FEDERAL COURT OF AUSTRALIA

Facton Ltd v Xu [2015] FCA 66

FEDERAL COURT OF AUSTRALIA

Facton Ltd v Xu [2015] FCA 66

CORRIGENDUM

1    In paragraph 310 of the Reasons for Judgment, in the last sentence, “Copyright Act” should read “Trade Marks Act”.

Associate:

Dated:    12 March 2015

THE COURT ORDERS THAT:

1.    The proceedings as against the second respondent be dismissed.

2.    The applicants pay the second respondent’s costs of the proceedings.

3.    The balance of the proceedings be listed for directions on 11 March 2015 at 9.30 am.

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

REASONS FOR JUDGMENT

1    “G-Star” is a brand of “urban clothing”. In early 2010, the applicants discovered that counterfeit clothing and clothing accessories branded with and by reference to the name “G-Star” (“counterfeit G-Star products”) were being sold at markets in Fairfield (“Fairfield market”) and Flemington (“Paddy’s Market, Flemington”) in Sydney.

2    In December 2010, the applicants commenced proceedings in the Federal Circuit Court (“FCC”) against Hasan Gogebakan seeking relief in connection with dealings in counterfeit G-Star products. Subsequently, those proceedings were amended to join Hakan Turkkan as a respondent.

3    After further investigations, on 25 August 2011, the first respondent Jia Zhi (John) Xu (“Mr Xu”) was made a respondent to the proceedings. On 26 and 27 August 2011, search and seizure orders were executed at a house at Lidcombe (“Lidcombe house”) and a warehouse at Flemington (“Flemington warehouse”). A large volume of counterfeit G-Star products was discovered at the properties, as well as documentation evidencing importation and sales of such products. In particular, approximately 1,385 items of counterfeit G-Star garments were removed from the Flemington warehouse and approximately 867 items of counterfeit G-Star garments were removed from the Lidcombe house. A van owned by Mr Xu had been seen at the Lidcombe house on 24 August 2011 and appeared to contain boxes and a clothing rack. The search also located garments branded with other labels.

4    On 29 August 2011, the second respondent (“Ms Ma”), the third respondent, Bais Bros Pty Ltd (“Bais Bros”) and the fourth respondent, Apparel 23 Pty Ltd (“Apparel 23”) were joined to the proceedings. Bais Bros was registered as a company in July 2005. Apparel 23 was registered as a company in June 2010.

5    In February 2013, the applicants obtained default judgments against Mr Xu, Bais Bros and Apparel 23: Facton Ltd & Ors v Xu & Ors [2013] FMCA 90. In particular, the FCC made declarations that Mr Xu, Bais Bros and Apparel 23 had infringed G-Star trade marks as defined in paragraph 5 of the fourth further amended statement of claim filed in accordance with the orders made by Federal Magistrate Emmett on 15 August 2012 (“statement of claim”), and infringed or authorised the infringement of the copyright works as defined in paragraph 7 of the statement of claim. The FCC also made declarations that Mr Xu, Bais Bros and Apparel 23 had contravened provisions of the Fair Trading Act 1987 (NSW) (“Fair Trading Act”), the Trade Practices Act 1974 (Cth) (“Trade Practices Act”) and the Australian Consumer Law (NSW) as found in schedule 2 to the Competition and Consumer Act 2010 (Cth) (“Competition and Consumer Act”) (and as applied by s 28 of the Fair Trading Act) (“Australian Consumer Law NSW”), and had engaged in conduct which constituted the tort of passing off.

6    The hearing before this Court concerned the applicants’ case against Ms Ma on questions of liability pleaded in the statement of claim. Ms Ma was unrepresented at the hearing, and appeared with the assistance of a Mandarin interpreter. At the commencement of the hearing, the applicants agreed that the issues to be determined were issues 6, 7, 8, 9, 10, 12, 16, 17, 18, 19, 20 and 22 of the statement of agreed issues dated April 2013.

7    Ms Ma is the former wife of Mr Xu. She was also formerly a director of Bais Bros. At the time of the hearing, she was the sole director of Apparel 23. By August 2011, Ms Ma was the sole owner of the Flemington warehouse and the Lidcombe house, having received those properties in a property settlement between her and Mr Xu. Consent orders were made in the Local Court at Burwood, New South Wales in August 2010, to give effect to the property settlement. Also pursuant to those consent orders, Mr Xu became the sole beneficial owner of shares in Bais Bros.

8    The applicants submitted, and I accept, that there was a large clothing business being run from the Flemington warehouse and the Lidcombe house, which imported and sold substantial volumes of counterfeit clothing between 2005 and 2011. The products were wholesaled to third parties and were sold from stalls at Paddy’s Market, Flemington and the Fairfield market, as well as from suburban shopping centres around Sydney, including Centro Seven Hills and Miller Community Shopping Centre.

9    There is ample evidence, including contemporaneous documentary evidence, that Mr Xu operated one or more businesses which dealt in counterfeit G-Star products. The evidence also supports a finding, on the balance of probabilities, that Bais Bros operated a business that dealt in counterfeit G-Star products.

10    At all material times, Ms Ma was recorded as the owner of the licence of stall numbers 187 to 190 at Paddy’s Market Flemington (“stalls 187 to 190”). Agents of the applicant made a trap purchase of a counterfeit G-Star product from stall 190 on 7 February 2010. On 14 November 2010, counterfeit G-Star products were also observed by an agent of the applicants to be on offer at these stalls.

11    Ms Ma (but not Mr Xu) was living at the Lidcombe house when the search orders were executed. She and Mr Xu also gave evidence that, after she became the sole owner of the Flemington warehouse, she made an arrangement with Mr Xu under which Bais Bros agreed to pay her $1,000 per week for the lease of that warehouse. As it turned out, the rent was not paid regularly.

12    Ms Ma also caused Apparel 23 to lease space for retail sale of clothing at Norwest Marketown, Baulkham Hills, at least for approximately three weeks in May/June 2011 and two weeks in November 2012. Garments branded “Patino” were sold by Apparel 23 from this space. “Patino” is a brand that Mr Xu claimed to have used by from about 2000. Ms Ma’s evidence was that she stored Apparel 23’s stock at the Lidcombe house. It is not suggested that counterfeit G-Star garments were sold at Norwest Marketown.

13    The applicants claim that Ms Ma has:

1.    Infringed G-Star trade marks in breach of s 120 of the Trade Marks Act 1995 (Cth) (“Trade Marks Act”);

2.    Infringed or authorised the infringement of certain copyright works in breach of s 36 of the Copyright Act 1968 (Cth) (“Copyright Act”);

3.    Committed the tort of passing off;

4.    Prior to 1 January 2011, contravened ss 42 and 44 of the Fair Trading Act and ss 52 and 53 of the Trade Practices Act by the operation of s 75B of the Trade Practices Act and post 1 January 2011, contravened ss 18 and 29 of the Australian Consumer Law NSW.

14    Ms Ma denies any involvement in dealings with counterfeit G-Star products.

15    In their closing written submissions, the applicants said:

The present case is not one where there is evidence that Ms Ma personally handed counterfeit G-Star goods to customers in exchange for money. Rather, the present case is one where such sales were made by a business over which Ms Ma exercised control and asserted ownership and from which she took profits.

16    It is not obvious that, even if Ms Ma exercised control and asserted ownership and took profits from a business that dealt in counterfeit goods, her conduct amounted to one or more of the alleged contraventions and torts. It is necessary to consider the particular conduct proved against the elements of each individual cause of action.

17    There is no evidence that Ms Ma was ever observed working (or even present) at any of the stalls or shops where counterfeit G-Star products are said to have been sold. On one occasion, in October 2011, Ms Ma was seen at Paddy’s Market, Flemington wearing a “bum bag”. This was after the searches of the Lidcombe house and the Flemington warehouse, and there is no suggestion that counterfeit G-Star goods were being offered for sale at the Paddy’s Market on that day.

18    For the reasons that follow, I am not satisfied that Ms Ma exercised control or asserted ownership over any business which dealt in counterfeit G-Star goods. Although Ms Ma received takings from such a business or businesses, those amounts were received pursuant to arrangements between Mr Xu and Ms Ma for child support and in repayment of an education fund for their children from which he had taken money. Ms Ma did not receive those takings because she had any ownership interest in the business or businesses. Rather, she received the takings because Mr Xu permitted her to receive them.

applicants’ intellectual property

Trade mark ownership (agreed issue 6)

19    Agreed issue 6 is whether the first applicant (“Facton”) is the registered owner of the 14 pleaded trade marks (“G-Star trade marks”).

20    The evidence establishes that Facton was the registered owner of the following 14 registered trade marks within the meaning of the Trade Marks Act at the following times:

Copyright subsistence and ownership (agreed issues 7 and 8)

21    Agreed issue 7 is whether the following logos are original artistic works in which copyright subsists:

1.    The G-Star logo represented in registered trade mark 722852;

2.    The G Raw logo represented in registered trade mark 980122; and

3.    The G-Star Originals logo represented in registered trade mark 883618 (collectively “the copyright logos”).

22    In order to demonstrate copyright ownership, the applicants allege that:

1.    the copyright logos are original artistic works in which copyrights subsists; and

2.    that G-Star Raw is the owner of copyright in the copyright logos.

23    The applicants rely on Ms Ma’s failure to dispute these matters in response to a notice to admit served pursuant to rule 22.01 of the Federal Court Rules 2011 (Cth).

24    As to the nature of the copyright logos as original artistic works, the applicants tendered the following evidence, which was unchallenged:

1.    An affidavit of Christian de Bil, general counsel of G-Star Raw, deposing to the creation of the G-Star logo. A “G” logo was created by an unknown employee of G-Star International B.V. (“G-Star International”) in about 1989 or 1990 which originally included the word “Gapstar”. That word was replaced by the word “G-Star” in the logo in or about 1994 to create the G-Star logo;

2.    An affidavit of Jaq La Fontaine deposing to his creation of the G Raw logo in the course of his employment with G-Star International in 1999;

3.    An affidavit of Pierre Morisset deposing to his creation of another logo, called the “Originals USA” logo, in early 1994 while engaged as a designer and stylist for G-Star International, pursuant to an agreement dated 23 May 1995 between Depèche Hommes B.V. and G-Star International which provided that the intellectual property rights to any articles designed or styled by Depèche or Mr Morisset are the property of G-Star International;

4.    An affidavit of Mr Fontaine deposing to his modification of the “Originals USA” logo in 1996, during the course of his employment with G-Star International in order to create the G-Star Originals logo.

25    By s 10 of the Copyright Act, “artistic work” relevantly means:

(a)    a painting, sculpture, drawing, engraving or photograph, whether the work is of artistic quality or not;

…

(c)     a work of artistic craftsmanship whether or not mentioned in paragraph (a) or (b);

…

26    In Roland Corporation v Lorenzo & Sons Pty Ltd (1991) 33 FCR 111, the Court found that copyright subsisted in two logos depicting the letters “R” and “B”. Pincus J said, relevantly at 114:

It seems clear that a mere random collection of letters of the alphabet could not be copyright and presumably a mere random scribble could not be either, but the devices with which I am concerned are by no means random and were plainly drawn with care, to obtain an effect. It is true that they are relatively simple and their simplicity will produce the result that only an exact or fairly exact copy will infringe but that is not a problem for the applicants here.

27    In Deckers Outdoor Corp Inc v Farley (No 5) (2009) 83 IPR 245; [2009] FCA 1298, Tracey J applied the reasoning of Pincus J to a sun device that formed part of a registered trade mark.

28    As appears from paragraph 20 above (items 2, 3 and 5), the copyright logos are each devices plainly drawn with care to obtain an effect. I am satisfied that each of them is an artistic work within the meaning of the Copyright Act.

29    Section 32(2) of the Copyright Act provides, relevantly, that subject to that Act, where an original literary, dramatic, musical or artistic work has been published:

(a)     copyright subsists in the work; or

(b)     if copyright in the work subsisted immediately before its first publication—copyright continues to subsist in the work;

if but only if at least one of three criteria are satisfied.

30    The main requirement of originality within the meaning of s 32 is that the work must not be wholly copied from another work but should originate with the author: Data Access Corp v Powerflex Services Pty Ltd (1999) 202 CLR 1 at [22]; IceTV v Nine Network Australia Pty Ltd (2009) 239 CLR 458 at [33].

31    The evidence set out above satisfies me that the copyright logos each satisfy the requirement of originality.

32    By s 126(a) of the Copyright Act, in an action brought by virtue of Part V of that Act, copyright shall be presumed to subsist in the work or other subject matter to which the action relates if the defendant does not put in issue the question whether copyright subsists in the work or other subject matter. Ms Ma did not put this question in issue. Accordingly, I find that copyright subsists in each of the copyright logos.

33    As to ownership of the copyright logos, the applicants refer to a transfer deed dated 19 April 2011 between G-Star International and G-Star Raw, by which G-Star International sold its assets to G-Star Raw effective from 1 April 2011, including all of its intellectual property, the right to sue for any past or present acts of passing off or copyright infringement and the right to continue with the prosecution of any and all litigation.

34    By s 126(b) of the Copyright Act, in an action brought by virtue of Part V of that Act, where the subsistence of the copyright is established, the plaintiff shall be presumed to be the owner of the copyright if he or she claims to be the owner of the copyright and the defendant does not put in issue the question of his or her ownership. Again, Ms Ma did not put in issue the claimed ownership of the copyright by G-Star Raw and I therefore find that G-Star Raw is the owner of the copyright in each of the copyright logos.

applicants’ reputation and goodwill in australia arising from intellectual property (Agreed issue 16)

35    Ms Ma admits that, at all material times, G-Star Australia was the exclusive Australian distributor of G-Star products.

36    She also admits the following matters:

1.    that the G-Star trade marks including the copyright logos are featured on “G-Star products”, and on packaging, promotional and advertising material relating to the sale of those products;

2.    that since 1989 and until 1 April 2011, G-Star International designed, promoted, marketed, advertised, distributed, offered for sale and sold around the world, G-Star products including on its website;

3.    that on 31 March 2011, G-Star International entered into a business sale and purchase agreement with G-Star Raw by which it agreed to sell its business and assets to G-Star Raw. Since 1 April 2011, G-Star Raw has designed, promoted, marketed, advertised, distributed, offered for sale and sold around the world G-Star products.

37    Although the admissions do not specify what is meant by “G-Star products”, having regard to paragraph 3 of the statement of claim, I take that expression to mean clothing and clothing accessories branded with and by reference to the name “G-Star”.

38    The evidence discloses that G-Star Raw sells G-Star products through “G-Star” branded stores and independent retailers in 70 countries. G-Star Raw operates more than 110 showrooms around the world with 6,000 retail points of sale.

39    G-Star Australia sells G-Star products to its franchisee who owns and operates 23 concept “G-Star” stores throughout Australia, and to over 40 independent multibrand retailers throughout Australia including the large department stores, Myer and David Jones.

40    G-Star Australia advertises and promotes the G-Star brand in Australia in various ways including on billboards, signage on public transport, in-store advertisements, and editorials and advertisements placed in magazines published in Australia. I am satisfied that G-Star International and G-Star Raw spent substantial amounts of money advertising and promoting the “G-Star” brand in Australian in the financial years ended 30 June 2005 to 30 June 2011.

41    G-Star Australia has sold substantial quantities of G-Star products in Australia, as demonstrated by its turnover in the years ended 30 June 2004 to 30 June 2009. Over that period, the turnover of G-Star Australia increased very substantially.

42    Based on the admissions and the evidence above, I am satisfied that:

1.    the applicants have established a substantial, exclusive and valuable reputation and goodwill in Australia by reference to the “G-Star brand;

2.    the business and goods of the applicants have become widely and favorably known and identified in Australia by reference to the G-Star brand;

3.    the G-Star trade marks, including the copyright logos, are featured on G-Star products and on packaging, promotional and advertising material relating to the sale of G-Star products;

4.    G-Star products are available for sale from retailers throughout the world, including Australia; and

5.    the G-Star trade marks, including the copyright logos are, and have been at all material times, known to be distinctive of and signify the business and goods of the applicants.

legal framework governing applicants’ claims

Trade mark infringement

43    Section 120(1) of the Trade Marks Act provides:

(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.

44    By s 6(1) of the Trade Marks Act, “registered trade mark” means a trade mark whose particulars are entered in the Register under that Act and “registered owner”, in relation to a registered trade mark, means the person in whose name the trade mark is registered.

45    By s 20(1) of the Trade Marks Act, if a trade mark is registered, the registered owner of the trade mark has, subject to certain specified limitations, the exclusive rights to use the trade mark and to authorise other persons to use the trade mark in relation to the goods and/or services in respect of which the trade mark is registered.

46    By s 20(2) of the Trade Marks Act, the registered owner of a trade mark has also the right to obtain relief under the Act if the trade mark has been infringed. By s 20(3), the rights are taken to have accrued to the registered owner as from the date of registration of the trade mark.

Copyright infringement

47    Section 36(1) of the Copyright Act provides:

Subject to this Act, the copyright in a literary, dramatic, musical or artistic work is infringed by a person who, not being the owner of the copyright, and without the licence of the owner of the copyright, does in Australia, or authorizes the doing in Australia of, any act comprised in the copyright.

48    36(1A) of the Copyright Act provides:

In determining, for the purposes of subsection (1), whether or not a person has authorised the doing in Australia of any act comprised in the copyright in a work, without the licence of the owner of the copyright, the matters that must be taken into account include the following:

(a)     the extent (if any) of the person’s power to prevent the doing of the act concerned;

(b)     the nature of any relationship existing between the person and the person who did the act concerned;

(c)     whether the person took any reasonable steps to prevent or avoid the doing of the act, including whether the person complied with any relevant industry codes of practice.

