman was actively involved in the business affairs of this company.  During his attendance at the Roper Street Factory Mr Watson obtained copies of:

·                    orders for large quantities of beige and brown sheets sent by Bobby Vaysman on Millhouse Pty Ltd letterhead;

·                    freight forwarding accounts addressed to Millhouse Pty Ltd and “Bobby”; and

·                    a number of express courier international slips where Millhouse is named as the sender and the addressees are various individuals in the UK.  On each slip the description of the goods is “boots” and the value of the goods is stated as AUS$50.  

Mr Watson also caused photographs to be taken of boxes of footwear with Millhouse printed on the side of the boxes.   

64                                          On 12 December 2007, the Applicant’s solicitors again searched the Roper Street Factory. Josef Vaysman answered the door to the factory.  Mr Wilson, the independent solicitor, waited for Vladimir Vaysman to arrive before he allowed the search to commence.  On this occasion Mr Watson observed and seized material from the Roper Street Factory which included: 

·                        approximately 200 pairs of finished and partly constructed sheepskin footwear marked with the UGG Logo, the Sun Device and the Trade Marks, some on shelves and some in boxes. Many of the boxes were labelled “Millhouse”;

·                        four bags of completed counterfeit footwear bearing the UGG Logo, the Sun Device and the Trade Marks;

·                        several boxes of component parts for footwear such as soles, heel pieces and foot inset and completed uppers without soles and labels bearing the UGG Logo, the Sun Device and the Trade Marks;

·                        various labels on which were written the names of the various styles and colours of UGG footwear, such as “Tall Chestnut” and “Tall Choc”; and

·                        boxes bearing the UGG Logo, the Sun Device and the Trade Marks some of which were made up and ready for dispatch.

This material was not in the Roper Street Factory on 13 November 2007.  Most of these items, and particularly the semi-completed footwear, were found under other boxes or included in boxes with other items or under benches.  I infer that someone with access to the factory had attempted to hide the completed footwear. 

65                                          When Mr Watson attended the Roper Street Factory he found that it was equipped with machinery used in the manufacture of sheepskin footwear such as cutting moulds, sewing machines and heat sealing equipment.  On 12 December 2007 there was also stock of sheepskins, sole material, glues and edge trims which had not been present on 13 November 2007. The report of Mr Wilson confirmed that each of the items deposed to by Mr Watson were seized from the Roper Street factory on 12 December 2007.  Mr Watson alleged that what he saw at the factory suggested that Mr Mykhalovskyi, Vladimir Vaysman and Josef Vaysman had continued to engage in manufacturing and distributing the counterfeit from the Roper Street Factory, despite the Court’s orders that they cease to do so. Vladimir Vaysman unlocked a black Lexus car with licence plate number QHD 032 which was parked near the factory.  When he searched the car, Mr Watson found approximately $10,000 in cash in the cabin.

66                                          Documents found at the Roper Street Factory revealed that, between July 2006 and October 2006 Vladimir Vaysman received payments in the total sum of $1,709,710.92 into four accounts held in his name.  Cheque books related to those accounts showed that, in the period 5 October 2005 to around 6 March 2007, 98 cheques were made out to “Cash”.  The total amount of these cheques was approximately $450,000.  Many of the documents relating to the purchasing and/or importation of materials used to make the sheepskin footwear were addressed to or made reference to “Bobby” or “Bobby Vaysman”.

67                                          Ms Farley is an eBay trading assistant.  She sells products on the trading website “eBay” on behalf of other people and charges a commission for her service.  Ms Farley used the eBay store “House of Designs” and the eBay identification “hUUGies House of Design” to trade goods on eBay. On 28 December 2005 Ms Farley was contacted by a person who identified himself as “Leon” who said that he had a quantity of Ugg boots that he wanted her to sell on eBay.  Ms Farley now knows “Leon” to be Vladimir Vaysman. Vladimir gave Ms Farley information on how to list the boots on eBay, the prices he wanted her to list them for, product descriptions and the photos to display with the eBay listing.  In an email from “Leon” to Leah (Ms Farley) dated 12 January 2006 he prescribed how the boots were to be described.  Each description of the boots included the word “UGG”.  In the email Vladimir wrote:

“Some information about the boots:

100% Australian sheepskin

Available in whole sizes only.  If between sizes order ½ size down from your usual size.

UGG Australia brand 

Thank you, Leon” (Emphasis added).

68                                          Initially Vladimir Vaysman delivered the boots to her house in Rowville.  The boots and the boxes in which they were packaged bore the “UGG australia” logo.  Ms Farley wrapped the boxes in butcher’s paper prior to shipping them to the customers.  From December 2006, Ms Farley packed the boots herself. Vladimir brought boxes branded with “Millhouse”, the boots, tissue paper, cartons, cardboard inserts and care instruction cards to her home. Vladimir would decide which styles, colours and sizes she would sell.

69                                          In an affidavit sworn on 26 November 2007, Vladimir deposed that, since 2005, he had not had in his personal possession any of the listed things (as that term was defined in the 12 November 2007 Orders:  see paragraphs [18] and [19] above) “save for one or two sample boots which I used during the course of my employment.”  As far as he was aware, all of the listed things which were in the possession of his employer (Millhouse Pty Ltd) were now in the possession of the independent solicitor, with the exception of a single brown Ugg boot which was in the possession of his solicitors.  Vladimir Vaysman had that boot in his possession at the time the 12 November 2007 Orders were executed and he gave the boot to his solicitors for the sole purpose of obtaining legal advice for himself and Hepbourne Pty Ltd.  He had not personally been supplied with or received an offer to be supplied with, any listed thing and he had never personally supplied, or offered to supply, any person with any listed thing. On behalf of Hepbourne Pty Ltd, Vladimir deposed that Hepbourne Pty Ltd had never had possession of, been supplied with, or received an offer to be supplied with any listed thing and had never supplied or offered to supply any person with any listed thing.  The Applicant submitted this affidavit was false and contemptuous. Despite his assertions to the contrary it is clear that Vladimir Vaysman manufactured or caused to be manufactured boots which bore the Ugg Australia logo, had those boots in his personal possession and deliberately and willingly supplied those products to Ms Farley, amongst others.  I reject the evidence of Vladimir Vaysman.

70                                          Ms Farley sold the boots in Canada and the United States of America and listed the boots on eBay’s USA site.  The boots sold well. Customers deposited the money for the boots into Ms Farley’s PayPal account.  As directed by Vladimir, Ms Farley transferred the money into a bank account held by Minatap Pty Ltd, and later into a bank account held by Millhouse Pty Ltd. Ms Farley deducted her commission from each of the sales receipts.  Initially she deducted AUS$20 but later this was increased to US$20.  By August 2006, Ms Farley was receiving 200-300 email enquiries each day.  She asked her mother, Sandy Hazendonk (the tenth respondent), to help her with her business, and split the commission with her.  Ms Farley prepared sales reports for Vladimir in which she listed the sales to the USA and the UK separately, and the number of sales made in each of her eBay trading names, and once she became involved, the sales made in Ms Strickland’s eBay trading name.  

71                                          In or around July or August 2006, Ms Farley invited Ms Strickland to participate in her business.  Ms Farley asked Ms Strickland whether she would be interested in selling boots on eBay during busy periods.  Ms Strickland assisted Ms Farley in selling boots on eBay between July 2006 and September 2006 and again between July 2007 and November 2007.  Ms Strickland received US$10, half of Ms Farley’s commission, for any pairs that she sold. Ms Farley provided Ms Strickland with the information and photos to post on eBay.  Initially Ms Strickland obtained the boots from Ms Farley.

72                                          In June 2007, Ms Farley moved to 30 Gareth Avenue Beaumaris.  From about this time, Ms Farley began collecting the footwear from the Roper Street Factory.  She attended the factory approximately four or five times a day.  Ms Farley was not aware that Vladimir was physically making the boots himself until she visited the factory.  Ms Farley always rang before she picked up the boots from the Roper Street Factory and the persons now known to her as Josef or Polina Vaysman would answer the phone. Often Josef Vaysman or Polina Vaysman would answer the door when she arrived at the factory and they were always present when she visited the factory during the week.  When she attended at the Roper Street Factory, Ms Farley observed that Vladimir and Josef would always be operating the sewing machinery.

73                                          In approximately July 2007 Ms Strickland contacted Vladimir, whose details had been provided to her by Ms Farley, and began collecting what she described as “the Respondents’ Products” directly from the Roper Street Factory.  By this I understand her to be referring to footwear manufactured by some or all of the Respondents to the proceeding.  Ms Strickland faxed a list of the items sold to what Vladimir told her was his work facsimile number.  Ms Strickland would ring Vladimir on his mobile telephone number and arrange a time to pick up the boots.  Vladimir would have the boots ready for collection for Ms Strickland when she arrived at the Roper Street Factory.  Vladimir admitted her to the factory.  Vladimir admitted in his affidavit that he believed he had heard the name “Joanne of Designer Comfort” before, possibly during conversations with either Ms Farley or Ms Sommer “which he had in the course of his employment with Millhouse”, but aside from that basic recognition of her name he did not have any further information about her.

74                                          Ms Strickland sold boots to customers in Canada and the United Kingdom using the eBay trading name “Designer Comfort”.  Between July 2006 and November 2007, Ms Strickland sold approximately 420 pairs of the boots.  The tall boots were sold for approximately $120 Canadian dollars and the short boots were sold for approximately $104 Canadian dollars.  She sold the short boots for GBP60 and the tall boots for GBP65.  Ms Strickland made $84,590.69 in total sales of the boots.  Of this $58,668.16 was deposited into Ms Farley and Mr Biondo’s accounts, eBay deducted $6,665.25 in fees, $11,460.47 was spent on postage and Ms Strickland retained $7,796.81 net profit. 

