FEDERAL COURT OF AUSTRALIA
Allam v Aristocrat Technologies Australia Pty Ltd [2012] FCAFC 34
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The approach of the Aristocrat parties to establishing liability |
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Blank compliance plates: Botany, Georges Hall and Bankstown premises |
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IN THE FEDERAL COURT OF AUSTRALIA |
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DATE OF ORDER: |
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WHERE MADE: |
THE COURT ORDERS THAT:
1. Within seven days the parties are to file agreed draft orders (including as to costs) giving effect to these reasons or, if agreement cannot be reached, file and serve proposed orders and written submissions in support thereof.
Note: Entry of orders is dealt with in Rule 39.32 of the Federal Court Rules 2011.
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IN THE FEDERAL COURT OF AUSTRALIA NEW SOUTH WALES DISTRICT REGISTRY |
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GENERAL DIVISION |
NSD 293 of 2010 |
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ON APPEAL FROM THE FEDERAL COURT OF AUSTRALIA |
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BETWEEN: |
GLOBAL GAMING SUPPLIES PTY LTD (ACN 008 548589) First Appellant ANTHONY EDWARD ANDREWS Second Appellant IMPACT GAMING PTY LTD (ACN 109 299 461) Third Appellant FRANCIS GEORGE BERNARD CRAGEN Fourth Appellant |
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AND: |
ARISTOCRAT TECHNOLOGIES AUSTRALIA PTY LTD (ACN 001 660 715) First Respondent ARISTOCRAT INTERNATIONAL PTY LIMITED (ACN 000 148 158) Second Respondent ARISTOCRAT TECHNOLOGIES INC Third Respondent |
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JUDGES: |
BENNETT, MIDDLETON and YATES JJ |
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DATE OF ORDER: |
21 MARCH 2012 |
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WHERE MADE: |
SYDNEY |
THE COURT ORDERS THAT:
1. Within seven days the parties are to file agreed draft orders (including as to costs) giving effect to these reasons or, if agreement cannot be reached, file and serve proposed orders and written submissions in support thereof.
Note: Entry of orders is dealt with in Rule 39.32 of the Federal Court Rules 2011.
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NEW SOUTH WALES DISTRICT REGISTRY |
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GENERAL DIVISION |
NSD 292 of 2010 |
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ON APPEAL FROM THE FEDERAL COURT OF AUSTRALIA |
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BETWEEN: |
RIAD ALLAM Appellant | |
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AND: |
ARISTOCRAT TECHNOLOGIES AUSTRALIA PTY LTD (ACN 001 660 715) First Respondent ARISTOCRAT INTERNATIONAL PTY LIMITED (ACN 000 148 158) Second Respondent ARISTOCRAT TECHNOLOGIES INC Third Respondent GLOBAL GAMING SUPPLIES PTY LTD (ACN 008 548 589) Fourth Respondent ANTHONY EDWARD ANDREWS Fifth Respondent IMPACT GAMING PTY LTD (ACN 109 299 461) Sixth Respondent FRANCIS GEORGE BERNARD CRAGEN Seventh Respondent | |
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IN THE FEDERAL COURT OF AUSTRALIA |
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NEW SOUTH WALES DISTRICT REGISTRY |
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GENERAL DIVISION |
NSD 293 of 2010 | |
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ON APPEAL FROM THE FEDERAL COURT OF AUSTRALIA |
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BETWEEN: |
GLOBAL GAMING SUPPLIES PTY LTD (ACN 008 548 589) First Appellant ANTHONY EDWARD ANDREWS Second Appellant IMPACT GAMING PTY LTD (ACN 109 299 461) Third Appellant FRANCIS GEORGE BERNARD CRAGEN Fourth Appellant |
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AND: |
ARISTOCRAT TECHNOLOGIES AUSTRALIA PTY LTD (ACN 001 660 715) First Respondent ARISTOCRAT INTERNATIONAL PTY LIMITED (ACN 000 148 158) Second Respondent ARISTOCRAT TECHNOLOGIES INC Third Respondent |
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JUDGES: |
BENNETT, MIDDLETON AND YATES JJ |
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DATE: |
21 MARCH 2012 |
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PLACE: |
SYDNEY |
REASONS FOR JUDGMENT
1 There are two appeals and two corresponding cross-appeals before the Court.
2 The appeals arise out of two separate proceedings that were consolidated on 22 June 2007. The consolidated proceeding concerned claims of copyright infringement, trade mark infringement and contraventions of the Trade Practices Act 1974 (Cth) (the Trade Practices Act) in relation to the supply of refurbished gaming machines in Latin America (principally Peru) pursuant to a joint venture arrangement.
3 The consolidated proceeding was conducted on pleadings supplemented by detailed particulars, including an annexure setting out the details of, and participants in, various transactions relied upon as involving infringing conduct.
