FEDERAL COURT OF AUSTRALIA

Deckers Outdoor Corporation Inc. v Farley (No 8) [2010] FCA 657

THE COURT ORDERS THAT:

1.                  It be declared that the Fifth Respondent is guilty of contempt by reason of the matters set out in Charges 8, 9, 18, 19, 20, 22, 32, 33, 34 and 48 of the Amended Statement of Charge dated 14 March 2008.

2.                  It be declared that the Nineteenth Respondent is guilty of contempt by reason of the matters set out in Charges 7, 11, 12, 14, 23, 25 and 26 of the Amended Statement of Charge dated 14 March 2008.

3.                  It be declared that the Third Respondent is guilty of contempt by reason of the matters set out in Charges 41, 46, 51, 59, 63 and 69 of the Amended Statement of Charge dated 14 March 2008.

4.                  It be declared that Vaysman Pty Ltd is guilty of contempt by reason of the matters set out in Charge 8 of the Amended Statement of Charge dated 14 March 2008.

5.                  It be declared that the Fourth Respondent is guilty of contempt by reason of the matters set out in Charges 9, 18, 32 and 48 of the Amended Statement of Charge dated 14 March 2008.

6.                  The Fifth Respondent be imprisoned for the following periods:

(a)      In respect of Charge 8 – three months;

(b)  In respect of Charge 9 – seven days;

(c)    In respect of Charge 18 – three years;

(d)  In respect of Charge 19 – six months;

(e)    In respect of Charge 20 – one month;

(f)     In respect of Charge 22 – one month;

(g)    In respect of Charge 32 – six months;

(h)    In respect of Charge 33 – six months;

(i)      In respect of Charge 34 – six months; and

(j)     In respect of Charge 48 – one month -

each sentence to be served concurrently with each other sentence.

7.                  A warrant issue for the committal of the Fifth Respondent to prison for the period of three years.

8.                  The Nineteenth Respondent be imprisoned for the following periods:

(a)      In respect of Charge 7 – three months;

(b)     In respect of Charge 11 – six months;

(c)      In respect of Charge 12 – seven days;

(d)     In respect of Charge 14 – 14 days;

(e)      In respect of Charge 23 – one year;

(f)       In respect of Charge 25 – seven days; and

(g)      In respect of Charge 26 – one year -

each sentence to be served concurrently with each other sentence.

9.                  The Nineteenth Respondent be imprisoned for a period of twelve months with:

(a)       The first two months being served in any event; and

(b)     The balance of the sentence being suspended from execution on condition that the Nineteenth Respondent refrains from contravening any of the orders made herein and binding on her on 23 December 2003, 10 February 2004 and 12 March 2004 for a period of two years from the date on which the suspension takes effect.

10.              A warrant issue for the committal of the Nineteenth Respondent to prison for a period of two months.

11.              The Third Respondent be imprisoned for the following periods:

(a)      In respect of Charge 41 – three months;

(b)     In respect of Charge 46 – one month;

(c)      In respect of Charge 51 – one month;

(d)     In respect of Charge 59 – one month;

(e)      In respect of Charge 63 – one month; and

(f)       In respect of Charge 69 – one month -

each sentence to be served concurrently with each other sentence.

12.              A warrant issue for the committal of the Third Respondent to prison for the period of three months.

13.              The Third, Fifth and Nineteenth Respondents pay the Applicant’s costs of the Applicant’s notice of motion dated 11 January 2008 on a solicitor-client basis.

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                     For most of the past decade the Applicant has found it necessary to take legal action to protect its intellectual property rights in relation to its Ugg brand of footwear.  Mr Josef Vaysman, Mr Vladimir Vaysman, Ms Victoria Vaysman and Mr Leonid Mykhalovskyi are among those against whom restraining orders have been made in an effort to protect the Applicant’s rights.  These attempts by the Applicant have not been successful:  each of the Respondents, at one time or another since 2003, has contravened orders made by the Court.  Each has done so on multiple occasions.

2                     Details of the relevant orders and the circumstances in which they came to be made are set out in Deckers Outdoor Corporation Pty Ltd v Farley (No 6) [2010] FCA 391 at [5]‑[29], (“Deckers (No 6)”).

3                     As a result of the various contraventions the Applicant preferred charges against each of the four earlier named Respondents and certain companies associated with one of them.  In Deckers (No 6) I found charges proven against the four individuals and against Vaysman Pty Ltd and Hepbourne Pty Ltd.  At relevant times Vladimir Vaysman was the sole director and shareholder of these companies.  In Deckers Outdoor Corporation Inc. v Farley (No 7) [2010] FCA 560(“Deckers (No 7)”) I found three additional charges proven against Josef Vaysman.

4                     On 7 June 2010 the Respondents were given the opportunity to make submissions on costs and penalties.  Submissions were made on behalf of Victoria Vaysman.  Neither Mr Vladimir Vaysman nor Mr Leonid Mykhalovski appeared.  Nor did the two corporate entities.  Mr Josef Vaysman was present but unrepresented.  Counsel who appeared for Ms Vaysman advised the Court that Mr Vaysman was seeking legal aid to assist him in making a plea.  The proceeding insofar as it involved him was adjourned to 18 June 2010.  On that day counsel appeared on his behalf and sought a further adjournment so that a plea could be prepared.  That application was granted.  As a result this judgment deals only with the charges which have been preferred against Ms Vaysman, Mr Vladimir Vaysman, Mr Leonid Mykhalovskyi and the two corporate respondents.

