FEDERAL COURT OF AUSTRALIA

Electrolux Home Products Pty Ltd v Delap Impex KFT [2015] FCA 62

THE COURT ORDERS THAT:

1.    Leave is granted to the applicant to file in Court a notice of motion seeking default judgment returnable instanter against the first respondent, the second respondent and the fifth respondent.

2.    Judgment is given against the first respondent and the second respondent.

THE COURT FURTHER ORDERS THAT:

3.    In these Orders, words bear the meanings assigned to them as follows:

a.    Nominated Websites means:

    www.euappliances.com;

    www.deluxeappliances.com; and

    www.deluxeappliances.com.au.

b.    AEG Mark means the trade marks 1244653 and 895938 and the Electrolux Mark means trade mark 1033311 of which the Sixth Respondent is the registered owner under the Trade Marks Act 1995 (Cth).

c.    electrical goods means goods coming within the classes 7, 9, 11, 12, 37 and 42.

First Respondent

4.    An injunction is granted restraining the first respondent itself or by its servants or agents from:

a.    Advertising, promoting, selling or supplying to consumers located in Australia electrical goods bearing a trade mark the same as or deceptively similar to the Electrolux Mark or the AEG Mark;

b.    Displaying on any of the Nominated Websites or on any other website or in any form whatsoever any advertising material by which electrical goods bearing a trade mark the same as or deceptively similar to the Electrolux Mark or the AEG Mark are offered for sale to consumers located in Australia; and

c.    Publishing in either written or electronic form any document bearing a trade mark the same as or deceptively similar to the Electrolux Mark or the AEG Mark including but not limited to any warranty, manual for use or instructions in connection with the supply of electrical goods to consumers located in Australia.

5.    An injunction be granted restraining the first respondent itself or by its servants or agents from directly or indirectly:

a.    representing on any of the Nominated Websites or on any other website or by any other means whatsoever that it is an authorised or appointed re-seller or supplier to consumers located in Australia of electrical goods bearing a trade mark the same as or deceptively similar to the Electrolux Mark or the AEG Mark.

b.    causing to be delivered to consumers located in Australia electrical goods bearing a trade mark the same as or deceptively similar to the Electrolux Mark or AEG Mark.

Second Respondent

6.    An injunction be granted restraining the second respondent himself or by his servants or agents from:

a.    Advertising, promoting, selling or supplying to consumers located in Australia electrical goods bearing a trade mark the same as or deceptively similar to the Electrolux Mark or the AEG Mark;

b.    Displaying on any of the Nominated Websites or on any other website or in any form whatsoever any advertising material by which electrical goods bearing a trade mark the same as or deceptively similar to the Electrolux Mark or the AEG Mark are offered for sale to consumers located in Australia;

c.    Publishing in either written or electronic form any document bearing trade marks the same as or deceptively similar to the Electrolux Mark or AEG Mark including but not limited to any warranty, manual for use or instructions in connection with the supply of electrical goods to consumers located in Australia;

d.    Aiding or abetting or being knowingly concerned in or party to the first respondent or any other corporation or entity engaging in any activity of a kind described in paragraphs a-c of this Order.

7.    An injunction is granted restraining the second respondent himself or by his servants or agents from directly or indirectly:

a.    Representing on any of the Nominated Websites or on any other website or by any other means whatsoever that he or the first respondent is an authorised or appointed re-seller or supplier to consumers located in Australia of electrical goods bearing a trade mark the same as or deceptively similar to the Electrolux Mark or the AEG Mark; or

b.    Causing to be delivered to consumers located in Australia electrical goods, bearing a trade mark the same as or deceptively similar to the Electrolux Mark or the AEG Mark; or

c.    Aiding or abetting or being knowingly concerned in or party to the first respondent or any other corporation or entity engaging in any activity of a kind described in paragraphs a. or b. of this Order.

Costs

8.    The first and second respondents pay the applicant’s costs of and incidental to the proceedings.

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

REASONS FOR JUDGMENT

1    The applicant (Electrolux) claims that the first respondent (Delap) offers for sale and sells to consumers in Australia via the internet electrical goods that carry the trade marks “AEG” and “Electrolux” (Marks) which do not meet Australian safety standards and which are supported by inadequate warranties. Electrolux claims that Delap thereby infringes the trade marks of which the sixth respondent (AB Electrolux) is the registered owner under s 120 of the Trade Marks Act 1995 (Cth) (Trade Marks Act) and contravenes ss 18, 29, 102 and 106 of Schedule 2 (Australian Consumer Law or ACL) of the Competition and Consumer Act 2010 (Cth) (CCA). Electrolux also claims that the second respondent (Mr Paradi) and fifth respondent (Ms Szabo) are knowingly concerned in or aid and abet the conduct of Delap.

2    Electrolux seeks injunctions to restrain Delap, Mr Paradi and Ms Szabo from a range of conduct including advertising, promoting or supplying appliances bearing the Marks to Australian consumers. The originating application claims the relief under s 232 of the Australian Consumer Law and s 120 of the Trade Marks Act.

Background

3    The following factual claims are made in the amended statement of claim filed on 17 June 2013 (Statement of Claim).

4    Electrolux is a wholly owned subsidiary of AB Electrolux, a Swedish company. Electrolux AB is the registered owner in Australia of trade marks pleaded at [7] of the Statement of Claim (Trade Marks) and Electrolux is an authorised user of the Trade Marks in Australia.

5    Delap is incorporated in Hungary. Mr Paradi is, and was at all material times, a director and the directing mind and will of Delap.

6    The domain name “www.euappliances.com” (Euappliances Website) is registered to Delap and Mr Paradi. Mr Paradi is the registrant contact person and “tech” contact name for the website styled www.deluxeappliances.com.au (Deluxe Appliances Website). I will refer to these websites as the Websites.

7    At all material times, Ms Szabo was the Australian contact for the Euappliances Website.

8    At no time has Delap, Mr Paradi or Ms Szabo been an authorised user of the Trade Marks.

9    Without authorisation and through the Websites, from 2012 onwards Delap advertised, offered for sale and sold to Australian customers domestic appliances coming within the classes 7, 9, 11, 12, 37 and 42 and bearing Marks which are the same as or deceptively similar to the Trade Marks. Those appliances include dishwashers, dryers, washing machines, stoves and ovens (white goods) that do not meet Australian standards. This conduct infringes the intellectual property rights of Electrolux as an authorised user of the Trade Marks.