75                                          In October 2007, Vladimir told Ms Farley that the boots had sold well in the past from websites dedicated to their sale.  Vladimir created a website for Ms Farley located at www.dusiafootwear.com.  Ms Farley opened up a new PayPal account for this website.  Initially, Ms Farley received a 7% commission on the sales she made from this website.  Later her commission increased to 12%.  Vladimir controlled the prices at which Ms Farley sold the boots, the number of boots she had to sell and her profit margin.  With Vladimir’s encouragement, Ms Farley also sold a large amount of the boots to customers on a wholesale basis.  

76                                         Ms Sommer is also an eBay trading assistant.  She sold ugg branded products on eBay for Victoria Vaysman from mid-January 2006 to mid-March 2006.  In August 2006 a person who Ms Sommer now knows to be Vladimir Vaysman contacted her and asked her whether she would be interested in selling UGG Australia footwear for him.  Vladimir arranged for Ms Sommer to meet him at the Roper Street Factory.  At the factory, Vladimir showed Ms Sommer the new “UGG Australia” product range and told her that she could see the entire range at any time on the UGG Australia website.  He told her that once she had sold the footwear, she would need to come to the Roper Street Factory to collect the footwear and then send the boots to the customer herself.  Ms Sommer emailed him a list of the footwear that she had sold and he would arrange for the goods to be ready for collection by her.  Ms Sommer would place an order with Vladimir and then arrange a time to meet him at the Roper Street Factory to collect the goods.  When Ms Sommer came to collect her orders Vladimir would have the boxes ready for her.  Vladimir sold the footwear to Ms Sommer at cost price and she kept any monies she made by selling the boots to customers above the cost price.

77                                          In approximately August 2007 Vladimir suggested that Ms Farley and Ms Sommer move their separate “operations” into a factory.  Ms Farley and Ms Sommer moved their operations to the Levanswell Road Warehouse.  Polina Vaysman came to look at the Levanswell Road Warehouse and looked through every room and every box. Polina admitted that she had been to the Levanswell Road Warehouse but denied that she was curious as to the contents of the boxes.   

78                                          Vladimir asked Ms Sommer and Ms Farley to submit a daily report to him which outlined the sales that they had made on that day.  Ms Sommer and Ms Farley continued to collect the footwear from the Roper Street factory to satisfy the orders they received at the Levanswell Road Warehouse. 

79                                          The Levanswell Road Warehouse and Ms Farley’s home at 30 Gareth Avenue, Beaumaris were searched by the Applicant’s solicitors on 12 November 2007.  Mr Watson gave evidence that the following items were found at the Levanswell Road Warehouse: 

·                        in excess of 600 units of finished ladies “and children’s”’ sheepskin footwear marked with the UGG Logo, the Sun Device and the Trade Marks in various stages of packaging and preparation for shipping and delivery. Some of these were in boxes which bore the UGG Logo, the Sun Device and the Trade Marks;

·                        71 packages containing rubber sheets with the Trade Marks and the Sun Device moulded into them;

·                        in excess of 100 flat packed unassembled footwear packaging boxes featuring the Trade Marks and the Sun Device;

·                        printed care instruction cards and information booklets bearing the Trade Marks and the Copyright Works; and

·                        bundles of completed Express Courier International receipts with various “sender/return address” names and addresses printed on them including B Vaysman and Millhouse.

80                                          Documents found at the Roper Street Factory indicated that the Levanswell Road Warehouse had been leased to “J Vaysman”.  Invoices for rental payments on the property were sent to Mr Vaysman at 11 Ellington Street Caulfield, by Hodges Commercial Pty Ltd.  Josef claimed that he was unaware of the leasing arrangements for the Levanswell Road Warehouse.  He could not read English and had not seen the invoice for rent or the letter from Hodges.

81                                          Ms Sommer and Ms Farley observed the Roper Street factory on 7 December 2007 and the Victoria Market on 8 December 2007.  On 7 December 2007 Ms Sommer and Ms Farley parked outside the Roper Street factory and observed Leonid Mykhalovski leaving the Roper Street Factory in a maroon sedan.   At 4.45 pm a man of Asian appearance arrived at the Roper Street Factory in a light blue Holden Lexcen wagon with the licence plate ECT 781.  He entered the factory and, 10 minutes later, left the factory with Josef Vaysman who was carrying two large boxes of sheepskin footwear with the name “Millhouse” on their sides.  Photographs taken by Ms Farley and Ms Sommer show that the top of these boxes were open and that sheepskin footwear was inside the boxes.

82                                          At 5.15 pm Ms Farley and Ms Sommer observed another car arrive at the Roper Street Factory.  It was driven by an elderly man who entered the factory empty-handed but left the factory carrying two large bags.  He was accompanied by Polina Vaysman. 

83                                          On 8 December 2007 Ms Farley and Ms Sommer attended the Victoria Market and observed that at the stall numbered “K9” a person was selling sheepskin boots which bore the UGG australia logo.  At stall number “C44” the same man of Asian appearance who they had observed at the Roper Street factory the previous evening and who was wearing the same t‑shirt which he had been wearing on 7 December 2007 was selling footwear.  They saw the same bags at the stall that he had carried out of the Roper Street factory.  Ms Farley and Ms Sommer also observed a box at stall C44 which was labelled “Joseph/Australia”. Ms Farley and Ms Sommer purchased from stall C44 a pair of black slippers which had the Sun Device moulded in the sole.  They took photographs which depict boots, with an “UGG Australia” label sewn onto them, on the stall.

84                                          Between January 2006 and November 2007, Ms Farley sold approximately 15,000 pairs of Ugg boots.  In the months leading up to the search of the Levanswell Road Warehouse on 13 November 2007 Ms Sommer sold approximately 1,000 pairs of Ugg boots per month. Ms Farley and Ms Sommer sold the boots for approximately 100 GB pounds per pair to Europe and USD$ 125 to the USA. 

85                                          Ms Ezzat is also an eBay trading assistant.  Ms Ezzat sold “Ugg” boots at the invitation of Victoria Vaysman from mid-December 2005 to January 2006.  From early 2006 Ms Ezzat dealt with Vladimir Vaysman.  Vladimir sent her emails with photos of new footwear products.  He also directed her that payments should be made to Millhouse Pty Ltd and provided her with the bank details for this company’s account.  Ms Ezzat set up a specific eBay user name “uggcentre” to sell the footwear.  Throughout 2006, either Vladimir or Victoria delivered the ugg branded footwear to Ms Ezzat. In or about April/May 2007, Victoria advised Ms Ezzat that Vladimir was now too busy to box the footwear and that Ms Ezzat would need to box the footwear herself.  Initially Ms Ezzat refused to do this but later agreed to do so for an increased fee.  Subsequently, Ms Ezzat was told by Victoria that she would have to collect the stock from Vladimir’s factory in Roper Street, Moorabbin.  Victoria told Ms Ezzat that she would be contacted by Vladimir when the stock was ready for collection.

86                                          Ms Ezzat started visiting the Roper Street Factory on a regular basis to pick up her footwear.  She dealt with Vladimir each time she attended the factory.  Ms Ezzat saw people at the Roper Street Factory who were manufacturing the footwear.  During her visits to the factory, Ms Ezzat was introduced to Victoria’s parents, Josef and Polina Vaysman.  On one occasion at the Roper Street Factory, Vladimir advised Ms Ezzat that she would no longer be selling for Victoria.  He stated that it would be much easier for him to keep track of the stock and how much it had been sold for by issuing invoices to Ms Ezzat.  Ms Ezzat was instructed by Vladimir to make payments to an account in the name of Rastov Pty Ltd.  Vladimir required payments from Ms Ezzat each Friday.  Vladimir told Ms Ezzat the price at which she should list the footwear on eBay.  Ms Ezzat no longer received a fixed amount for each sale and was now required to pay for the eBay and PayPal fees.  She was entitled to keep the remaining monies once she had paid these fees and had paid Vladimir for the footwear she had sold.

87                                          On or about 20 November 2007, Vladimir telephoned Ms Ezzat and told her that he wanted her to list the footwear on eBay UK.  He told Ms Ezzat that he would no longer be providing the footwear to his other eBay sellers and that he wanted her to sell more stock and at a quicker pace.  Ms Ezzat asked Vladimir why he was no longer supplying the goods to his other sellers and he told her that it was better not to ask what had happened.  Ms Ezzat was joined as a Respondent to the proceeding on 27 November 2007. 

88                                          In an affidavit dated 4 December 2007, Vladimir deposed that he recalled that, about six months earlier, in the course of his employment with Millhouse Pty Ltd, he had received a telephone call from Gihan Ezzat in relation to the possible supply of some boots to him, but that those enquiries never proceeded beyond that one phone call and he had no further information about her.  In an affidavit sworn 11 December 2007, Vladimir deposed that, further to his previous affidavits, in the course of his employment with Millhouse Pty Ltd he had “arranged to provide “Uggcentre” with boots and shoes as requested by her from time to time.”   On or about 5 December 2007 he was told by his solicitors, that the person he knew as “Uggcentre” was in fact called Gihan Ezzat.  These attempts, by Vladimir Vaysman, to suggest that he did not know Ms Ezzat and that he was unaware of the arrangements she had put in place to sell the UGG boots, are disingenuous.  The evidence of Ms Ezzat, which I accept, makes it plain that Vladimir Vaysman had regular meetings with her during which arrangements to sell large quantities of the boots were made.

89                                          During her involvement with the sale of the boots Ms Ezzat paid the sum of $177,776.66 into accounts held by Samba Enterprise Pty Ltd, Minatap Pty Ltd and Millhouse Pty Ltd.  This money was derived from the sales made by Ms Ezzat of the boots which were supplied to her by Victoria Vaysman and Vladimir Vaysman.  The payments were confirmed by bank receipts which she produced.