PRINCIPLES GOVERNING THE IMPOSITION OF PENALTIES FOR CONTEMPT

5                     Before dealing with the individual cases it will be convenient to identify the principles which guide the Court’s approach to the imposition of penalties for contempt.

6                     The power of the Court to punish for contempts is conferred by s 31 of the Federal Court of Australia Act 1976 (Cth):  it has the same powers as are possessed by the High Court.  The High Court, in turn, has the same power as was possessed by the Supreme Court of Judicature in England at the time of the enactment of the Judiciary Act 1903 (Cth):  see s 24 Judiciary Act.  By rule 11.04.1(a) of the High Court Rules 2004 the Court has power to order that a contemnor “pay a fine, be committed to prison, or both pay a fine and be committed to prison.”  The Court also has power to order the sequestration of the assets of a contemnor and to suspend on condition any sentence of imprisonment that it might impose in respect of a contempt:  see Australian Competition and Consumer Commission v Info4pc.Com Pty Ltd (2002) 121 FCR 24 at 54(per Nicholson J).

7                     The imposition of a penalty for contempt serves to protect both the interests of the Applicant and the administration of justice.  In their joint judgment in Australasian Meat Industry Employees’ Union v Mudginberri Station Pty Ltd (1986) 161 CLR 98 at 107 Gibbs CJ, Mason, Wilson and Deane JJ said that:

“Although the primary purpose in committing a defendant who disobeys an injunction is to enforce the injunction for the benefit of the plaintiff, another purpose is to protect the effective administration of justice by demonstrating that the court’s orders will be enforced.  As the authors of Borrie and Lowe’s Law of Contempt (2^nd ed. 1983) say, at p 3:  “If a court lacked the means to enforce its orders, and its orders could be disobeyed with impunity, not only would individual litigants suffer, the whole administration of justice would be brought into disrepute.””

See also Witham v Holloway (1995) 183 CLR 525 at 533-4; Australian Competition and Consumer Commission v Hughes [2001] FCA 38 at [15].

8                     In Louis Vuitton Malletier SA v Design Elegance Pty Ltd (2006) 149 FCR 494 at 501‑2, Merkel J identified the following considerations as being relevant to the determination of an appropriate penalty for contempt of Court:

·                    The contemnor’s personal circumstances;

·                    The nature and circumstances of the contempt;

·                    The effect of the contempt on the administration of justice;

·                    The contemnor’s culpability;

·                    The need to deter the contemnor and others from repeating contempt;

·                    The absence or presence of a prior conviction for contempt;

·                    The contemnor’s financial means;

·                    Whether the contemnor has demonstrated genuine contrition and made a full and ample apology;

·                    Whether the conduct falls within the most serious category of criminal contempt cases such as to warrant the imposition of a term of imprisonment; and

·                    Whether or not imprisonment is a “last resort” penalty in the circumstances of the case.

See also Info4pc.Com Pty Ltd at 54; Australian Competition and Consumer Commission v World Netsafe Pty Ltd (2003) 133 FCR 279 at 283.

VLADIMIR VAYSMAN

9                     I have found 10 charges proven against Vladimir Vaysman.  Those charges are set out in full in Deckers (No 6) at [51] and immediately above paragraphs [56], [59], [91], [94], [97], [98] and [102].  The substance of these charges may be summarised as follows:

·                    Charge 8 – Between 22 December 2003 and 10 February 2004 Mr Vaysman sold numerous pairs of counterfeit Ugg boots contrary to orders made by the Court on 23 December 2003 which restrained him from selling such products.

·                    Charge 9 – On or about 27 December 2003 Mr Vaysman sold a pair of counterfeit boots to a purchaser.  Those boots bore the Ugg logo and were accompanied by printed material such as care instructions which was copied from the material which the Applicant provided with its Ugg boots.  This sale also contravened the orders made on 23 December 2003.

·                    Charge 18 – Between December 2005 and (at least) November 2007 Mr Vaysman caused and encouraged the use of a factory in Roper Street Moorabbin for manufacturing and selling counterfeit footwear.  He did so contrary to consent orders to which he was a party which were made by the Court on 12 March 2004.  During this period, as I found in Deckers Outdoor Corporation Inc. v Farley (No 5)[2009] FCA 1298 (“Deckers (No 5)”) at [84]-[92], over 30,000 pairs of counterfeit boots were sold with the profit on those sales amounting to over $3 million.

·                    Charge 19 – Between December 2005 and November 2007 Mr Vaysman procured the services of five persons to act as his agents in offering for sale and selling counterfeit footwear.  He then assisted them in carrying out their marketing and selling activities.  This also was a contravention of the orders made on 12 March 2004. 

·                    Charge 20 – Mr Vaysman represented to at least one of the persons whom he recruited to sell the counterfeit footwear that the products were manufactured, advertised and/or promoted with the sponsorship or approval of the Applicant.  He did so in contravention of the orders made in March 2004.

·                    Charge 22 – Mr Vaysman caused a warehouse in Braeside to be used for importing, exporting, manufacturing, distributing and selling counterfeit footwear in contravention of the orders made in March 2004.