4 The primary judge found that the appellants had infringed the copyright of certain of the respondents and assessed damages accordingly. The primary judge declined to grant declaratory or injunctive relief. His Honour also found it unnecessary to decide the questions of trade mark infringement and contravention of the Trade Practices Act on the basis that if compensatory damages were awarded under s 115(2) of the Copyright Act 1968 (Cth) (the Copyright Act), no further damages for trade mark infringement or under the Trade Practices Act would be appropriate: [45] and [47]. His Honour’s refusal to grant declaratory or injunctive relief, and the absence of findings in relation to trade mark infringement, are matters raised in the cross-appeals.
5 There are effectively two groups of appellants. The first group comprises Global Gaming Supplies Pty Ltd (Global) and its principal Anthony Edward Andrews (collectively, the Global parties) and Impact Gaming Pty Ltd (Impact) and its principal, Francis George Bernard Cragen (collectively, the Impact parties). The primary judge found, and there is no dispute on appeal, that the Global parties and the Impact parties operated as a joint venture from 1 October 2004 for the supply of refurbished gaming machines to overseas markets. These appellants (the Global/Impact parties) bring one appeal (the Global/Impact appeal): NSD 293 of 2010.
6 The other appellant is Riad Allam, who brings a separate appeal (the Allam appeal): NSD 292 of 2010. Mr Allam is the principal of Tonita Enterprises Pty Ltd (Tonita). Tonita is not an appellant. However, for ease of exposition, it is convenient to group it with Mr Allam (the Allam parties). In the primary proceeding, claims of copyright infringement, trade mark infringement and contravention of the Trade Practices Act were also made against Tonita. However, the primary judge found that all proven transactions relating to infringing conduct occurred before Tonita was incorporated on 14 July 2006. This finding is also challenged in the cross-appeals. The primary judge found that the Allam parties, or Mr Allam personally, carried out significant technical work and business functions for the joint venture. Indeed, Mr Allam was referred to by Mr Andrews as the joint venturers’ “technical guy”. The Allam parties are respondents in the Global/Impact appeal.
7 The other respondents in each appeal (the Aristocrat parties) are companies within the Aristocrat group of companies (Aristocrat), of which Aristocrat Leisure Limited (AL) is the holding company. Aristocrat is engaged in the business of supplying gaming technologies and services to the international gaming industry. Aristocrat’s activities include the manufacture and sale of electronic gaming machines and game software.
8 Aristocrat Technologies Australia Pty Limited (ATA) is the main operating subsidiary within Aristocrat. It designs and manufactures gaming machines, gaming machine components and conversion kits for Aristocrat gaming machines. It also sells Aristocrat gaming machines and conversion kits in Australia.
9 Aristocrat International Pty Limited (AI) and Aristocrat Technologies Inc (ATI) export Aristocrat’s products and associated intellectual property rights to places outside Australia. AI is a wholly owned subsidiary of AL and sells products to Aristocrat companies in various markets for on-sale to customers. It is also responsible for the export, distribution and sale of Aristocrat’s products to third parties outside Australia.
10 ATI is a wholly-owned subsidiary of AI, and is based in the state of Nevada in the United States of America. It is engaged in the manufacture and supply of Aristocrat gaming machines in North and South America.
11 There are various organisational arrangements between the Aristocrat companies. Although ATA is the designated holder of intellectual property, it has entered into licensing arrangements with other companies in the group. One arrangement of significance in the present appeal is embodied in a written contract styled “Head Distribution & Intellectual Property Licence Agreement” between ATA and AI. This written contract is expressed to give AI an exclusive licence to intellectual property in respect of products worldwide other than Australia, but including products made for export outside Australia. The contract was executed on 19 July 2006 although the licenses were expressed to commence from 1 January 2005. The present significance of this lies in the fact that the contract was entered into after the commencement of proceedings and after the proven infringements. The primary judge awarded damages in favour of all of the Aristocrat parties. The appellants in the Global/Impact appeal contend that his Honour erred in so doing and that any award of damages should only be in favour of ATA as copyright owner.
12 Before continuing to describe the activities of the parties, it is convenient to say something in a general way about the gaming machines supplied by the joint venture and the general nature of the intellectual property claimed by the Aristocrat parties as being infringed by those machines.
13 A gaming machine consists of computers which play a game of chance based on odds of winning according to computer programs. The games are viewed on a video screen which simulates the spinning reels of mechanical gaming machines. A gaming machine includes the following component parts: a cabinet; artwork panels which are fixed to the cabinet (identifying the particular game housed in the cabinet); pay scale artwork (listing the pay scale for the particular game housed in the cabinet); a video monitor; game software stored on sets of removable memory chips called Erasable Programmable Read Only Memory chips (EPROMs); system software (ie software which is more generally required for a gaming machine to function without being specific to a particular game); a logic board (electronic circuit board) into which EPROMs are plugged; a logic cage (ie a metal box with hinged door that sits within the cabinet and securely holds gaming systems such as the logic board and EPROMs); a currency validator, and mechanical meters.