Procedural history

10    On 24 April 2013, AB Electrolux wrote to Delap (attention the Managing Director) and Deluxe Appliances (attention Ms Szabo) asserting its ownership of the Trade Marks registered in Australia in classes 7, 9 and 11. The letter said specifically that it did not authorise or consent to the use of the Trade Marks by Delap or Ms Szabo in connection with the importation into Australia and sale to Australian consumers of goods or services in those classes and it would regard any such activities as infringement of its rights as registered owner. By a further letter dated 26 April 2013 addressed in the same way, AB Electrolux through its solicitors Sydney Legal Advisers Pty Ltd advised that Electrolux sells goods employing the Trade Marks in Australia under exclusive arrangements and the activities of which AB Electrolux complains are contrary to its arrangements with Electrolux.

11    Delap and Mr Paradi replied, initially in Hungarian and subsequently in Hungarian and English, indicating an intention to defend vigorously any action taken by Electrolux. The last email contact from Delap or Mr Paradi appears to have been on 24 October 2012. It was an email to Mr Fitzpatrick of Sydney Legal Advisers (Electrolux’s solicitors) which follows as written (errors in original):

Mr Fitzpatrick,

I have heard you are threatening our domain renter. If you do not stop immediately and confirm closing this case today, I will do the followings:

1.    move the a website to a different domain name,

2.    start a new marketing strategy targeting Electrolux products on online media like Facebook,

3.    reduce all of Electrolux and AEG prices to wholesale price,

4.    on all big Australians forums start to public comments about price fixing in Australia compare to the whole world for Harvey Normann and Retravision, etc, and the real value of these products compare to the image been built by Electrolux Australia.

This also means your chance to achieve an agreement with us will be zero.

You should understand, Delap Impex was just a hobby for me till now, but if you do not close this case, it will be my goal to sell more AEG in Australia and make the Australian public understand how overpriced the AEG products are. In long term, I can not loose anything, only Electrolux Australia. I do not really care, if I sell a few ovens a month or not, but AEG position can change dramatically. I will start direct comparison on prices with Australian retailers.

You can sue Delap Impex, but you will achieve nothing, it is 10 minutes to set up a new company anywhere in Europe.

Please send your answer today by 5pm Sydney time, I will move webshop this afternoon.

Good luck.

Andras Paradi

12    The originating process was filed on 17 May 2013. Proceedings were subsequently discontinued against the third and fourth respondents.

13    On 17 May 2013 Electrolux applied to serve Delap and Mr Paradi outside Australia pursuant to r 10.43 of the Federal Court Rules 2011 (Cth) (Federal Court Rules). On 17 June 2013, Katzmann J delivered judgment, holding that she was satisfied that Delap and Mr Paradi were located in Hungary and made orders granting leave to Electrolux to serve the amended originating application filed on 13 June 2013 and the Statement of Claim, on Delap and Mr Paradi in accordance with the Convention on the Service Abroad of Judicial and Extrajudicial Documents in Civil or Commercial Matters 1965 (Hague Convention) and Div 10.6 of the Federal Court Rules.

14    Leave was also granted to serve Ms Szabo at the contact address supplied on the Euappliances Website (info@euappliances.com) following futile efforts to locate her personal address. Mr Fitzpatrick’s affidavit sworn on 15 May 2013 indicates that on that day he called the mobile telephone number for Ms Szabo on the Euappliances Website and spoke to a person who said she was Ms Szabo. Ms Szabo refused to provide an Australian address and instead suggested that she be contacted at that email address.

15    Electrolux filed an affidavit of service sworn by Ms Helen Hall of Sydney Legal Advisers on 18 November 2014 containing copies of certificates of service certified by the Ministry of Public Administration and Justice of Hungary confirming that Delap had been served on 22 October 2013 and Mr Paradi on 11 July 2014. Ms Hall also confirmed that Ms Szabo was served at the Delap email addresses (info@deluxeappliance.com.au and info@euappliances.com) on 27 June 2013.

16    On 27 November 2014, I made directions in relation to preparation for the hearing of Electrolux’s application. Delap, Mr Paradi and Ms Szabo were each advised of the orders by email sent on that day by Mr Fitzpatrick. On 18 December 2014, copies of the affidavit evidence filed before that date was given to Delap, Mr Paradi and Ms Szabo by email.

17    Notwithstanding the tenor of initial correspondence, none of Delap, Mr Paradi or Ms Szabo has filed a notice of address for service or made an appearance or filed any pleadings or evidence.

18    By affidavit sworn on 28 January 2015, Mr John Fitzpatrick of Sydney Legal Advisors confirmed that he had sent to Delap, Mr Paradi and Ms Szabo on 26 January 2015 a letter advising them of Electrolux’s intention to seek default judgment and of modification to the injunctions sought against Mr Paradi and Ms Szabo. He also confirmed that no response had been received from Delap, Mr Paradi or Ms Szabo to his letter of 27 November 2014. None of them appeared at the hearing of Electrolux’s application for default judgment.

19    Electrolux’s application was supported by affidavit evidence comprised in the Court Book all of which was read and exhibits tendered at the hearing, save for the affidavits of Ms Robyn Clarke sworn on 12 December 2014 and Mr John Bird sworn on 18 December 2014.

Relevant legislation and authorities

20    Rules 5.22 and 5.23(2) of the Federal Court Rules relevantly provide as follows:

5.22    When a party is in default

A party is in default if the party fails to:

(a)    do an act required to be done, or to do an act in the time required, by these Rules; or

(b)    comply with an order of the Court; or

(c)    attend a hearing in the proceeding; or

(d)    prosecute or defend the proceeding with due diligence.