·                    Charge 32 – Between 27 November 2007 and 12 December 2007 Mr Vaysman permitted and caused the factory in Roper Street Moorabbin to be used for importing, exporting, manufacturing, distributing and selling counterfeit footwear.  He did so in breach of an undertaking which he gave to the Court on 27 November 2007.

·                    Charge 33 – Between 27 November 2007 and 12 December 2007 Mr Vaysman permitted and caused the Braeside warehouse to be used for importing, exporting, manufacturing, distributing and selling counterfeit footwear.  This also constituted a contravention of the undertaken given to the Court on 27 November 2007.

·                    Charge 34 – Between 27 November 2007 and 12 December 2007 Mr Vaysman attempted to procure further agents to promote, advertise, offer for sale and sell counterfeit footwear on the internet in contravention of the undertaking given to the Court on 27 November 2007.

·                    Charge 48 – Mr Vaysman failed to comply with an order of the Court, made on 12 November 2007 which required him to provide information as to the persons to whom he supplied counterfeit products.

10                  In Deckers (No 5) at [46]-[53] I found that the Applicant had a well-established reputation in the getup of its Ugg Australia branded footwear and that Mr Vaysman sought to persuade potential purchasers of counterfeit boots that the products he sold were “genuine Ugg Australia” footwear.

11                  While other members of his family were involved in varying roles and to varying degrees in the production, sale and distribution of counterfeit footwear, Mr Vaysman was the person who exercised overall control of what was a significant commercial operation.  The operation had its origins in Mr Vaysman’s father, Josef Vaysman’s, ability to manufacture what he considered to be a genre of footwear, namely, Ugg Boots.  He made these boots and sold them at public markets.  Sometime earlier than 2003 Vladimir Vaysman came to appreciate the market potential for sales of this footwear more widely in Australia and overseas.  He also appears to have come to the view that this marketing potential would be enhanced if the footwear was presented using the Applicant’s established getup. 

12                  When, towards the end of 2003, the Applicant became aware of sales of counterfeit footwear it commenced proceedings in this Court.  Mr Vaysman’s reaction was to agree to the making of restraining orders without admitting liability and then to resume the production and marketing of counterfeit Ugg products.  When, a few months later, his unlawful activities were again discovered, he consented to the making of further restraining orders which he appears to have obeyed for a relatively short period before resuming the manufacture and sale of counterfeit products. 

13                  Between 2005 and 2007 his business developed apace, generating millions of dollars in sales revenue.  As the business developed he recruited a team of people to market the boots using the e-Bay facilities on the internet and attracting customers in Europe and North America.  He established a number of corporate structures to facilitate the conduct of various aspects of the business.  In some cases he installed his compliant father as director and shareholder of the companies.  The companies opened bank accounts through which millions of dollars in turnover passed.  Mr Vaysman used some of the companies which he had set up to lease premises in which counterfeit footwear was manufactured and from which this footwear was distributed.  Mr Vaysman benefited financially from the trade in counterfeit products.  As I found in Deckers (No 6) at [66], in a four month period between July and October 2006, payments exceeding $1.7 million were credited to four accounts held in his name.  Cheque books related to those accounts disclosed that, in the period between October 2005 and March 2007, 98 cheques for amounts totalling about $450,000 were drawn made out to cash.

14                  When Mr Vaysman’s activities were discovered for a third time in November 2007, his response was again to give undertakings to the Court without admitting liability and then to proceed with business as usual as if nothing had happened.  On the day before he gave the undertakings he falsely swore on affidavit that neither he nor Hepbourne Pty Ltd had, since 2005, had possession of, supplied or offered to supply any person with counterfeit footwear. 

15                  In Deckers (No 5) I outlined in greater detail what had occurred towards the end of 2007.  I also made some observations, to which I adhere, relating to Mr Vaysman’s contumelious disregard of the orders made by the Court and the undertakings which he had given to it.  At [106]-[113] I said:

“[106]   During 2005, 2006 and 2007 the manufacture at and the distribution from Hepbourne’s Moorabbin factory continued apace.  Additional people were recruited to sell the boots on e-Bay.  Once sales were made the persons who had made the sales advised Vladimir Vaysman and he (or someone on his behalf) delivered the boots to the salesperson’s residence ready for despatch to the purchasers.  Business became more brisk and the salespersons were asked to attend the Moorabbin factory to collect the products they needed to fill the orders which they had received.  This they did.  The arrangements are described in more detail in Deckers (No 2) at [30]-[35]:  see above at [21].

[107]    Late in 2007, Deckers had cause to believe that infringing conduct was again occurring.  The present proceeding was commenced.  On 12 November 2007 Deckers was granted a further search order in respect of the Moorabbin factory.  The order was executed the following day and the search yielded evidence of the manufacture and distribution of infringing products on a substantial scale. 

[108]    Not long after the search had commenced Vladimir Vaysman telephoned Ms Farley and asked her whether a search order had also been executed at her home.  When she answered “yes” he advised her not to give those present her e-mail address.  He rang again later in the afternoon while lawyers were still present in her house.  He asked her if they were still there.  When advised that they were, he told Ms Farley to get them to leave.  After they had left he again telephoned her.  Ms Farley asked him what was going on and told him that she thought she was in serious trouble and might go to gaol.  Vladimir Vaysman told her that she would not go to gaol but she could expect to pay a lot of legal fees.  Vladimir Vaysman asked Ms Farley whether she was still prepared to sell the UGG branded boots.  He also told her that he would not pay Deckers any money.