90                                          Mr Oliver Doederlein conducts a re-sale business on eBay.  Mr Doederlein sold ugg branded boots for Victoria Vaysman from early January 2006 to February 2006 [from his affidavit, Doederlein was not contacted by Vladimir until “late 2006” so presumably only commencing re-selling the boots from that time]  This was admitted by Victoria. When he sold the boots for Victoria he received a commission of US$20-30 per pair of boots sold. Mr Doederlein later met “Bobby” at the warehouse in Moorabbin.  Mr Doederlein noticed that there was a lot of merchandise at the warehouse, including Ugg boots in a variety of styles.  Mr Doederlein handed the money directly to “Bobby” or, if he wasn’t there, he would hand the money to an older lady.  From approximately April 2006 until August / September 2007, Mr Doederlein purchased the boots directly from “Bobby”.  Mr Doederlein purchased approximately 400 pairs of boots during this time for between US$90 and $120 per pair.  In an affidavit dated 4 December 2007, Vladimir admitted that, about seven or eight months earlier, in the course of his employment with Millhouse Pty Ltd, he had received a telephone call from a person called “Oliver” in relation to the possible supply of some boots to him, but said that those enquiries never proceeded beyond that one phone call and he had no further information about him.  Mr Doederlein’s evidence was not challenged.  I accept it.  Vladimir Vaysman’s evidence is untrue insofar as it fails to acknowledge his extensive dealings with Mr Doederlein.

·                    Charge 19

In breach of the March 2004 Order, from December 2005 to November 2007 Vladimir Vaysman deliberately and voluntarily procured, aided, abetted, assisted and/or instructed each of Ms Farley, Ms Sommer, Ms Strickland, Ms Ezzat and Mr Doederlein to act as his agents in promoting, advertising, offering for sale and selling on the internet sheepskin footwear under or by reference to the names “Ugg” and/or “Ugg Australia” and/or the Ugg Logo and the Sun Device and personally delivered such footwear to them.  

91                                          The evidence relied on by the Applicant in support of this charge is that of Ms Farley, Ms Sommer, Ms Strickland, Ms Ezzat and Mr Doederlein which it also relied on in support of Charge 18.

·                    Charge 20

In breach of the March 2004 Orders, Vladimir Vaysman deliberately and voluntarily represented to Ms Sommer that the Respondents’ sheepskin footwear products were manufactured, advertised and/or promoted with the sponsorship or approval of the Applicant.

92                                          The Applicant relied on the evidence of Ms Sommer.  During her meeting with Vladimir at the Roper Street Factory in August 2006, Ms Sommer told Vladimir that he had a fantastic business and asked him how he got involved.  Vladimir told her that his wife was a trade mark attorney and that she had negotiated a licence.  He showed Ms Sommer a document which had the word “licence” on it which he said was between “us” and Deckers Corporation.  Ms Sommer conducted internet searches on “Bobby’s” wife Tanya Vaysman.  Ms Sommer’s searches confirmed that Tanya Vaysman was a trade mark attorney and that she worked for the law firm Allens Arthur Robinson.  Mrs Tanya Vaysman denied that she had ever negotiated such a licence.  I accept her evidence.

·                    Charge 21

In breach of the March 2004 Orders, Vladimir Vaysman deliberately and voluntarily represented to Ms Farley that the Respondents’ sheepskin footwear products were manufactured, advertised and/or promoted with the sponsorship or approval of the Applicant.   

93                                          The Applicant relies on the evidence of Ms Farley.  Ms Farley deposed that, in January 2006, she was not aware that there was a brand associated with Ugg boots.  When Vladimir said to her that his parents had made “genuine” sheepskin boots for 30 years, Ms Farley said she thought that he meant genuine sheepskin.  Ms Farley also gave evidence that Vladimir had told her that he had a licence to sell the boots overseas but not a licence to sell the boots in Australia.  Ms Farley presumed that he had an export licence.  She was never shown a licence document.  In my view this evidence is not sufficient to support the charge.

·                    Charge 22

In breach of the March 2004 Orders,  Vladimir Vaysman deliberately and voluntarily permitted, directed, procured, caused and/or encouraged the Braeside Warehouse to be used for importing, exporting, manufacturing, distributing and/or selling the Enjoined Products (as defined in the March 2004 Order). 

94                                          The Applicant relies on the evidence of Mr Watson and the report of Mr Wilson in relation to the search of the Braeside Warehouse on 12 December 2007.  When Mr Watson searched the Roper Street Factory on 12 December 2007 he discovered an invoice which indicated that the Braeside Warehouse had been leased to Vernon Co Pty Ltd on or about 28 November 2007.  The invoice was addressed to “Bobby Vaysman, Vernon Co Pty Ltd, 1 Roper Street Moorabbin.”  At relevant times Josef Vaysman was the sole director of Vernon Co Pty Ltd.  Mr Watson immediately applied to the Court, via telephone, for an order extending the search order to the Braeside Warehouse.  Mr Watson, Mr Wilson and Messrs Douglas and Adams of Ernst & Young attended the Braeside warehouse at approximately 5.20 pm on 12 December 2007. 

95                                          Mr Watson there observed and secured many pairs of footwear and component parts marked with the Ugg Logo and the Sun Device including:

·                        82 large cartons containing counterfeit boots with approximately 30 pairs of boots in each carton (amounting to over 2,400 pairs).  Each carton was labelled with the name “MILLHOUSE”;

·                        6 large striped bags containing counterfeit footwear;

·                        1 large garbage bag containing counterfeit footwear;

·                        an invoice dated 6 December 2007 from K&G Cartons for 2000 cartons which the invoice stated were delivered to the Braeside Warehouse.  Footwear packaging boxes featuring the Trade Marks and the Sun Device sufficient to make up approximately 3,400 boxes.

·                         17 boxes containing various fabric labels bearing the Ugg Logo which each contained 500 or 1000 labels;

·                         6 packs of rubber sole material which featured the Trade Marks and the Sun Device;

·                         5 boxes with printed care instruction cards bearing the Trade Marks and the Copyright Works, with 2000 cards in each box; and

·                         a package containing counterfeit footwear which was ready to be shipped to a purchaser in Canada.

96                                          The report of Mr Wilson confirmed that, when he entered the Braeside Warehouse on 12 December 2007, he saw many boxes containing “Ugg” labelled footwear and stacks of “Ugg” labelled pre-assembled cardboard packaging.  The items seized were listed in an inventory attached to Mr Wilson’s report.   

·                    Charge 32

In breach of the November 2007 Undertaking, since 27 November 2007 and continuing as at 12 December 2007 Vladimir Vaysman and/or Hepbourne Pty Ltd deliberately and voluntarily permitted, directed, procured, caused and/or encouraged the Roper Street Factory to be used for importing, exporting, manufacturing, distributing and/or selling the Enjoined Products.

97                                          The Applicant relies on the observations made by Ms Farley and Ms Sommer, on 7 and 8 December 2007 and the evidence of Mr Watson and Mr Wilson in relation to the search of the Roper Street Factory on 12 December 2007.  This evidence was outlined in dealing with Charges 18 and 22.  See above at [81]-[83], [94]-[96].     

·                    Charge 33

In breach of the November 2007 Undertaking, since 27 November 2007 and continuing as at 12 December 2007 Vladimir Vaysman deliberately and voluntarily permitted, directed, procured, caused and/or encouraged the Braeside Warehouse to be used for importing, exporting, manufacturing, distributing and/or selling the Enjoined Products.  

The evidence relied on to support Charge 33 is the same as that relied on in respect of Charge 22. 

·                    Charge 34

In breach of the November 2007 Undertaking, since 27 November 2007 and continuing as at 12 December 2007, Vladimir Vaysman has deliberately and voluntarily attempted to procure further agents to promote, advertise, offer for sale and sell the Enjoined Products on the internet. 

98                                          The Applicant relies on the evidence of Ms Farley, Ms Sommer and Ms Ezzat and the material that was found at Vladimir’s home at 303 Balaclava Road, Caulfield, and the Roper Street Factory on 12 December 2007.  

99                                          Ms Farley’s evidence was that, on 13 November 2007, after she had been served with a search order and her home had been “raided”, Vladimir telephoned her and asked whether she still wanted to keep selling the boots.  Ms Sommer also gave evidence that Vladimir had called her that day, at approximately 8.45 am, and told her not to go to the Levanswell Road Warehouse and said that, if anyone came to her house, she should say nothing.  Vladimir told Ms Sommer that everything would quieten down in the next two weeks and he asked her whether she would continue to sell the footwear once everything had blown over.  

100                                       On or about 20 November 2007, Ms Ezzat received an email from the email address ag1_12@hotmail.com from a person who was looking for a trading assistant to sell UGG Australia boots on the US and UK eBay sites.  The email was signed by “John”.  On the same day, Ms Ezzat received the same email from the email address wwwuggs.  On receiving the emails, Ms Ezzat contacted Vladimir and told him that someone had contacted her and asked her to sell “UGG Australia” footwear. Vladimir told her that the emails were from him and that she should just ignore them.  He told her that he was searching for more trading assistants and that he forgot that the email address he had directed his request to belonged to Ms Ezzat.

101                                       On 12 December 2007 Mr Watson, Mr Wilson, Mr Douglas and Mr Adams attended 303 Balaclava Road, North Caulfield.  A copy of the hard drive of Vladimir Vaysman’s computer was taken.  A search of the hard drive revealed draft emails to potential eBay sellers in which “John” advised that he was looking for a trade assistant to help him sell Ugg boots on eBay and the description the seller who to use when listing the products.  The hard drive also contained images and text which had been taken from the Applicant’s website.

·                    Charge 48

Vladimir Vaysman has not, either on his own behalf or on behalf of Hepbourne Pty Ltd, complied with paragraph 23 of the 12 November 2007 Orders.

102                                       Vladimir Vaysman did not object to complying with the 12 November 2007 Orders on the ground that to do so would incriminate him or Hepbourne Pty Ltd, or make him or it liable to a civil penalty.  The affidavit of Vladimir Vaysman, sworn on 26 November 2007, was filed in purported compliance with paragraph 23 of the 12 November 2007 Orders.  The contents of the affidavit are summarised above at paragraph [69].     