49    By s 31(1), for the purposes of the Copyright Act, unless the contrary intention appears, copyright is, in relation to an artistic work, the exclusive right to do acts that relevantly include reproducing that work in a material form.

50    Section 37 of the Copyright Act provides:

(1)     Subject to Division 3, the copyright in a literary, dramatic, musical or artistic work is infringed by a person who, without the licence of the owner of the copyright, imports an article into Australia for the purpose of:

(a)     selling, letting for hire, or by way of trade offering or exposing for sale or hire, the article;

(b)     distributing the article:

(i)     for the purpose of trade; or

(ii)     for any other purpose to an extent that will affect prejudicially the owner of the copyright; or

(c)     by way of trade exhibiting the article in public;

if the importer knew, or ought reasonably to have known, that the making of the article would, if the article had been made in Australia by the importer, have constituted an infringement of the copyright.

(2)     In relation to an accessory to an article that is or includes a copy of a work, being a copy that was made without the licence of the owner of the copyright in the work in the country in which the copy was made, subsection (1) has effect as if the words “the importer knew, or ought reasonably to have known, that” were omitted.

51    Section 38 of the Copyright Act provides:

(1)     Subject to Division 3, the copyright in a literary, dramatic, musical or artistic work is infringed by a person who, in Australia, and without the licence of the owner of the copyright:

(a)     sells, lets for hire, or by way of trade offers or exposes for sale or hire, an article; or

(b)     by way of trade exhibits an article in public;

if the person knew, or ought reasonably to have known, that the making of the article constituted an infringement of the copyright or, in the case of an imported article, would, if the article had been made in Australia by the importer, have constituted such an infringement.

(2)     For the purposes of the last preceding subsection, the distribution of any articles:

(a)     for the purpose of trade; or

(b)     for any other purpose to an extent that affects prejudicially the owner of the copyright concerned;

shall be taken to be the sale of those articles.

(3)     In this section:

article includes a reproduction or copy of a work or other subject‑matter, being a reproduction or copy in electronic form.

Misleading or deceptive conduct (in contravention of Fair Trading Act, Trade Practices Act and Australian Consumer Law NSW)

52    Concerning conduct prior to 1 January 2011, the applicants rely on:

1.    Sections 42 and 44 of the Fair Trading Act; and

2.    Sections 52 and 53 of the Trade Practices Act, by the operation of s 75B of the Trade Practices Act.

53    For conduct after 1 January 2011, the applicants rely on:

1.    Section 18 of the Australian Consumer Law (NSW); and

2.    Section 29 of the Australian Consumer Law (NSW).

54    Section 42 of the Fair Trading Act provides:

(1)     A person shall not, in trade or commerce, engage in conduct that is misleading or deceptive or is likely to mislead or deceive.

(2)     Nothing in this Part shall be taken as limiting by implication the generality of subsection (1).

55    Section 44 of the Fair Trading Act provides relevantly:

A person shall 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)     falsely represent that goods are of a particular standard, quality, value, grade, composition, style or model or have had a particular history or particular previous use,

(b)     falsely represent that services are of a particular standard, quality, value or grade,

…

(e)     represent that goods or services have sponsorship, approval, performance characteristics, accessories, uses or benefits they do not have,

(f)     represent that the person has a sponsorship, approval or affiliation the person does not have,

….

56    Section 42 of the Fair Trading Act is similar to s 52 of the Trade Practices Act, except that s 52 applies to “corporations” rather than “persons”. Section 18 of the Australian Consumer Law NSW is an equivalent provision to s 42 of the Fair Trading Act.

57    Section 44 of the Fair Trading Act is similar to s 53 of the Trade Practices Act, except that s 53 applies to “corporations” rather than “persons”. Section 29 of the Australian Consumer Law NSW is an equivalent provision to s 44 of the Fair Trading Act.

58    The following principles, stated by Gordon J in Australian Competition and Consumer Commission v Dukemaster Pty Ltd [2009] FCA 682 at [10], are relevant to this case:

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.

59    In Australian Competition and Consumer Commission v Telstra Corporation Ltd [2007] FCA 1904 at [14] and [15], Gordon J held that the following two-step analysis is required to determine whether a person has engaged in misleading or deceptive conduct:

First, it is necessary to ask whether each or any of the pleaded representations is conveyed by the particular events complained of: Campomar Sociedad, Limitada v Nike International Ltd (2000) 202 CLR 45 at [105]; National Exchange Pty Ltd v Australian Securities and Investments Commission [2004] ATPR 42-000 at [18] per Dowsett J (with whom Jacobson and Bennett JJ agreed) and Astrazeneca Pty Ltd v GlaxoSmithKline Australia Pty Ltd [2006] ATPR 42-106 at [37]…

Secondly, it is necessary to ask whether the representations conveyed are false, misleading or deceptive or likely to mislead or deceive. This is a “quintessential question of fact”: Australian Competition and Consumer Commission v Telstra (2004) 208 ALR 459 at [49].

60    As to the likelihood of misrepresentation, in Vieright Pty Ltd v Myer Stores Ltd (1995) 31 IPR 361 at 37, a full court of the Federal Court said:

The settled course of authority holds that, as in the passing off claim, the essential question here is largely one of fact: is, in all the circumstances, the respondent's conduct likely to mislead? In the present kind of case, it will usually be the situation that if a passing off claim is established, it will be so by reason of a finding of a misrepresentation of the type discussed in the authorities. Such a misrepresentation will usually constitute a contravention of s 52, and possibly s 53, of the Trade Practices Act. Conversely, if no misrepresentation is found, it will usually follow that the Trade Practices Act claim will also fail.

Tort of passing off

61    In Bodum v DKSH Australia Pty Limited [2011] FCAFC 98 at [212], Greenwood J cited with approval the following statement about the elements of the tort of passing off by Lord Oliver in Reckitt & Colman Products Ltd v Borden Inc [1990] UKHL 12; [1990] RPC 341 at 406:

The law of passing off can be summarised in one short general proposition – no man may pass off his goods as those of another. More specifically, it may be expressed in terms of the elements which the plaintiff in such an action has to prove in order to succeed. These are three in number.

First, he must establish a goodwill or reputation attached to the goods or services which he supplies in the mind of the purchasing public by association with the identifying ‘get-up’ (whether it consists simply of a brand name or a trade description, or the individual features of labelling or packaging) under which his particular goods or services are offered to the public, such that the get-up is recognised by the public as distinctive specifically of the plaintiff’s goods or services.

Second, he must demonstrate a misrepresentation by the defendant to the public (whether or not intentional) leading or likely to lead the public to believe that the goods or services offered by him are the goods or services of the plaintiff. Whether the public is aware of the plaintiff’s identity as the manufacturer or supplier of the goods or services is immaterial, as long as they are identified with a particular source which is in fact the plaintiff. ...

Thirdly, he must demonstrate that he suffers… damage by reason of the erroneous belief engendered by the defendant’s misrepresentation that the source of the defendant’s goods or services is the same as the source of those offered by the plaintiff.

62    The relevant date for determining whether an applicant has established the necessary goodwill or reputation of his product is the date of commencement of the conduct complained of: Ricegrowers v Real Foods Pty Ltd [2008] FCA 639 at [51] (“Ricegrowers”), citing Cadbury Schweppes Pty Limited v Pub Squash Co Pty Limited [1980] 2 NSWLR 851 at 861 per Lord Scarman.

63    The applicants emphasised that it is not necessary that the persons purchasing the goods should know of them by name, and have in mind when they purchased the goods that they are made by the applicants (or the person they associate with having produced those goods, whether or not the name is known), citing Ricegrowers at [59].

64    The applicants also submitted that there is no requirement to prove subjective intention to mislead or actual deception, citing Sydneywide Distributors Pty Ltd v Red Bull Australia Pty Ltd [2002] FCAFC 157 at [62], and that the misrepresentation need only be likely to lead the public to believe that the goods are those of the applicants – there being no requirement that actual deception be proven.

65    If a case of passing off is made out, the Court will presume damage, but, as to the measure of damage, the Court will consider all the circumstances of the case: Nutrientwater Pty Ltd v Baco Pty Ltd [2010] FCA 2 at [79] citing Childrens Television Workshop Inc v Woolworths (NSW) Ltd [1981] 1 NSWLR 273 at 281-2 per Helsham CJ in Eq and Draper v Trist (1939) 56 RPC 429 at 442 per Goddard LJ.

conduct alleged to give rise to contraventions

Alleged dealings in counterfeit G-Star products

66    Agreed issue 9 is “[w]hether since at least January 2005, [Ms Ma] has without the knowledge or authority or licence of the applicants or any of them imported, advertised, marketed, promoted, distributed, offered for sale and sold clothing and clothing accessories in Australia which feature marks that infringe” the G-Star trade marks and the copyright logos.

67    The applicants’ statement of claim attributes the conduct complained of to the respondents collectively: it does not specify occasions on which Ms Ma allegedly dealt in counterfeit G-Star products. Paragraph 14 of the statement of claim sets out the following matters as particulars of the conduct complained of:

(a)    In the period from 19 June 2002 to 25 August 2011, the “respondents’ products” were warehoused at and wholesaled from the Flemington warehouse.

The “respondents’ products” are defined in paragraph 14 of the statement of claim to mean clothing and clothing accessories which:

(i)    Feature the G-Star trade marks or marks which are substantially identical with or deceptively similar to the G-Star trade marks, which marks were placed on such items without the knowledge, authority or licence of the applicants or any of them; and

(ii)    Bear logos which reproduce or substantially reproduce the Copyright works, which logos were placed on such items without the knowledge, authority or licence of the applicants or any of them.

The particulars include a reference to the evidence of the results of the search of the Flemington warehouse, set out at paragraph 3 above.

(b)    Evidence of supply to operators of market stall 330 at Paddy’s Market, Flemington and stall 181 at the Fairfield market of counterfeit G-Star products, which products were offered for sale at those stalls in early 2010.

(c)    In the period from 2003 to 25 August 2011, the respondents’ products were warehoused at and wholesaled from the house at Lidcombe. The particulars include a reference to the evidence of the results of the search of the Lidcombe, also set out at paragraph 3 above.

(d)    In the period from 2002 to 2011, the respondents’ products were sold at retail from stalls 187-190, 330 and 432 at Paddy’s Market, Flemington. The particulars set out the following trap purchases of counterfeit G-Star products from those stalls:

(i)    On 7 February 2010, a “G-Star” branded t-shirt from stall 432;

(ii)    On 7 February 2010, a “G-Star” branded t-shirt from stall 190;

(iii)    On 14 November 2010, a “G-Star” branded button shirt from stalls 187-189.

I note that the last two of these three trap purchases were made from stalls for which Ms Ma was recorded as licensee.

The particular also states that, on 26 August 2011, “documents relating to the sale of the respondents’ products from the Paddy’s Market Stalls in the period from 2002 to 2011 were removed from the Flemington Warehouse and the Lidcombe House”;

(e)    The respondents’ products were sold at retail by the respondents from:

(i)    Shop 45, Miller Community Shopping Centre under the trading name Baitino Fashion in the period 2005 to 2011 (“Miller shop”);

(ii)    Chullora Marketplace in the period January to December 2011 (“Chullora mall space”);

(iii)    Shop 14, Chester Square Shopping Centre in the period 2004 to 2007 (“Chester Hill shop”);

(iv)    Centro Seven Hills shopping centre in the period from 2009 to 2010 (“Centro Seven Hills stall”); and

(v)    Norwest Marketown in the period May to June 2011.

68    Particular (f) states that further particulars would be provided after the respondents’ discovery. I was not referred to any further particulars.

Case put in closing submissions on primary liability

69    The case put in the applicants’ closing submissions relied upon 15 “clear and undisputed facts” to support a contention that Ms Ma was “clearly involved in the business conducted from the Flemington Warehouse and the Lidcombe house and actively participated in the business prior to her separation from Mr Xu”. Ms Ma’s evidence was that she and Mr Xu separated in about July 2009.

70    10 of the facts identified by the applicants concerned the period after the separation. The applicants did not explain how those facts might be relevant to the question of Ms Ma’s possible involvement in the business before the separation. In my view, they are not relevant. That left the following five facts:

(a)    There was a large clothing business being run from the Flemington warehouse and the Lidcombe house which imported and sold large volumes of counterfeit clothing between 2005 and Ms Ma’s separation from Mr Xu;

(b)    Ms Ma paid hundreds of thousands of dollars to people in China between 2005 and 2007;

(c)    Ms Ma was the joint owner of the Flemington warehouse and the Lidcombe house between 2005 and her separation from Mr Xu;

(d)    Ms Ma signed the licence for stalls 187 to 189 at Paddy’s Market, Flemington in November 1999 and for stall 190 in November 2006. She was the licensee of these stalls during periods in which counterfeit G-Star garments were being sold from the stalls and she attended the stalls;

(e)    Ms Ma has resided in the Lidcombe house at all relevant times.

71    Ms Ma did not dispute any of (b) to (e). As to (a), she said that her husband ran a large clothing business from the Flemington warehouse, and she did not pay attention to the particular kinds of clothing imported and sold by the clothing business.

72    For the period following Mr Xu and Ms Ma’s separation, the applicants’ case as articulated in the closing written submissions focussed on:

(a)    Ms Ma’s receipt of takings from goods sold at the Centro Seven Hills stall at which counterfeit G-Star garments were sold;

(b)    Ms Ma’s activities relating to the operation of the Centro Seven Hills stall, including the fact that she took two counterfeit G-Star garments from the shop/stall for her son, and that she delivered stock in September and October 2010;

(c)    The large quantity of counterfeit G-Star goods at the Lidcombe house when the search orders were executed in August 201l;

(d)    Ms Ma’s knowledge of the alarm code for the Flemington warehouse in August 2011, and that she was known to the neighbour “Tong”;

(e)    Ms Ma’s knowledge of “Eric”, Mr Xu’s employee, whom she allowed to park Mr Xu’s van in the driveway of the Lidcombe house, and her ability to contact Eric;

(f)    Ms Ma’s attendance at Paddy’s Market on 16 October 2011 wearing a “bum bag”.

73    The facts concerning these matters were admitted by Ms Ma in oral evidence. Her case was that those facts did not demonstrate any dealing by her in counterfeit G-Star goods, or any involvement in the business or businesses that was found to be dealing in counterfeit G-Star goods.

Alleged trade mark infringement

74    The statement of claim alleges that by reason of the dealings in counterfeit G-Star goods, the respondents (collectively) infringed the G-Star trade marks “by importing, selling or by way of trade offering or exposing for sale in Australia” the “respondents’ products”.

75    Agreed issue 10 is:

10. Whether [Ms Ma] has infringed the G-Star trade marks by importing, selling or by way of trade offering or exposing for sale in Australia the Respondents’ Products which feature:

a.    the Trade Marks; or

b.    marks which are substantially identical with or deceptively similar to the G-Star Trade marks.

76    In the applicants’ final submissions, under the heading “Has Ms Ma used the G-Star trade marks “as a trade mark?””, the applicant said:

100. In the present case, it is clear that the G-Star trade marks appearing [sic] on the products purchased by the applicants’ agents from stalls 187 to 190 at Paddy’s Market, Flemington in a way that would have appeared to consumers as possessing the character of a brand, which is the well established test for determining use of a mark “as a trade mark”. There is also clear evidence that products bearing the G-Star Trade Marks were being sold from Centro Seven Hills as sales of “G-Star” branded products were recorded in the sales books.

…

109…the Applicants submit that Ms Ma has used each of the G-Star trade marks on the basis that counterfeit G-Star goods were imported and sold to customers by a business over which she exercised control and asserted ownership and from which she took profits.

77    The submissions raise for determination whether any business which imported and sold counterfeit G-Star goods which infringed the G-Star trade marks was a business over which Ms Ma:

1.    exercised control;

2.    asserted ownership;

And from which Ms Ma:

3.    took profits.

78    As to what amounts to a use of a trademark ‘as a trademark,’ the applicants relied on the decisions in Shell Co of Australia Ltd v Esso Standard Oil (Aust) Ltd (1963) 109 CLR 407 at 425 per Kitto J (Dixon CJ, Taylor and Owen JJ agreeing) and Johnson & Johnson Australia Pty Ltd v Sterling Pharmaceuticals Pty Ltd (1991) 30 FCR 326 at 348 (Gummow J).

Alleged copyright infringement

79    In the statement of claim, the applicants rely on the same conduct said to constitute trade mark infringement to claim that the respondents (collectively) infringed or authorised the infringement of the applicant’s copyright in the copyright logos.

80    Agreed issue 12 is:

Whether [Ms Ma] has infringed [G-Star Raw’s] copyright in the [copyright logos] by:

a.    reproducing or substantially reproducing the [copyright logos] in breach of section 36 of the [Copyright Act];

b.    authorising the reproduction or substantial reproduction of the [copyright logos] in breach of section 36 of the [Copyright Act]; and/or

c.    importing, selling or by way of trade offering or exposing for sale the Respondents’ Products which feature the [copyright logos] in circumstances where [Ms Ma] knew or ought reasonably to have known that the marking of the Respondents’ Product, if they were made in Australia, would have constituted an infringement of [G-Star Raw’s] copyright in the [copyright logos] in breach of sections 37 and or 38 of the [Copyright Act].

81    In the applicants’ final submissions, the applicants submitted that Ms Ma contravened s 37 of the Copyright Act by importing counterfeit G-Star products. The particular matters said to demonstrate Ms Ma’s responsibility for the importation of such products concerned her receipt of foreign exchange transfers from Mr Xu when she was in China during the period 2005 to 2007, and her payment of substantial portions of those transfers to people in China at the direction of Mr Xu. The submission was that the Court should infer that the payments made by Ms Ma included payments to suppliers of counterfeit G-Star clothing.