5.23    Orders on default

…

(2)    If a respondent is in default, an applicant may apply to the Court for:

…

(c)    if the proceeding was started by an originating application supported by a statement of claim, or if the Court has ordered that the proceeding continue on pleadings — an order giving judgment against the respondent for the relief claimed in the statement of claim to which the Court is satisfied that the applicant is entitled; or

(d)    an order giving judgment against the respondent for damages to be assessed, or any other order; or

(e)    an order mentioned in paragraph (b), (c) or (d) to take effect if the respondent does not take a step ordered by the Court in the proceeding in the time specified in the order.

Note 1 The Court may make any order that the Court considers appropriate in the interests of justice — see rule 1.32.

Note 2     An order or judgment under this Division may be set aside or varied.

21    Rule 10.70 imposes restrictions on the power to enter default judgment if a certificate of service has been filed under the Hague Convention. It provides as follows:

10.70    Restriction on power to enter default judgment if certificate of service filed

(1)    This rule applies if:

(a)    a certificate of service of initiating process has been filed in the proceeding (being a certificate in due form (within the meaning of rule 10.66(2)), stating that service has been duly effected; and

(b)    the respondent has not appeared or filed a notice of address for service.

(2)    In circumstances to which this rule applies, default judgment may not be given against the respondent unless the Court is satisfied that:

(a)    the initiating process was served on the respondent:

(i)    by a method of service prescribed by the internal law of the Convention country for the service of documents in domestic proceedings on persons who are within its territory; or

(ii)    if the applicant requested a particular method of service (being a method under which the document was actually delivered to the respondent or to the respondent’s residence) and that method is compatible with the law in force in the country, by that method; or

(iii)    if the applicant did not request a particular method of service, in circumstances where the respondent accepted the document voluntarily; and

(b)    the initiating process was served in sufficient time to enable the respondent to enter an appearance in the proceeding.

(3)    In paragraph (2)(b), sufficient time means:

(a)    42 days from the date specified in the certificate of service in relation to the initiating process as the date service of the process was effected; or

(b)    such lesser time as the Court considers, in the circumstances, to be a sufficient time to enable the respondent to enter an appearance in the proceeding.

22    Under r 30.21(1)(b)(i), where a respondent is absent on the date fixed for hearing, the Court may order that the hearing proceed in the absence of the respondent.

23    Having regard to the procedural history set out above, I am satisfied that Delap, Mr Paradi and Ms Szabo are in default and that service of the initiating process on Delap and Mr Paradi was effected by the required method and in sufficient time. I was satisfied that the hearing on 28 January 2015 should proceed in their absence.

24    The principles applicable to the discretion to enter a default judgment were set out in Speedo Holdings BV v Evans (No 2) [2011] FCA 1227 (Speedo Holdings) per Flick J (emphasis in original):

19     A number of principles that have been established in respect to the former Order 35A r 3(2)(c) continue to be equally applicable to the current r 5.23(2)(c). Some of those principles of relevance to the present application are as follows.

20    First, the power invoked by the Applicants remains discretionary. So much necessarily follows from the discretion conferred by r 1.32: cf Bank of Kuwait and the Middle East v Ship MV “Mawashi Al Gasseem” (No 2) [2007] FCA 815 at [9], 240 ALR 120 at 122 per Mansfield J; United Broadcasting International Pty Ltd v Turkplus Pty Ltd (No 2) [2010] FCA 1413 at [42] per Yates J. Just as the discretion must be exercised “cautious[ly]” where it is the applicant that is in default (cf McKenzie v South Australia [2005] FCA 22 at [26], 214 ALR 214 at 221 per Finn J; Lawson v NSW Minister for Land and Water Conservation [2007] FCA 8 at [22] per Stone J; Tucker v Western Australia [2009] FCA 1459 at [9] per Marshall J), the same caution must be exercised where it is the applicant who is seeking orders as against a defaulting respondent.

21    Other than necessarily recognising that the power must be exercised with caution, there is little detailed consideration as to how the discretion must otherwise be exercised. One source of assistance may, however, be found in ACOHS Pty Ltd v Ucorp Pty Ltd [2009] FCA 577…

22     Second, the discretionary power to enter a default judgment is enlivened when … an applicant applies to the court for an order. Rule 5.23(2) provides that where a respondent is in default “an applicant may apply to the Court”. An applicant may, of course, decide not to do so.

23    Third, there is a difference in the terms in which the ambit of the power conferred by the former r 3(2)(c) (“the relief... that the applicant appears entitled to on the statement of claim”) and the wording of the current r 5.23(2)(c) (“the relief claimed in the statement of claim to which the Court is satisfied that the applicant is entitled”). Notwithstanding that difference in language, the requirement imposed is not that an applicant prove by way of evidence the claim sought to be advanced; the requirement is that the Court needs to be “satisfied” on the face of the statement of claim that the applicant is entitled to the “relief” claimed: … The facts as alleged in the statement of claim are deemed to have been admitted by a respondent: Australian Competition and Consumer Commission v Dataline.net.au Pty Ltd [2007] FCAFC 146 at [42], 161 FCR 513 at 523 per Moore, Dowsett and Greenwood JJ. …

24    Fourth, to be satisfied that an applicant “is entitled” to the relief claimed in the statement of claim, the Court needs to be satisfied that “each element of the relevant civil wrong involved is properly and discretely pleaded in the statement of claim”: Macquarie Bank Ltd v Seagle [2005] FCA 1239 at [24]; 146 FCR 400 at 406 to 407 per Conti J; Macquarie Bank Ltd v Seagle [2008] FCA 1417 at [20] per Jagot J.

25    Fifth, in addition to the facts alleged in a statement of claim, the Court may permit recourse to limited further evidence. But it may not admit evidence which would alter the case as pleaded.

26     … It is unnecessary for present purposes to consider whether the difference in language between the former Order 35A r 3(2)(c) and the current r 5.23(2)(c) also now permits the Court to grant any relief other than that claimed in the statement of claim.

25    Although no evidence need be adduced in relation to the facts deemed to be admitted by the respondents, evidence which would not alter the pleaded case may be admitted in relation to the relief sought. Regard ought not to be had to evidence of facts which could have been but were not pleaded concerning the conduct of the respondents. Additional or different relief from that asked for in the statement of claim might also be granted, depending on the nature of the case, the order sought and whether the respondent is, or can be taken to be, cognisant of the prospect of such an order being made: see Australian Competition and Consumer Commission v Dataline.Net.Au Pty Ltd [2006] FCA 1427 at [46]-[50].