14 Aristocrat gaming machines use multiple EPROMs. A complete set of EPROMs is required before a gaming machine can be used. The game software is “burned” onto the EPROMs using a personal computer, EPROM burning software and an EPROM burning device connected to the computer. One proprietary portable EPROM burning device is the “Dataman”. This device allows files contained on EPROMs to be easily uploaded to a computer hard drive and then burned onto blank EPROMs. It enables the software contained on an EPROM to be copied and stored on a computer.
15 The artwork includes the visual themes, words, symbols and images which are physically printed and appear on the bottom (belly panel) and top (top panel) sections of a gaming machine.
16 It is possible to change the game on a gaming machine by using, for example, conversion kits, which comprise game software on EPROMs and artwork panels that correspond to the game on the EPROMs.
17 Aristocrat gaming machines come in different versions. In the present appeals it is the “Mark V” and “Mark VI” versions that are of relevance.
Aristocrat’s claimed copyright
18 In the present matter the Aristocrat parties claimed copyright in a number of works. Relevantly for present purposes, copyright was claimed in game software (comprising computer programs), artwork and compliance plates.
19 The Aristocrat compliance plates are manufactured in accordance with a written design specification which sets out precise layout and design information. The compliance plates are manufactured from aluminium with a matt-anodised finish. In the anodising process, the surface of the compliance plate is converted so as to form a coating to which dye is added. Each Aristocrat compliance plate has information engraved on it, including a serial number.
20 In the primary proceeding, copyright was also claimed in Aristocrat EPROM labels which were produced with every Aristocrat EPROM. An EPROM label records a unique program number associated with the software program on the EPROM; the name of the relevant Aristocrat game; the position in the motherboard where the EPROM is to be inserted; the memory capacity of the EPROM; a unique number called a combination number (taken from a basic technical design document which describes the structure and mathematics of a particular game, called a combination sheet); the number of the EPROM in the set; and various copyright information. However, at the time of making final submissions before the primary judge, the Aristocrat parties did not press a claim of copyright infringement with respect to the Aristocrat EPROM labels.
21 In the primary proceeding, the appellants did not dispute the subsistence of copyright in the Aristocrat game software, artwork or compliance plates, nor, it would seem, in the Aristocrat EPROM labels, or that copyright in those works was owned by Aristocrat.
The joint venture and its activities
22 Markets exist for gaming machines and conversion kits throughout the world, including in Australia, the Asia-Pacific region, Europe, North America and South America. The markets in Latin America assumed importance in the primary proceeding.
23 Mr Andrews commenced carrying on the business of selling second-hand gaming machines to overseas markets in late 1999. Mr Andrews is the sole director, secretary and shareholder of Global and conducted these business activities using Global (under its then corporate name) as a corporate vehicle. Global’s main office is located at Florey in the Australian Capital Territory (the Florey premises). For a time it also used an office at Mascot in New South Wales (the Mascot premises). In the period 2000 to 2005, Global’s general business model consisted of trading in second-hand gaming machines; advertising via a website located in Australia to attract overseas customers; dealing with prospective overseas customers contacting Global in Australia; sourcing gaming machines from suppliers in Australia; and shipping gaming machines from Australia to the overseas customers.
24 Mr Cragen commenced supplying second-hand gaming machines to overseas customers in 1997. He did this initially through a company (Bondtren Pty Limited) and then Impact, which was incorporated on 26 May 2004. Mr Cragen is the sole director, secretary and shareholder of Impact, which carries on business from an office and warehouse at Botany in New South Wales (the Botany premises). Prior to dealing in the second-hand gaming machines, Mr Cragen had worked for Aristocrat from 1972 to 1983. He had also held the position of General Manager (as well as senior sales positions) with a gaming company called IGT Australia Pty Limited, a competitor of Aristocrat.
25 The Aristocrat parties alleged that, from about April 2004, the Global parties and the Impact parties operated their gaming machine businesses on the basis of a joint venture arrangement. The Global parties and the Impact parties disputed this, saying that no joint venture was in existence until about one year later, in April 2005. The primary judge found that the joint venture between the Global parties and the Impact parties was in existence as at 1 October 2004. His Honour made this finding on the basis of a chain of emails to which Mr Andrews and Mr Cragen were parties. That chain of emails related to the provision of compliance plates to be used for a large number of refurbished Aristocrat gaming machines that were to be supplied by the joint venture to a Mr Mendelson for sale in the Russian market.
26 Neither Tonita nor Mr Allam were parties to the joint venture. Nevertheless, they played an important role in the joint venture’s activities.