82    Concerning s 38 of the Copyright Act, the applicants submitted:

173. The shirts, t-shirts and jeans imported by Ms Ma and then offered for sale, exhibited in public and sold by Ms Ma to Ms Smith and Mr McAlister bore reproductions of the artistic works comprised in the [G-Star logos] and were made without [G-Star Raw]’s licence.

174. It follows that the elements of ss 37 and 38… are made out in relation to the t-shirt and the shirt.

83    The applicants also submitted that Ms Ma had authorised copyright infringement by Mr Xu, Bais Bros and Apparel 23.

84    In support of its case that Ms Ma authorised copyright infringements, the applicants submitted that it is sufficient for the purposes of s 36(1A)(a) of the Copyright Act that Ms Ma had the power not to facilitate the doing of the relevant act, citing Cooper v Universal Music Australia Pty Ltd (2006) 156 FCR 380 at [41] (Branson J, French J agreeing) (“Cooper”). Branson J there rejected a contention that:

…unless Mr Cooper had power, at the time of the doing of each relevant act comprised in a copyright subsisting by virtue of the Act, to prevent its being done, he had no relevant power within the meaning of s 101(1A)(a). I conclude that, within the meaning of the paragraph, a person’s power to prevent the doing of an act comprised in a copyright includes the person’s power not to facilitate the doing of that act by, for example, making available to the public a technical capacity calculated to lead to the doing of that act. The evidence leads to the inexorable inference that it was the deliberate choice of Mr Cooper to establish and maintain his website in a form which did not give him the power immediately to prevent, or immediately to restrict, internet users from using links on his website to access remote websites for the purpose of copying sound recordings in which copyright subsisted.

85     It was submitted that Ms Ma had the requisite power to prevent acts of infringement committed by Bais Bros and Apparel 23. The written submissions were unclear as to whether the applicants submitted that Ms Ma had a similar power or degree of power to prevent copyright infringements by Mr Xu.

Alleged misleading or deceptive conduct/passing off

86    In the statement of claim, the applicants also rely on the conduct said to constitute trade mark and copyright infringements to claim that the respondents (collectively) made false representations in trade or commerce to retailers, the public and consumers of clothing and accessories in Australia that:

1.    The respondents’ products were imported, manufactured, advertised, promoted, offered for sale and sold with the sponsorship or approval of the applicants or any of them;

2.    The respondents’ products were the G-Star products;

3.    The respondents’ products emanated from the same trade source as the G-Star products;

4.    The respondents’ products were made by the applicants or any of them; and

5.    The respondents were licensed, authorised, sponsored, approved or endorsed by the applicants or any of them.

87    The parties’ statement of agreed issues dated April 2013 identifies the following issues to be determined:

17.    Whether [Ms Ma] has represented that:

(a)    the respondents’ products are imported, manufactured, advertised, promoted, offered for sale and sold with the sponsorship or approval of the applicants or any of them;

(b)    the respondents’ products are the G-Star products;

(c)    The respondents’ products emanate from the same trade source as the G-Star products;

(d)    The respondents’ products are made by the applicants or any of them; and

(e)    The respondents are licensed, authorised, sponsored, approved or endorsed by the applicants or any of them,

(Representations).

18.     Whether the Representations were, and are made, in trade or commerce in Australia.

19.     Whether the Representations were and are contrary to fact and thereby false in that:

(a)    the respondents’ products are not imported, manufactured, advertised, promoted, offered for sale and sold with the sponsorship or approval of the applicants or any of them;

(b)    the respondents’ products are not the G-Star products;

(c)    The respondents’ products do not emanate from the same trade source as the G-Star products;

(d)    The respondents’ products are not made by the applicants or any of them; and

(e)    The respondents are not licensed, authorised, sponsored, approved or endorsed by the applicants or any of them.

20.     If [Ms Ma] made the Representations and if the Representations were contrary to fact and thereby false, whether:

(a)    before 1 January 2011, [Ms Ma] has engaged in misleading or deceptive conduct in breach of sections 44 and 44 [sic] of the [Fair Trading Act] and sections 52 and 53 of the [Trade Practices Act] by the operation of section 75B of the [Trade Practices Act]; and

(b)    after 1 January 2011, [Ms Ma] has engaged in misleading or deceptive conduct in breach of sections 18 and 29 of the [Australian Consumer Law NSW].

…

22.    Whether [Ms Ma] has commited the tort of passing off by passing off:

(a)    her business as having the sponsorship, approval or a connection or affiliation in the course of trade with the Applicants of any of them and the G-Star Products; and

    (b)    the respondents’ products as and for:

        (i)    the G-Star Products;    

(ii)    having the sponsorship, approval or a connection or affiliation in the course of trade with the Applicants of any them and the G-Star Products.

88    In their final written submissions, the applicants put the following propositions concerning the facts relied upon to prove the relevant breaches:

The products sold by Ms Ma from places controlled by Ms Ma bear numerous G-Star trade marks and copyright works, leading to the obvious result that people will mistake them for genuine G-Star products emanating from the applicants.

And

The applicants submit that employees and stall attendants at Centro Seven Hills and Paddy’s Market offered for sale and sold clothing products under the direction of Mr Xu and Ms Ma. This included the sale of counterfeit G-Star products.

evidence

Applicants’ evidence

89    On the question of liability (including affidavits proving the relevant intellectual property rights, reputation and various formal matters), the applicants read 26 affidavits. Several affidavits addressed the execution of the search and seizure orders in August 2011 and identified garments and documents seized pursuant to the orders.

90    Ms Ma did not challenge any of the applicants’ affidavit evidence.

Applicants’ early investigations: supply of counterfeit G-Star products in 2010

91    In their written submissions, the applicants referred to evidence of a visit by Morrie Fahd to Fairfield market on 9 January 2010. That affidavit was not read at the trial and accordingly, no findings are made about this visit.

92    On 7 February 2010, an agent of the applicants, Mr McAlister, visited stall 330 at Paddy’s Market, Flemington (leased by Mr Gogebakan and Mr Turkkan) and noted G-Star branded items being offered for sale, comprising approximately 30 t-shirts for $15 each and 50 pairs of shorts for $20 each. He purchased 1 G-Star branded t-shirt for $15.

93    By an email dated 30 June 2011, Mr Gogebakan advised the applicants’ solicitor that Mr Xu was his supplier and provided the address of the Flemington warehouse as his business address. Mr Gogebakan also provided an invoice from John Xu dated October 2009.

Trap purchases at Paddy’s Market, Flemington

94    There was evidence of the following trap purchases of counterfeit G-Star products:

1.    On 7 February 2010, a “G-Star” branded t-shirt from stall 432.

2.    On 7 February 2010, a “G-Star” branded t-shirt from stall 190;

3.    On 14 November 2010, a “G-Star” branded button shirt from stalls 187-189.

95    These are the trap purchases identified in particular (d) of the conduct complained of, set out in paragraph 67 above.

96    There was no evidence about the licensee of stall 432, except that a letter addressed to Mr Xu at stall 432 was accepted by the stallholder “Eric Shi”.

97    Although particular (d) states that on 25 August 2011, documents relating to the sale of the respondents’ products from the Paddy’s Market stalls in the period from 2002 to 2011 were removed from the Flemington warehouse and the Lidcombe house, no particular documents meeting this description were identified by the applicants during the hearing.

Garments located at the Flemington warehouse and the Lidcombe house in August 2011

98    As noted at the commencement of these reasons, approximately 1,385 counterfeit G-Star garments were seized from the Flemington warehouse as well as various documents.

99    The search of the Lidcombe house found approximately 867 counterfeit G-Star branded products comprising t-shirts, collared shirts, shorts, hoodies, jumpers, jackets, denim shorts, jeans and track pants. The evidence of the independent lawyer who attended on the execution of the search and seizure order included a list of items located at the house and its garage. In summary:

1.    19 boxes of garments located in the garage were collected;

2.    Two garments were taken as samples from a van in the driveway of the house;

3.    139 garments located in the entry of the house were collected.

100    Also found was a trestle table in the entrance to the Lidcombe house and three bum bags, including one that contained small denomination change.

Documentary evidence tendered by the applicants

101    A substantial volume of documents were seized from the Lidcombe house and the Flemington warehouse pursuant to the August 2011 search orders. Other documents were obtained under subpoena.

102    The documents included invoices and freight importation documents, as well as bills of lading and Australian customs documents, recording Mr Xu’s importation of substantial volumes of garments from China in the period 30 January 2003 to 2 June 2006, as well as invoices and other documents recording the importation by Bais Bros of substantial volumes of garments from China in the period 8 January 2007 to 2 June 2011. In addition, in 2008 invoices were issued to an unknown person at the Lidcombe house address for at least 12,690 units of clothing. The invoices were all issued by Jieyang Lingfeng Industrial Co Ltd (“Jieyang”) and do not specify whether the items were branded.

103    The invoices and importation documents were addressed variously to Mr Xu and Bais Bros. Documents obtained from the Lidcombe house and the Flemington warehouse recorded that, between about May 2003 and June 2006, Mr Xu imported:

1.    over 167,000 garments from Jieyang; and

2.    over 10,000 garments from Dong Guan Yi Hua Garment Co.

104    A substantial volume of documents recording sales was also seized from the Lidcombe house and the Flemington warehouse. On their face, the documents record sales by Mr Xu and other entities or businesses including “Sun Yang Co” and “Sun Yang In-Export Trading Co”, but not sales by Ms Ma or Apparel 23.

105    There is evidence of the sale of 108 pairs of “G-Star” jeans on 7 April 2005, in an exercise book which appears to contain handwritten entries of sales of various garments. The exercise book appears to cover the period from 22 April 2004 to 16 June 2005. The exercise book does not reveal the identity of the seller or the location where the sales were made.

106    No records of sales from Paddy’s Market, Flemington, the Chullora mall space or the Norwest Marketown stall were identified. There are records that appear to show G-Star branded products were sold, offered for sale or stocked from time to time:

    At the Miller shop, between about May 2004 to July 2005;

    At the Chester Hill shop, in around mid 2005; and

    At the Centro Seven Hills stall, in June and July 2011.

107    There was also evidence that G-Star branded products were offered for sale at the Centro Seven Hills stall in November 2010, comprising two “G-Star” jackets which Ms Ma took from that stall.

108     There is a volume of delivery notes which record the sender as variously John, Sun Yang Co, Sun Yang and John Xu and 14/159 Arthur Street Homebush West (the address of the Flemington warehouse).

109    There is a single Startrack Express receipt from “John & Mary” to Sandra Edmundson at an address in South Australia for five cartons of clothing weighing 110 kilograms. The receipt is undated.

110    There are lease documents, receipts and invoices for rental payments for the following premises:

1.    The Miller shop. Documents identify Mr Xu as the tenant of the Miller shop;

2.    The Chullora mall space. The documents suggest that Mr Xu or a business called “Brandie’s” was the tenant;

3.    The Chester Hill shop. There are documents which identify variously Mr Xu and Sun Yang In-Export Trading Co as the tenant of the shop;

4.    The Centro Seven Hills stall. Documents obtained from the Lidcombe house dated 1 August 2009 and 1 March 2010 identify Bais Bros and Patino respectively as the tenant. An insurance certificate obtained under subpoena from CPM (NSW) Pty Ltd refers to “Brandie’s P/L” as the insured. In addition, there are three documents headed “Casual Licence Agreement” which identify “Patino” as the licensee and Mr Xu as the relevant contact. The first is for the period 30 June 2009 to 27 September 2009, the second for the period 12 July 2010 to 9 October 2010, and the third for the period 4 Oct 2010 to 1 January 2011. The second document was signed by Ms Ma. Mr Xu’s unchallenged evidence was that he had designed a logo named “Patino” in 2000 and then traded primarily using that logo. Mr Xu estimated that, since 2000, he had sold about 20,000 Patino branded garments annually;

5.    Stalls 187 to 190 and 432 at Paddy’s Market Flemington. The documents include documents identifying Ms Ma as the licensee of stalls 187 to 190 and include a receipt signed by Mr Xu, a receipt addressed to Mr Xu, credit card receipts signed by Q Ma for two amounts in 2003 for accounts addressed to Mrs Ma and Mr Xu, and invoices, receipts and statements addressed variously to Ms Ma and Mr Xu.

111    The applicants also tendered bank statements which showed that:

1.    There was an account in Mr Xu’s name with substantial transactions over the period from September 2000 to March 2008;

2.    There was an account in the name of Bais Bros with substantial transactions over the period 22 March 2007 to 22 June 2011;

3.    There was an account in the name of Sun Yang In-Export Trading Co with substantial transactions over the period 3 August 1999 to 31 May 2011;

4.    There was a second account in the name of Sun Yang In-Export Trading Co which was operated at least during the period April 2002 to July 2004

112    Finally, the applicants tendered two statements that purport to record the trading income, cost of sales and gross profit of Bais Bros for the years ended 30 June 2007 to 2010 inclusive. The sales stated are:

Year ended 30 June 2007        $403,690.73

Year ended 30 June 2008        $294,790.91

Year ended 30 June 2009        $308,273.64

Year ended 30 June 2010         $306,478.18

Mr Xu’s evidence

113    Ms Ma called Mr Xu to give evidence in her case.

114    Mr Xu conceded that he had dealt in counterfeit G-Star products, although generally only to the extent that this could be proved by records. The cross-examination demonstrated that Mr Xu had understated the extent of his dealings in counterfeit G-Star products on oath.

115    Mr Xu said that he directed and authorised Bais Bros to import 2,500 counterfeit G-Star clothing items into Australia in about August 2009 and later directed and authorised Bais Bro to sell the items in Sydney. In cross-examination, Mr Xu conceded that he and his company imported over 3,000 G-Star garments from China in 2005 and over 2,100 G-Star garments in 2008. On these figures, he and Bais Bros imported at least 7,600 counterfeit G-Star garments.

116    Mr Xu gave uncontradicted evidence that supported Ms Ma’s case in important respects, including that:

1.    Mr Xu caused counterfeit G-Star branded products to be stored at the Lidcombe house and Flemington warehouse;

2.    Ms Ma did not participate in the business of either Mr Xu or Bais Bros, except as specifically the subject of other findings;

3.    Ms Ma did not participate in the decision making of Bais Bros;

4.    Mr Xu did not discuss with Ms Ma the importation or sale of clothing items bearing the G-Star brand;

5.    Mr Xu was responsible for the administration of the business conducted at Paddy’s Market, Flemington.

117    Although uncontradicted, there is an obvious question as to the weight to be given to Mr Xu’s evidence. The applicants did not make submissions on this point, although they identified certain matters said to “relate to the credit of Mr Xu”. While I do not accord Mr Xu’s evidence substantial weight, his evidence was not contradicted (and was, in some respects, corroborated) by the documents located at the Flemington warehouse and the Lidcombe house.

118    In cross-examination, Mr Xu agreed that he owed Ms Ma thousands of dollars. He also agreed that he had received a financial benefit that was not taken into account in the property settlement between him and Ms Ma, in that between 2009 and 2011, Mr Xu had transferred more than $1 million to China. The applicants suggested that Mr Xu felt some guilt about his treatment of Ms Ma, which led to an arrangement between him and Ms Ma, under which she was permitted to collect the takings from the Centro Seven Hills stall for a period of months in 2011.

119    The applicants sought to emphasise the following question and answer in Mr Xu’s cross-examination:

Mr Heerey: …Mr Xu, to sooth the guilt that you feel, you have granted Ms Ma an entitlement to the takings from your business; is that correct?

Mr Xu: That is a factor.

Ms Ma’s evidence

120    To a significant extent, the case ultimately put by the applicants depended upon Ms Ma’s evidence. The applicants contend that Ms Ma’s evidence demonstrated that she was involved in a business which dealt in counterfeit G-Star products. For her part, Ms Ma’s case was that nothing that she said demonstrated any liability to the applicants.

121    The applicants submitted that Ms Ma’s evidence reflected adversely on her credit in various respects. Ultimately, it was the applicants’ case that Ms Ma was untruthful when she denied involvement in any such business.

122    The applicants claim that Ms Ma’s evidence was inconsistent in some respects and implausible in others. In their final written submissions, the applicants identified particular portions of her evidence, which mainly concerned events in 2010 and 2011, after Ms Ma’s separation from Mr Xu. I deal with each of the matters identified by the applicants below.

123    Ms Ma gave evidence and was cross-examined with the assistance of a Mandarin interpreter. After observing Ms Ma in the witness box over approximately two days, I formed the view that Ms Ma was a forthright witness, who had a good recollection of many relevant events. Ms Ma’s evidence was generally consistent with the available documentation. Despite the difficulties of being cross-examined through an interpreter, Ms Ma generally responded to questions directly and clearly. She made prompt and appropriate concessions, for example, that she knew that there were stalls at Paddy’s Market licensed in her name. She readily identified her signature on documents (with one exception, discussed below), and Mr Xu’s handwriting. Ms Ma also readily identified handwritten records in Chinese characters of her receipts from the takings of the Centro Seven Hills stall.

124    In my assessment, Ms Ma was generally a truthful and reliable witness.

125    From time to time, Ms Ma volunteered evidence. For example, during the applicants’ opening, while counsel for the applicants, Mr Heerey, was tendering a shirt purchased from stall 190 in November 2010, Ms Ma said (through the interpreter):

The shop was mine, but when my husband purchased this he asked me to sign it to avoid the tax, so in regards to what business he conducted, I have no idea.

126    On another occasion, Ms Ma was being cross-examined about her knowledge of a letter from the applicant’s solicitors addressed to her and dated 30 January 2011. She had previously said that she did not read English. The following exchange took place:

Q: Ms Ma, when you – when Mr Xu gave you this letter, did he tell you that it was a letter from lawyers?