[109]    Vladimir Vaysman also spoke to Ms Sommer on the afternoon of 13 November 2007.  He told her that everything would quieten down over the next two weeks.  He asked her whether she was prepared to continue selling the footwear once everything had blown over.

[110]    About a week later Vladimir Vaysman contacted Ms Ezzat and told her that he wanted her to list UGG branded footwear on e-Bay UK.  She was not aware, at that time, that a Court-sanctioned search had taken place at the Moorabbin factory.  Vladimir Vaysman told her that he would no longer be providing footwear to his other e-Bay sellers and that he wanted her to sell more stock and at a quicker pace.  She questioned him about why he was no longer using the services of the other sellers and he told her that it was better that she did not ask what had happened.

[111]    On 27 November 2007 Hepbourne and Vladimir Vaysman gave undertakings to the Court that they would refrain until trial from manufacturing or distributing footwear bearing Deckers’ get-up.  In breach of this undertaking, counterfeit footwear continued to be produced at and distributed from the Moorabbin factory.  This continued at least until 12 December 2007 when a further search order was executed. 

[112]    It is clear, and I find, that Hepbourne, acting through Vladimir Vaysman, was intent on manufacturing and marketing counterfeit footwear, totally disregarding Deckers’ rights and Court orders.  The commencement of legal proceedings, the execution of search orders and the making of restraining orders were simply treated as inconvenient interruptions to what was intended to be, and was, for over four years, a calculated and successful attempt to make money through selling footwear which purported to have been manufactured by Deckers. 

[113]    This case must be adjudged as one of the worst of its kind to come before the Court.  It is probably too generous to describe it as “flagrant”.  General deterrence must be a significant consideration.  Most of the damage complained of occurred after Hepbourne was well aware that it was engaged in infringing conduct.  Although the monetary benefits which flowed to Hepbourne as a result of the activities of Vladimir Vaysman cannot be determined with precision, it amounted to many millions of dollars.”

(Emphasis added).

16                  Mr Vaysman has chosen not to seek to defend himself against any of the contempt charges which have been preferred against him by the Applicant.  He has not appeared at any of the hearings at which the charges were considered.  He has not filed any affidavits explaining his conduct.  He has not made any attempt to acknowledge his wrong doing and apologise for it.  He has not demonstrated the slightest contrition for what he has done.  On the contrary, he has continued to treat the curial processes with distain. 

17                  Little is known of Mr Vaysman’s financial circumstances.  In Deckers Outdoor Corporation Inc. v Farley (No 4) [2009] FCA 369 (“Deckers (No 4)”) Mr Vaysman and Hepbourne Pty Ltd were jointly and severally adjudged liable to pay the Applicant $150,000 pursuant to terms of settlement which had been entered into between them and the Applicant on 10 June 2005.  On 24 September 2009 Mr Vaysman consented to orders being made against him for $3 million for general compensatory damages and a further $3 million for additional damages for copyright infringement.  Shortly afterwards Mr Vaysman entered voluntary bankruptcy.  In these circumstances it may reasonably be assumed that Mr Vaysman would not be in a position to pay any fine which the Court might impose as punishment for his contempt.

18                  This is one of the worst cases of contempt to have come before the Court.  Mr Vaysman has deliberately and repeatedly contravened undertakings given by him to the Court and orders of the Court over a four year period.  The need for both personal and general deterrence ranks highly in the sentencing process.  Not only have the Applicant’s rights been seriously infringed, the authority of the Court has been severely undermined.  Mr Vaysman’s conduct falls within the most serious category of criminal contempt cases.  Although a sentence of imprisonment is a last resort, nothing less would be appropriate in the circumstances of the present case.

19                  The charges on which Mr Vaysman stands guilty vary in severity and, in some cases, overlap.  By far the most serious offence is that covered by Charge 18.  It warrants a sentence of imprisonment for three years.  On the other charges I would impose the following penalties with each sentence to be served concurrently with each other sentence, including that imposed in relation to Charge 18: 

·                    Charge 8 – Three months imprisonment.

·                    Charge 9 – Seven days imprisonment.

·                    Charge 19 – Six months imprisonment.

·                    Charge 20 – One month imprisonment.

·                    Charge 22 – One month imprisonment.

·                    Charge 32 – Six months imprisonment.

·                    Charge 33 – Six months imprisonment.

·                    Charge 34 – Six months imprisonment.

·                    Charge 48 – One month imprisonment.

VICTORIA VAYSMAN

20                  Seven charges of contempt of Court were found proven against Victoria Vaysman.  The terms of those charges are recorded in Deckers (No 6) at [49].  The substance of the charges may be summarised as follows:

·                    Charge 7 – On 4 January 2004 Ms Vaysman sold six pairs of counterfeit boots thereby contravening orders made by the Court on 23 December 2003. 

·                    Charge 11 – At various times since December 2003 Ms Vaysman advertised, promoted and offered for sale counterfeit footwear through an internet website controlled by her.  In doing so she contravened the orders made on 23 December 2003.

·                    Charge 12 – In or about January and February 2004 Ms Vaysman represented to another person that sheepskin footwear products sold by her to that person were genuine Ugg products made by the Applicant.  In doing so she also contravened the 23 December 2003 orders.