27 Mr Allam is a gaming machine technician who has been involved in that activity for many years. In 2002 he sub-contracted his services to a business called Goldstar Gaming as a field technician. It was in that capacity that he commenced an association with the Global parties and the Impact parties in about January 2003. By January 2004 he was performing significantly more work for the Impact parties but thereafter provided services to the joint venture. As already mentioned, by 2005 Mr Allam was being referred to by Mr Andrews as the joint venturers’ “technical guy”. He was also referred to as the joint venture’s “main guy”.
28 Mr Allam is a director, secretary and shareholder of Tonita, which was incorporated on 14 July 2006. From that date, Mr Allam provided his services to the joint venture through Tonita and conducted his activities under the business name Tonita Enterprises.
29 Tonita, and before its incorporation Mr Allam, carried on business at the Botany premises (that is, Impact’s warehouse) and at Mr Allam’s residence at Georges Hall, New South Wales (the Georges Hall premises). Tonita also carried on business at a warehouse in Bankstown (the Bankstown premises) which Mr Allam leased between May 2006 and February 2008 to store materials obtained from Behong Import & Export (Australia) Pty Ltd (Behong), a scrap merchant located in Sydney.
30 Behong provided scrap metal containment, removal, disposal and purchasing services to Aristocrat with respect to its business premises in Rosebery, with effect from 1 July 2005. The Allam parties commenced their purchase of used gaming machines and gaming machine parts from Behong in around February 2006.
31 In the period from about February to December 2006 a Mr Channa was employed by either Mr Allam or Tonita as an assistant at the Botany premises.
32 Mr Allam undertook the refurbishment work on behalf of the joint venture at the Botany premises. He sourced spare parts and acted as a contact point for the materials received into those premises. Invoices were issued by Tonita to Impact, which listed items including EPROM model numbers and conversion kits.
33 The primary judge found that the joint venture’s operation included the following features: Impact provided the capital to buy gaming machines; Global provided back-office services, including making all the freight arrangements; Global managed the refurbishment of gaming machines by Tonita; Impact and Global both sourced gaming machines and sales (although the arrangements developed so that Impact did most of the sourcing); and Impact held any licences required for the joint venture.
34 The activities of the joint venture, including obtaining supplies for second-hand gaming machines and storing them, and refurbishing gaming machines and packing them for delivery, took place at the Botany premises.
35 Global had no staff permanently located at the Botany premises, although Mr Andrews went to those premises from time-to-time to ensure that the joint venture’s activities were being conducted properly. Mr Cragen visited the Botany premises on a daily basis. Mr Andrews kept records relating to the joint venture at the Florey premises. In about April 2005 the manner in which the joint venture was conducted changed in that, at Mr Cragen’s behest, all receipts were banked into Impact’s account only.
The regulation of gaming machines
36 The regulation of gaming machines differs in each country in Latin America. Certain Latin American countries, such as Peru, require games to be specifically approved and adapted to local conditions (known as “homologated machines”). The primary judge found that this may require Spanish language games and artwork, but also noted evidence given by Mr Coster (Aristocrat’s Special Projects Manager) that local regulations in Peru required games and artwork on gaming machines to be in Spanish.
37 On appeal there was a dispute between the parties as to the purport of the primary judge’s findings in this regard. The appellants contended that the primary judge’s findings should be seen as being to the effect that Spanish language games and artwork were a requirement of the regulatory system in Peru. On the other hand the Aristocrat parties contended that the primary judge was correct to say that Spanish language games and artwork may be required because, over the course of the transactions the subject of their claim, the regulatory regime in Peru was in a period of transition. It was not in dispute, however, that the joint venture did not supply gaming machines in Latin America with artwork other than English artwork and that it had not been suggested that the joint venture had supplied Spanish artwork.
38 The primary judge also found that it was a requirement of certain Latin American countries, such as Peru, that it be demonstrated that a gaming machine has a unique serial number and has been genuinely manufactured. This finding was not challenged on appeal.
39 The primary judge found that, in Peru, gaming machine sales consist predominantly of refurbished machines due to a combination of high import duties and relatively low average daily revenue generated by such machines. The primary judge found that, in the past six years, the gaming industry had been largely unregulated and that it had only recently become a more strongly regulated industry.
The approach of the Aristocrat parties to establishing liability
40 The Aristocrat parties sought to make good their claims primarily by reference to circumstantial evidence based on physical evidence seized during the execution of Anton Piller orders. The Aristocrat parties then sought to relate that evidence, for the purposes of damages, to 54 transactions in which some or all of the appellants were said to have exported counterfeit gaming machines to Latin America.
41 The 54 transactions involved dealings with 618 gaming machines. As noted, detailed particulars of the transactions were provided. These particulars identified which of the Global/Impact parties and Allam parties were alleged to be participants in those transactions.