A: No,

Q: Did he…

A: He said it’s a warning letter for the markets.

127    When asked about whether Ms Ma knew “Eric”, a man whom she said worked at Paddy’s Market for Mr Xu, Ms Ma volunteered:

That uni student worked at the market and I needed to collect money from him for my children.

128    Ms Ma was not questioned about when or how frequently she had collected money from “Eric” at Paddy’s Market.

129    Ms Ma was asked whether she might have transferred as much as $57,000 to a Mr Wu in late 2010. Her response was:

I don’t know but there is only one supply I had, so I can calculate.

130    On some occasions, it seemed that Ms Ma may have been reconstructing events rather than simply giving her recollection of what happened, and on other occasions, she appeared to be a little careless in her responses. An example of the latter is her evidence that “pretty much” all of the money that Mr Xu sent to her in China was spent on personal living expenses. Almost immediately after giving that evidence, Ms Ma agreed that Mr Xu sent her over $475,000 (“If it’s under my name, I received this”) and that there “was money left” after her living expenses were paid. However, I did not gain the impression that Ms Ma was attempting to tailor her evidence to suit her case. In some respects, she seemed unaware of the case that was put against her and inclined to be less careful about matters that seemed to her to be unimportant, of which the money received from Mr Xu while she was living in China between about 2005 and 2007 is an example.

131    Ms Ma has suffered significant personal tragedy and difficulty, particularly as a result of the disabilities of her second child who has been diagnosed with autism, and her ex-husband’s infidelity. Ms Ma described her suffering and was tearful at times but, in my assessment, did not seek to exaggerate. Except where I indicate specifically, I accept Ms Ma’s evidence as truthful and accurate. In particular, I accept Ms Ma’s evidence about the extent of her knowledge of dealings in counterfeit G-Star products.

Topics addressed by evidence

Ms Ma’s personal circumstances

132    Ms Ma and Mr Xu were educated in China to a tertiary level in physical education and married in China in 1989. They migrated to Australia in 1992. Their children were born in 1990, 1998 and 1999. According to Ms Ma, she and Mr Xu separated in July 2009. As noted in paragraph 7 above, consent orders dealing with their matrimonial property were made in August 2010.

133    In February 1998, Ms Ma gave birth to her second son, Bai Sheng Xu, after a difficult pregnancy. Around that time, she quit her previous job as a gymnastics coach to become a full time mother.

134    Bai did not reach early developmental milestones. At seven months, a paediatrician reported that Bai presented with severe gross and fine motor delay and other problems.

135    Ms Ma had a third child in 1999. At the age of two, Bai was diagnosed with autistic spectrum disorder. According to a medical report dated 7 February 2000, at that time Ms Ma was occasionally assisting Mr Xu with his business. According to her first affidavit, Ms Ma would sometimes attend the markets to act as a salesperson after the birth of Bai. The period of these attendances is not clear. However, Ms Ma said (also in her first affidavit) that she attended the markets during the period 2005 to 2010 on about 10 but no more than 15 occasions.

136    By the age of 13, in late 2011, Bai was described by a paediatric registrar as suffering from autism and moderate-severe intellectual disability.

137    Ms Ma gave evidence that, over the past 14 years, she has travelled between China and Australia attempting to obtain medical treatment and education for Bai. In particular, between 2005 and 2007, Ms Ma took Bai to Guangzhou, China for a special educational program which lasted two years. For part of the time, Ms Ma was alone with her son Bai but, at some point, she was joined by her daughter.

138    In February 2009, because of Bai’s aggressive behaviour, Ms Ma took him to Beijing for neurosurgery and intracranial stem cell therapy. There is no reason to doubt Ms Ma’s evidence concerning her son’s disabilities and her efforts to obtain treatment for him. I accept her evidence on this issue. I also accept Ms Ma’s evidence that Bai has required a great deal of her time and attention since his birth. This latter evidence is corroborated by Mr Xu, who said that Ms Ma was solely responsible for looking after all of their three children.

139    In May 2009, Ms Ma discovered that Mr Xu was having an extra-marital relationship with another woman. Shortly after that discovery, Mr Xu travelled to China with this woman and when he returned to Australia, commenced living with her.

140    Ms Ma was greatly traumatised by the breakdown of her marriage and particularly by the fact that Mr Xu’s new partner was 20 years his junior. In January 2010, she had a motor vehicle accident after her husband’s new partner insulted her. After attending Westmead Hospital, Ms Ma was sent to the Cumberland Psychiatric Hospital where she was diagnosed with severe depression and major depressive disorder. Ms Ma gave evidence orally about the impact of the marriage breakdown on her. This included financial difficulties as a result of Mr Xu’s inability or unwillingness to provide financial support for herself and the three children.

141    At one point, Ms Ma volunteered that after “the incident” (which I understood to be a reference to the breakdown of her marriage) she tried to kill herself several times and she had two car accidents, after which a government agency provided her with respite care for her autistic son. Later Ms Ma said that she “committed suicide twice”. A diary note made in Chinese characters by Ms Ma in October 2011 reveals Ms Ma’s pain and frustration. Translated into English, the note reads:

Called in the morning and asked me to take his sister to the market for a walk. Nothing is done for no reason, that call must be asking for something. Since I was asked to go to the market I would take the two marriage certificates and get him to deal with our divorce. I waited for some time in the market and bought some gifts for his sister. His business looked very well but only gave me $300. I asked him to deliver meal to Sheng at night but he still did not want to go. Not even have any care for his own son, does such man still have conscience?

142    Ms Ma also gave evidence that Mr Xu had forged her signature on a lease for a BMW motor vehicle. The relevant form was purportedly signed at a time when Ms Ma was in China. This evidence was not disputed.

Ms Ma’s ability to speak English and read English documents

143    Ms Ma gave her evidence through a Mandarin interpreter. I accept the applicants’ submission that Ms Ma appeared to understand at least some of the English communications that occurred during the course of the hearing. I also accept that she probably can read at least some English. This is unsurprising because Ms Ma has lived mostly in Australia for the past 22 years and is an intelligent woman, having obtained tertiary qualifications in physical education in China. However, I did not gain the impression that Ms Ma was exaggerating the limitations of her understanding of the English language. To give just one example, it was my impression that Ms Ma required the assistance of the Mandarin interpreter when Mr Xu attempted to give some evidence in English.

144    I accept that Ms Ma must have read the words “packing declaration” in English on a document written in both English and Chinese characters, as the applicants submitted. However, Ms Ma had herself imported goods from China in 2010, so it is unsurprising that she could read those English words. I do not infer that Ms Ma had a working knowledge of written English that would have enabled her to read a document of any complexity (such as the statutory declaration that she signed in 1999 relating to stalls 187 to 189 at Paddy’s Market, Flemington).

Ms Ma’s role as licensee of stalls 187 to 190

145    Ms Ma readily agreed that she knew that there were stalls at Paddy’s Market, Flemington in her name, but said that she did not participate in the business conducted from the stalls.

146    The applicants noted, as a matter telling against Ms Ma’s credit, that Ms Ma initially suggested that Mr Xu had forged her signature on Paddy’s Market stall applications in 1999 but subsequently stated that she did not know whether she signed them. A little later, Ms Ma said that her husband had taken her to sign the documents.

147    However, as I mentioned earlier, in the course of Mr Heerey’s opening, Ms Ma had volunteered that stall 190 was “her” shop. Also, when the cross-examination on this topic commenced, Ms Ma was shown a bundle of documents, mainly dated in 1999 and 2006 (and not in 2010). When asked if she remembered admitting that she was recorded as the owner of the licence from 28 June 2010 (she had admitted in her defence that was recorded as the owner of the licence of stalls 187-190 “at all material times”), she said (apparently referring to the bundle of documents):

I remember this. My husband asked me to sign on that.

148    Ms Ma subsequently clarified that she did not remember the specific occasion when the documents were signed.

149    When shown a particular document, Ms Ma said that the signature did not look like her signature and then “that’s not my signature”. As it turned out, Ms Ma’s signature has changed substantially between 1999 and more recent years. There is a distinct difference between Ms Ma’s signature on the 1999 and the 2006 documents, reflected in copies of her passport and driver’s licence.

150    Finally, Ms Ma said that she could not be sure if the statutory declaration was signed by her or not.

151    I am satisfied on the balance of probabilities that Ms Ma signed the November 1999 documents. I also accept Ms Ma’s evidence that she signed the documents at Mr Xu’s direction for the purpose of enabling him to conduct a business at Paddy’s Market, Flemington. This is consistent with the 2000 paediatrician’s report that Mr Xu imported sportswear with Ms Ma occasionally helping at work.

152    In my view, Ms Ma was not being disingenuous when she gave her evidence on this topic. Rather, my assessment is that Ms Ma was being cautious in circumstances where she did not remember the occasion and claimed to have had experience (which claim was not disputed) of Mr Xu forging her signature in connection with the lease of a BMW.

153    In my view Ms Ma’s original evidence, referred to in paragraph 146 above, is explained by her mistrust of Mr Xu, her recollection of her personal circumstances as at November 1999 (which included having a small baby and an infant with severe developmental delays) and her lack of immediate recognition of her earlier signature. That lack of recognition is not particularly surprising in the context that Ms Ma’s primary written language is Mandarin. In my opinion, Ms Ma was incorrect when she initially suggested that Mr Xu had forged her signature in 1999 but she was, more probably than not, drawing an incorrect inference rather than telling a deliberate untruth. In my opinion, Ms Ma probably did not take sufficient care in addressing the cross-examination on this point but I do not conclude that this reflects very badly on her.

154    Similar documents were tendered concerning stall 190, dated around November 2006. The description of the goods proposed to be sold from this stall is “denim clothing”. Although Ms Ma accepted that she signed the documents, that admission is inconsistent with her unchallenged evidence that she was in China from February 2005 to February 2007. On the basis of Ms Ma’s admission, I find that she signed documents for the licence of stall 190 in about November 2006.

Ms Ma’s dealings with foreign currency transfers from Mr Xu

155    The evidence revealed that Ms Ma had received over $475,000 of foreign currency transfers from Mr Xu when she was living in China between about April 2005 and late 2006 or early 2007. When initially asked about this, Ms Ma readily said “If it’s under my name, I received this. Yes. I agree.” She accepted that Mr Xu sent her money almost every month during this period.

156    Ms Ma said that she had paid several hundreds of thousands of dollars to “several people” and “not too many people” at the direction of Mr Xu. She maintained that she could not remember their names. Ms Ma agreed that the payments related to the conduct of Mr Xu’s business.

157    The applicants contend that it was implausible that Ms Ma did not remember the identity of the recipients of the money, and argued that this claim reflects adversely on Ms Ma’s credit. However, there was no evidence which contradicted it directly. Ms Ma also gave evidence that the payments she made were by bank transfer, and not by delivery of cash. In the absence of any contradictory evidence and bearing in mind Ms Ma’s personal circumstances at this time, which included looking after one or two small children at different times (one severely disabled) without the assistance of her husband, and the favourable view that I formed of Ms Ma as an honest and frank witness, I accept Ms Ma’s evidence on this point. It does not seem implausible to me that Ms Ma would not remember the identities of individuals whom she did not pay in person.

158    The applicants submitted that the payments included payments to suppliers of counterfeit “G-Star” clothing. They did not identify direct evidence to support this submission. The grounds for the submission were:

1.    Ms Ma was aware that Mr Xu was conducting a clothing business;

2.    Ms Ma knew that the payments were made to people to whom Mr Xu owed money for “business”;

3.    There was no evidence that Mr Xu’s business involved anything other than the importation and sale of clothing;

4.    Ms Ma imported 11,016 t-shirts from an individual named Wu Chaomin in about November 2010, and made payments to Wu Chaomin in October, November and December 2010. According to Mr Xu, Wu Chaomin was the boss of Jieyang;

5.    Mr Xu ordered “G-Star” branded goods through his “middle man” Li Weijiang from at least April 2005, including in May 2005. These goods were scheduled for delivery on 10 June 2005. The goods were exported by Jieyang;

6.    On 6 May 2005, Li Weijiang wrote to Mr Xu stating that “if 20 feet container is scheduled to deliver on 10 June, transfer AUD$60,000 today or latest tomorrow, need to pay Chen CNY¥250,000 and Xiao CNY¥100,000”;

7.    Ms Ma received payments from Mr Xu through KVB Kunlun, a financial services provider, of $30,000 on 8 April 2005 and a little over $50,000 on 3 August 2005. Mr Xu did not make his first payment to Li Weijiang through KVB Kunlun until 1 September 2005;

8.    Mr Xu did not make any direct payments to Wu Chaomin.

159    The applicants submit that I should infer from these facts that:

1.    Ms Ma paid money to Li Weijiang, Chen and/or Xiao for the importation of clothing prior to 1 September 2005; and

2.    Ms Ma paid for the goods ordered by Mr Xu in May 2005 which included counterfeit G-Star goods.

160    The evidence does not reveal anything about what payments were made by Ms Ma to whom, when and for what particular purpose. Ms Ma said that the payments she made were by transfer to bank accounts, at her husband’s direction. There are no relevant bank statements in evidence and no evidence of any direction to make any particular payment or payments. There is no evidence of any transfer of $60,000 around 6 May 2005. There is no particular reason to think that Mr Xu did not have another means of paying Li Weijiang in May 2005, if Li Weijiang, Mr Chen and/or Mr Xiao were paid around that time. There is no evidence as to how the amounts received by Ms Ma in April and August 2005 were spent. The evidence is that the clothing business or businesses operated by Mr Xu or entities with which he was associated sold a range of clothing. Without more evidence, I am not satisfied that it is more likely than not that the payments made by Ms Ma at Mr Xu’s direction included payments to suppliers of counterfeit G-Star products.

161    Further, even if these inferences in paragraph 159 could be drawn, they would not support a more general inference that Ms Ma made payments to suppliers of counterfeit G-Star products.

162    The applicants did not explain how Ms Ma’s importation of t-shirts from Wu Chaomin in 2010 was relevant to her conduct in 2005, and I do not see any relevance. There was no evidence that Ms Ma knew Wu Chaomin before Mr Xu introduced them in 2010. There was also no evidence that Ms Ma knew any particular individual who supplied or facilitated the supply of counterfeit G-Star products in China.

163    It was put to Ms Ma that she received five additional payments totalling $200,000 in addition to the payments totalling $475,000. Ms Ma disagreed. The payments were recorded in notes which Ms Ma said were in Mr Xu’s handwriting. Ms Ma volunteered (through the interpreter):

I think it’s clearer if you ask my ex-husband about those transfers.

164    The question was not explored in the cross-examination of Mr Xu. I am not satisfied on the balance of probabilities that, while she was in China, Ms Ma received additional payments in excess of the $475,000.

Ms Ma and Bais Bros

165    Bais Bros was registered as a company in July 2005. It was Ms Ma’s unchallenged evidence that she was in China at this time and was unaware of the registration of the company. Nevertheless, Ms Ma has agreed that she was a director and shareholder of Bais Bros from its incorporation until 6 October 2010.

166    Ms Ma suggested that Mr Xu had forged her signature on documents by which she became a director and shareholder. It is unnecessary to make a finding about this matter.

167    In August 2010, pursuant to the property settlement between Ms Ma and Mr Xu, Mr Xu was declared to be the sole and absolute owner of Bais Bros.

168    According to the applicants’ written submissions, on 8 September 2011, Ms Ma filed with the Australian Securities and Investments Commission a notification of her resignation as an officeholder of Bais Bros, stating that she sent a resignation letter to Bais Bros on 6 October 2010.

169    There are no business records showing that Ms Ma played any active role in the affairs of Bais Bros.

170    However, in the parties’ statement of agreed facts, it is agreed that from 12 July 2005 until 8 September 2011, Ms Ma was:

1.    Directing or procuring Bais Bros’ conduct but not at all times;

2.    Personally involved in Bais Bros’ conduct but not at all times;

3.    Acting with Bais Bros towards a common goal but not at all times; and

4.    Authorising Bais Bros’ conduct but not at all times.

171    In the absence of any evidence about the basis for this agreed fact, and having regard to the absence of relevant documentary evidence and the evidence of Mr Xu and Ms Ma that she did not play any active role in the management or operations of Bais Bros, I accord these agreed facts little weight.

172    Having regard to the consent orders made in August 2010 and the absence of any evidence to the contrary, I find that Ms Ma played no role in the management or operations of Bais Bros at least from August 2010.

Ms Ma’s role in the clothing business when Mr Xu was overseas

173    Mr Xu gave evidence that he “very frequently” travelled back to China to place orders for his business. The applicants submitted that, given the significant scale of the clothing business, it is improbable that the business was left unattended during his absence or was managed by university students or casual market stall attendants. The issue was not canvassed in cross-examination of Mr Xu. However, the applicants submitted that I should infer that Ms Ma was the “logical person” to continue carrying on the “family clothing business” and to direct staff and collect takings from the following facts:

1.    Ms Ma’s occupation of the Lidcombe house, where stock and equipment necessary for operating and managing the business were located;

2.    Ms Ma’s ownership of the Flemington warehouse and her knowledge (in August 2011) of the alarm code for the warehouse;

3.    Ms Ma’s demonstrated propensity to follow her husband’s instructions without question, as a result of which she would have complied with any direction to assist in the business.

174    Although the proposed inference is not illogical or fanciful, it not a matter about which I am satisfied on the balance of probabilities. Even if Ms Ma were the “logical person” to carry on the business in Mr Xu’s absence, that does not mean that she did so and there are plausible reasons why she might not have taken that role, not the least of which were her responsibilities to her children. The position might also have been different at different times. The evidence does not support a sweeping conclusion that Ms Ma conducted the business in Mr Xu’s absence overseas or that she did so on any particular occasion.