103                                       The Applicant contended that Vladimir Vaysman and Hepbourne Pty Ltd have not complied with the 12 November 2007 Orders.  I accept this submission.  The overwhelming evidence supports the conclusion that the contents of Vladimir Vaysman’s affidavit were untrue and that he had wholly failed to comply with his obligation to inform the Applicant as to the whereabouts of counterfeit Ugg products which were in his possession or under his control, the names and addresses of his suppliers and details of the marketing of the counterfeit products.

Josef Vaysman, Millhouse Pty Ltd, HGU Pty Ltd, Taskinc Pty Ltd and Vernon Co Pty Ltd

104                                       Josef Vaysman was the sole director and shareholder of:

·                        Millhouse Pty Ltd from 27 November 2007 to at least 6 June 2008; 

·                        HGU Pty Ltd from 26 September 2006 to at least 6 June 2008;

·                        Taskinc Pty Ltd from 26 September 2006 to at least 6 June 2008;

·                        Vernon Co Pty Ltd from 8 December 2006 to at least 6 June 2008.

The charges against Josef Vaysman are as follows: 

·                    Charge 36

In breach of the 27 November 2007 Order, on 7 and 8 December 2007, Josef Vaysman and/or Millhouse Pty Ltd deliberately and voluntarily distributed, disposed and dealt with the Enjoined Products and/or procured or induced a person to offer to sell and sell the Enjoined Products by, on 7 December 2007, supplying such Enjoined Products in boxes bearing the name “Millhouse” to a person outside the Roper Street factory which were then offered for sale and sold by that person on 8 December 2007 at stall number C44 of the Queen Victoria Market, Melbourne, Victoria.

105                                       The Applicant relied on the evidence which is summarised above at [63]-[65].  Ms Sommer and Ms Farley said that the man they observed at stall C44 was selling many pairs of boots branded with the Applicant’s trademarks.  The photographs taken by them of the stall at the Victoria Market showed many pairs of boots which bore the “Ugg Australia” logo.  The soles of the boots contained the word “Ugg” adjacent to the sun device.

106                                       Josef Vaysman denied Charge 36.  He admitted that the photographs taken by Ms Sommer and Ms Farley were of his stall at the Victoria Market and that he had made the products shown in the photograph.  He admitted that he had personally glued a sole with Ugg branding onto a boot.  He maintained, however, that none of the items of sheepskin footwear in the photographs were Enjoined Products (as defined in the 27 November 2007 orders).  I do not accept his evidence.  His admission that he had glued “a sole with Ugg branding onto a boot” is, literally, true.  However it represents a gross understatement.  The undisputed evidence of many witnesses was that he was involved in the manufacture of a very large number of counterfeit boots.  The photographs clearly show sheepskin footwear bearing the “Ugg Australia” logo.

·                    Charge 37

In breach of the 27 November 2007 Order, from 27 November 2007 to 12 December 2007 Josef Vaysman deliberately and voluntarily manufactured the Enjoined Products at the Roper Street Factory. 

107                                       The Applicant relies on the evidence of Mr Watson and Mr Wilson in relation to the search of the Roper Street Factory on 12 December 2007 (see above at [81]-[82]) and the evidence of Ms Farley, Ms Strickland, Ms Ezzat and Ms Sommer including the observations of Ms Sommer and Ms Farley on 7 and 8 December 2007 (see above at [94]-[96]).

108                                       Apart from the account given by Ms Farley and Ms Sommer of what they saw at the factory on 7 and 8 December 2007, the evidence of Ms Farley, Ms Strickland, Ms Sommer and Ms Ezzat that is relied on by the Applicant related to events which occurred before 27 November 2007 and, therefore, does not support the allegations made in Charge 37.  

109                                       In addition to the evidence which is summarised above at [81]-[82] Mr Watson said that, when he attended the Roper Street Factory on 12 December 2007 (to execute a search warrant issued by the Court), Josef was present.  Until Vladimir arrived, no person other than Josef and Polina Vaysman was apparently in control of the factory.  During the 12 December 2007 search Josef paced around the factory and moved items on the workbenches.  He was told by Mr Wilson that he could call a solicitor about the search order and that he could isolate any privileged documents but that he may not conceal anything.  Josef said words to the effect that he did not understand English.  Mr Wilson observed Josef attempt to hide documents.  Mr Wilson again told Josef that he may not hide anything.  Josef told Mr Wilson that he did not understand.  Josef also said to Mr Wilson words to the effect that selling Ugg boots was his job for many years.    

110                                       Josef admitted that, when his son, Vladimir, was not present at the Roper Street Factory, he carried out the supervision of the factory necessary for the production of the scuffs, slippers, baby bootees, moccasins, short and tall boots.  Josef denied that he deliberately and voluntarily manufactured the Enjoined Products at the Roper Street factory from 27 November 2007 to 12 December 2007.  He admitted that he manufactured moccasins, sheepskin footwear, slippers and bootees but denied ever manufacturing anything that bore the word Ugg.  He denied the accusation that he attempted to hide documents by putting them under a couch during the 12 December 2007 search of the Roper Street Factory.  He repeated that he did not read English and would not have known what any of the documents that he was alleged to have put under the couch were.  The items he was moving around the Roper Street Factory during the 12 December 2007 search were moccasins, scuffs, slippers and bootees. He maintained that he was not involved in the manufacture and distribution of sheepskin footwear other than moccasins, scuffs, slippers and bootees, which he made for sale at the Victoria Market and other markets.

111                                       I do not accept Josef Vaysman’s denial that he manufactured counterfeit products at the Roper Street Factory between 27 November and 12 December 2007.  Production of footwear was continuing when Mr Watson returned to the premises on 12 December 2007.  Large quantities of Ugg branded products were found which had not been there two weeks earlier.  Josef Vaysman was on the premises and apparently in control.  He admitted undertaking the manufacture of sheepskin footwear at relevant times.  I reject his denial that that footwear (or some of it) had Ugg labels attached to it.

·                    Charge 52

In breach of the 26 November 2007 Orders, Josef Vaysman did not comply with paragraph 6 of the 26 November 2007 Orders.  

112                                       It was common ground that, despite being served with the 26 November 2007 Orders, as at 6 February 2008, Josef Vaysman had not complied with those orders.  He said that he  was not aware of the 26 November 2007 Orders or that he was required to file an affidavit of his assets until his then solicitor, Mr Goldsmith, informed him of this in mid-February 2008.  Josef filed an affidavit in compliance with the 26 November 2007 Orders on 27 February 2008. 

·                    Charge 55

In breach of the 26 November 2007 Orders, Josef Vaysman has not caused Millhouse Pty Ltd to comply with paragraph 6 of the 26 November 2007 Orders.

·                    Charge 57

In breach of the 26 November 2007 Orders, Josef Vaysman has not caused HGU Pty Ltd to comply with paragraph 6 of the 26 November 2007 Orders. 

·                    Charge 61

In breach of the 26 November 2007 Orders, Josef Vaysman has not caused Taskinc Pty Ltd to comply with paragraph 6 of the 26 November 2007 Orders.

·                    Charge 67

In breach of the 14 December 2007 Orders, Josef Vaysman has not caused Vernon Co Pty Ltd to comply with paragraph 10 of the 14 December 2007 Orders. 

113                                       It was common ground that, despite his solicitors being served with the 26 November 2007 Orders and the 14 December 2007 Orders, as at 6 June 2008, Josef Vaysman had not caused Millhouse Pty Ltd, HGU Pty Ltd, Taskinc Pty Ltd and Vernon Co Pty Ltd to comply with those orders.   Sealed copies of the 14 December 2007 Orders were duly served by courier on Vernon Pty Ltd at 11 Ellington Street, Caulfield South and on Rastov Pty Ltd at Unit 1, No 544 New Street, Brighton.

114                                       Josef asserted that, prior to preparing his affidavit on 1 April 2008, he had never heard of the companies Millhouse Pty Ltd, Vernon Co Pty Ltd, HGU Pty Ltd or Taskinc Pty Ltd,  he did not know anything about those companies, and he did not know that he was the sole director of those companies.  He understood at the date of preparing the affidavit that Millhouse Pty Ltd, Vernon Co Pty Ltd, HGU Pty Ltd and Taskinc Pty Ltd were placed in liquidation on 21 December 2007.  Josef said that Vladimir made a stamp version of Josef’s signature and that Josef had authorised Vladimir to use it.  Josef had “no idea” when or to what documents Vladimir applied the stamp.

115                                       I accept that Josef may have been unaware of the signing of various documents relating to the companies of which he was a director.  The day to day conduct of these companies (insofar as they undertook any business activities) would appear to have been in the hands of Vladimir.  I do not, however, accept that the first time Josef had heard of these companies was when he was preparing the affidavit which he swore on 1 April 2008.  He had solicitors acting for him in the period shortly after the making of the 26 November 2007 and the 14 December 2007 orders.  Those orders contained the names of the various companies.  Having authorised Vladimir to utilise the stamped version of his signature, he ought reasonably to have caused his solicitors to make enquiries as to the directorships of such companies.  In any event, having become aware of the existence of these companies and his directorships of them no later than 1 April 2008, he still failed to comply with the orders.

Polina Vaysman

116                                       The Applicant lays two charges against Polina Vaysman:

·                    Charge 40

In breach of the November 2007 Order, since 27 November 2007 and continuing as at 12 December 2007, Polina Vaysman deliberately and voluntarily manufactured, distributed, disposed and/or dealt with the Enjoined Products at the Roper Street Factory.