Consideration

26    As outlined above, the facts as alleged in the Statement of Claim are deemed to have been admitted by Delap, Mr Paradi and Ms Szabo. That being the case, what must be determined regarding each of the contraventions alleged is whether, on the face of the Statement of Claim, Electrolux has demonstrated an entitlement to the relief claimed.

Trade Marks

27    Electrolux’s first claim is relevantly as follows:

7.    At all material times the Sixth Respondent was the registered owner of trade marks in connection with the supply of goods coming within the classes 7, 9, 11, 12, 37 and 42 (the Trade Marks).

Particulars

a.    trade marks 1244653 and 895938 (the AEG Mark)

b.    trade mark 1033311 (the Electrolux Mark)

8.    At all material times the Applicant was a wholly owned subsidiary of Sixth Respondent and was an authorised user of the Trade Marks in Australia within the meaning of s 8(1) of the Trade Marks Act 1995.

9.    None of the First Respondent, Second Respondent … and Fifth Respondent has at any time been an authorised user of the AEG Mark or the Electrolux Mark.

10.    Commencing during 2012 and continuing to date the First Respondent has by means of the deluxeappliances website and the euappliances website (the websites) advertised, offered for sale in Australia and sold in Australia domestic electrical appliances including dishwashers, dryers, washing machines, stoves and ovens (white goods).

11.    The white goods advertised, offered for sale in Australia and sold in Australia by the First Respondent include goods of the same description as the goods in respect of which the Trade Marks are registered being goods coming within classes 7, 9, 11, 12, 37 and 42 that are advertised and offered for sale as AEG brand goods and Electrolux brand goods and which bear the Trade Marks or marks which are essentially identical with or deceptively similar to the Trade Marks (Infringing Marks).

12.    The offering for sale, sale and supply in Australia by the First Respondent of white goods of the same description as goods in respect of which the Trade Marks are registered and bearing the Infringing Marks infringes the intellectual property rights of the Applicant as an authorised user of the Trade Marks in Australia.

28    Section 120 of the Trade Marks Act relevantly provides:

120    When is a registered trade mark infringed?

(1)    A person infringes a registered trade mark if the person uses as a trade mark a sign that is substantially identical with, or deceptively similar to, the trade mark in relation to goods or services in respect of which the trade mark is registered.

Note 1:    For registered trade mark see section 6.

Note 2:    For deceptively similar see section 10.

Note 3:    In addition, the regulations may provide for the effect of a protected international trade mark: see Part 17A.

(2)    A person infringes a registered trade mark if the person uses as a trade mark a sign that is substantially identical with, or deceptively similar to, the trade mark in relation to:

(a)    goods of the same description as that of goods (registered goods) in respect of which the trade mark is registered; or

(b)    services that are closely related to registered goods; or

(c)    services of the same description as that of services (registered services) in respect of which the trade mark is registered; or

(d)    goods that are closely related to registered services.

However, the person is not taken to have infringed the trade mark if the person establishes that using the sign as the person did is not likely to deceive or cause confusion.

Note 1:    For registered trade mark see section 6.

Note 2:    For deceptively similar see section 10.

Note 3:    In addition, the regulations may provide for the effect of a protected international trade mark: see Part 17A.

…

29    Section 26 of the Trade Marks Act relevantly provides as follows:

26    Powers of authorised user of registered trade mark

(1)    Subject to any agreement between the registered owner of a registered trade mark and an authorised user of the trade mark, the authorised user may do any of the following:

…

(b)    the authorised user may (subject to subsection (2)) bring an action for infringement of the trade mark:

(i)    at any time, with the consent of the registered owner; or

(ii)    during the prescribed period, if the registered owner refuses to bring such an action on a particular occasion during the prescribed period; or

(iii)    after the end of the prescribed period, if the registered owner has failed to bring such an action during the prescribed period;

…

(2)     If the authorised user brings an action for infringement of the trade mark, the authorised user must make the registered owner of the trade mark a defendant in the action. However, the registered owner is not liable for costs if he or she does not take part in the proceedings.

30    Section 126 of the Trade Marks Act relevantly provides:

126     What relief can be obtained from court

(1)    The relief that a court may grant in an action for an infringement of a registered trade mark includes:

(a)    an injunction, which may be granted subject to any condition that the court thinks fit; …

…

31    Electrolux has clearly pleaded (and supported by evidence) that AB Electrolux is the registered owner of the Trade Marks and Electrolux is the authorised user of the Trade Marks in Australia.

32    I note Flick J’s comment in Speedo Holdings at [23]-[24]. The Statement of Claim does not plead that AB Electrolux has given consent to Electrolux as authorised user to bring the proceedings as provided for under s 26(1)(b)(i) of the Trade Marks Act. Electrolux has provided evidence that by letter to Electrolux dated 4 June 2013, AB Electrolux did provide the required consent. Counsel for Electrolux relies on r 16.05 of the Federal Court Rules on the basis of which I am satisfied that it was not necessary for Electrolux to plead the consent. Rule 16.05 provides as follows:

16.05     Conditions precedent

(1)    A party need not state in a pleading that a condition precedent to the party’s right of action has been satisfied.

(2)    However, a party who wants to deny that a condition precedent has been satisfied must expressly plead the denial.

33    Delap is deemed to have admitted (and on the basis of the email of 24 October 2012 has in fact admitted) that it advertises for sale and sells in Australia white goods in the pleaded classes bearing Marks the same as or deceptively similar to the Trade Marks. This establishes a clear prima facie case for relief having regard to s 120(1) and (2) of the Trade Marks Act: see Paul’s Retail Pty Ltd v Lonsdale Australia Ltd [2012] FCAFC 130.