Dealings with Mr Xu’s employees

175    In cross-examination, Ms Ma gave evidence that “Eric” worked for her husband and was a driver who helped Mr Xu to move things from the Flemington warehouse to the markets and to the Lidcombe house.

176    The applicants contended that Ms Ma’s evidence that Mr Xu’s employee parked his vehicle at the Lidcombe house and exchanged it for Mr Xu’s van rather than just driving to the Flemington warehouse and back was implausible. This evidence was given in the context of Ms Ma’s denial that she was running Mr Xu’s business while he was overseas.

177    Although the applicants’ submissions were not clear on this point, I understood them to contend that the frequency of Eric’s presence at the Lidcombe house after her separation from Mr Xu tended to suggest that Ms Ma was involved in the business in which Eric was employed. The applicants also relied on Ms Ma’s ability to contact Eric and apparently to give him directions on the day when the search and seizure order was executed, as evidence of her involvement in the business. Ms Ma denied a suggestion that she permitted Eric to take goods in and out of her house while Mr Xu was overseas and twice gave evidence to the effect that Eric’s car parking arrangements were affected by Mr Xu’s desire that Eric not know that there was a problem in his marriage.

178    There was no direct evidence that Eric moved goods either to or from the house while Mr Xu was overseas. I infer from what Ms Ma said that Eric had parked his vehicle at the Lidcombe house before the separation of Ms Ma and Mr Xu, that this arrangement continued after the separation, and that Ms Ma believed this to be because Mr Xu did not want to tell Eric about their marriage breakdown.

179    The applicants suggested that Ms Ma’s claim about Mr Xu’s desire not to tell Eric about the marriage breakdown was at odds with the following evidence given by Ms Ma:

1.    That Mr Xu’s business at Centro Seven Hills was mingled with his girlfriend’s business;

2.    That Ms Ma would occasionally walk past Mr Xu’s stall at the markets to see if Mr Xu’s girlfriend was there with him; and

3.    That Mr Xu dumped goods at the Lidcombe house because he did not want his girlfriend to see Ms Ma.

180    It was suggested that this evidence made it “clear” that Mr Xu’s girlfriend must have regularly been at Centro Seven Hills, the Paddy’s Market stalls, the Flemington warehouse or otherwise in the company of Mr Xu, with the result that there was no reason for Mr Xu to hide this relationship from Eric. I do not accept that I should infer from the available evidence that Eric knew about Mr Xu’s girlfriend, that Mr Xu had told Eric about his girlfriend or that Mr Xu had no reason (or desire, which is a different thing) to hide that relationship. I also do not conclude from the frequency of Eric’s attendance at the Lidcombe house after Ms Ma’s separation from Mr Xu that Ms Ma was participating in the business in which Eric was employed.

Ms Ma’s business dealings through Apparel 23

181    Apparel 23 was registered as a company on 28 June 2010. Since its registration, Ms Ma has been the sole shareholder and director.

182    In her affidavit evidence, Ms Ma said that Apparel 23 was set up because she was to be personally responsible for a mortgage over either or both of the Lidcombe house and the Flemington warehouse following her property settlement with Mr Xu.

183    In her oral evidence, Ms Ma agreed that by July 2010, Mr Xu owed her a substantial amount of money. This was around the time when Ms Ma signed a licence for the Centro Seven Hills stall. The cross-examination continued as follows:

MR HEEREY: By July 2010, you did not owe him anything and he owed you a lot, correct?

THE INTERPRETER: Correct.

MR HEEREY: And so to try to repay you something that he owed you, he helped you set up this stall at Centro Seven Hills; is that correct?

THE INTERPRETER: That is what he did but I just wanted to get my money.

MR HEEREY: Is that all you did when you want there?

THE INTERPRETER: Yes. Sometimes he forced me to deliver some goods for him.

184    Early in her cross-examination, Ms Ma was asked some questions about Wu Chaomin. Ms Ma readily identified him as a person with whom Mr Xu had done business, including by reference to a document in Chinese characters that referred to “G-Star”. Ms Ma was asked to clarify how she could identify this individual as the same person referred to on two documents. In response, she said:

I didn’t know this person before. After separation my ex-husband in 2010, he wouldn’t pay child support, so I tried to do business myself. I asked his company’s boss, he told me about this person. That’s how I came to know him.

185    Ms Ma said that, in order to make money, she asked Mr Xu to put her in contact with a supplier in China so that she could start her own business. In late August 2010, Ms Ma opened an account with KVB Kunlun for the purpose of sending money to China to pay for stock.

186    On 13 October 2010, Ms Ma paid about $9,000 to Wu Chaomin. On 5 November 2010, she paid a further $10,000. Ms Ma said that this payment was made for the benefit of Apparel 23. Ms Ma said that she was using Apparel 23 for the business that she was conducting with Wu Chaomin. There was a third payment of US$18,220 on 30 December 2010. Ms Ma said that the money she sent to Wu Chaomin totalled about $40,000 and was borrowed from her mother and her sister.

187    The applicants submitted that Ms Ma had falsely stated, by accepting paragraph 24 of the statement of agreed facts dated 15 April 2013, that although she made foreign exchange transactions through the KVB Kunlun account opened in her name, she was unable to recall the amounts of the transactions or the identity or relationship of the recipients of the transactions. I do not accept that submission: first, Ms Ma was not given an opportunity to deal with it in cross-examination; second, the facts relied upon by the applicants (that she deposed to making only one importation from China and that she was aware of transfers totalling $40,000 and the purpose of the transfers when cross-examined in July 2014) do not demonstrate on the balance of probabilities that Ms Ma recalled anything in particular about the account in April 2013.

188    In November 2010, Ms Ma received 154 cartons of t-shirts from China. She began to sell them in late 2010. There is no evidence that the t-shirts were G-Star branded items.

189    In her affidavit made on 12 September 2011, Ms Ma said that Apparel 23 “only traded once” and that this involved importing a single batch of “Patino” brand menswear from China. Ms Ma said that she “only had one supply” from Wu Chaomin. This evidence was not disputed.

190    The applicants raise two particular issues about Ms Ma’s dealings in November 2010 and following. The first was whether her business included garments apart from the 154 cartons of t-shirts received from China in November 2010. The second issue was whether Ms Ma sold her stock at the Centro Seven Hills stall, intermingled with counterfeit “G-Star” products.

191    I accept the applicants’ submission that Ms Ma’s evidence was unsatisfactory on these issues. As to the first matter, in her affidavit made on 26 November 2013, Ms Ma said that the only garments she sold at Norwest Marketown were identified in documents annexed to that affidavit. The relevant documents were sourced from Moorebank Australia and not from China. This evidence is inconsistent with Ms Ma’s evidence at the hearing that she sold t-shirts imported from China at Norwest Marketown.

192    At the hearing, Ms Ma said:

…as long as I was not selling G-Star products, in regards to where I sold the goods at, I don’t think that’s important.

193    I accept the applicants’ submission that Ms Ma’s evidence about where she sold or offered for sale the 154 cartons of t-shirts from China was evasive.

194    Ms Ma also claimed that she had rented a stall at Norwest more frequently than was indicated by the records at Norwest Marketown, saying:

Norwest - I didn’t only have that for – the stand for two weeks. Whenever they had an empty stand I can go and sell there.

195    The applicants submitted that I should reject Ms Ma’s evidence that she sold her t-shirts at Norwest Marketown, and conclude that the t-shirts were sold at the Centro Seven Hills stall. Matters relied upon by the applicants were:

1.    The absence of documentation from the owner or manager of Norwest Marketown demonstrating that Ms Ma was a casual lessee in late 2010. There was evidence that Ms Ma or Apparel 23 appears to have been a casual lessee of mall space at Norwest Marketown during two brief periods in 2011 and 2012:

(a)    30 May to 19 June 2011;

(b)    12 to 25 Nov 2012;

2.    The evidence of Ms Ma’s deliveries of stock to the Centro Seven Hills stall on four occasions shortly after the arrival of her stock from China;

3.    The fact that Ms Ma had borrowed money from her sister and mother to import the goods and can be inferred to have been motivated to start selling the goods as soon as possible;

4.    The Centro Seven Hills stall was said to be the “obvious” place to sell the stock because Ms Ma had signed a licence there in July 2010 “and had been assisting since at least 23 September 2010”;

5.    The evidence of the director of Norwest Marketown, Ms Georgiou, that the only relevant leasing agreements she had found relating to Ms Ma were the two mentioned above, after conducting “a thorough search”. The applicants submitted that Ms Georgiou, on the basis of the search “determined that the first date that Ms Ma or Apparel 23 leased space at Norwest Marketown was 30 May 2011”.

196    I accept the factual accuracy of the first four matters although the extent to which Ms Ma had been “assisting” the operation of the Centro Seven Hills stall is confined to the matters identified in the evidence. As to the last matter, the applicants did not offer a reference to evidence of Ms Georgiou’s determination. I do not read Ms Georgiou’s evidence to include any such determination. Further, Ms Georgiou said nothing about the completeness of the records of Norwest Marketown concerning casual mall leases.

197    Ms Ma agreed that she signed the July 2010 licence agreement for the Centro Seven Hills stall but said that she did so at Mr Xu’s request. She said “When I took money there he asked me to sign that by the way.”

198    The applicants contended that Mr Xu asked Ms Ma to sign this licence agreement so that she would have somewhere to sell her stock. Ms Ma denied this proposition. The applicants’ contention was not supported by evidence from Mr Xu.

199    The applicants did not ask Mr Xu about whether Ms Ma’s t-shirts were sold at the Centro Seven Hills stall. To the contrary, it was put to Mr Xu that he permitted Ms Ma to have the takings from his business as a result of his guilt about debts he owed to Ms Ma. The only evidence about Ms Ma’s receipt of takings was that she received them from the Centro Seven Hills stall and Paddy’s Market, Flemington.

200    The applicants submitted that the volume of the importation made it likely that Apparel 23’s stock was delivered to the Flemington warehouse and not the Lidcombe house as stated by Ms Ma. Then, it was argued, evidence that, on 8 December 2010, Ms Ma picked up 72 t-shirts (and a pair of shoes) from the Flemington warehouse and, on the same day, took three boxes of t-shirts from the Flemington warehouse to the Centro Seven Hills stall probably referred to Apparel 23’s stock. The evidence relied upon by the applicants comprised handwritten notes (in Chinese characters) contained in lecture pad marked “Seven Hills”. The lecture pad appeared to record details of sales and stock at the Centro Seven Hills stall from 23 July 2010. Ms Ma said that Mr Xu asked her to take 72 t-shirts and a pair of shoes from the warehouse to Seven Hills. However, she denied that she sold stock imported by her at the Centro Seven Hills stall. She stated positively that the t-shirts delivered to Seven Hills on 25 November 2010 were not hers.

201    Apart from the entries on 8 December 2010, the applicants did not point to anything in the lecture pad to support their case that Ms Ma’s stock was offered for sale at the Centro Seven Hills stall.

202    One reason that Ms Ma gave for why she did not sell her goods at Seven Hills was as follows:

My ex-husband had his girlfriend at that time so how could I accept the fact that – his business mingled with his girlfriend’s business so how could I ask to be involved in doing business with him?

203    I agree with Ms Ma that it is unlikely that she would have intermingled her business with the business of her husband after their separation, in the particular circumstances of the separation.

204    In my view, the applicants’ have not demonstrated that it is more likely than not that Ms Ma’s stock was offered for sale at the Centro Seven Hills stall. There is no evidence that her stock was observed at the stall, and no evidence of any sale of her stock despite apparently detailed records of sales at the stall. In the absence of such evidence, I accept Ms Ma’s evidence that she did not offer her stock for sale at the Centro Seven Hills stall.

Ms Ma’s receipt of takings from the Centro Seven Hills stall and Paddy’s Market, and her activities in connection with the Centro Seven Hills stall

205    Ms Ma said that she had received the takings from goods sold at the Centro Seven Hills stall on numerous occasions between September 2010 and December 2010 and May 2011 and July 2011. Her receipts during the second period are recorded in a second exercise book that appears to record details of the business operated from the Centro Seven Hills stall. Receipts during the first period are not recorded.

206    Ms Ma agreed that, on several occasions, between September and December 2010, she:

1.    Delivered stock from the Lidcombe house to the Centro Seven Hills stall (both before and after the arrival of the 154 cartons of t-shirts from China);

2.    Took stock from the Flemington warehouse to the Centro Seven Hills stall; and

3.    Collected stock from the Centro Seven Hills stall on one occasion on 6 December 2010.

207    Ms Ma said that Mr Xu would leave goods at the door of the Lidcombe house for her to deliver to Centro Seven Hills when she went to the stall to collect money. In answer to the question whether Mr Xu always made Ms Ma deliver goods in order to get money from the Seven Hills stall, she said (through the interpreter) “Sometimes. Not too many.”

208    I accept Ms Ma’s evidence that she received takings from the Centro Seven Hills business from time to time in late 2010 and in 2011.

Education fund

209    In cross-examination, Ms Ma was asked about her receipt of takings from the Centro Seven Hills stall on 13 May 2011. She agreed that a staff member of her husband had given her money at Seven Hills on that date. When asked whether that payment was for child support or something else, Ms Ma said (through the interpreter):

He stole the money from the children – my children’s fund – education fund. He stole the amount of (foreign language spoken). Okay. $17,000 for two children. That’s the children education insurance fund. Do you want to have a look?

210    Subsequently, Ms Ma tendered two letters dated 4 and 10 May 2011 which record the surrender of two insurance policies in the name of Mr Xu and the payments to him of approximately $17,000.00. Ms Ma’s evidence was that, after receiving these letters, she received takings from the Centro Seven Hills stall on multiple occasions, as a result of an arrangement between Mr Xu and Ms Ma that Mr Xu would pay back the education fund. According to Ms Ma, Mr Xu said that whatever money was at the Centro Seven Hills stall, Ms Ma could take. Mr Xu corroborated Ms Ma’s evidence on this topic, agreeing that he had paid about $9000 of the money that he took from the education fund, through letting Ms Ma have takings from the Seven Hills business.

Items located at the Lidcombe house and the Flemington warehouse in August 2011

211    Mr Xu and Ms Ma gave the following evidence:

1.    Mr Xu said that after receiving a warning letter from the applicants’ solicitors in late January 2011, he had “authorised and directed” Bais Bros to store all remaining G-Star branded clothing items at the garage of the Lidcombe house and the Flemington warehouse. In cross-examination, Mr Xu conceded that he was continuing to sell counterfeit “G-Star” branded products through his business at the Centro Seven Hills stall during July 2011;

2.    Ms Ma said that Mr Xu kept things, including boxes at the Lidcombe house, usually in the garage but some things were left in the house. Boxes in the garage of the Lidcombe house belonged to Mr Xu and had nothing to do with her;

3.    Mr Xu maintained an office at the Lidcombe house after their separation and occasionally did some work in it;

4.    Ms Ma did not touch Mr Xu’s documents;

5.    In cross-examination, Ms Ma agreed that there were full boxes of clothing in the entrance to her house, as well as a trestle table. Ms Ma said that she had asked Mr Xu to move the boxes but he said that he had nowhere to store them; and

6.    According to Mr Xu, the goods stored in her house (apart from “Patino” branded t-shirts imported by Ms Ma or Apparel 23) belonged to Bais Bros. According to Ms Ma, the goods belonged to Mr Xu and not to her.

Ms Ma’s first awareness of G-Star’s rights

212    In March 2010, the applicants’ agent attended Paddy’s Market and served a letter of demand addressed to Ms Ma at stall 190. The letter was accepted by the stall holder “Eric Guan”. There is no evidence that Ms Ma received this letter.

213    In November 2010, Ms Ma took two G-Star branded jackets from the Seven Hills stall. The applicants submitted that Ms Ma must have had an awareness of the G-Star brand at this time for the following reasons:

1.    Ms Ma made a physical assessment of the two G-Star leather jackets in order to conclude that she liked them;

2.    The G-Star leather jackets seized from the Lidcombe house during execution of the search orders were very prominently branded “G-Star”;

3.    the G-Star leather jacket exhibited at Exhibit JAF-36 features very prominent use of the words "G-Star" on the swing tags and garment itself. Accordingly, it would be apparent to any person, regardless of language ability, that the word “G-Star” was a brand; and

4.    At the time Ms Ma took the two “G-Star” leather jackets, the stall attendant noted down the words “Mrs Xu took Hard JK × 2 $30, G-star leather × 2 $25.” Accordingly, it is likely that there was some interaction between the stall attendant and Ms Ma concerning the description of the items she was taking so that the stall attendant could reduce the stock on hand in the daily sale ledger.

214    In February 2011, Mr Xu handed Ms Ma a letter which he told her was a “warning letter” from the markets. The letter was probably a letter dated 30 January 2011 from Middletons Lawyers on behalf of G-Star. The letter contained multiple references to G-Star. Ms Ma said she did not pay any attention to the letter because, “I was not participating in the business. I had no time for this”. Ms Ma also said about the letter “I didn’t even take a look because I don’t know English”. However, Ms Ma acknowledged that, if she had paid attention to another document dated July 2011 which apparently listed sales of clothing, she would at least have been able to read the words “G-Star jacket” in English and to have understood their meaning.

215    Ms Ma says that, on receipt of the letter, she telephoned Jonathan Feder, the applicants’ solicitor and told him that she had received the letter. She also said that she was not running this business because she was separated from her husband.

216    The applicants submitted that I should infer that Ms Ma received the March 2010 letter around the time that it was delivered to stall 190. It was suggested that the inference should be drawn from the following evidence:

1.    On 28 March 2010, an agent of the applicants served on ‘Eric Guan’ at stall 190, a letter addressed to Ms Ma. On the same day, she served on ‘Eric Shi’ at stall 432, a letter addressed to Mr Xu.