·                    Charge 14 – In February 2004 Ms Vaysman took various steps to obstruct the execution of search orders made by the Court on 10 February 2004. 

·                    Charge 23 – Between January and March 2006 Ms Vaysman recruited, instructed and assisted various persons to act as her agents in promoting, advertising, offering for sale and selling on the internet counterfeit footwear.  In doing so she contravened consent orders made by the Court on 12 March 2004.

·                    Charge 25 – In about December 2005 Ms Vaysman represented to one of the persons she had recruited to market counterfeit footwear that the counterfeit products were manufactured, advertised and promoted with the sponsorship or approval of the Applicant.  She did so in contravention of the orders made on 12 March 2004.

·                    Charge 26 – Between July 2005 and December 2007 Ms Vaysman offered counterfeit footwear for sale.  In doing so she again contravened the orders made in March 2004.

Ms Vaysman admitted that the total value of the sales covered by Charges 23 and 26 was in the vicinity of $300,000.

21                  Ms Vaysman admitted all of the charges save for Charge 14.  She admitted Charge 14 but only to the extent that she had refused to provide the password to an e-mail account used for marketing counterfeit footwear.  She acknowledged her contravening conduct in an agreed statement of facts.  In doing so she relieved the Applicant of the need to obtain and lead evidence supporting the charges.

22                  On 7 May 2010 Ms Vaysman filed an affidavit in which she appeared to resile from some or all of the factual admissions which she had earlier made.  She claimed that she had “not had proper legal representation” at the trial of the contempt charges.  She also claimed that one of those representing her “did not take diligent care”.  She said that she “felt very rushed” while considering a draft of the statement of facts before she agreed to it.  She went on:

“But I did not feel relaxed and when I don’t feel relaxed I make mistakes.  Thus I believe I may have misread some parts of what the Applicant wrote in the Statements of Facts and Agreed [sic] to something that I should not have agreed to.  I felt very flustered.”

She concluded this section of her affidavit with a further attack on counsel.  She said:

“I believe that if punishment is thrust upon me, injustice will be done.  As my pro-bono lawyer did not take sufficient care when representing me.  He just wanted to get this case over and done with.  I was told by another lawyer that [counsel] was upset that he wasn’t being paid for his time.  And when he signed up for this case, he did not realise how big the case was and how much information he had to read.”

23                  The affidavit may fairly be understood as an attempt to argue that some of the charges against her should not have been admitted and found to have been proven.  This impression is confirmed by her later contention that she had “admitted all of my wrong doings in the Statement of Facts and that I am genuinely sorry for what I did.  And I may have admitted to something that I may not have done in the Agreed Statement of Facts.”

24                  Ms Vaysman did, however, accept that she had, to some extent, acted wrongly.  Interspersed at later points in her affidavit were statements that:

·                    “I know what I did was wrong but I believe that I have already been punished enough in the last 2 years.  I have stayed out of trouble and plan to do so.”

·                    “I am sorry and remorseful for my past actions.  I have learnt from my mistakes and I just want to do the right thing and move on with my life.”

·                    “I am truly sorry and remorseful for what I did.  And I won’t do it again.  I promise.”

25                  At the time at which Ms Vaysman affirmed this affidavit she was not legally represented.  Shortly before the hearing on penalty Ms Vaysman sought and obtained legally aided representation.  On the morning of the hearing she affirmed a further affidavit.

26                  In this later affidavit she withdrew her criticism of counsel and praised their work.  She said that she “did not intentionally mean to hurt them or criticise them.”  Ms Vaysman also offered apologies to those who had been hurt by her “wrongful behaviour.”  She apologised to the people whom she had recruited to market the counterfeit products on e-Bay for having deceived them and caused them financial loss.  She also apologised to those who had purchased the counterfeit products believing that they were genuine Ugg Australia footwear.  She said that she “would like to one day set up a repayment plan of sort (sic), (when I am able to afford it) to pay back all the customers that did not receive their merchandise or who were not fully satisfied with their merchandise.”  She went on to apologise “from the bottom of my heart to the court for wasting everybody’s time and spending huge amounts of money on this case.”

27                  Ms Vaysman was at pains to say that she had “truly changed” her attitude and had also changed her behaviour.  She expressed regret about what she had done and promised “that I will never do anything like this again.”  She said that she had been “delusional and misguided and thus did not think through the consequences of my wrongful actions” and that she was “sincerely remorseful”. 

28                  In both her affidavits Ms Vaysman stressed the adverse impact any sentence of imprisonment would have on her four year old daughter.  Her daughter’s father has no contact with the family and Ms Vaysman is unaware of his whereabouts.  She asserted that her parents suffered from medical conditions which would render them unable to cope with caring for her daughter on a full time basis.  They would not be able to take her to kindergarten and to other social activities outside the home.  Ms Vaysman also relied on a report from a child psychologist who expressed the opinion that, if Ms Vaysman were to be imprisoned, her daughter “may not understand why she needs to be separated from her mother and this may affect her relationship with her mother.”  There may also be an effect on the daughter’s ability to relate to other people.  Separation from her mother “could be detrimental to the child’s well being.”