117                                       In prosecuting this Charge the Applicant sought to rely on substantially the same evidence on which it relied in relation to Charge 37.  Most of that evidence related to events which occurred prior to 27 November 2007.  The evidence of Ms Farley, Ms Sommer and Ms Ezzat clearly established that, earlier in 2007, Polina was engaged in the manufacture of footwear at the Roper Street Factory.  None of the witnesses observed Polina engaged in manufacturing footwear between 27 November and 12 December 2007.  She was seen by Ms Farley and Ms Sommer outside the Roper Street Factory on 7 December 2007 with a person who Polina described as “an old family friend” who left the factory with her.  She was present at the factory when Mr Watson attended on 12 December 2007.

118                                       Polina Vaysman denied Charge 40.  She said that she had never been involved in any way in the sale or manufacture of Ugg boots nor had she ever been involved in working in any of her husband’s or her son’s businesses.  When she was at the Roper Street Factory, she was not involved in any of the manufacturing activities taking place there including the manufacture of footwear.  Polina visited Josef at the Roper Street Factory two or three days a week to take him food and drink.

119                                       I do not accept Polina Vaysman’s denial that she was ever engaged in the manufacture of Ugg products at the Roper Street Factory.  I am not, however, satisfied, beyond reasonable doubt, that she was so engaged between 27 November and 12 December 2007. 

·                    Charge 53

In breach of the 26 November 2007 Orders, Polina Vaysman did not comply with paragraph 6 of the 26 November 2007 Orders.  

120                                       It was accepted that, despite being served with the 26 November 2007 Orders, as at 6 February 2008, Polina Vaysman had not complied with paragraph 6 of those orders.   Polina gave evidence that she was not aware of the 26 November 2007 Orders or that she was required to file an affidavit of her assets until Mr Goldsmith informed her of this in mid-February 2008.  Polina filed an affidavit in compliance with the 26 November 2007 Orders on 27 February 2008. 

Leonid Mykhalovskyi

121                                       Leonid Mykhalovskyi was the sole director and shareholder of each of Dusia Pty Ltd, Fedia Pty Ltd, OTK International Pty Ltd and Rastov Pty Ltd from 31 August 2006 to at least 6 June 2008.  The charges against Mr Mykhalovskyi are as follows: 

·                    Charge 41

In breach of the November 2007 Orders, since 27 November 2007 and continuing as at 12 December 2007, Leonid Mykhalovskyi deliberately and voluntarily manufactured the Enjoined Products at the Roper Street Factory.

122                                       The Applicant relies on the evidence of Ms Farley, Ms Sommer and Mr Watson. Ms Farley deposed that, on a visit to the Roper Street Factory or an unspecified date, she saw a man gluing the soles on “the products” and using a pressing machine which was used to secure the soles on “the boots”.  It is likely that that visit occurred some time before 27 November 2007.  She could now say that the man was Mr Mykhalovskyi because she had seen a copy of his driver’s licence in the Court documents.  The licence bore his photograph.  Ms Sommer also saw him working on a machine in the back corner of the Roper Street factory.  She did not specify what work Mr Mykhalovskyi was undertaking.

123                                       Mr Mykhalovski, Vladimir Vaysman and Josef Vaysman conducted the business of Dusia Pty Ltd.  Josef Vaysman was the sole director and shareholder of Dusia Pty Ltd from 2 May 2006 until 31 August 2006, at which time Mr Mykhalovski became the sole director and shareholder.  Mr Watson’s evidence was that Dusia Pty Ltd obtained counterfeit footwear from the Roper Street Factory and sold those products via the Dusia website www.dusiafootwear.com.  

124                                       The Applicant contended that Mr Mykhalovskyi worked at the Roper Street factory and was “actively engaged in the manufacture of counterfeit footwear.”  When Mr Watson attended the Roper Street Factory on 13 November 2007 he asked Josef Vaysman whether Leonid Mykhalovskyi was present at the factory.  Josef denied knowledge of a person by that name.  Mr Mykhalovskyi was not observed to be present at the premises on that day.  According to time sheets found on the premises Mr Mykhalovskyi worked in the factory between 13 August and 12 December 2007. In most weeks he worked on six days.  During the search Mr Watson found many letters addressed to Leonid Mykhalovskyi.  Leonid Mykhalovskyi was the secretary of Dusia Pty Ltd from 2 May 2006 to 31 August 2006, during which time Josef Vaysman was a director of that company.

125                                       When Mr Watson arrived at the Roper Street Factory on 12 December 2007 he saw Leonid Mykhalovskyi alight from a maroon Nissan Pintara with registration number UYY 139 and enter the factory.

·                    Charge 46

In breach of the 12 November 2007 Orders, Leonid Mykhalovskyi has not personally or on behalf of Dusia Pty Ltd complied with paragraph 23 of the 12 November 2007 Orders.

·                    Charge 51

In breach of the 26 November 2007 Orders, Leonid Mykhalovskyi has not himself or on behalf of Dusia Pty Ltd complied with paragraph 6 of the 26 November 2007 Orders.  

·                    Charge 59

In breach of the 26 November 2007 Orders, Leonid Mykhalovskyi did not cause Fedia Pty Ltd to comply with paragraph 6 of the 26 November 2007 Orders. 

·                    Charge 63

In breach of the 26 November 2007 Orders, Leonid Mykhalovskyi has not caused OTK International Pty Ltd to comply with paragraph 6 of the 26 November 2007 Orders.  

·                    Charge 69

In breach of the 14 December 2007 Orders, Leonid Mykhalovskyi has not caused Rastov Pty Ltd to comply with paragraph 10 of the 14 December 2007 Orders.

126                                       Despite being served with the 12 November 2007 Orders, the 26 November 2007 Orders and the 14 December 2007 Orders, as at 6 June 2008, Leonid Mykhalovskyi had not caused Dusia Pty Ltd, Fedia Pty Ltd, OTK International Pty Ltd and Rastov Pty Ltd to comply with those orders.  

ORDERS SOUGHT

127                                       The Applicant seeks declarations of contempt and the imposition of a fine against each of the alleged contemnors, and a warrant for the arrest of each of Vladimir Vaysman, Victoria Vaysman, Josef Vaysman, Polina Vaysman and Leonid Mykhalovskyi and the imposition of a term of imprisonment against those respondents for a period determined by the Court.

CONTEMPT OF COURT

128                                       Pursuant to s 31(1) of the Federal Court of Australia Act 1976 (Cth), the Federal Court “has the same power to punish contempts of its power and authority as is possessed by the High Court in respect of contempts of the High Court”.  The power of the High Court to punish for contempt is the same as that which was possessed by the Supreme Court of the Judicature in England as at 1903: see s 24 Judiciary Act 1903 (Cth).

129                                       In Louis Vuitton Malletier SA v Design Elegance Pty Ltd (2006) 149 FCR 494 at 497‑8 Merkel J summarised the current state of the law on when disobedience of a Court order will constitute a contempt of court.  His Honour said:

“Deliberate conduct which is in breach of a court order will constitute wilful disobedience of the order, and therefore a civil contempt, unless the conduct be casual, accidental or unintentional:  see Australasian Meat Industry Employee’ Union v Mudginberri Station Pty Ltd (1986) 161 CLR 98 at 106-107 and 112-113.  However, the disobedience will amount to a criminal contempt if it involves ‘deliberate defiance or, as it is sometimes said, if it is contumacious’: see Witham v Holloway (1995) 183 CLR 525 at 530 … However, as all proceedings for contempt are now regarded as criminal in nature, all of the charges must be proved beyond reasonable doubt:  see Witham at 534.”

See also Australasian Meat Industry Employees Union v Mudginberri Station Pty Ltd (1986) 161 CLR 98 at 112-113; Heatons Transport v TGWU [1973] AC 15 at 109.

130                                       In Advan Investments Pty Ltd v Dean Gleeson Motor Sales Pty Ltd [2003] VSC 201 Gillard J identified the elements which it is necessary for a complainant to establish in order to make good a charge of civil contempt of Court.  His Honour said:

“[31]     In order to prove a civil contempt of Court involving a breach of an order of the court, the plaintiff has to prove the following:

(i)                 that an order was made by the Court;

(ii)                that the terms of the order are clear, unambiguous and capable of compliance;

(iii)              that the order was served on the alleged contemnor or excused in the circumstances, or service dispensed with pursuant to the Rules of Court;

(iv)              that the alleged contemnor has knowledge of the terms of the order;

(v)               that the alleged contemnor has breached the terms of the order.

[32]      … in proving element (v) it must be proven that the act or omission which constituted the breach of the order was deliberate and voluntary.”

131                                       In every case where the Court exercises its power to punish contempt it seeks to vindicate its authority and preserve the rule of law.  In Australian Competition and Consumer Commission v Hughes (2001) ATPR 41-807 Tamberlin J described the rationale behind the contempt power as follows:

“Ultimately, in the case of mandatory or prohibitory orders made by it, the sanction which the Court has in order to enforce its decisions is the power to punish for contempt.  This is the way in which the Court preserves respect for its role and the rule of law.  Without the enforcement of court orders the whole process of adjudication becomes a hollow exercise.  If a losing party can defy the orders of the Court then such disobedience renders futile, in the perception of the community, the remedy secured by the successful party.  Orders are not made simply to suggest or advise persons that they ought to keep to the law as proclaimed but to ensure that the law is carried out as determined by the decision pursuant to which the order is made.  Defiance of court orders diminishes the authority of courts and removes the incentive of parties, if such conduct is left unpunished, to comply with the requirements of the courts.”

132                                       In Witham v Holloway the High Court determined that a critical element of the distinction between civil contempts and criminal contempts, the differing standards of proof, was not justified and held that all charges of contempt, whether civil or criminal, must be proved beyond reasonable doubt: see Witham v Holloway (1995) 183 CLR 525 at 534 per Brennan, Deane, Toohey and Gaudron JJ; at 548 per McHugh J.

133                                       Having regard to these principles, and in particular the rationale underlying the Court’s powers to punish contempts, I turn to the facts of this case.