2.    Ms Ma later denied receiving the letter addressed to her which was served on “Eric Guan” at stall 190 on 28 March 2010 and claimed that she did not know personally anyone by the name of “Eric Guan” but did recall hearing the name and believed that “Eric Guan” was an employee or associate of Mr Xu.

3.    Ms Ma subsequently admitted that she knew an employee of Mr Xu named “Eric” who worked at Paddy's Market, that she had his phone number stored in her phone, that he would move stock from the Flemington Warehouse to the markets to the Lidcombe House, that he gave her takings from the stalls at Paddy's Market and that when she gave him instructions, he followed those instructions.

217    I am not satisfied that Ms Ma received the March 2010 letter in about March 2010. Ms Ma denies it and the facts relied upon do not support the suggested inference. Ms Ma says that she received a letter which caused her to telephone Mr Feder. There is no dispute that she made such a telephone call in about February 2011. The probabilities are that it was the 30 January 2011 letter which led Ms Ma to telephone Mr Feder. In further support of this latter conclusion, I note Mr Feder’s evidence that the 30 January 2011 letter was located at the Lidcombe house in August 2011.

218    When Mr Heerey tendered four garments seized at the Lidcombe house, Ms Ma volunteered (through the interpreter):

I have seen those clothes before, but I didn’t know that G-Star was a brand name. So until this time I didn’t realise this is a brand name.

219    While I accept this evidence, I do not infer from it that Ms Ma was entirely unaware of the possibility that the garments were counterfeit products designed to copy the genuine article.

other factual findings

Dealings in counterfeit G-Star products

Warehousing and wholesaling of counterfeit G-Star products from the Flemington warehouse

220    Although the statement of claim alleges that the warehousing and wholesaling conduct occurred during the period from 19 June 2002 to 25 August 2011, in closing written submissions the applicants contended that documents seized during the execution of the search order show that the respondents were selling counterfeit G-Star products as early as 7 April 2005. This date appears to relate to the sale of 108 jeans referred to at paragraph 105.

221    In the absence of evidence that the seller was any other person or entity, I infer that Mr Xu was the seller and that this was a wholesale sale rather than a retail sale.

222    I find that, in the period from at least about 7 April 2005 to August 2011, from time to time counterfeit “G-Star” products were warehoused at and wholesaled from the Flemington warehouse.

223    There is evidence that counterfeit “G-Star” products were imported in 2005, 2008 and 2009. I find that, in 2005, these garments were imported by Mr Xu because the importation pre-dated the registration of Bais Bros.

224    Mr Xu said that he directed and authorised Bais Bros to import 2,500 counterfeit G-Star clothing items into Australia in about August 2009 and later directed and authorised Bais Bros to sell the items in Sydney. Mr Xu agreed that there was an arrangement between Bais Bros and Ms Ma by which Bais Bros agreed to pay her $1,000 per week for the use of the warehouse.

225    However, there is evidence that Mr Xu continued supply counterfeit G-Star goods as late as June 2011. Mr Xu accepted the proposition put by the applicants that he operated a business from the Flemington warehouse.

226    I find that garments imported in 2008 and 2009 were imported by Mr Xu or Bais Bros, and were warehoused at the Flemington warehouse. I also find that some of these garments were wholesaled to Mr Gogebakan and Mr Turkkan.

227    I do not accept that I should infer from these facts that there was a continuous activity of warehousing and wholesaling of counterfeit G-Star products from the Flemington warehouse over any particular period. However, I am satisfied that:

1.    In about April 2005, Mr Xu sold a large quantity of counterfeit G-Star products to a third party;

2.    In about June 2005, Mr Xu imported a large quantity of counterfeit G-Star products into Australia;

3.    From time to time over the period from mid July 2005 to late August 2011, Bais Bros or Mr Xu imported counterfeit G-Star products into Australia; and

4.    Counterfeit G-Star products located at the Flemington warehouse in August 2011 were owned by Mr Xu or Bais Bros.

228    I am not satisfied that the goods described by the applicants as the “respondents’ products” were owned by any person or entity other than Mr Xu or Bais Bros.

229    I do not find that Ms Ma imported counterfeit G-Star products into Australia or that she authorised, directed or procured Mr Xu or Bais Bros to import counterfeit G-Star products into Australia.

Warehousing and wholesaling of counterfeit G-Star products from the Lidcombe house

230    Ms Ma did not dispute that counterfeit G-Star products were warehoused at the Lidcombe house during 2011. There was no evidence that the products were wholesaled from the house.

231    The allegation is that, in the period from 2003 to 25 August 2011, the respondents’ products were warehoused at and wholesaled from the house at Lidcombe. I find that, at least during 2011, Mr Xu or Bais Bros stored counterfeit G-Star products at the Lidcombe house.

232    I also find that Ms Ma permitted (albeit reluctantly) Mr Xu or Bais Bros to store counterfeit G-Star products in her home and garage, at least during 2011. This included a substantial number of products stored in the entrance to the house.

233    I reject the submission that throughout 2011, Ms Ma permitted someone to regularly attend the Lidcombe house to drop off and pick up from the foyer stock, as well as the Centro Seven Hills sales ledger, the trestle table and bum bags for operation of the Centro Seven Hills stall and or the Paddy’s Market stalls. The submission was not supported by reference to any evidence.

Supply to two market stalls of counterfeit G-Star products offered for sale in early 2010.

234    I find that Mr Xu supplied counterfeit G-Star products to the operators of stall 330 at Paddy’s Market, Flemington and stall 181 at the Fairfield market, which products were offered for sale in early 2010.

Paddy’s Market, Flemington: sale of respondents’ products from stalls 187 to 190, 330 and 432

235    This allegation concerned the period 2002 to 2011. Although he does not say so explicitly, it is implicit in Mr Xu’s affidavit that at least some of the counterfeit G-Star products imported by him or Bais Bros were sold at Paddy’s Market, Flemington. It is more probable than not that, between about some time during 2005 and August 2011, from time to time, counterfeit G-Star products were sold from stalls 187 to 190.

236    Those garments were sold or offered for sale by Mr Xu or Bais Bros.

237    Further, counterfeit G-Star products were sighted at stalls 330 and 432 on 10 January 2010 and purchased at each of these stalls on 7 February 2010. I accept that Mr Xu was probably the supplier of these products.

238    I find that Ms Ma was the licence holder of stalls 187-190 at Mr Xu’s request. I do not infer from Ms Ma’s position as licence holder of the stalls that she sold or offered for sale counterfeit G-Star products at those stalls.

Retail sales from suburban shops and malls

239    I find that counterfeit G-Star products were sold from the Miller shop, the Chester Hill shop and the Centro Seven Hills stall at the times identified above. The sales from the Miller shop and the Chester Hill shop were made by Mr Xu. The sales from the Centro Seven Hills stall were probably made by Mr Xu or Bais Bros.

Did the counterfeit G-Star products bear a registered trade mark?

240    The plaintiffs tendered 11 counterfeit G-Star products comprising:

    1 black T-shirt purchased from stall 190 on 7 February 2010;

    1 white buttoned shirt purchased from stall 187 to 189 on 14 November 2010;

    1 leather jacket seized from the Flemington warehouse;

    1 grey jacket seized from the Flemington warehouse;

    1 pair of grey shorts seized from the Flemington warehouse;

    1 black buttoned shirt seized from the Flemington warehouse;

    1 olive polo shirt seized from the Flemington warehouse;

    2 grey sweatshirts seized from the Lidcombe garage or house; and

    2 pairs of denim shorts seized from the Lidcombe garage or house

241    I have examined the garments. Each of them bears one or more of the G-Star trade marks by the presence of a mark on the fabric label which is substantially identical to or deceptively similar to one or more of those marks, particularly trade mark 2 (and trade mark 3 in the case of the denim shorts). In most cases, there is a swing tag on the garment which bears one or more marks that is substantially identical to one or more of the G-Star trade marks, particularly trade marks 1, 4 and 5.

Did the counterfeit G-Star products bear a copyright logo?

242    It follows that each of the 11 garments is marked on its fabric label with one of the copyright logos.

Were the counterfeit G-Star products likely to lead consumers to believe that they were the genuine article?

243    I am satisfied that the 11 garments were designed to lead consumers to believe that they were the genuine article. Having regard to the substantial similarity between the marks on the garments and the G-Star trade marks (including the copyright logos), I conclude that the counterfeit G-Star products were reasonably likely to lead consumers to believe that they were the genuine article.

Was Ms Ma “clearly involved” in the business prior to her separation from Mr Xu?

244    I accept that there was a large clothing business being run from the Flemington warehouse (and possibly the Lidcombe house) which, from time to time, imported and sold large volumes of G-Star counterfeit clothing, as well as other garments, between 2005 and the time of Ms Ma’s separation from Mr Xu. Ms Ma was the joint owner of the Flemington warehouse and the Lidcombe house at those times, and Ms Ma resided in the Lidcombe house for a substantial portion of that time, although she also spent a substantial portion of that time living in China.

245    Ms Ma signed the licence for stalls 187 to 189 at Paddy’s Markets, Flemington in November 1999 and for stall 190 in November 2006.

246    Ms Ma agreed that she paid hundreds of thousands of dollars to people in China between 2005 and 2007, at Mr Xu’s direction and for the purposes of his business. However, that activity does not permit any more general inference to be drawn about her involvement in the relevant business. In particular, the evidence does not permit a finding that Ms Ma ever made a payment to a supplier of counterfeit “G-Star” clothing.

247    I do not conclude from this that Ms Ma was “involved” in a business that dealt in counterfeit G-Star goods prior to her separation from Mr Xu, except to the extent of my specific findings above. Nor does the available evidence support a finding that Ms Ma exercised control over the business or businesses that dealt in counterfeit G-Star goods. Similarly, the available evidence does not support a finding that Ms Ma either asserted ownership over that business or those businesses prior to her separation from Mr Xu. Nor does the available evidence support a finding that Ms Ma took profits from that business or those businesses during this period.

Was Ms Ma “clearly involved” in the business following Mr Xu and Ms Ma’s separation?

Ms Ma and the Centro Seven Hills stall

248    At various times, particularly in November 2010 and June and July 2011, counterfeit G-Star products were sold at the Centro Seven Hills stall. Ms Ma was aware of this, at least in 2010, because in November 2010 she took two G-Star garments for her son. However, I accept her evidence to the effect that she did not pay particular attention to the stock for sale at Centro Seven Hills stall.

249    The applicants contended that Ms Ma was “involved with the business” at the Centro Seven Hills stall. I accept that Ms Ma made the deliveries identified above, received the money set out above and signed the licence for the July to October 2010 period. I also accept that Ms Ma did those things in the context that she explained in her oral evidence, namely, to obtain money which she was owed by Mr Xu for child support and, in 2011, to recoup money taken by Mr Xu from the “education fund”.

250    It was not put to Mr Xu that Ms Ma had any ownership or control of the business at Centro Seven Hills. To the contrary, it was suggested that Mr Xu had given Ms Ma an entitlement to the takings from his business out of guilt. Mr Xu responded “That is a factor”.

251    In closing submissions, the applicants contended that Mr Xu asked Ms Ma to sign the July 2010 licence agreement “so that she would have somewhere to sell her stock”. Ms Ma’s evidence was that Mr Xu asked her to sign the document when she visited the stall to collect money: “When I took money there he asked me to sign that by the way”. This contention was not put to Mr Xu.

252    The applicants made the following submission:

Any suggestion that Ms Ma attended Centro Seven Hills and assisted in the distribution of goods at the stall between September and December 2010 in order to receive child support payments must be rejected. It is simply not plausible that Mr Xu refused to financially support Ms Ma in July 2010 forcing her to make the life changing decision to begin her own business as a clothing importer and retailer, but that by September 2010, he had changed his mind and was again financially supporting Ms Ma. It is also implausible that after Ms Ma had received her stock in late November 2010, Ms Ma was still delivering Mr Xu's stock to him in December 2010 for the purpose of receiving child support payments. The far more probable reason for her participation is that she was engaging in work at Centro Seven Hills to earn her share of the takings from that stall.

253    Contrary to this submission, I regard it as quite plausible that Ms Ma attended the Centro Seven Hills stall to obtain money for child support, because Mr Xu was not giving her money, in person, by bank transfer or by arranging someone to deliver money to her.

254    I do not accept that the second sentence of this passage is a fair summary of Ms Ma’s evidence. In particular, while the evidence was not clear about the amounts Ms Ma received from Mr Xu from September 2010, there was no suggestion that they were regarded by her as sufficient to meet her needs and those of her children. Ms Ma also said that her mother was providing financial support, and that she borrowed money from her mother and sister. There was no dispute that Mr Xu owed Ms Ma substantial amounts of money. Further, the plausibility of Ms Ma’s evidence that she decided to commence her own business in July 2010 is corroborated by the imminent priority settlement, as a result of which she acquired a mortgage over the Lidcombe house (and possibly the Flemington warehouse) with, presumably, an obligation to demonstrate to the lender her capacity to make payments under the mortgage.

255    I also do not accept the submission made in the third sentence of the passage. In my opinion, it is very plausible that Mr Xu would seek to obtain something from Ms Ma (such as stock delivery) in return for meeting his financial obligations. I also do not accept the final sentence of the passage. The facts do not support a conclusion that Ms Ma was entitled to a “share” in the takings from the stall.

256    I also accept Ms Ma’s evidence that, on several occasions, particularly during 2010, Mr Xu required Ms Ma to deliver stock to the Centro Seven Hills stall. She had good practical reasons for cooperating with Mr Xu, including to ensure that she would be able to collect the money that she was owed and, more generally, to maximise her chances of obtaining financial support from Mr Xu for her children. The same reasons support Ms Ma’s evidence that she signed the July 2010 licence agreement at Mr Xu’s request.

257    I do not accept that Ms Ma ever sold her own stock from the Centro Seven Hills stall. There is no documentation to support this conclusion. In particular, the sales records of the Centro Seven Hills stall do not support such a conclusion. For example, the records do not refer to any sales of “Patino” branded garments, and there are no references to stock as belonging to either Ms Ma or Apparel 23.

258    I accept that, after Mr Xu took money from an education fund for their children, Ms Ma and Mr Xu made an arrangement whereby Mr Xu allowed Ms Ma to have takings from the Centro Seven Hills stall. This arrangement was able to be made because Mr Xu (or a business with which he was concerned) ran the Centro Seven Hills stall. He was a person who was entitled to takings from the stall (or at least in a position to exert control over those takings), and was therefore able to give Ms Ma the takings in order to reduce his debt to her.

259    The applicants asked rhetorically “if the business at Centro Seven Hills was the business of Mr Xu and his girlfriend then why would Mr Xu and his girlfriend allow Ms Ma to collect the daily takings from the sales made at this location and why would Mr Xu have wanted Ms Ma to sign a lease for these premises and deliver goods to these premises”. This question was not directed to Mr Xu in cross-examination. There was no evidence as to whether his girlfriend had any interest in the business, as Ms Ma believed. In any event, in my opinion, a plausible answer is that Mr Xu owed Ms Ma money and it was convenient to him to discharge that obligation with takings from the Centro Seven Hills stall on the basis that he would obtain some benefit from Ms Ma by having her do errands there.

260    The applicants argued that Ms Ma’s denial of her involvement in doing business with Mr Xu at Centro Seven Hills was improbable for the following reasons:

1.    Mr Xu had an employee who would drive his van to deliver clothing;

2.    Mr Ma said that Mr Xu would drop off clothing to the Lidcombe house for her to deliver to Centro Seven Hills;

3.    Ms Ma believed that Mr Xu’s girlfriend’s business was mingled with the business at Centro Seven Hills; and

4.    Accordingly, there was little incentive for Mr Xu to agree to a potential meeting between his wife and girlfriend at Seven Hills when he could simply give money directly to Ms Ma at her Lidcombe house and have the goods delivered by his employee from the Flemington warehouse directly to Centro Seven Hills.

261    I accept Ms Ma’s denial. It is not implausible to me that Mr Xu would ask Ms Ma to run errands for him in order to obtain money from him even if he could have had those errands done by an employee (which may or may not have been the case on particular occasions). As noted above, although there are records relating to the Centro Seven Hills stall business, they do not appear to record any sale of stock owned by Ms Ma or Apparel 23. Further, there is no documentary evidence to support a case that Ms Ma had any interest in the business, once it is accepted that her receipt of takings was in repayment of amounts due to her for child support or for the education fund.

262    The applicants submitted that Ms Ma’s ability to take garments from the Centro Seven Hills stall without payments indicated her “level of influence”. The applicants referred to four garments, but only two pieces were branded G-Star. I do not regard this as indicative of a high degree of influence, beyond what might be expected to be enjoyed (or exerted) by the ex-wife of the owner of the business over an employee.

263    In particular, I do not consider that Ms Ma’s conduct in taking garments from the Centro Seven Hills stall amounts to an assertion of control over the business. In my view, it is equally explicable as an act of self-help by which Ms Ma obtained goods from the father of her children to clothe them, in circumstances in which she believed that he was not providing adequate child support.

264    Finally, it follows from my findings above that I reject the submission that Ms Ma and Mr Xu were acting in pursuance of a common purpose to make money from selling clothing at the Centro Seven Hills stall. So far as the evidence discloses it, the purpose of selling the clothing at that location was to make money for Mr Xu (or a business with which he was associated).

Ms Ma’s possession of a large quantity of counterfeit G-Star goods at the Lidcombe house when the search orders were executed in August 2011

265    There is no doubt that Ms Ma had a large quantity of counterfeit G-Star goods stored at her house and in her garage in August 2011. Based on Mr Xu’s evidence, it was stored there from at least early 2011.