34    However, the originating application sought an injunction under s 120 of the Trade Marks Act (which establishes when infringement of a trade mark occurs), not s 126 (which establishes the power of the Court to grant injunctive relief in an infringement action). The intent of the application is clear and it would be an appropriate case to grant leave to amend the application. However, the appropriateness of that step is questionable in the context of a default judgement unless the respondents are given an opportunity to be heard. In the end it is not necessary for me to decide the issue because I am satisfied for the reasons which follow that Electrolux is entitled to the same relief under s 232 of the ACL for contravention of s 18 of the ACL in relation to essentially the same conduct.

Misleading and deceptive conduct

35    Electrolux’s second claim is as follows:

13.    The offering for sale, sale and supply in Australia by the First Respondent of white goods bearing the Infringing Marks is misleading and deceptive or likely to mislead or deceive in contravention of s 18 of the Competition and Consumer Act 2010 – Schedule 2 (the Australian Consumer Law):

Particulars

The conduct is misleading and deceptive or likely to mislead or deceive consumers into believing:

a.    that the First Respondent is authorised or permitted by the Applicant or the Sixth Respondent to use the Trade Marks on white goods sold and supplied in Australia when that is not the case;

b.    that the white goods sold and supplied by the First Respondent in Australia are identical to white goods sold and supplied by the Applicant when that is not the case; and

c.    that the First Respondent is an authorised or appointed reseller or supplier to consumers in Australia of white goods bearing the Trade Marks.

14.    The advertising and offering for sale in Australia on the websites of AEG brand and Electrolux brand white goods is a false or misleading representation that those white goods have a sponsorship or approval, namely the approval of the Sixth Respondent or the Applicant as respectively the registered owner and authorised user of the Trade Marks, which sponsorship or approval the white goods do not have, in contravention of s 29(1)(a) of the Australian Consumer Law.

36    At the hearing, Electrolux abandoned the claim in [14] of the Statement of Claim which might more aptly have been made under s 29(1)(g) of the Australian Consumer Law.

37    Section 18(1) of the ACL provides as follows:

A person must not, in trade or commerce, engage in conduct that is misleading or deceptive or is likely to mislead or deceive.

38    In Australian Competition & Consumer Commission v Dukemaster Pty Ltd [2009] ATPR 42-290; [2009] FCA 682 at [10], Gordon J usefully summarised relevant principles in the context of the legislative predecessor of s 18 of the Australian Consumer Law, s 52 of the Trade Practices Act 1974 (Cth) (TPA):

1.     A contravention of s 52(1) of the TPA is established by “conduct” which is misleading or deceptive or likely to mislead or deceive: Global Sportsman Pty Ltd 2 FCR 82, 87. The “conduct”, in the circumstances, must lead, or be capable of leading, a person into error (Hannaford (trading as Torrens Valley Orchards) v Australian Farmlink Pty Ltd [2008] FCA 1591 at [252] citing Taco Company of Australia Inc v Taco Bell Pty Ltd (1982) 42 ALR 177 at 200; Parkdale Custom Built Furniture Pty Ltd v Puxu Pty Ltd (1982) 149 CLR 191 at 198) and the error or misconception must result from “conduct” of the corporation and not from other circumstances for which the corporation is not responsible: Global Sportsman Pty Ltd 2 FCR 82, 91. “Conduct” is likely to mislead or deceive if there is a “real or not remote chance or possibility regardless of whether it is less or more than fifty per cent”: Global Sportsman Pty Ltd 2 FCR 82, 87.

2.     Section 52(1) is concerned with the effect or likely effect of “conduct” upon the minds of that person or those persons in relation to whom the question of whether the “conduct” is or is likely to be misleading or deceptive falls to be tested. The test is objective and the Court must determine the question for itself: Global Sportsman Pty Ltd 2 FCR 82, 87. Section 52 is not designed for the benefit of persons who fail, in the circumstances of the case, to take reasonable care of their own interests: Elders Trustee and Executor Co Ltd v E G Reeves Pty Ltd (1987) 78 ALR 193 at 241. Moreover, it would be wrong to select particular words or acts which although misleading in isolation do not have that character when viewed in context: Elders Trustee 78 ALR 193 at 241 citing Parkdale Custom Built Furniture Pty Ltd v Puxu Pty Ltd (1982) 149 CLR 191 at 199.

3.     “Conduct” can, of course, include making a statement which is misleading or deceptive or likely to mislead or deceive: Global Sportsman Pty Ltd 2 FCR 82, 88.

4.     By making a statement of past or present fact, a corporation’s state of mind is irrelevant unless the statement involved the state of the corporation’s mind: Global Sportsman Pty Ltd 2 FCR 82, 88. Contravention of s 52(1) does not depend upon the corporation’s intention or its belief concerning the accuracy of the statement of fact but upon whether the statement conveys a meaning which is false. A false meaning will be conveyed if what is stated concerning the past or present fact is inaccurate but also if, although literally true, the statement conveys a meaning which is false.

39    I am satisfied that Delap’s admitted conduct of advertising for sale and selling to consumers in Australia white goods bearing Marks the same as or deceptively similar to the Trade Marks without AB Electrolux’s consent has the tendency to lead a consumer to the erroneous beliefs pleaded at [13] of the Statement of Claim. It is conduct in trade or commerce (between Australia and another place) and it is conduct which is likely to mislead or deceive potential purchasers in Australia. Electrolux has therefore established a prima facie case that Delap’s conduct contravenes s 18 of the ACL.

Non-compliant warranty

40    Electrolux next pleaded as follows:

Non-Compliant Warranty

15.    In connection with the supply in Australia of the white goods the First Respondent gave to consumers a document that evidences a warranty that does not comply with s 102(1) of the Australian Consumer Law in contravention of ss 102 (2) & (3) of the Australian Consumer Law.

Particulars

a.    the warranty provided by the First Respondent with white goods supplied in Australia does not contain the words prescribed by Regulation 90 of the Competition and Consumer Regulations 2010.

41    Section 102 of the ACL provides as follows:

102     Prescribed requirements for warranties against defects

(1)    The regulations may prescribe requirements relating to the form and content of warranties against defects.

(2)    A person must not, in connection with the supply, in trade or commerce, of goods or services to a consumer:

(a)    give to the consumer a document that evidences a warranty against defects that does not comply with the requirements prescribed for the purposes of subsection (1); or

(b)    represent directly to the consumer that the goods or services are goods or services to which such a warranty against defects relates.