29                  Both affidavits also dealt with Ms Vaysman’s financial position.  Her principal source of income at the present time is Family Benefit payments made by Centrelink.  She has about $1,000 in a bank account.  She does not own any real property.  In her first affidavit she said that she had given most of the $300,000 which she derived from the sales of counterfeit footwear to her brother “to help with his construction of the house at 303 Balaclava Road, Caulfield …”.  She no longer had any of the balance of the $300,000.  In her second affidavit she described the $300,000 as being “just turnover”.  The profit was only about one third of the sales and this amounted to about $33,000 per year over two to three years.  This, she said, was “why I have no money left.”  She did not attempt to explain the apparent inconsistency with her earlier claim to have given “most of the $300,000” to her brother.

30                  Ms Vaysman said that she “would most likely not be able to pay” any fine imposed by the Court and that, if she became bankrupt, this would severely hamper her efforts to get her “life back together and build a future for [her] daughter.” 

31                  In written submissions counsel for Ms Vaysman accepted that her contemptuous conduct warranted the imposition of a term of imprisonment.  He submitted, however, that in all of the circumstances, any term of imprisonment imposed should be wholly suspended.  He identified the following considerations which, he contended, weighed in favour of a suspended sentence:

·                    Ms Vaysman had not previously been found guilty of contempt of Court;

·                    Ms Vaysman had substantially admitted the conduct constituting each of the offences with which she stood charged;

·                    She was remorseful and had apologised for her misconduct;

·                    Both Ms Vaysman and her family had been financially devastated by legal proceedings brought by the Applicant;

·                    The proceedings had been “hanging over” Ms Vaysman for two and a half years; and

·                    She had a very young child for whom she is the sole carer and no alternative carer is available.

32                  In the course of an oral plea, counsel for Ms Vaysman advised the Court that she was 38 years old, having been born on 4 September 1971.  In her late 20’s she had a relationship break up with led to depression.  After the first restraining orders had been made by the Court in 2003 Ms Vaysman could have opted out of participation in what was described as “the family business”.  She did not do so because, after the orders had been made, a family meeting took place during which it was decided that those involved would continue to manufacture the counterfeit footwear.  She and other members of the family regarded it as “unfair” that they were being prevented by Court order from doing what they and, they believed, others had been doing for many years.  Ms Vaysman made a conscious choice not to opt out because to do so would have involved turning her back on her family. 

33                  Counsel advised the Court that Ms Vaysman’s total weekly income, including Centrelink and Child Support Payments was in the order of $500.

34                  Counsel relied on a number of character references provided by professional friends of Ms Vaysman.  They spoke well of her and made observations about the impact the legal proceeding had had on her.  They considered it unlikely that she would re-offend.

35                  Counsel submitted that prison would weigh more heavily on Ms Vaysman than it would on someone who went there in “more common place circumstances.”

36                  Counsel for the Applicant submitted that a penalty of two years imprisonment with one year suspended would be an appropriate penalty for Ms Vaysman.

37                  Counsel on both sides were, in my view, correct to submit that Ms Vaysman’s conduct warranted the imposition of a custodial sentence.  She made a conscious decision to involve herself in the “family business” notwithstanding her knowledge that the Court had made orders which prevented the sale and distribution of counterfeit footwear.  She may have done so, in part, because of a misguided sense of family loyalty.  She was, however, also motivated by a desire to participate in the financial benefits which were derived from what became a lucrative enterprise.  Ms Vaysman played a key role in the business procuring sales through the internet and recruiting a number of other people also to undertake this work.

38                  I have no doubt that Ms Vaysman is much chastened by her experience as a Respondent in the principal proceeding and in defending the contempt charges which were preferred against her.  With hindsight she clearly regrets having chosen to disregard orders made by the Court.  While not unmindful of her expressions of remorse and her promises not to re-offend, I am far from persuaded that she appreciates and accepts the gravity of her misconduct.  Ms Vaysman appeared before the Court on a number of occasions during the interlocutory stages of the principal proceeding.  More than once she expressed the view that the Applicant was persecuting her family and interfering with their ability to make an honest living.  More than a hint of this attitude persisted, even after Ms Vaysman acknowledged that she had committed contempt of Court.  In the affidavit which she affirmed on 7 May 2010 she professed concern about her “poor dad” having lost “his business that he was so tirelessly building for the last 30 years.”  She said that this had occurred “because of one stupid mistake.”  She did not identify what that one mistake was.  As can be seen from Deckers (No 6) and Deckers (No 7), her father was guilty of multiple contraventions of Court orders over a period of two years.  Ms Vaysman appears unable to comprehend that Mr Vaysman’s predicament was caused by his deliberate and repeated attempts to develop his business by doing things which he well knew were prohibited by Court order.  More significantly, she was personally and actively involved, for over four years, in the marketing of the counterfeit footwear which her father was manufacturing.

39                  A second cause for scepticism is provided by other parts of her May affidavit.  Despite having signed an agreed statement of facts in which she effectively admitted the charges which had been laid against her, she could not bring herself to acknowledge fully the responsibility which she bore for her conduct.  Her instinctive and untutored reaction to the Applicant’s reliance on her admissions was to suggest that her legal advisers had acted unprofessionally and so induced her into making admissions which should not have been made.  No attempt was made to identify any particular facts contained in the statement which were not correct.  Although, having received further legal advice, she withdrew her allegations against counsel, the strong impression remains that she retains the view that she and her family are being victimised for doing something they were entitled to do.