42 However, with the exception of two transactions (which the primary judge found to be non-infringing transactions in any event), no gaming machines were inspected by the Aristocrat parties. The result of this was that the Aristocrat parties did not identify which components of the gaming machines in the impugned transactions were alleged to infringe the copyright that was claimed.
43 At the outset the primary judge identified the principal question to be whether he could infer copyright infringement in the absence of direct evidence of the gaming machines which were said by the Aristocrat parties to be “counterfeited”. At [34] of the primary judge’s reasons (Reasons), the primary judge said:
At the heart of the case is the question of whether the mass of material tendered by the Aristocrat companies is sufficient to satisfy their evidentiary onus and whether the denials of Mr Andrews, Mr Cragen and Mr Allam ought to be accepted.
44 This fundamental issue was the focus of each appeal.
The primary judge’s findings of fact
45 The primary judge’s approach to determining the question of copyright infringement can be summarised as follows.
46 First, the primary judge noted that inferences of infringement were said by the Aristocrat parties to flow from a vast quantity of evidentiary material which included: materials seized on the execution of the Anton Piller orders; the evidence of Mr Channa (who was employed by either Tonita or Mr Allam as an assistant at the Botany premises); business records generated by the appellants in the course of conducting their business operations, in particular email correspondence relating to the supply of gaming machines to the Latin American market; and a very large volume of invoices generated by the Global parties and the Impact parties, which were analysed by the Aristocrat parties in a computerised data-matching exercise which was said to demonstrate that the serial numbers of certain gaming machines shown on the invoices were not genuine.
47 Secondly, the primary judge analysed this evidence and made specific findings in relation to it.
48 In relation to the seized materials, the evidence of what was seized at the Florey, Mascot and Botany premises was admitted against the Global parties and the Impact parties and then, subsequently, admitted provisionally against all appellants. The primary judge took the same course in relation to material seized at the premises of the Allam parties (ie the Bankstown premises and the Georges Hall premises): the evidence was admitted initially against the Allam parties but then, subsequently, admitted provisionally against all the appellants.
49 The seized material included gaming machine components and software. His Honour found these to be indicative of copying of Aristocrat copyright materials. Of particular importance were EPROM labels, game software, artwork and compliance plates. The primary judge dealt with the seized materials as follows:
artwork at Florey and Mascot premises;
gamesheets at the Florey and Mascot premises;
EPROMs and EPROM labels at the Florey and Mascot premises;
game software at the Florey and Mascot premises;
EPROMs at the Botany premises;
EPROM label files at the Botany premises;
compliance plates at the Botany premises;
compliance plates at the Bankstown premises;
EPROMs at the Bankstown premises;
compliance plates at the Botany and the Bankstown premises;
EPROM labels at the Georges Hall premises;
blank EPROMs at the Georges Hall premises;
compliance plates at the Georges Hall premises;
Aristocrat game software at the Georges Hall premises;
computers at the Georges Hall premises;
a loose hard disk drive at the Georges Hall premises (the loose HDD);
Desktop 1 at the Georges Hall premises; and
Desktop 2 at the Georges Hall premises.
50 Another important piece of physical evidence was a CD-ROM which became Exhibit CCC-14. It will be necessary to say something further about Exhibit CCC-14 and its relationship to other evidence that was tendered relating to the seized materials. This evidence was the subject of criticism by the Allam parties both at the primary hearing and on appeal.
51 It is convenient at this juncture to identify a number of the key elements of the physical evidence and the primary judge’s findings in relation to that evidence.
52 As noted, in the period from about February to December 2006, Mr Channa was employed by Tonita or Mr Allam as an assistant at the Botany premises. He gave evidence of his observations at those premises. The primary judge noted that, if accepted, Mr Channa’s evidence was direct evidence of copyright infringement by the Allam parties. Mr Channa’s observations included the following:
He saw “chips” being fitted into a device which Mr Allam told him was used to “load and unload” programs. He saw Mr Allam using the device in this way approximately five times a month. He also saw Mr Allam placing stickers on the “chips”. Mr Allam would give Mr Channa stickers with numbers on them and Mr Channa would match the numbers on the stickers to a number in a book. The primary judge found the effect of this evidence to be that Mr Channa saw Mr Allam burning or copying EPROMs using an EPROM burning device, and placing EPROM labels on EPROMs using numbers that Mr Channa matched with numbers in a book apparently kept by Mr Allam.
Mr Allam told Mr Channa to hide compliance plates which were “illegal” or “prohibited”. Mr Channa said that he hid the plates in various locations, including in the ceiling and in drawers. He also gave evidence that he buried them in a plastic bag in the backyard of the workshop, although he later denied doing so. Some of the plates had printing on them, others were blank. He observed Mr Allam or one of Mr Allam’s other employees printing on them.