266    Ms Ma herself gave evidence that substantial volumes of counterfeit G-Star products were stored at her home between January and August 2011. She said that her husband stored the products there and refused to move them when requested.

267    I accept Ms Ma’s evidence about the circumstances in which the goods were stored. That is:

1.    Mr Xu stored the goods at her house;

2.    She asked him to remove it;

3.    He did not remove it; and

4.    She did not, at the time, have the emotional wherewithal (as a result of factors that included her distress about Mr Xu’s affair, the strain of caring for a severely disabled child and her financial concerns which arose, at least in part, from Mr Xu’s failures to provide child support) either to insist that the goods be removed or to dispose of them herself.

Ms Ma’s knowledge of the alarm code for the Flemington warehouse, and that she was known to the neighbour “Tong”

268    Ms Ma accepted that she knew the alarm code for the Flemington warehouse in August 2011 and knew the neighbour who occupied premises adjacent to the warehouse. Her awareness of the alarm code is consistent with her ownership of the property.

269    The applicants submitted that the “only reasonable conclusion that can be reached from the available evidence is that Tong knew Ms Ma and that he had her telephone number as he knew her from when she regularly visited the Flemington warehouse”. This was not suggested to Ms Ma. The evidence does not reveal with any precision the nature, duration or extent of Tong’s relationship with Ms Ma beyond what she said in evidence.

Ms Ma’s knowledge of and ability to contact “Eric”, Mr Xu’s employee whom she allowed to park Mr Xu’s van in the driveway of the Lidcombe house

270    Ms Ma agreed that she knew “Eric”, that she allowed him to park Mr Xu’s van in her driveway and she was able to contact him by telephone.

Ms Ma’s attendance at Paddy’s Market on 16 October 2011 wearing a “bum bag”.

271    I accept Ms Ma’s explanation for her attendance at Paddy’s Market, Flemington on 16 October 2011, namely to discuss her marital situation with Mr Xu. I also accept that she used a bum bag to have both arms free to control her autistic son. There was no evidence to contradict that explanation.

Conclusion

272    I do not conclude from the matters relied upon by the applicants, to the extent that they were established, that Ms Ma was “involved” in the business or businesses that dealt in counterfeit G-Star goods after her separation from Mr Xu, except to the extent of my specific findings above.

273    Further, I find that Ms Ma did not exercise control or assert ownership over that business or those businesses. I also do not find that, by being paid the takings from the Centro Seven Hills stall, Ms Ma took profits from a business that dealt in counterfeit G-Star profits in any relevant sense. The correct characterisation of these transactions is that Ms Ma received money from Mr Xu, which were the profits of his business (or a business with which he was associated), in repayment of a debt he accepted that he owed to Ms Ma.

case based on joint tortfeasorship

274    In the applicants’ written submissions, it was argued, separately to the case that Ms Ma was liable as a result of her “involvement” in the business which dealt with counterfeit G-Star products, that Ms Ma was a joint tortfeasor with Bais Bros, Apparel 23, Mr Xu and employees or agents of the family business in their respective infringements.

275    The applicants did not identify particular tortious acts said to be joint torts but referred to the default judgments obtained against Bais Bros, Apparel 23 and Mr Xu and the declarations made to the effect that each of them had:

1.    infringed the G-Star trade marks;

2.    infringed or authorised the infringement of the copyright logos;

3.    committed the tort of passing off;

4.    prior to 1 January 2011, contravened sections 42 and 44 of the Fair Trading Act and sections 52 and 53 of the Trade Practices Act; and

5.    post 1 January 2011, contravened sections 18 and 29 of the Australian Consumer Law NSW.

276    The applicants also referred to admissions by Ms Ma that:

1.    from 12 July 2005 until 8 September 2011 she was a director and shareholder of Bais Bros;

2.    since 28 June 2010, she has been a director and shareholder of Apparel 23 and that she has been in absolute control of its conduct, has been directing or procuring its conduct, has been personally involved in its conduct, has been acting with Apparel 23 towards a common goal and has been authorising Apparel 23's conduct;

3.    from 12 July 2005 to 6 October 2010, she was:

(a)    a director of Bais Bros;

(b)    a shareholder of Bais Bros;

(c)    directing or procuring Bais Bros’ conduct but not at all times;

(d)    personally involved in Bais Bros’ conduct but not at all times;

(e)    acting with Bais Bros towards a common goal but not at all times;

(f)    authorising Bais Bros’ conduct but not at all times;

4.    from 6 October 2010 to 8 September 2011, she was:

(a)    directing or procuring Bais Bros conduct but not at all times;

(b)    personally involved in Bais Bros conduct but not at all times;

(c)    acting with Bais Bros towards a common goal but not at all times;

(d)    authorising Bais Bros conduct but not at all times.

277    I do not propose to deal with the case put in the applicants’ written submissions based on Ms Ma’s alleged joint tortfeasorship with employees or agents of the “family business”. The relevant employees, “Eric” and “Fang”, are not parties to the proceedings. Material facts relevant to the case were not pleaded in the statement of claim and the issue is not identified in the agreed issues. Procedural fairness required the case to be identified including by reference to the particular conduct of each employee said to have been tortious and the particular facts by which Ms Ma was allegedly jointly liable for the torts: Banque Commercial SA (En Liqn) v Akhil Holdings Ltd (1990) 169 CLR 279 at 286. As far as I can tell, Ms Ma was given no opportunity to deal with this case either prior to or during the hearing. It should not have been raised in the written submissions, particularly where Ms Ma is not legally represented.

Relevant legal principles

Joint tortfeasorship between director and company

278    In Sporte Leisure Pty Ltd v Paul's International Pty Ltd (No 3) [2010] FCA 1162; (2010) 275 ALR 258, Nicholas J considered whether the sole director of a company, involved in the operation of the company on a day to day basis, was a joint tortfeasor with the company for trade mark infringement. Nicholas J said, relevantly:

[108]    The relevant legal principles which govern Mr Dwyer’s liability for trade mark infringement were recently considered by the Full Court in Keller v LED Technologies Pty Ltd (2010) 185 FCR 449 (Emmett, Besanko and Jessup JJ). The judgments of Besanko J and Jessup J in that case essay the nature and history of the competing tests concerning the liability of a company director for a tort committed by his or her company.

[109]    The first of these tests is sometimes referred to as the Performing Right Society test after Performing Right Society Ltd v Ciryl Theatrical Syndicate Ltd [1924] 1 KB 1. In that case Atkin LJ said (at 15) that “[i]f the directors themselves directed or procured the commission of the act they would be liable in whatever sense they did so, whether expressly or impliedly.” As explained by Besanko J in Keller at [272], this “…test of liability is that a director is liable as a joint tortfeasor where he or she has directed or procured the infringing acts by the company. It is the company which performs the tortious acts and a director is liable if he or she directs or procures it to do so.” ….

[110]     The second of the two tests referred to in Keller is sometimes referred to as the Mentmore test after the decision in Mentmore Manufacturing Co Ltd v National Merchandising Manufacturing Co Inc (1978) 89 DLR (3d) 195. Again, as explained by Besanko J in Keller at [273] the Mentmore test holds a director liable as a joint tortfeasor “only where he or she has engaged in the deliberate, wilful and knowing pursuit of a course of conduct that is likely to constitute infringement or which reflected an indifference to the risk of it.”

[111]    I think it is correct to say that the Performing Right Society test cannot be applied literally at least not where it is suggested that a company director acting in that capacity and in good faith has directed or procured the tortious acts of the company. A company director acting in that capacity and in good faith who directs or procures his or her company to perform an act which is subsequently held to be an infringing act will not necessarily be liable as a joint tortfeasor. Some broader consideration of the circumstances of the director’s involvement is required.

[112]    So much appears to me to have been accepted by Emmett J and Besanko J in Keller, each of whom accepted that the knowledge of a director that his or her company may be infringing another person’s rights is a relevant consideration. Emmett J said at [83]-[84]:

[83]    A company cannot act other than through a natural person. In considering whether a natural person is a joint tortfeasor with a company, it is necessary to show something more than that the company acted through that person. Where a person is acting in the capacity of a director, the person will not be liable for the act of the company unless it can be shown that, in so acting, the director was doing something more than acting as a director. The person must do something that makes him or her, in addition to the company, an invader of the victim’s rights (see O’Brien v Dawson (1942) 66 CLR 18 at 32–3). The mere fact that a company is small and that the director has control over its affairs is not, of itself, sufficient to make the director a joint tortfeasor with the company (see C Evans & Sons Ltd v Spritebrand Ltd (1985) 1 WLR 317 at 329; [1985] 2 All ER 415 at 424).

[84]    Infringement by a principal actor, of course, is an objective matter. For a director of a company to be held to be invading the rights of a victim of the company, by reason of the actions committed in the capacity of a director, there must be some mental element involved. Thus, in circumstances where a director can be shown to be making use of a corporation or company as an instrument whereby infringement is perpetrated, such that the director can be seen to be hiding behind the corporate veil, it may be thought that that director is going beyond actions performed merely in the capacity as director. If a company is merely the alter ego of a director, such that there is no real difference between the mind of the officer and the mind of the company, there may well be circumstances where it will be appropriate to conclude that the officer is invading the rights of a victim of the company.

In the passage cited by Emmett J in C Evans & Sons Ltd v Spritebrand Ltd (1985) 1 WLR 317 at 329 Slade J (with whom the rest of the Court agreed) accepted that Atkin LJ’s statement in the Performing Right Society case “cannot be regarded as a precise and unqualified statement of the principles governing a director’s personal liability for his company’s torts”.

[113]    In Keller Besanko J said at [291]:

In my opinion, in considering a director’s potential liability as a joint tortfeasor, it is necessary to consider carefully the director’s involvement in the unlawful or infringing acts. A close personal involvement in the infringing acts by the director must be shown before he or she will be held liable. The director’s knowledge will be relevant. In theory, that knowledge may range from knowledge that the relevant acts are infringing acts to knowledge of an applicant’s registered designs to knowledge of acts carried out by others.

Jessup J at [405] took a narrower view of the circumstances that would render a company director liable as a joint tortfeasor for the wrongful acts of his or her company. After undertaking an extensive review of the relevant authorities and the practical and policy considerations relevant to that issue, his Honour came down in favour of a test which, adopting language used by Le Dain J in Mentmore, requires that the director have a degree of personal involvement by which he or she “makes the tort his or her own”. In that context Jessup J drew what his Honour referred to as a crucial distinction between the acts performed by a person in his or her role as a director and acts done in a “non-company capacity”. His Honour then concluded at [407] that the question of a director’s liability for the wrongful acts of his or her company depended on:

… whether there was a dimension to his or her role which was separate from the good faith discharge of his or her duties in the service of the company. If so, there will be a basis, in accordance with general principles, for making the individual liable because he or she was involved in a joint, wrongful, enterprise with the company.

[114]    Thus, the personal involvement of a director acting in a “non-company capacity” is relevant to the question of whether or not the director is liable as a joint tortfeasor. It was an important factor in the case of the company director sued in Allen Manufacturing Co Pty Ltd v McCallum & Co Pty Ltd (2001) 53 IPR 400. In that case the director was held liable as a joint tortfeasor because he had, amongst other things, applied for registration in his own name of a design which was the commercial embodiment of a product made by the respondent under a licence ultimately derived from him which embodiment was held to have infringed the respondent’s registered designs.

[115]    However, I do not think that personal involvement of that character is a prerequisite to holding a director liable as a joint tortfeasor. Knowledge of a director that his or her company is invading another person’s legal rights is something which may in a particular case be no less significant than the personal involvement of a director of the kind identified in Allen Manufacturing. In [Cooper] the managing director of the company which hosted Mr Cooper’s website was jointly liable with his company for copyright infringement in the absence of any suggestion that he had acted in any “non-company capacity”: see, in particular, Kenny J (with whom French J agreed) at [163]. Kenny J referred to Finkelstein J’s judgment in Root Quality Pty Ltd v Root Control Technologies Pty Ltd (2000) 177 ALR 231 and said she was inclined to agree with his Honour’s approach. In that case, in a passage also cited by Besanko J in Keller, Finkelstein J said (at [146]):

… The director’s conduct must be such that it can be said of him that he was so personally involved in the commission of the unlawful act that it is just that he should be rendered liable. If a director deliberately takes steps to procure the commission of an act which the director knows is unlawful and procures that act for the purpose of causing injury to a third party, then plainly it is just that liability should be imposed upon him. Lesser conduct may suffice. For example, if the director is recklessly indifferent as regards whether his company’s act was unlawful and would cause harm, that may also suffice. In the end it will depend upon the facts of each particular case. Where the boundary lies between the non-tortious conduct of a director who acts bona fide within the course of his authority and the tortious conduct of a director who acts deliberately and maliciously to cause harm, cannot be stated with any precision.

[116]     I find his Honour’s observations helpful. Though the language used by his Honour is different to that used by Emmett J and Besanko J in Keller, the approach taken by each of them seems to me to be broadly consistent.

…

[118]    I think the authorities demonstrate that something more will usually be required if a director is to be held liable as a joint tortfeasor than a simple finding that he or she, while acting in that capacity, caused or directed his or her company to perform acts which are later held to be infringing acts. The extent of the director’s personal involvement in the commission of the infringing acts is no doubt critical. But his or her state of mind is itself an important aspect of that involvement. That does not mean that knowledge that the relevant acts are infringing is a prerequisite to liability. The authorities are clear in holding that it is not. Even so, a finding that a director who held an honest belief that the acts which he or she directed or procured were not unlawful is a significant consideration telling against the director’s liability. In the present case I regard that consideration as decisive.

279    The applicants referred to a third test for determining whether a director is liable as a joint tortfeasor for acts committed by the company, being the test first suggested by Finkelstein J in an obiter remark in Root Quality Pty Ltd v Root Control Technologies Pty Ltd [2000] FCA 980; (2000) 177 ALR 231 at [146], namely whether the director’s conduct is “such that it can be said of him that he was so personally involved in the commission of the unlawful act that it is just that he should be rendered liable”.

Joint tortfeasorship between Ms Ma and Mr Xu

280    The applicants relied upon the following passage from The Koursk [1924] P 140 at 155:

The substantial question in the present case is: What is meant by “joint tortfeasors”? and one way of answering it is: “Is the cause of action against them the same?” Certain classes of persons seem clearly to be “joint tortfeasors”: The agent who commits a tort within the scope of his employment for his principal, and the principal; the servant who commits a tort in the course of his employment, and his master; two persons who agree on common action, in the course of, and to further which, one of them commits a tort. These seem clearly joint tortfeasors; there is one tort committed by one of them on behalf of, or in concert with another.

281    In Thompson v Australian Capital Television Pty Ltd (1996) 186 CLR 574 at 580-581, Brennan CJ and Dawson and Toohey JJ said:

The difference between joint tortfeasors and several tortfeasors is that the former are responsible for the same tort whereas the latter are responsible only for the same damage. As was said in The Koursk, for there to be joint tortfeasors “there must be a concurrence in the act or acts causing damage, not merely a coincidence of separate acts which by their conjoined effect cause damage”. Principal and agent may be joint tortfeasors where the agent commits a tort on behalf of the principal, as master and servant may be where the servant commits a tort in the course of employment. Persons who breach a joint duty may also be joint tortfeasors. Otherwise, to constitute joint tortfeasors two or more persons must act in concert in committing the tort. Torts of all kinds may be joint and defamation is no exception. The transmission of the television program in question was the result of concerted action on the part of Channel 9 and Channel 7 and that made them joint tortfeasors. In the same way, the journalist, printer, publisher and distributor are joint tortfeasors in respect of the ultimate publication of a libellous periodical or book. In the present case, PBL had licensed Channel 7 to transmit the program in question. The relevant licence agreement established the common design, namely, the transmission of the program by Channel 7 to the Australian Capital Territory and adjoining areas in pursuit of commercial gain. Whilst Channel 7 had the right not to broadcast any particular program or part of a program, where a program was in fact broadcast it was because Channel 9 and Channel 7 acted together - in concert - to achieve a common end. (footnotes omitted)

282    The applicants also referred to the following statement of Stuart Smith LJ in Credit Lyonnais Bank Nederland NV v Export Credit Guarantee Department [1998] 1 Lloyd's Rep 19 at 35:

a person who acts with another to commit a tort in furtherance of a common design will be liable as a joint tortfeasor. It is not enough that he merely facilitates the commission of the tort unless his assistance is given in pursuance and furtherance of the common design.

283    The applicants also cited the following passage from Louis Vuitton Malletier SA v Toea Pty Ltd (2006) 156 FCR 158 at [171] and [172]:

[171] … in order to hold the respondents liable for the stallholders’ infringements, “there must be a concurrence in the act or acts causing damage, not merely a coincidence of separate acts which by their conjoined effect cause damage”, and that in order to satisfy that test in the present case, it is necessary to show that the respondents acted in concert with each stallholder in “committing the tort”.

[172] In my view it is simply impossible to reach that conclusion. I accept Mr Rosenlund’s evidence that he wished to deter stallholders from infringing trade marks and took steps to do so. The primary infringing stallholders all understood that this was his position and therefore that of Toea. The applicant’s case hangs upon the assertion that he did not do enough, or could have done more, to deter infringement. It is said that from this, I should infer that he was really encouraging the stallholders in their illegal activities. In other words, it is submitted that although there was no duty on the respondents to take steps to prevent infringement, the failure to do so evidenced an intention to encourage infringement. That approach fails to take account of the fact that there may have been other reasons for not taking more draconian measures to prevent infringement. In any event, I am unpersuaded that either of the respondents acted in common with any of the stallholders in the actions which constituted infringement of the applicant’s copyrights. I am also satisfied that such infringements were not committed in the execution of any common purpose shared with the respondents. As I have said, the respondents’ purpose was to conduct an efficient and profitable market. The purpose of each stallholder was the successful conduct of his or her stall. There was no common purpose.