CONSIDERATION

134                                       It is not disputed and I am satisfied that each of the Orders the subject of the present charges (the December 2003 Order, the March 2004 Order, the 12 November 2007 Order, the November 2007 Undertaking, the 26 November 2007 Order, the 27 November 2007 Order, and the 14 December 2007 Order), was made by or given to the Court and that the terms of each order and the undertaking were clear, unambiguous and capable of compliance.  In relation to the issues of service, knowledge and breach of the respective Orders it is convenient to deal with each of the respondents in turn.

Victoria Vaysman

135                                       Victoria Vaysman contended that the Applicant had not complied with O 40 r 8 of the Federal Court Rules, that the December 2003 Orders and the March 2004 Orders did not have a penal notice attached to them, as required by O 37 r 2(3) and that there was no evidence that she was ever served with the December 2003 Orders, the February 2004 Orders or the March 2004 Orders.  Victoria did not, however, disavow knowledge of those orders at the time at which they were made or subsequently.  

Compliance with O 40 r 8

136                                       Counsel for Victoria submitted that there was no evidence that the Statement of Charge, the Notice of Motion or “any of the Applicant’s affidavits” had been served on her as required by O 40 r 8 of the Federal Court Rules. Order 40 r 8 provides:

“The notice of motion or application, the statement of charge, and the affidavits shall be served personally on the accused person.”

137                                       The Applicant moved on a Notice of Motion dated 11 January 2008 and an Amended Statement of Charge dated 13 March 2008 which were filed with the leave of the Court.  The Amended Statement of Charge included the Charges which had been preferred in the 2003 proceeding.  While no affidavits were filed with the Notice of Motion, the following affidavits were relied on in support of the Charges against Victoria Vaysman (Charges 7, 11, 12, 14, 23, 25 and 26):  

·                             Affidavit of Anthony Brooke Watson sworn 10 February 2004;

·                             Affidavit of Lisa Maree Egan sworn 23 February 2004;

·                             Affidavit of Emma Kate Mitchell sworn 24 February 2004;

·                             Affidavit of Anthony Brooke Watson sworn 26 February 2004;

·                             Affidavit of Jessilyn Chen sworn 15 January 2008;

·                             Affidavit of Andrew James Watson sworn 18 January 2008;

·                             Affidavit of Gihan Ezzat sworn 25 January 2008;

·                             Affidavit of Oliver Doederlein sworn 19 February 2008;

·                             Affidavit of Anthony Brooke Watson sworn 27 February 2008;

·                             Affidavit of Gihan Ezzat sworn 8 April 2008; 

·                             Affidavit of Dianne Sommer sworn 8 April 2008; and

·                             Affidavit of Gihan Ezzat sworn 8 May 2008

138                                       As was earlier noted, an order for substituted service in relation to Victoria Vaysman was made on 4 December 2007 (see above at [32]).  Frederick Goodall, a process server, deposed that he caused to be personally served on Victoria the Amended Statement of Charge dated 13 March 2008.  Caroline Cossio, a solicitor, deposed that the Notice of Motion and Statement of Charge, both of which were dated 11 January 2008 had been served on Victoria via express post.  The evidence of Mr Goodall and Ms Cossio was not challenged.  By affidavit dated 7 April 2008, Victoria admitted that she had received a letter from the Applicant’s solicitors which enclosed the Amended Statement of Charge dated 14 March 2008.  This affidavit was relied on by Victoria on the first day of the contempt hearing in support of her application for an adjournment of the contempt proceeding, insofar as it related to her.  I am satisfied that Victoria was served with the Notice of Motion dated 11 January 2008 and the Amended Statement of Charge dated 13 March 2008.

139                                       Despite assurances from counsel for the Applicant that Victoria had been served with all of the affidavits, there was no evidence before the Court that, as at 8 April 2008, Victoria had been served with all of the affidavits relied on against her in support of the charges for contempt.  On 8 April 2008 the proceeding against Victoria was adjourned until 2 June 2008.  Before the resumption of the hearing Victoria was provided with the court book which comprised some 20 volumes, and contained a copy of each of the affidavits referred to above.  Victoria’s solicitors filed a notice of discontinuance on 1 May 2008. Pro bono counsel were appointed to act on her behalf on 28 May 2008.  Counsel had access to the court books.  The court books contained each of the affidavits referred to above at [137]. At the resumed hearing which commenced on 2 June 2008, the Applicant filed an Annotated Statement of Charge in which it identified the affidavit evidence on which it proposed to rely in support of each charge. Counsel for Victoria advised the Court that they were prepared to proceed provided that the evidence relied on by the Applicant was limited to that which was specified in the Annotated Statement of Charge.  I advised Counsel that if they felt disadvantaged as a result of unexpected testimony that may fall from any of the witnesses the Court should be advised and, if necessary, steps to protect Victoria’s interests would be taken.  No such application was made.  The hearing proceeded on 2, 3, 5, 11 and 12 June and on 10 July 2008.  On 10 July 2008, the Applicant and Victoria filed the Agreed Statement of Facts.    

140                                       The procedures which are provided for in O 40 seek to ensure that no injustice is done to the alleged contemnor.  The accused must be given notice of the charges laid against him or her, with proper particularity, and the opportunity of answering the charges see: Doyle v Commonwealth (1985) 56 CLR 510; Coward v Stapleton (1953) 90 CLR 573 at 580; Australasian Meat Industry Employees' Union v Mudginberri (No 2) (1985) 9 FCR 194 at 224 (per Toohey J); Churchman v Joint Shop Stewards’ Committee of the Workers of the Port of London [1972] 3 All ER 603 at 608.  In Siminton v APRA (2006) 152 FCR 129 a Full Court of this Court adopted (at 147) the following observations of Kaye J in Clifford v Middleton [1974] VR 737 at 741:

“In my opinion, the power to relieve a party from the consequences of non-compliance with the Rules of the Court where the liberty of the subject is in jeopardy should not be exercised unless the evidence shows that the requirements of and purpose for the particular rule have been fulfilled in a manner otherwise than in the form provided.”

141                                       By O 1 r 8 the Court has a wide discretion to dispense with any of the requirements of the Rules, “either before or after the occasion for compliance arises”.  In Lazar v Taito (Aust) Pty Ltd (1985) 5 FCR 395 the Full Court held that the discretion conferred by O 1 r 8 was not qualified by the express requirement for personal service contained in O 40, r 8. McGregor J (at 403-404) said that the power conferred by O 1 r 8 may be exercised in contempt proceedings, particularly, “where there is no apparent injustice and the alleged error can only be one of procedure.” Neaves J (at 414) accepted that, in contempt proceedings, there will be limited circumstances in which the discretion conferred by the rule should be exercised.  Fox J agreed (at 396) with McGregor and Neaves JJ on this point.  In Australasian Meat Industry Employees' Union v Mudginberri (No 2) (1985) 9 FCR 194 at 199; 61 ALR 635 at 639 Smithers and Northrop JJ held that the affidavits referred to in O 40 r 8 are the affidavits filed in support of the motion and that O 40 r 8 did not apply to other affidavits which may be used at the hearing of the motion. Toohey J said at 226:

“In my view r 8 does not impose an absolute prohibition on the use of material that has not been served personally on an accused person. The intention of the rule is to ensure that no injustice is done to an accused person by reason of a failure to provide him with the material filed in support of the charge against him. Rule 7(2) contemplates that evidence may be given orally in support of the charge. Again the question is one of fairness to the accused. Evidence, whether orally or by some later affidavit, may represent such a departure from the material served on the accused person or may introduce such new matter that the applicant ought not to be permitted to adduce that material without service of the affidavit or notification of the proposed oral evidence to the accused person. But where, as in the present case, an accused person or someone with authority to speak on his behalf makes some comments at the time of service of material, the reception of that additional material is one for the discretion of the judge before whom the contempt motion comes.”

142                                       The evidence does not establish that all of the affidavits which are identified above at [139] were served personally on Victoria Vaysman at the same time as the Notice of Motion and the Amended Statement of Charge.  She was, however, provided with all that material prior to her trial commencing.  Counsel acting for her had access to the material and the Applicant had provided her, in an annotated Statement of Charge, with references to the specific passages in the various affidavits on which it proposed to rely to support each of the Charges against her.  The purpose served by O 40 r 8 was satisfied.  Victoria suffered no prejudice arising from the course which was followed.  I will order that the requirements of O 40 r 8, insofar as they apply to affidavits relied on by the Applicant and to the extent to which they have not been complied with, be dispensed with.

Service and Knowledge - December 2003 Orders, February 2004 Orders, March 2004 Orders

143                                       Victoria submitted that there is no evidence that the December 2003 Orders, the February 2004 Orders or the March 2004 Orders were personally served on her.  In addition, Victoria claims that there is no evidence that the December 2003 Orders or the March 2004 Orders had a penal notice attached to them as required by O 37 r 2(1) of the Federal Court Rules.  Victoria did not complain that the February 2004 Orders did not contain a penal notice.

144                                       The sealed copies of the December 2003 Orders and the March 2004 Orders on the Court file each bear the penal notice set out above at [8].  I infer that the only form of the order taken out which could have been served on Victoria was a form that did bear the notice referred to in O 37, r 2(3): cf  Siminton v APRA (2006) 152 FCR 129 ; (2006) 232 ALR 27. 

145                                       It is true that there is no evidence before the Court that the December 2003 Orders or the March 2004 Orders were personally served on Victoria Vaysman.  There was no order for substituted service made in the 2003 proceedings.  Order 37 r 2(1) of the Federal Court Rules provides that an order shall not be enforced by committal or sequestration unless the order, or a certified copy thereof, is personally served on the person bound.  Order 37 r 2(5), however, permits an order to be enforced against a person by committal or sequestration of property notwithstanding that service has not been effected in accordance with r 2(1), where the person has been notified of the terms of the order:  cf Mead v Mead (2007) 81 ALJR 1185 at 1187.