He observed a man give a CD-ROM (Exhibit CCC-14) to Mr Allam which Mr Allam subsequently gave to Mr Channa. It had the word “Riad” written in handwriting on it (that is, Mr Allam’s given name). Mr Channa denied that he had written Mr Allam’s name on the CD-ROM.
53 The primary judge found that this evidence was consistent with other evidence in the case, particularly aspects of the email correspondence relating to the supply of gaming machines to the Latin American market, concerning offers to make compliance plates with false numbers. Other emails had suggested that Mr Allam had burned Aristocrat games onto blank EPROMs.
54 However, the primary judge also found that there was a degree of exaggeration in Mr Channa’s evidence on some important matters of detail, as well as a reluctance to make concessions which he thought might be against the Aristocrat parties’ interests. The primary judge also noted that there was “no love lost” between Mr Allam and Mr Channa. Mr Channa had lost money in dealings with Mr Allam.
55 The primary judge found that it was impossible to say to what extent Mr Channa was motivated by revenge against Mr Allam. The primary judge noted a number of inconsistencies in Mr Channa’s evidence which adversely affected the reliability of that evidence generally.
56 The primary judge also noted another troubling aspect of Mr Channa’s evidence: in an interview conducted before application was made for the Anton Piller orders, Mr Channa had told the Aristocrat parties’ solicitors that he hoped that Aristocrat would assist him by giving him some of the money he had lost in his dealings with Mr Allam. Mr Channa denied having expressed that hope.
The CD-ROM (Exhibit CCC-14) and the loose HDD
57 The Aristocrat parties had submitted in the course of the primary hearing that the contents of the CD-ROM (Exhibit CCC-14) were significant. The primary judge accepted the expert evidence of a computer forensic specialist, Mr Carson, that it appeared to comprise binary game files and several documents that appeared to be labels and invoices for “Tonita Enterprises”. Mr Carson had been engaged by the Allam parties to provide a report for use in the proceedings. As things transpired, they did not seek to rely on his report. However, the Aristocrat parties tendered it.
58 The primary judge also accepted the evidence of Mr Polaczek (the manager of Aristocrat’s Compliance Verification Laboratory) that the CD-ROM contained files which included Aristocrat game software (in particular, relating to the games called “Dolphin Treasure”, “Queen of the Nile”, “Indian Dreaming”, “Boot Scootin’”, “Chicken”, “Orchid Mist”, “Wild Thing” and “Wild Ways”). This was relied on as evidence of direct infringement by the Allam parties of the copyright that had been claimed.
59 Mr Carson’s report had also indicated that there was strong evidence that the CD-ROM had been viewed on the loose HDD found at the Georges Hall premises. The primary judge accepted this evidence.
60 On examination the loose HDD contained information plainly connecting it to Mr Allam, including the fact that Mr Allam was shown as its registered owner and the fact that there was file activity as early as 19 August 2003 involving members of Mr Allam’s family. It included files relating to university assignments and family snapshots. It also contained Dataman software (used to burn EPROMs) and references to a Dataman directory containing file paths that included the word “Aristocrat” and names of Aristocrat games. From his analysis, Mr McKemmish (an expert initially engaged in relation to an examination of the materials seized under the Anton Piller orders) concluded that the loose HDD had been used to burn and/or read binary data to and from EPROM chips. The primary judge accepted this evidence. Mr Carson also gave evidence that the loose HDD contained what appeared to be game binaries that had been created in various folders, including under a profile relating to “Riad”. In addition, the Dataman folders identified by Mr McKemmish contained files indicating the use of the application in relation to game binaries.
61 The inference that was sought to be drawn from the files on the loose HDD and the activity related to the Dataman software was that the Allam parties had used the Dataman program to copy Aristocrat software to blank EPROMs.
62 The loose HDD was also shown, on examination, to contain 11 game sheet files under the profile relating to Mr Allam. There was evidence that these images could be used to produce hard copy artwork that would be of “acceptable” quality, although not necessarily of a quality acceptable to the Aristocrat parties for their own use. Mr Allam accepted that he had scanned several images from an Aristocrat catalogue which were consistent with those found on the loose HDD.
63 The primary judge also found that a large number of other files on the loose HDD appeared to belong to the Allam parties. For example, Mr Allam identified a file on the loose HDD containing a table with a list of Aristocrat games which he had prepared when packing gaming machines for export.
64 The primary judge noted that Mr Allam accepted that the CD-ROM contained Aristocrat game software and that he also accepted that the CD-ROM had been used in conjunction with the loose HDD. However, the Allam parties contended that the CD-ROM had never been used or accessed by Mr Allam but had been “planted” by Mr Channa. The primary judge rejected this explanation. They also submitted that the loose HDD had been planted by Mr Channa and its contents fabricated so as to incriminate Mr Allam. The primary judge considered this submission to be, on the evidence, so extraordinary as to be untenable.