40                  It is, I think, more likely that Ms Vaysman’s expressions of contrition flow from the realisation that her conduct has placed her at risk of imprisonment and from her concern that her imprisonment might have an adverse impact on her and her daughter.

41                  I have not overlooked the belated apologies which Ms Vaysman has extended to those who have suffered as a result of her activities and to the Court.  No such apologies were offered in Ms Vaysman’s first affidavit which was made on 7 May 2010.  The absence of such apologies was noted in written submissions, filed on behalf of the Applicant on 14 May 2010, which were served on Ms Vaysman.  The apologies which were contained in the affidavit which she affirmed on the day of the hearing on penalty would seem to have been prompted by the earlier omission being brought to her attention by counsel for the Applicant.

42                  The most difficult issue which confronts me in determining appropriate penalties for the various contempts committed by Ms Vaysman relates to the impact any term of imprisonment is likely to have on her daughter. 

43                  The imprisonment of any person who has responsibility for the care of children or infirm relatives is inevitably going to have the potential to cause hardship to others.  Although the probable effect of a sentence of imprisonment on a dependant is a matter calling for consideration in the exercise of the sentencing discretion, save in truly exceptional circumstances this is a consideration which does not weigh heavily in determining the length of a sentence:  see R v Spiers (1983) 34 SASR 546.  Such exceptional circumstances may be found to exist where the imprisonment of a parent leaves a child without parental care:  see, for example, R v Sinclair (1990) 51 ACrimR 418 at 431-2.  Even then, the result may not be that the parent is spared imprisonment but that the length of the sentence which would otherwise be imposed is reduced: see generally, Fox and Freiberg, Sentencing (2^nd ed, 1999) at 342-4.

44                  In order to establish the existence of exceptional hardship a defendant must adduce “cogent evidence … to establish that his imprisonment would impose exceptional hardship upon his family … or that his imprisonment would effectively deprive his children of parental care”:  Mawson v Nayda (1995) 5 NTLR 56 at 57 (per Kearney J).  Ms Vaysman’s evidence satisfied me that it is unlikely that her daughter’s father would be available or willing to care for their daughter during any period in which she was imprisoned.  She has, from time to time, left her daughter in the care of her parents but not for protracted periods.  Were they to have to undertake full time care of the daughter for any significant length of time this would place a strain on all concerned because of her parents’ health problems and language difficulties.  The daughter’s kindergarten attendance and social activities could well be disrupted.  Ms Vaysman’s parents have not given evidence that they are unable or unwilling to care for her daughter should the need arise.  The psychological evidence which Ms Vaysman produced was guarded and went no further than raising the possibility of her daughter being prejudicially affected by any prolonged separation.  The psychologist’s opinion was based on one session with Ms Vaysman’s daughter shortly before the penalty hearing.

45                  I am not satisfied that Ms Vaysman has adduced cogent evidence that her daughter would be deprived of appropriate care were Ms Vaysman to be imprisoned.  I do not, however, ignore the possibility that, if called upon to provide care for a lengthy period, her parents’ capacity to provide adequate care may diminish.  As a result, I consider it appropriate to accord some weight to Ms Vaysman’s daughter’s circumstances in determining the appropriate penalties.

46                  Although Ms Vaysman was not the person who was principally responsible for the manufacturing and marketing of the counterfeit footwear, she played a key role in assisting her brother by making the arrangements for internet sales of the footwear.  She did so well knowing that she was contravening orders which had been made by the Court and which she chose deliberately to ignore.  Again, therefore, both specific and general deterrence are raised as important sentencing considerations.

47                  The two most serious charges preferred against Ms Vaysman are Charges 23 and 26 which deal with her engaging in selling counterfeit footwear and recruiting others to do so.  Both of these contempts, in my opinion, warrant nothing less than a sentence of imprisonment.  The term of imprisonment should, in each case, be one year.  The sentences should be served concurrently.

48                  On the other charges I impose the following penalties with each sentence to be served concurrently with each other sentence, including those imposed in relation to Charges 23 and 26:

·                    Charge 7 - Three months imprisonment.

·                    Charge 11 – Six months imprisonment.

·                    Charge 12 – Seven days imprisonment.

·                    Charge 14 - 14 days imprisonment.

·                    Charge 25 – Seven days imprisonment.

49                  Having regard to the potentially adverse impact of a long period of imprisonment on Ms Vaysman’s daughter I will require that Ms Vaysman serve two months imprisonment and suspend from execution the remaining period of the sentence.  Whilst I consider that Ms Vaysman is genuinely concerned about her daughter’s welfare she cannot escape an otherwise deserved sentence of imprisonment for conduct she deliberately engaged in during the girl’s formative years.

LEONID MYKHALOVSKyI

50                  I have found six charges proven against Leonid Mykhalovski.  These charges are set out in full in Deckers (No 6) immediately above paragraphs [122] and [126].  The substance of these charges may be summarised as follows:

·                    Charge 41 – Between 27 November 2007 and 12 December 2007 Mr Mykhalovskyi manufactured counterfeit footwear at the Roper Street factory in Moorabbin in contravention of the orders made by the Court on 27 November 2007.