146                                       In Australian Competition and Consumer Commission v Contact Plus Group Pty Ltd (in liq) (No 2) (2006)232 ALR 364 at 370-2,Young Jheld that O 37 had been complied with notwithstanding that the order had not been personally served on the alleged contemnor.  In that case the alleged contemnor was represented by counsel when the orders were made, he had previously consented to and signed copies of the relevant orders and shortly after the orders were made was notified by his solicitor of the terms of the orders. 

147                                       The Court must be satisfied, beyond reasonable doubt, that Victoria knew of the contents of the December 2003 Orders in so far as they relate to the alleged contempt and knew that the December 2003 Orders had been made:  see Mead v Mead (2007) 81 ALJR 1185 at 1186.  The Applicant contends that the December 2003 Orders were served on Victoria’s then solicitors, Minter Ellison, by facsimile on 19 December 2003.  No notice of appearance was filed by Minter Ellison in the 2003 proceeding.  The Applicant relies on a letter dated 19 December 2003 in which Minter Ellison advised the Applicant’s solicitors that they acted on behalf of the respondents to the 2003 proceeding.  A solicitor from Minter Ellison appeared at a directions hearing held on 22 December 2003 and, significantly, proposed minutes of consent orders handed up on that day were signed by Minter Ellison as “Solicitors for the Respondents” (who included Victoria).  With the exception of a minor alteration to the wording of the costs order and an additional order that the matter be listed for directions, the December 2003 Orders are in identical terms to the proposed minutes of consent orders and include an express denial of liability on the part of the respondents.  The December 2003 Orders were made by consent.  This is sufficient to permit the drawing of the inference (as I do) that Victoria was aware of the terms in which the order was made and that she authorised her legal representative to consent, on her behalf, to all of those terms, prior to the order being made: see Australian Securities Commission v Macleod (1993) 40 FCR 155 at 161.  There is nothing before the Court to suggest that Minter Ellison were not acting on Victoria’s instructions.  I have no doubt that Victoria Vaysman was notified of the terms of the December 2003 Orders.  It is sufficient that Victoria had “knowledge of the order”, and it is not necessary that she was aware of the full terms of the order see:  BHP Steel (AIS) Pty Ltd v Construction, Forestry, Mining and Energy Union [2000] FCA 1853 referring to Sun Newspapers Pty Ltd v Brisbane TV Limited (1989) 92 ALR 535.  The terms of the December 2003 Orders were not difficult to comprehend and Victoria had the benefit of legal advice.  I have no doubt that she had knowledge of the orders and knew that they had been made.

148                                       The Applicant submits that Victoria was personally served with the February 2004 Orders. Mr Jones, an independent solicitor, filed a report in relation to the searches that were conducted on 11 February 2004.  In the report, Mr Jones stated that Mr McRobert, another independent solicitor, had informed him that he (Mr McRobert) had personally served the February 2004 Orders on Victoria Vaysman prior to the search of 11 Ellington Street, Caulfield on 11 February 2004. Emma Mitchell, a solicitor acting on behalf of the Applicant, deposed that she witnessed Mr McRobert serve Victoria Vaysman with the February 2004 Orders on 11 February 2004.  Victoria asked Mr McRobert and Ms Mitchell to return in one hour as she wanted to seek legal advice.  The evidence of Mr Jones and Ms Mitchell was not challenged.  I accept that Victoria Vaysman was personally served with the February 2004 Orders and that she had knowledge of those orders.

149                                       Minter Ellison filed a notice of solicitor ceasing to act on 20 February 2004. On 11 March 2004 Victoria signed Terms of Settlement with the Applicant’s predecessor in which she consented to the Court granting a permanent injunction in the form of paragraph 1 of the December 2003 Orders (see above at [7]).  A copy of the December 2003 Orders (which I note contained the penal notice) was annexed to the Terms of Settlement.  By clause 8 of the Terms of Settlement, Victoria warranted that she had obtained independent legal advice prior to signing the agreement.  On 12 March 2004 Victoria signed minutes of consent orders which contained a permanent injunction in the form of paragraph 1 of the December 2003 Orders.  The minutes of consent orders did not contain a penal notice.  Save for this omission and a slight difference in formatting in paragraph (a), the minutes of consent orders were replicated in the March 2004 Orders which were made by consent.

150                                       Mr Watson deposed that the March 2004 Orders were served on Victoria by letter dated 22 March 2004 which was posted to her then home address Unit 4/181 Bay Street, Port Melbourne.  The Applicant submitted that Victoria clearly had knowledge of the terms of the March 2004 Orders because she had personally signed the Terms of Settlement and the minutes of consent order.  I accept this submission. I am satisfied beyond reasonable doubt that Victoria had consented to the making of the March 2004 Orders and had knowledge of the terms of those Orders.  Although there is no direct evidence that Victoria, in fact, knew that the Court subsequently made the orders she would plainly, having given her consent, expected this to have occurred and, had she been minded to do so, she could have readily confirmed, by examining the Court file, that the order had been made.

Breach of the Terms 

151                                       Victoria Vaysman has admitted that she breached the orders and undertaking that were the subject of Charges 7, 11, 12, 14, 23, 25 and 26. 

Finding

152                                       I find that the Applicant has proven beyond reasonable doubt that Victoria Vaysman deliberately engaged in the conduct alleged in each of Charges 7, 11, 12, 14, 23, 25 and 26.

Vladimir Vaysman, Vaysman Pty Ltd and Hepbourne Pty Ltd

153                                       Although Vladimir Vaysman has not appeared in the proceeding since 10 April 2008, the Court must, nonetheless, be satisfied that the charges of contempt which are preferred against him are established beyond reasonable doubt before findings of contempt can be made:  see  Witham v Holloway (1995) 183 CLR 525; Churchman v Joint Shop Stewards’ Committee of the Workers of the Port of London [1972] 3 All ER 603 at 608; Australasian Meat Industry Employees' Union v Mudginberri (No 2) (1985) 9 FCR 194 at 200, (1985) 61 ALR 635 at 640.

Compliance with O 40 r 8

154                                       The evidence relied on by the Applicant to establish its allegations against Vladimir Vaysman, Hepbourne Pty Ltd and Vaysman Pty Ltd was contained in the following affidavits:

·                Affidavit of Anthony Brooke Watson sworn 15 December 2003;

·                Affidavit of Anthony Brooke Watson sworn 23 February 2004;

·                Affidavit of Anthony Brooke Watson sworn 20 November 2007;

·                Affidavit of Anthony Brooke Watson sworn 14 December 2007;

·                Second Affidavit of Anthony Brooke Watson sworn 14 December 2007;

·                Report of Craig Raymond Douglas dated 24 January 2008;

·                Affidavit of Gihan Ezzat sworn 25 January 2008;

·                Affidavit of Anthony Brooke Watson sworn 6 February 2008.

·                Affidavit of Oliver Doederlein sworn 19 February 2008;

·                Affidavit of Joanne Cherie Strickland sworn 25 March 2008;

·                Affidavit of Leah Jane Farley sworn 4 April 2008;

·                Affidavit of Dianne Sommer sworn 8 April 2008;

155                                       There is no evidence before the Court that these affidavits, or the Notice of Motion dated 11 January 2008 or the Amended Statement of Charge dated 13 March 2008 were personally served on Vladimir Vaysman, Hepbourne Pty Ltd or Vaysman Pty Ltd.  

156                                       Vladimir Vaysman and Hepbourne Pty Ltd were represented by Goldsmiths from 4 December 2007 until 17 November 2008. Ms Cossio deposed that she caused to be served on Goldsmiths the Notice of Motion dated 11 January 2008 and an earlier version of the Statement of Charge.   

Service and Knowledge - December 2003 Order and the March 2004 Order

157                                       There is no evidence before the Court that either the December 2003 Order or the March 2004 Order was personally served on Vladimir Vaysman.  As noted above, the December 2003 Orders were made by consent.  The minutes of consent orders were signed by Minter Ellison on behalf of the respondents (who included Vladimir, Vaysman Pty Ltd and Hepbourne Pty Ltd).  As I have said above at [147], I am satisfied that the solicitors from Minter Ellison were acting on informed instructions.  As the December 2003 Orders were made by consent it may readily by inferred (as I do) that Vladimir, and through him Vaysman Pty Ltd and Hepbourne Pty Ltd, were aware of the terms of the order and authorised their legal representative to consent, on their behalf, to all those terms, prior to the order being made.  I have no doubt that Vladimir Vaysman, and therefore Vaysman Pty Ltd and Hepbourne Pty Ltd, were notified of the terms of the December 2003 Orders and had knowledge of those orders.  Mr Watson deposed that the December 2003 Order was served on Vladimir Vaysman, Vaysman Pty Ltd and Hepbourne Pty Ltd by facsimile to those respondents’ then solicitors, Minter Ellison. The evidence of Mr Watson was not challenged. A copy of the facsimile covering letter was in evidence. A copy of the orders was not however exhibited with the letter. The transmission report confirms that a total of 5 pages were sent. The December 2003 Orders on the Court file are contained in 4 pages. I therefore infer that the December 2003 Orders were served on Minter Ellison.

158                                       By notice of change of practitioner filed on 19 February 2004, Goldsmiths, Barristers & Solicitors, advised the Court that they had been appointed to act on behalf of Vladimir Vaysman, Vaysman Pty Ltd and Hepbourne Pty Ltd.  Those respondents were represented by counsel instructed by Goldsmiths at a mediation held on 10 March 2004.  The mediation resulted in the minutes of consent orders being signed.  On 12 March 2004 Mr Goldsmith signed the minutes of consent orders on behalf of Vladimir Vaysman, Vaysman Pty Ltd and Hepbourne Pty Ltd.  The differences between the minutes and the March 2004 Orders have been noted above at [151].  A copy of the March 2004 Orders was served on Goldsmiths. This was not disputed by Vladimir. In those circumstances, I have no doubt that Vladimir Vaysman, Hepbourne Pty Ltd and Vaysman Pty Ltd were notified of the terms of the March 2004 Orders and had knowledge of the terms of those orders.  