65 Another computer hard drive (the Georges Hall Desktop 2) was also examined. This computer was Mr Allam’s computer. It contained information plainly linking it to him. The primary judge found that it also had been used with Dataman software to write binary file data to EPROM chips. Mr McKemmish gave evidence that a number of binary files appeared to have been read and their contents written to an EPROM, including files containing names of Aristocrat games.
66 Although the content of these files was not established, this evidence is of significance because Mr Allam claimed that he had not used any Dataman programming device or any other EPROM programmer since 2002. Mr Allam also gave evidence that this computer was accessible by all of the workers at the Botany premises, including Mr Channa.
67 A large number of EPROMs relating to Aristocrat games were seized from the Bankstown premises. There was evidence that a number of EPROM labels relating to these games were not genuine. The Allam parties gave evidence that these EPROMs were obtained from Behong. The primary judge rejected this explanation and found that the EPROMs seized from the Bankstown premises were counterfeit. The primary judge also found that blank EPROMs seized from the Georges Hall premises were capable of being used to store Aristocrat software and were suggestive of copying by the Allam parties.
Blank compliance plates: Botany, Georges Hall and Bankstown premises
68 Blank compliance plates were seized at the Botany, Georges Hall and Bankstown premises. The primary judge accepted evidence from Mr Parsons (the manager of Aristocrat’s Mechanical Platform Development) that these plates were not genuine. The primary judge rejected the contention that these compliance plates had been “planted” by Mr Channa. The evidence also included the important fact that Mr Allam possessed a hand engraving machine. The primary judge found that Mr Allam had manufactured these plates.
69 In relation to the email correspondence, the primary judge noted that, initially, some pieces of correspondence were tendered against only the Global parties, some against the Global parties and the Impact parties or the Global parties and the Allam parties, and some against the Global parties, the Impact parties and the Allam parties. However, at the conclusion of the hearing, the primary judge made orders admitting this evidence on a provisional basis against all the appellants and Tonita. The course taken by the primary judge in this regard was the subject of objection by the appellants at the hearing. It was one of the matters raised on this appeal as constituting a significant error on the part of the primary judge.
70 The primary judge also noted that the emails were not tendered as proof of the facts stated in them. It seems that the emails were admitted as going to the credit of Messrs Andrews, Cragen and Allam, however this is not entirely clear. There was cross-examination on the emails and, plainly enough, the evidence given on cross-examination was not limited to issues going to credit. The appellants complain that, although the emails were not tendered as proof of the facts stated in them, this is how the primary judge in fact used them. They submitted that this also constituted a significant error on the part of the primary judge. Moreover the appellants contended that a number of the emails had nothing to do with the case at all but, rather, related to other transactions that were extraneous to the pleaded case. The appellants also contended that the content of the emails, even using them as they say the primary judge did, fell far short of proving the impugned transactions.
71 The primary judge made the following specific findings in relation to the email correspondence.
72 First, the primary judge found that Mr Andrews offered to provide a customer with artwork that was digitally copied from Aristocrat artwork.
73 Secondly, the primary judge found that Mr Andrews offered to send (to a customer in South America) artwork that could be matched to games that could be copied in South America. Although the primary judge found that this offer would not constitute an infringement of copyright under ss 36 or 38 of the Copyright Act, he nevertheless found that it did indicate Mr Andrews’ willingness to assist “serial counterfeiters” in South America to carry out their actions. It is to be noted, however, that it was never suggested to Mr Andrews that he had supplied Spanish artwork.
74 Thirdly, the primary judge found that Mr Andrews had offered to arrange for Aristocrat compliance plates with fake serial numbers to be made for a customer of the joint venture. The primary judge found that he had done so following a conversation between Mr Cragen and the customer about the supply of gaming machines. The primary judge found that this was an acceptance (at least by Mr Cragen) that the joint venture was prepared to supply gaming machines with false Aristocrat compliance plates.
75 Fourthly, the primary judge found that Mr Allam provided to another person a CD containing Aristocrat Mark VI games which he (Mr Allam) had burned on the CD.
76 Fifthly, the primary judge found that Mr Allam was requested by a South American customer to provide blank EPROMs for Aristocrat Mark VI gaming machines and that Mr Allam knew the purpose of the request was to enable the customer to copy Aristocrat game software onto EPROMs in South America.
77 Sixthly, the primary judge found that Mr Andrews had adopted protocols to avoid detection of the joint venture’s involvement in copyright infringement, particularly by adopting a web-based Yahoo email address.
78 Although Mr Andrews, Mr Cragen and Mr Allam in cross-examination sought to give innocent explanations of the matters stated in the emails, the primary judge rejected these explanations, which he found to be quite unconvincing and at odds with the terms of the communications which, his Honour found, were reasonably clear on their face.