(3)    A warranty against defects is a representation communicated to a consumer in connection with the supply of goods or services, at or about the time of supply, to the effect that a person will (unconditionally or on specified conditions):

(a)    repair or replace the goods or part of them; or

(b)    provide again or rectify the services or part of them; or

(c)    wholly or partly recompense the consumer;

if the goods or services or part of them are defective, and includes any document by which such a representation is evidenced.

42    Regulation 90 of the Competition and Consumer Regulations 2010 (Cth) relevantly provides as follows:

90     Requirements for warranties against defects

(1)    For subsection 102(1) of the Australian Consumer Law, the following requirements are prescribed:

…

(c)    a warranty against defects must include the text mentioned in subregulation (2);

…

(2)     For paragraph (1)(c), the text is ‘Our goods come with guarantees that cannot be excluded under the Australian Consumer Law. You are entitled to a replacement or refund for a major failure and compensation for any other reasonably foreseeable loss or damage. You are also entitled to have the goods repaired or replaced if the goods fail to be of acceptable quality and the failure does not amount to a major failure’.

43    Delap is taken to have admitted that the warranty it supplied to Australian consumers with the white goods it sold to them did not contain the language required by reg 90(2). I note that Electrolux has also provided evidence of this. Exhibit IF 1/9 to the affidavit of Ian Forte sworn 16 May 2013 is a copy of a page from the Deluxe Appliances Website which sets out a warranty providing for 60 days replacement with provision for a 1 or 2 years manufacturer’s warranty. It contains no text as prescribed by reg 90.

44    Electrolux has therefore established a prima facie case that Delap has contravened s 102(2) of the ACL.

Non-compliance with Safety Standards

45    The Statement of Claim made the following claim:

17.    The supply in Australia by the first respondent of the white goods is a supply of consumer goods of a kind for which a safety standard is in force and with which the consumer goods do not comply in contravention of s 106 of the Australian Consumer Law.

Particulars    

a.    The white goods supplied by the First Respondent are electrical goods which are required to comply with AS/NZS 60335 part 1 and part 2 published by Standards Australia Ltd.

46    Section 106 of the ACL relevantly provides:

106     Supplying etc. consumer goods that do not comply with safety standards

(1)     A person must not, in trade or commerce, supply consumer goods of a particular kind if:

(a)    a safety standard for consumer goods of that kind is in force; and

(b)    those goods do not comply with the standard.

Note:     A pecuniary penalty may be imposed for a contravention of this subsection.

(2)    A person must not, in trade or commerce, offer for supply (other than for export) consumer goods the supply of which is prohibited by subsection (1).

Note:    A pecuniary penalty may be imposed for a contravention of this subsection.

…

(7)    If:

(a)    a person supplies consumer goods in contravention of this section; and

(b)    another person suffers loss or damage:

(i)    because of a defect in, or a dangerous characteristic of, the goods; or

(ii)    because of a reasonably foreseeable use (including a misuse) of the goods; or

(iii)    because, contrary to the safety standard, he or she was not provided with particular information in relation to the goods; and

(c)    the other person would not have suffered the loss or damage if the goods had complied with the safety standard;

the other person is taken, for the purposes of this Schedule, to have suffered the loss or damage because of that supply.

47    Section 2(1) of the ACL defines “consumer goods” as follows:

“consumer goods” means goods that are intended to be used, or are of a kind likely to be used, for personal, domestic or household use or consumption, and includes any such goods that have become fixtures since the time they were supplied if:

(a)    a recall notice for the goods has been issued; or

(b)    a person has voluntarily taken action to recall the goods.

48    The white goods which Delap is taken to have admitted that it supplied are clearly “consumer goods” as defined as they are for domestic or household use.

49    By his affidavit sworn on 16 May 2013, Mr Ian Forte gave evidence that he was the regulatory affairs manager of Electrolux, a position he has held since 2005. He graduated as an electrical engineer from the University of Adelaide in 1973 and he has been involved in the appliance industry since then. Mr Forte has executive responsibility for product safety and performance compliance at Electrolux. Among other things, Mr Forte has over 20 years’ experience in designing appliance electric motors for major manufacturers. He represents the Australian Industry Group on Standards Australia’s major household appliances safety (EL 2) and performance (EL 15) committees and has represented Australia on the International Electrotechnical Commission (which assists in the preparation and publication of international standards for all electrical, electronic and related technologies) SC59M WG 2 refrigeration performance standard since 2007 and is currently chair of WG 2. He is a Chartered Professional Engineer, Fellow and Corporate Member of the Institution of Engineers, Australia, Council Member of Standards Australia, Director, Consumer Electronics Suppliers Association and Executive Member of the Gas Appliance Manufacturers Association of Australia.

50    I accept that Mr Forte was in a position to give expert evidence on safety standards applicable to white goods and he attested to the fact that he had read the Court’s Practice Note CM 7 and agreed to be bound by it.

51    Mr Forte gave evidence that the relevant standard is AS/NZS 60335 (parts 1 and 2) published by Standards Australia Limited which relates to household and similar electrical appliances and general safety requirements. Appliances must be approved by an authorised certifier or regulator if sold within Australia, for example State based regulators such as the New South Wales Department of Fair Trading. Mr Forte gave evidence that, although not exactly the same, all of the States and Territories have legislation and schemes governing the sale and approval of electrical articles which include washing machines, refrigerators, vacuum cleaners, dishwashers, range hoods, ovens and cooktops. These goods are of a kind which includes the white goods which the Statement of Claim pleads were supplied by Delap to Australian consumers.

52    Delap is taken to have admitted that the white goods it supplied to Australian consumers did not comply with AS/NZS 60335 (parts 1 and 2). I therefore find that Electrolux has established a prima facie case that Delap acted in contravention of s 106 of the ACL as pleaded at [17] of the Statement of Claim.

False and misleading representations

53    The Statement of Claim made the following claim:

16.    The advertising and offering for supply of white goods in Australia on the deluxeappliance website by the First Respondent constitutes a false or misleading representation that the white goods are of a particular standard or quality in contravention of s 29(1)(a) of the Australian Consumer Law.