Facts relied upon to demonstrate joint tortfeasorship

Ms Ma and Bais Bros

284    Without identifying particular tortious acts said to be joint torts, the applicants sought to make out their case by reference to eight facts, not all of which appeared to concern the relationship between Ms Ma and Bais Bros:

1.    her licensing of stalls 187 – 189 at Paddy's Market Flemington;

2.    her licensing of stall 190 at Paddy's Market Flemington for the sale of “denim clothing” since 9 November 2006;

3.    the payment of AUD$475,024.23 to Chinese bank accounts in the name of Ms Ma by Mr Xu between April 2005 and January 2007. The payments were made during a period in which Ms Ma was in China and Ms Ma admits that during this period she paid “various amounts of money to different people” at the instruction of Mr Xu;

4.    her use of KVB Kunlun to make foreign exchange transfer totalling AUD$84,088.54 to Chinese bank accounts in the period between 27 August 2010 and 30 December 2010. Several of the transfers were made using large cash deposits which are not consistent with Ms Ma's disclosed sources of income. In the application form to open the account, Ms Ma described her occupation as “business”;

5.    her ownership and occupation of the Lidcombe House where approximately 867 “G-Star” branded garments including t-shirts, collared shirts, shorts, hoodies, jumpers, jackets, denim shorts, jeans and track pants were found during the execution of the search order on 26 August 2011;

6.    her joint legal and sole beneficial ownership of the Flemington Warehouse where approximately 1,385 “G-Star” branded garments including t-shirts, collared shirts, shorts, caps, jackets, jeans and tracksuits were found during the execution of the search order on 26 August 2011;

7.    her knowledge of the alarm code at the Flemington Warehouse which had been leased to Bais Bros and which Ms Ma alleges was used by Mr Xu and Bais Bros for the purpose of their clothing business; and

8.     her actual and/or constructive possession of the books and records of Bais Bros and Apparel 23 which were seized during the execution of the Search Order at the Lidcombe house and the Flemington warehouse.

285    I have previously noted that there is no evidence that Ms Ma played an active role in the operations or management of Bais Bros.

286    I do not accept that the facts relied upon, either separately or together, demonstrate that Ms Ma directed or procured any infringing act by Bais Bros. Those facts do not include any single act of direction or procurement of any infringing act by Bais Bros, nor do any of those facts amount to an implied direction or an implied procurement of any infringing act by Bais Bros. The facts, taken together, are equally consistent with a conclusion that any infringement by Bais Bros occurred at the direction of Mr Xu, or was procured by Mr Xu rather than Ms Ma. Accordingly, the Performing Rights Society test is not satisfied in respect of any relevant tort, let alone the Mentmore test or the Root Quality test.

287    Accordingly, in my opinion Ms Ma is not liable as a joint tortfeasor for any tort committed by Bais Bros.

Ms Ma and Apparel 23

288    Apart from the default judgment and the declarations, there is no evidence of the commission of any relevant tort by Apparel 23.

289    The facts relied upon by the applicants were the same as those relied upon to demonstrate joint tortfeasorship between Ms Ma and Bais Bros.

290    The applicants did not identify any particular infringing act on the part of Apparel 23 which Ms Ma was said to have directed or procured. In the absence of that identification, I am not satisfied that Ms Ma is liable as a joint tortfeasor for any tort committed by Apparel 23.

Ms Ma and Mr Xu

291    The applicants submitted that Ms Ma “actively participated in the importation and distribution of clothing and the collection of proceeds from the sale of counterfeit clothing. Her motives for doing so were to obtain the cash proceeds of the business.”

292    As to the period prior to their marital separation, the applicants submit that Ms Ma and Mr Xu were joint tortfeasors “operating a business with a common design of selling clothing, in particular large volumes of counterfeit clothing, in order to maximise revenue to support their children, acquire assets including the Lidcombe house and the Flemington warehouse, and service the mortgage of the Lidcombe house”.

293    I have previously found that the applicants did not demonstrate that Ms Ma was “involved” in any business with Mr Xu prior to their separation, except to the limited extent of my specific findings. As I do not accept that Ms Ma was operating any business prior to the marital separation, this submission fails.

294    The applicants also submit that Ms Ma acted in pursuance and furtherance of “the common design” by transferring hundreds of thousands of dollars to people in China at the request of her husband between 2005 and 2007. I do not accept this submission because the evidence is insufficient to make any connection between the transfers of money and any tort committed by Mr Xu.

295    The applicants also submit that in the period prior to July 2010, Ms Ma acted in pursuance and furtherance of “the common design” by signing the licences for stalls 187 to 189 in November 1999 and for stall 190 in November 2006. This submission fails because the relevant conduct did not form part of the commission of any tort. In particular, as to stalls 187 to 189, there is no evidence of any connection between the signing of the licence and any tort committed by Mr Xu. On any view of the evidence, there was a period of several years between the execution of the licence in November 1999 and the first evidence of a sale of counterfeit G-Star products at the stalls.

296    As to the period after July 2010, the applicants submit that Ms Ma and Mr Xu “continued to be joint tortfeasors with the common design of selling clothing including large volumes of counterfeit clothing in order to maximise revenue to service the mortgage of the Lidcombe house and repay monies which were owed by Mr Xu to Ms Ma including amounts for the support of their children, the acquisition of assets including the Lidcombe house and the Flemington warehouse and the servicing of the mortgage of the Lidcombe house.”

297    This submission appeared to be based upon the contention that Ms Ma actively participated in Mr Xu’s business prior to their separation. I do not accept that Ms Ma “actively participated” in Mr Xu’s business except to the extent that I have specifically found above. That participation did not involve the commission of any tort. None of the things identified by the applicants amount to joint participation in any tort committed by Mr Xu.

298    I have previously rejected the submission that Ms Ma was entitled to a “share” in the takings from the Centro Seven Hills stall. Equally, there is no evidence that she was entitled to or received a share in takings earned at Paddy’s Market, Flemington, except to the extent that they were received from Mr Xu in reduction of amounts he owed to Ms Ma or had agreed to pay her. Accordingly, I reject the submission that Ms Ma and Mr Xu shared the takings earned at Centro Seven Hills stall and Paddy’s Markets, Flemington.

299    The applicants submitted that Ms Ma could have done certain things to prevent Mr Xu from committing any tort, including:

    preventing Mr Xu and his employees or agents from accessing stock in the foyer and garage of the Lidcombe House;

    arranging for the removal or destruction of stock in the foyer and garage of the Lidcombe House;

    refusing to accept the takings from the sale of counterfeit G-Star products in June and July 2011;

    refusing to deliver stock to the business at Centro Seven Hills; and

    giving Mr Xu a notice to vacate the Flemington warehouse and then leasing the Flemington warehouse to another tenant who would pay the rent.

300    In my assessment of the evidence and demeanour of Mr Xu and Ms Ma, this submission is unrealistic. The evidence did not support a conclusion that Ms Ma was able to compel or persuade Mr Xu to do anything which he did not want to do. The applicants’ submission also fails to take into account broader considerations, the two most obvious of which were Ms Ma’s desire to obtain financial support from Mr Xu and her apparent wish that he should maintain a relationship with their children.

301    It is not in dispute that Ms Ma received money from a business which included the sale of counterfeit G-Star products and that she had a personal interest in continuing to receive that money. I also accept that Ms Ma may well have chosen not to take steps of the kind set out above, because she decided that this was in her financial interests and those of her children.

302    Even if it were true, there is no authority to support a conclusion that a simple failure to prevent Mr Xu’s torts would be sufficient to make her a joint tortfeasor in those torts.

Alleged authorisation of copyright infringement by Mr Xu, Bais Bros and Apparel 23

303    I am not satisfied that Ms Ma authorised any copyright infringement.

304    As to Apparel 23, apart from the declaration made by the FCC, there is no evidence of any copyright infringement by that company. The allegation of authorisation of copyright infringement is serious and, in my view, requires, in this case, at least identification (and evidence) of the particular acts of infringement in order to determine, as a matter of fact, what was authorised.

305    I do not accept that Ms Ma authorised any copyright infringement by Mr Xu. The nature of the relationship between them was one in which Mr Xu was dominant and Ms Ma subservient. As a matter of practical reality, Ms Ma had very little or no power to control or even influence Mr Xu.

306    It follows that I do not accept that Ms Ma authorised any copyright infringement by Bais Bros because, in my view, Mr Xu was the directing mind of the company and Ms Ma did not take any active role in its affairs, even though she was a director for some years.

307    The facts in this case are readily distinguishable from those in Australasian Performing Right Association Ltd v Jain (1990) 26 FCR 53 (“Jain”). As the Court observed in that case, matters of degree are involved in determining the question of authorisation. In Jain, the respondent was found to have it within his power to control whether or not the offending conduct would occur. Ms Ma was not in that position.

308    Similarly, in Cooper, an issue was whether a person “authorises” a breach of copyright by owning and operating a website which he chose to create and maintain in a manner which did not enable him to prevent certain breaches. It was significant that he had a capacity for control, although he chose not to exercise it. Again, Ms Ma did not have a relevant capacity for controlling infringements by Mr Xu or Bais Bros.

Alleged trade mark and copyright infringements

Agreed issue 9

309    It follows from my findings about that I am not satisfied that Ms Ma has, without the knowledge or authority or licence of the applicants or any of them, imported, advertised, marketed, promoted, distributed, offered for sale and sold clothing and clothing accessories in Australia which feature marks that infringe the G-Star trade marks or the copyright logos.

Agreed issue 10

310    It also follows from my findings above that I am not satisfied that Ms Ma infringed the G-Star trade marks by importing, selling or by way of trade offering or exposing for sale in Australia products which feature the G-Star trade marks or marks which are substantially identical with or deceptively similar to the G-Star trade marks in connection with the goods in respect of which the G-Star trade marks are registered, in breach of s 120 of the Copyright Act.

Agreed issue 12

311    Further, as a result of my findings above, I am not satisfied that Ms Ma has infringed G-Star Raw’s copyright in the copyright logos by:

1.    Reproducing or substantially reproducing the copyright logos (or any of them) in breach of s 36 of the Copyright Act;

2.    Authorising the reproduction or substantial reproduction of the copyright logos (or any of them) in breach of s 36 of the Copyright Act;

3.    Importing, selling or by way of trade offering or exposing for sale products which featured the copyright logos (or any of them) in breach of s 37 and or 38 of the Copyright Act.

alleged false misrepresentations

Agreed issue 17

312    It follows from my findings above that I am not satisfied that Ms Ma represented at any time that counterfeit G-Star products imported and sold or offered for sale by Mr Xu or Bais Bros, or any counterfeit G-Star products:

1.    are imported, manufactured, advertised, promoted, offered for sale and sold with the sponsorship or approval of the applicants or any of them;

2.    are genuine G-Star products;

3.    emanate from the same trade source as genuine G-Star products; or

4.    are made by the applicants or any of them.

313    Further, I am not satisfied that Ms Ma represented at any time that the respondents, or any of them are licensed, authorised, sponsored, approved or endorsed by the applicants or any of them.

Agreed issue 18

314    It follows from my findings above that, if representations of the kind identified in agreed issue 17 were made, then I would be satisfied that those representations were made in trade or commerce in Australia.

Agreed issue 19

315    It also follows from my findings above that, if representations of the kind identified in agreed issue 17 were made, then I would be satisfied that those representations were false.

316    It follows from my findings above that I am satisfied that from time to time, by offering counterfeit G-Star products for sale, Mr Xu and Bais Bros made representations that counterfeit G-Star products imported by them were:

1.    imported, manufactured, offered for sale and sold with the sponsorship or approval of the applicants or any of them;

2.    genuine G-Star products;

3.    emanated from the same trade source as genuine G-Star products; and

4.    made by the applicants or any of them.

317    Further, I am satisfied that, from time to time, by offering counterfeit G-Star products for sale, Mr Xu and Bais Bros respectively represented that Mr Xu or Bais Bros was licensed, authorised, sponsored, approved or endorsed by the applicants or any of them.

318    I am satisfied that each of those representations was false.

319    I am not satisfied that Apparel 23 made any of the representations set out in agreed issue 17.

Agreed issue 20

320    As a result of my findings on agreed issue 17, I am not satisfied that either:

1.    Before 1 January 2011, Ms Ma engaged in misleading or deceptive conduct in breach of ss 44 and 42 of the Fair Trading Act; or

2.    After 1 January 2011, Ms Ma engaged in misleading and deceptive conduct in breach of ss 18 and 29 of the Australian Consumer Law NSW.

Liability by operation of s 75B of the Trade Practices Act

321    This aspect of the applicants’ case relates only to the period before 1 January 2011 and concerns only the conduct of Bais Bros and Apparel 23. As I have not found that Apparel 23 contravened the Trade Practices Act, it is necessary to consider only the operation of s 75B in connection with any relevant contravention by Bais Bros.

322    By s 82 of the Trade Practices Act, a person who suffers loss or damage by conduct done in contravention of s 52 or 53 may recover the amount of the loss or damage by action against any person involved in the contravention.

323    By s 75B(1)(c), a reference to a person involved in a contravention in s 82 is to be read as a reference to a person who has been in any way, directly or indirectly, knowingly concerned in, or party to, the contravention.

324    In their written submissions, the applicants acknowledged that, in order to establish accessorial liability under s 75B(1)(c), it was necessary to show that Ms Ma had knowledge of the essential elements of the contravention. Such knowledge may be established by a finding of wilful blindness, but not by mere recklessness or negligence: Keller v LED Technologies Pty Ltd (2010) 185 FCR 449 at [335] (Besanko J, Jessup J agreeing).

325    In Yorke v Lucas (1985) 158 CLR 661 at 670, the Court stated:

In our view, the proper construction of par (c) requires a party to a contravention to be an intentional participant, the necessary intent being based upon knowledge of the essential elements of the contravention.

326    To establish accessorial liability, the applicants relied upon the facts said to have demonstrated joint tortfeasorship and authorisation of copyright infringement. They submitted:

254. The applicants submit that Ms Ma was on notice of G-Star’s rights from as early as March 2010. At the very least, Ms Ma was familiar with the G-Star brand from November 2010 and knew that G-Star had issued a warning letter in relation to the markets by February 2011.

255. From this time, Ms Ma knew, or was wilfully blind to the infringing conduct occurring at Centro Seven Hills and Paddy's Market. From mid 2010, Ms Ma distributed stock to and from Centro Seven Hills, collected takings from Centro Seven Hills, signed a lease for Centro Seven Hills and took G-Star garments from Centro Seven Hills. Nevertheless, despite collecting takings from Centro Seven Hills on 32 separate occasions between May and July 2011, Ms Ma sought to turn a blind eye while taking the proceeds of sales from counterfeit “G-Star” garments. This wilful blindness was plain during Ms Ma’s cross examination. When confronted with the fact that she had taken the proceeds from the sale of a counterfeit “G-Star jacket”, Ms Ma sought to distance herself from the sale as follows:

MR HEEREY: Thank you. Page 2276, this document is dated 19 July 2011.

THE WITNESS: Yes.

MR HEEREY: Do you accept that?

THE WITNESS: Yes.

MR HEEREY: Yes. And you wrote at the bottom “received $445” and then your signature?

THE WITNESS: Yes.

MR HEEREY: And can you see halfway up the page there’s a record of a sale of a G-Star jacket?

THE INTERPRETER: Yes.

MR HEEREY: Can you see that? And the takings - - -

HER HONOUR: Ms Ma, can you read that yourself in English?

THE INTERPRETER: I didn’t ..... when I received the money but I know.

HER HONOUR: Yes. Okay. But are you saying that if you had looked at it when you received the money you would have been able to read that it said “G-Star jacket” in English?

THE INTERPRETER: I didn’t pay attention.

HER HONOUR: I’m asking a different question. If you had paid attention, could you have read the words “G-Star jacket” in English and understood their meaning?

THE INTERPRETER: I can read the name.

327    I have previously found that Ms Ma played no role in the management or operations of Bais Bros at least from August 2010. It follows that, from August 2010, Ms Ma could not be said to have been a participant in any contravention by Bais Bros. Accordingly, the question of whether she was “knowingly” concerned in any contravention does not arise for the period from August 2010 to January 2011.

328    As I have previously found, I am not satisfied that Ms Ma received the March 2010 letter relied upon to suggest that she was on notice of G-Star’s rights from around that time. I accept that she was aware of the G-Star brand from November 2010. Ms Ma was also aware of the warning letter issued in February 2011. However, by that stage, to the extent that she had any involvement in the conduct of Bais Bros (which is far from clear), any such involvement had ceased.

329    Accordingly, I am not satisfied that Ms Ma was ever knowingly concerned in any contravention by Bais Bros of the Trade Practices Act.

Agreed issue 22

330    As a result of my findings above, I am not satisfied that Ms Ma has committed the tort of passing off by passing off:

1.    her business as having the sponsorship, approval or a connection or affiliation in the course of trade with the applicants or any of them and the G-Star products; or

2.    counterfeit G-Star products imported and sold or offered for sale by Mr Xu or Bais Bros, or any counterfeit G-Star products as and for:

(a)    genuine G-Star products; or

(b)    having the sponsorship, approval or a connection or affiliation in the course of trade with the applicants or any of them and the G-Star products.

Conclusion

331    The applicants have failed to demonstrate liability on the part of Ms Ma for the alleged breaches.

332    Accordingly, the proceedings must be dismissed.

Associate:

Dated:    11 February 2015