12 November 2007 Orders  

159                                       Mr Watson personally served Vladimir Vaysman with the 12 November 2007 Orders on 13 November 2007, prior to the commencement of the search of the Roper Street factory on that day.  Hepbourne Pty Ltd was served with the 12 November 2007 Orders by letter dated 13 November 2007 sent via express post to the registered office of Hepbourne Pty Ltd.  As Vladimir Vaysman was the sole director of Hepbourne Pty Ltd at the relevant time there can be no doubt that both he and Hepbourne Pty Ltd had knowledge of the 12 November 2007 Orders no later than 13 November 2007.

November 2007 Undertaking 

160                                       The Applicant submits that a sealed copy of the 27 November 2007 Order (which contained the November 2007 Undertaking) was served on Vladimir Vaysman and Hepbourne Pty Ltd by the Applicant’s solicitors transmitting a facsimile copy to the solicitors acting on behalf of Vladimir Vaysman and Hepbourne Pty Ltd, Goldsmiths.  There is no evidence of personal service of this order on either Vladimir Vaysman or Hepbourne Pty Ltd.  This is of no moment.  Order 37 r 2 only applies to orders.  There is no rule which requires a prosecutor to satisfy the court that the terms of an undertaking or a penal notice had been served on a party whom it is alleged has been guilty of contempt by failing to observe the undertaking: see Windsurfing International Inc v Sailboards Australia Pty Ltd (1986) 19 FCR 110 at 112-116.

161                                       Goldsmiths filed an appearance on behalf of Vladimir Vaysman and Hepbourne Pty Ltd on 20 November 2007.  The November 2007 Undertaking was given to the Court by counsel for Hepbourne Pty Ltd and Vladimir Vaysman on 27 November 2007:  see above [23].  A copy of the 27 November Order, which included the November 2007 Undertaking, was served on Goldsmiths on 29 November 2007.  The terms of the November 2007 Undertaking appear in the 27 November 2007 Order.  The terms of the undertaking were provided by the Applicant’s solicitors to Goldsmiths prior to the hearing on 27 November 2007.  There is nothing before the Court to suggest that the undertaking was not given, as Counsel said it was, on instructions.  Nor is there anything to suggest that the contents of the 27 November 2007 Order were not communicated to Vladimir Vaysman and Hepbourne Pty Ltd.  Indeed, by undertaking to refrain from, inter alia, manufacturing and distributing Ugg products in the November 2007 Undertaking, Vladimir Vaysman and Hepbourne Pty Ltd agreed to refrain from conduct which they were already prohibited from engaging in by reason of the March 2004 Orders, of which, as I have found, they were well aware.  I am satisfied beyond reasonable doubt that Vladimir Vaysman and, therefore, Hepbourne Pty Ltd, had knowledge of the November 2007 Undertaking and were bound to comply with its terms.

Findings

162                                       I am satisfied that the affidavit and documentary evidence tendered by the Applicants strongly supports the case made by it in respect of Charges 8, 9, 18, 19, 20, 22, 32, 33, 34 and 48 and that this evidence establishes each of the matters of fact necessary to make good each of those charges.  Insofar as I have made findings based on inferences, I am satisfied beyond reasonable doubt that those inferences ought to be drawn, that the conclusions contended for by the Applicant are supported by evidence and that the evidence does not support a finding that there is any reasonable or rational hypothesis consistent with the particular Respondents’ innocence of any of the charges.

163                                       I have concluded that Charges 10 and 21 have not been proven to the required standard and that Vaysman Pty Ltd and Hepbourne Pty Ltd are not guilty of Charge 10 and that Vladimir Vaysman is not guilty of Charge 21.

Josef Vaysman and Polina Vaysman

164                                       Josef and Polina Vaysman dispute that they were served with the Notice of Motion dated 11 January 2008, the Amended Statement of Charge dated 14 March 2008, the affidavits relied on by the Applicant in support of the charges laid against them, the 26 November 2007 Orders and the 27 November 2007 Orders.

Service of the Amended Statement of Charge, the Notice of Motion and the affidavits  

165                                       There is no evidence before the Court that either Josef or Polina Vaysman were personally served with the Notice of Motion dated 11 January 2008, the Amended Statement of Charge dated 13 March 2008, or the affidavits relied on by the Applicant in support of the charges against them. I do not understand the Applicant to have submitted otherwise.  The Applicant submitted that it was beyond reasonable doubt that Josef and Polina Vaysman had, none the less, been served with all relevant documents.  It was submitted that the Amended Statement of Charge, the Notice of Motion and the affidavits had been served on Goldsmiths, and that Josef and Polina had knowledge of, and were aware of, the Amended Statement of Charge and the Notice of Motion. 

166                                       The Applicant relied on the fact that counsel appeared on behalf of Josef and Polina Vaysman at two directions hearings (one on 6 February 2008 and one on 7 March 2008) after the Amended Statement of Charge and the Notice of Motion had been filed and the fact that Josef and Polina Vaysman each filed an affidavit in defence of the contempt proceeding on 1 April 2008.  In their affidavits both deposed that they had not been personally served with the Amended Statement of Charge, the Notice of Motion and the supporting affidavits.  They did not, however, say that they were not aware of the contents of these documents.  Indeed the affidavits refer to evidence, given on affidavit by witnesses for the Applicant, and deny or otherwise deal with that evidence.  The Applicant submitted, in the alternative, that any “technical omission” or non-compliance may be overcome by O 1 r 8. 

167                                       No objection relating to the service of these documents was taken by counsel at the directions hearings on 6 February 2008 and 7 March 2008:  cf  Carver v de Robillard [2006] FCA 1041 at [40] (per Lindgren J).  Furthermore, service on solicitors on the record for Josef and Polina who both claim to have language difficulties, ensured that no injustice was done to them.  It is clear that, certainly before 1 April 2008, the allegations against them and the evidence supporting those allegations were drawn to their attention in sufficient detail for them to provide the instructions which were necessary for the preparation of their affidavits.  cf Australasian Meat Industry Employees’ Union v Mudginberri Station (1985) 9 FCR 194 at 226 (per Toohey J).  I am satisfied that the protective purposes, served by O 40 r 8, have been satisfied in respect of both Josef and Polina Vaysman insofar as service of the Amended Statement of Charge, the Notice of Motion and the supporting affidavits are concerned.

Service and Knowledge of the 26 November 2007 Orders and the 27 November 2007 Orders

168                                       The Applicant contended that Josef and Polina Vaysman were each served with the orders made on 26 November 2007 by way of facsimile transmission on that date.  The facsimile was directed to their solicitors, Goldsmiths.

169                                       The Applicant submitted that the 27 November 2007 orders were personally served on Josef and Polina Vaysman by Mr Goodall, a process server, at 1 Roper Street Moorabbin on 30 November 2007.  The process server’s evidence was given on affidavit and he was not required for cross-examination.

170                                       Josef Vaysman denied receiving the 26 November 2007 orders and deposed that he had no recollection of receiving the 27 November 2007 orders.  He said further that he had not read any orders “because I did not receive them and in any event I cannot read English.”

171                                       Polina Vaysman deposed that she was not aware of the 26 November 2007 orders until Mr Goldsmith told her about them in mid February 2008.  She said that she did not recall being personally served with any of the orders made in the proceeding.  In a later affidavit, however, she deposed that her solicitors had explained the 27 November 2007 orders to her on or about 4 December 2007 and that she believed that she understood the explanation.

172                                       I accept that the 26 November 2007 orders were served by facsimile transmission to the solicitors for Josef and Polina Vaysman.  I am not, however, satisfied, that the solicitors drew the terms of the order to their attention before mid February 2008.  There is no evidence to suggest that they otherwise became aware of the substance of the orders before that time.

173                                       I accept the evidence of Mr Goodall that he personally served the 27 November 2007 orders on both Josef and Polina Vaysman on 30 November 2007.

Findings

174                                       I find that the Applicant has proven beyond reasonable doubt that Josef Vaysman deliberately engaged in the conduct alleged in each of Charges 36, 37, 52, 55, 57, 61 and 67.

175                                       I find that the two charges preferred against Polina Vaysman have not been proven beyond reasonable doubt and I hold that she is not guilty of Charges 40 and 53.

Leonid Mykhalovski

176                                       As has already been noted, Mr Mykhalovski played no part in the proceeding despite being served with all relevant documents.  That service was effected pursuant to an order for substituted service which I made on 21 November 2007.

177                                       I find that the Applicant has proven beyond reasonable doubt that Leonid Mykhalovski deliberately engaged in the conduct alleged in each of Charges 41, 46, 51, 59, 63 and 69. 

CONCLUSION

178                                       The following Charges have been established beyond reasonable doubt:

·                        As against Victoria Vaysman:  Charges 7, 11, 12, 14, 23, 25 and 26.

·                        As against Vladimir Vaysman:  Charges 8, 9, 18, 19, 20, 22, 32, 33, 34 and 48.

·                        As against Vaysman Pty Ltd:  Charge 8.

·                        As against Hepbourne Pty Ltd:  Charges 9, 18, 32 and 48.

·                        As against Josef Vaysman:  Charges 36, 37, 52, 55, 57, 61 and 67.

·                        As against Leonid Mykhalovski:  Charges 41, 46, 51, 59, 63 and 69.

179                                       I will give directions as to the steps which need to be taken in advance of a hearing on penalty.

180                                       I record my gratitude to counsel who appeared pro bono for some of the respondents.  They provided necessary assistance to both their clients and the Court.  Their willingness to provide such service reflects well on them, the legal profession and the Bar of which they are members.

Annexure A

Associate:

Dated:         23 April 2010