·                    Charge 46 – Mr Mykhalovskyi did not personally or on behalf of Dusia Pty Ltd (of which he was the sole director) comply with the orders made on 12 November 2007 that he provide information about the counterfeit footwear including the names and addresses of every supplier and those to whom counterfeit footwear was supplied.  He was required to provide this information within 10 working days.  He did not do so.

·                    Charges 51, 59, 63 and 69 – Mr Mykhalovskyi was required by orders made on 26 November 2007 and 14 December 2007 to cause companies of which he was the sole director to provide a statement of assets within 10 working days.  He failed to do so.

51                  Mr Mykhalovskyi has failed to offer any defence to the charges and has not made any submissions in relation to appropriate penalties for his contravention of the Court’s orders.  He has simply ignored the Court’s orders and chosen not to take part in any hearing despite being served with all necessary documents.

52                  By far the most serious of the charges preferred against Mr Mykhalovskyi is Charge 41.  The Court’s orders, made on 27 November 2007, required Mr Mykhalovskyi, among others, to desist from manufacturing counterfeit footwear at the Roper Street factory in Moorabbin.  Despite being served with the orders, Mr Mykhalovskyi continued to manufacture footwear at the premises until a second search order was executed in mid December.  In Deckers (No 5) at [137] and [139] I found that:

“[137]   … Mr Mykhalovskyi was restrained, by an order which I made on 27 November 2007, from manufacturing the counterfeit footwear.  Despite this, when a search order was executed at the Moorabbin factory on 12 December 2007, Mr Mykhalovskyi was observed to be working there.  As already noted, time sheets which were found at the Moorabbin factory on 12 December 2007 showed that Mr Mykhalovskyi had continued to work there between 27 November and 12 December 2007, notwithstanding the Court’s order. 

[138]    …

[139]    Mr Mykhalovskyi has exhibited a flagrant disregard for [the Applicant’s] rights.  He continued to infringe those rights by persisting in working at the Moorabbin factory after being served with the Court’s order which required him to cease manufacturing counterfeit boots.  There is a need for both specific and general deterrence of similar misconduct.  The evidence does not suggest however, that Mr Mykhalovskyi benefited financially from his involvement in the infringement of [the Applicant’s] copyright beyond receiving wages for the work which he performed.”

53                  It will be recalled that, when the second search order was executed at the factory on 12 December 2007 large quantities of counterfeit footwear were discovered which had not been present when the earlier search order had been executed in November of that year.

54                  The evidence suggests that Mr Mykhalovskyi’s contribution to the Vaysman “family business” involved no more than the contribution of his labour at the factory and, possibly, the transportation on occasions of counterfeit products to the Queen Victoria Market where the footwear was sold.  Nonetheless, his blatant disregard of the Court order that he cease manufacturing counterfeit footwear warrants a custodial sentence.  Again, considerations of general and specific deterrence weigh heavily.  Mr Mykhalovskyi should be imprisoned for three months.

55                  The remaining charges against him are less serious.  They should each attract a penalty of one month imprisonment.  Each sentence should be served concurrently with each other sentence and concurrently with the penalty imposed in relation to Charge 41.

VAYSMAN PTY LTD & HEPBOURNE PTY LTD

56                  In Deckers (No 6) I found one charge proven against Vaysman Pty Ltd.  This company was a vehicle, used by Vladimir Vaysman, to receive orders for counterfeit footwear and to forward the goods to the purchasers.  The details of this charge (Charge 8) are set out above at [9].

57                  Vaysman Pty Ltd was deregistered on 21 March 2007.  In these circumstances it is not necessary to consider the imposition of penalties against the company.  There should, however, be a declaration to the effect that Vaysman Pty Ltd was guilty to contempt of Court.

58                  In Deckers (No 6) I also found four charges proven against Hepbourne Pty Ltd.  Hepbourne was another vehicle which was used by Vladimir Vaysman to conduct the business of manufacturing and marketing counterfeit footwear.  Hepbourne was the subject of Charges 9, 18, 32 and 48.  Full details of those charges appear above at [9].

59                  Liquidators were appointed to Hepbourne on 26 August 2009.  Its only known asset is the net proceeds of the sale of the Roper Street Moorabbin factory.  These proceeds amounted to $144,483.66.  This amount was paid into Court on 18 March 2009. 

60                  On 13 November 2009 the Court ordered that Hepbourne and Vladimir Vaysman were jointly and severally liable to pay the Applicant general damages of $3 million.  It further ordered Hepbourne to pay $3,500,000 in additional damages.

61                  It is, therefore, apparent that Hepbourne would not be in a position to pay any monetary fine imposed by the Court.  Nothing would be gained by the imposition of such fines and, realistically, the Applicant does not seek their imposition.  Nonetheless, declarations should be made that Hepbourne has been guilty of contempt of Court.

COSTS

62                  The Applicant seeks an order that each Respondent pay its costs on a solicitor-client basis.  It has prosecuted the charges at considerable cost.  It has not done so vindictively.  It stood to make no financial gain by doing so.  If the penalties imposed act as a deterrent to the relevant Respondents and others, the outcome of the contempt proceeding may have some indirect future benefit to the Applicant.  In successfully prosecuting the charges the Applicant has sought to vindicate the authority of the Court.  It should not have to bear the costs incurred by it in doing so.  In such circumstances, in my opinion, the orders sought are appropriate.

Associate:

24 June 2010