Particulars

a.    advertising and offering for supply on a website with an Australian domain identification represented that the white goods were a standard or quality that permits them to be sold in Australia;

b.     the white goods supplied by the first respondent to consumers in Australia do not comply with safety standards required under mandatory Australian Standards and have not been approved by any Australian certifier or regulator.

54    Section 29(1)(a) of the ACL provides:

29    False or misleading representations about goods or services

(1)    A person must not, in trade or commerce, in connection with the supply or possible supply of goods or services or in connection with the promotion by any means of the supply or use of goods or services:

(a)    make a false or misleading representation that goods are of a particular standard, quality, value, grade, composition, style or model or have had a particular history or particular previous use; …

55    Electrolux did not take me to any authority in relation to s 29(1)(a) of the ACL.

56    The first issue is whether there was a representation. There is no allegation that there was an express representation by Delap.

57    The word “representation” is of wide import. In Given v Pryor (1979) 24 ALR 442 at 446 Franki J said:

The word “representation” is one which has been the subject of considerable judicial consideration. Without wishing to express a concluded view on what is embraced in the word it seems to me that in addition to including statements orally or in writing, associated with any pictorial material, conduct may also be added in an appropriate case, at least to the extent of which is embraced in the ordinary meaning of that word: see generally Given v C V Holland (Holdings) Pty Ltd (1977) 15 ALR 439 at 442-3.

58    A representation may be made or implied by conduct. Whether conduct amounts to a representation is a question of fact to be determined by the Court.

59    In this case, the conduct complained of is using a website with an Australian domain name to advertise for sale and sell goods in Australia which do not comply with mandatory safety standards without warning of that fact.

60    Courts have generally been reluctant to find that silence concerning a material fact amounts to misleading or deceptive conduct in the absence of a duty of disclosure. In Rhone-Poulenc Agrochimie SA v UIM Chemical Services Pty Limited (1986) 12 FCR 477, a majority of the Full Court of this Court (Bowen CJ and Lockhart J, Jackson J dissenting) found that the sale of a fungicide to the public without revealing that the sales were illegal did not contravene s 52 of the TPA. In the context of s 52 TPA/s 18 ACL, silence is to be assessed as a circumstance like any other in determining whether conduct is misleading or deceptive or likely to mislead or deceive: Demagogue Pty Ltd v Ramensky (1992) 39 FCR 31.

61    In this case, the white goods being offered by Delap are designed for household use. An appliance installed and operated normally but which does not comply with Australian standards might well be dangerous or useless, even if it complies with standards in other countries. That is because the appliance must be connected to an electricity supply to operate. An appliance which is safe to use in Europe (for instance) might not, without modification, be safe to use in Australia due to the different systems of electricity supply. It would be a reasonable expectation of an Australian purchaser that white goods offered for sale in Australia would comply with mandatory Australian standards and if not, that they would be told. That expectation might be heightened by a sales channel which employs an Australian domain name, but it would be true no matter where the domain of the website is located. It may well be that it would be open to find that Delap’s silence in the pleaded circumstance is conduct which contravenes s 18 of the ACL.

62    However, in the absence of an express statement that the white goods do comply with mandatory safety standards in Australia or some other relevant conduct, I do not accept that it is appropriate to characterise the conduct of offering white goods for sale on a website with an Australian domain as amounting to a representation to that effect. In those circumstances it is not necessary for me to consider whether any of the other elements of s 29(1)(a) have been made out.

63    I find that Electrolux has not made out a prima facie case in terms of [16] of the Statement of Claim.

Accessorial Liability

64    The Statement of Claim then turns from the liability of Delap to Mr Paradi and Ms Szabo. It provides as follows:

Claims against Second to Fifth Respondents

18.    The Second Respondent has aided or abetted, or has been knowingly concerned in or party to the contraventions of the Australian Consumer Law by the First Respondent set out in paragraphs 12, 13, 14, 15, 16 and 17.

Particulars

a.    The Second Respondent is a director and the directing mind and will of the First Respondent.

b.    The Second Respondent is a registrant of the euappliances website by means of which the First Respondent offered the white goods for sale and supply in Australia.

c.    The Second Respondent is the registrant contact name and the Tech Contact of the deluxeappliances website by means of which the First Respondent offered the white goods for sale and supply in Australia.

19.    ...

20.    The Fifth Respondent has aided or abetted, or has been knowingly concerned in or party to the contraventions of the Australian Consumer Law by the First Respondent set out in paragraphs 12, 13, 14, 15, 16 and 17.

Particulars

a.    The Fifth Respondent is the Australian contact for the euappliances website by means of which the First Respondent offered the white goods for sale and supply in Australia.

65    A person is “involved” in a contravention of a provision of the ACL if the person has ‘aided, abetted, counselled or procured’ the contravention: see s 2 of the ACL.

66    In Yorke v Lucas (1985) 158 CLR 661, the High Court considered the accessorial liability provisions of the TPA. Mason ACJ, Wilson, Deane and Dawson JJ observed that the words ‘aided, abetted, counselled or procured’ found in the TPA were taken from the criminal law where they are used to designate participation in a crime as a principal in the second degree or as an accessory before the fact: at 667. Their Honours observed at 667:

Both in the case of felonies where the principal offender and the secondary participant commit separate offences, and in the case of misdemeanours where no distinction is drawn between the two, a person will be guilty of the offences of aiding and abetting or counselling and procuring the commission of an offence only if he intentionally participates in it. To form the requisite intent he must have knowledge of the essential matters which go to make up the offence whether or not he knows that those matters amount to a crime.

67    Their Honours concluded that, notwithstanding that the TPA imposed civil liability as opposed to criminal liability, there was ‘every reason to suppose that [the section] was intended to carry with it the settled meaning which it already bore’: at 668.

68    To make out a prima facie case for the purposes of r 5.23(2)(c), it is necessary that the Statement of Claim pleads material facts necessary to demonstrate that the respondent intentionally participated in the contravention, with actual knowledge of the essential matters that make up the contravention. Alternatively, it may be sufficient to demonstrate a combination of suspicious circumstances and a failure to enquire on the basis of which it is possible to infer knowledge of the essential matters. It will not be sufficient, however, if the pleading demonstrates only that the person has shut his or her eyes to the obvious: see Compaq Computer Australia Pty Ltd v Merry (1998) 157 ALR 1 at 4-5.

Mr Paradi

69    Paragraph [18] of the Statement of Claim claims that Mr Paradi is the guiding mind of Delap who is also responsible for the Websites. Mr Paradi is deemed to have admitted those facts which are sufficient to demonstrate Mr Paradi’s knowledge of and participation in Delap’s business and therefore his knowing participation in Delap’s infringement of the Trade Marks and contravention of the Australian Consumer Law as pleaded in [13], [15] and [17] of the Statement of Claim.

70    The claim that Mr Paradi is the guiding mind of Delap is supported by a search of Delap obtained by Electrolux which indicates that Mr Paradi is indeed the CEO/Chairman and sole shareholder of Delap. Further, the affidavit of Mr Joao Lay sworn on 23 May 2013 relates to the purchase by Mr Lay of an oven bearing the AEG Mark through the Deluxe Appliances Website. Annexure JL 1 provides evidence of an email dated 9 July 2012 from Mr Paradi to Mr Lay in relation to tracking a shipment of “kitchen appliances”. It indicates that the “Sender” of the shipment is “Delap Impex Kft From: Paradi Andras, Francia ut 40/b Budapest”.

71    Mr Paradi’s knowing involvement is graphically illustrated by his email of 24 October 2012 set out at [11] above. It provides a clear justification for the relief sought by Electrolux.

Ms Szabo

72    Ms Szabo is taken to admit that she is the Australian contact on the Euappliances Website. Exhibit IF 7 to Mr Forte’s affidavit sworn on 16 May 2013 is a screenshot of the URL ‘http://euappliances.com/site/contact’ as at 13 May 2013. On that page, the following appears:

DELUXE APPLIANCES

Australian contact: Suzanne Szabo

Phone number: +61 424 [digits deleted]

Monday to Friday 9am - 5pm WST

Saturday 9am - 3pm WST

73    This is far too slight a base on which to establish a prima facie case that Ms Szabo had actual knowledge of the essential matters which make up the contraventions pleaded at [13], [15] and [17] of the Statement of Claim.

Injunctions

Standing

74    The Court may grant an injunction if it is satisfied that a person has engaged or is proposing to engage in conduct that constitutes or would constitute a contravention, attempting to contravene, or aiding, abetting, counselling or procuring a person to contravene a provision of Chapter 2, 3 or 4 of the ACL: s 232(1) of the ACL. Section 18 of the ACL is contained in Chapter 2, and ss 102 and 106 are contained in Chapter 3 of the ACL.

75    The Court may grant an injunction on application by the ACCC ‘or any other person’: s 232(2) of the ACL. The words ‘any other person’ are to be given their ‘natural breadth’: R v Judges of the Federal Court of Australia; Ex parte Pilkington ACI (Operations) Pty Ltd (1978) 142 CLR 113 at 131 per Murphy J (see also 121 (Stephen J) and 128 (Mason J)).

76    I am satisfied that Electrolux has standing to bring applications for injunctions in respect of alleged contraventions of ss 18, 102 and 106 of the ACL.

Futility

77    Given Mr Paradi’s attitude to these proceedings to date and the facts that Delap is situated in Hungary, that Mr Paradi is resident in Budapest, and that they conduct business through the Websites, there may be difficulties enforcing injunctions against them.

78    An injunction is a discretionary remedy. As the Court held in Australian Competition and Consumer Commission v Dataline.Net.Au Pty Ltd (2007) 161 FCR 513 (ACCC v Dataline) at [112]:

If an injunction is to serve any purpose, it must be enforceable. That requires a degree of clarity in its terms. There must also be a probability that any breach will be detected and result in the imposition of sanctions.

79    While difficulty in or even impossibility of enforcement is a material consideration relevant to the exercise of the Court’s discretion, it will not necessarily bar the grant of relief: Australian Competition and Consumer Commission v Chen (2003) 132 FCR 309 at 321 per Sackville J.

80    The Court may be satisfied that the injunction should be ordered notwithstanding difficulties in enforcement if the order is in the public interest. It may be appropriate to grant an injunction in order to mark the Court’s disapproval of the respondent’s conduct: Trade Practices Commission v Mobil Oil Australia Ltd (1984) 4 FCR 296 at 300 per Toohey J. The purpose of granting an injunction ‘may be merely to reinforce to the market place that the restrained behaviour is unacceptable’: Australian Competition and Consumer Commission v 4WD Systems Pty Ltd [2003] FCA 850 at [217] per Selway J. In this way, injunctions may serve an entirely educative purpose: Humane Society International Inc v Kyodo Senpaku Kaisha Ltd (2006) 154 FCR 425 at [24].

81    Mr Paradi has not responded to the requests of Electrolux and AB Electrolux to stop conduct which contravenes their rights and has the capacity to mislead or deceive members of the Australian public into purchasing from Delap white goods which are unsuitable for use in Australia. I accept Electrolux’s submissions that Delap’s conduct as pleaded can result in damage to consumers and to the reputation and legitimate expectation of profit of Electrolux in Australia as an authorised user of the Trade Marks.

Conclusion

82    I am satisfied that it is appropriate to make orders restraining Delap and Mr Paradi from engaging in conduct in the nature of advertising for sale and selling to customers in Australia white goods which bear Marks which are the same as or deceptively similar to the Trade Marks and it is appropriate to prohibit the use of related materials such as warranties, manuals and instructions. That is because it is in the public interest to identify the conduct of that kind by Delap and Mr Paradi as contrary to law.

83    However, I will not enjoin the issuing of warranties which breach s 102 or importing into Australia white goods bearing the Marks and safety compliance marks, since the general injunction in relation to offering to sell or selling to Australians white goods bearing trade marks the same as or deceptively similar to the Trade Marks already covers that ground.

Associate:

Dated:    10 February 2015