79 The Aristocrat parties carried out a data-matching exercise with respect to the serial numbers recorded on a large number of invoices that had been generated by the Global parties and the Impact parties. The exercise was said to have identified some 3,500 serial numbers that “prima facie, were attended by very real questions”. In this regard the Aristocrat parties had submitted that the exercise showed that fake serial numbers had been invented “because the serial numbers did not correspond to Aristocrat’s database of serial numbers affixed to genuine Aristocrat gaming machines”; that there were serial numbers for machines reportedly sold overseas by the joint venture but yet, according to records of the Office of Liquor, Gaming and Racing (the OLGR), were still present in New South Wales; and that, according to the same records, serial numbers were used in respect of games on a machine which had been recorded for different games.
80 The primary judge found that there were significant difficulties with the evidence on which Aristocrat relied. First, he was not satisfied that the evidence established the provenance of the OLGR records which constituted the essential premise upon which the exercise depended. Secondly, the primary judge found that the data-matching exercise was tainted by human error and also relied on incomplete data that resulted in numerous errors which called into question the reliability of the results. In the end result, the primary judge rejected the data-matching exercise.
The primary judge’s findings on credit
81 The primary judge made a number of damning findings with respect to credit. The primary judge found that Mr Andrews’ evidence was lacking in candour and that answers had to be extracted from him with difficulty. The primary judge found that some of his answers were quite evasive. His Honour noted a number of examples of prevarication and untruthfulness.
82 The primary judge found Mr Cragen’s evidence to be at odds with contemporaneous documents in a number of material respects. In particular, the primary judge found Mr Cragen’s efforts to explain away and distance himself from emails which suggested knowledge of, or participation in, copyright infringement to be quite unconvincing. The primary judge found that a number of answers given by Mr Cragen reflected badly on his credit. His Honour did not accept him as a reliable witness.
83 The primary judge found Mr Allam to be an excitable witness who was prone to dramatic outbursts. The primary judge gave detailed consideration to a number of aspects of Mr Allam’s evidence and found him to be untruthful.
The primary judge’s findings on liability
84 The primary judge noted that it was incumbent on the Aristocrat parties to prove their case on the balance of probabilities. However, importantly in this regard, his Honour noted that the claims were based largely on circumstantial evidence and that his assessment of the credit of the principal witnesses for the Global parties, the Impact parties and the Allam parties enabled him to make a number of preliminary factual findings against which the impugned transactions would fall to be considered. The primary judge then made five findings, which he referred to as “five essential propositions”.
85 First, that the Allam parties (specifically Mr Allam) burned Aristocrat game software onto blank EPROMs. Secondly, that the Allam parties (specifically Mr Allam) manufactured counterfeit compliance plates. Thirdly, that Mr Andrews and Mr Cragen were aware that Mr Allam was burning Aristocrat game software onto blank EPROMs. Fourthly, that Mr Andrews and Mr Cragen were aware that Mr Allam was manufacturing counterfeit compliance plates for export to foreign markets. Fifthly, that Mr Andrews and Mr Cragen sent, or were aware that the joint venture had sent, original and digital artwork to South America for the purpose of having it copied.
86 The primary judge also found that the Global parties and Impact parties authorised any copyright infringements either as participants in the joint venture which commenced on 1 October 2004 or, prior to that, individually. The primary judge found that the nature of the joint venture was such that it contemplated the very acts alleged to have taken place. The primary judge also found that the email correspondence made it plain that the Global parties and the Impact parties had sanctioned, approved or countenanced the infringements of copyright carried out by the Allam parties. The primary judge found that this was a case of a studied and deliberate course of action in which the Global parties and the Impact parties had decided to ignore the rights of the Aristocrat parties with knowledge that there was likely to be an infringement of copyright.
87 The primary judge also found that although Mr Andrews and Mr Cragen each had power to prevent the other from doing the acts concerned, each failed to take any reasonable steps to prevent the infringements his Honour found to have been committed in the present case.
88 The primary judge also considered the question of joint tortfeasance by reference to the principles discussed in Universal Music Australia Pty Ltd v Cooper (2005) 150 FCR 1 at [135]. He found that, whilst there was no joint venture between the Allam parties, the Global parties and the Impact parties, there was something in the nature of concerted action or agreed common action between them. The primary judge found that the evidence more than sufficiently established “tacit” agreement between the parties.
89 It is important to note the following matters in relation to these findings.
90 First, the primary judge’s findings concerning the burning of game software onto blank EPROMs and the manufacture of counterfeit compliance plates are findings with respect to direct infringement of copyright by the Allam parties under s 36 of the Copyright Act. These findings were based substantially on the physical evidence obtained from the execution of the Anton Piller orders.
91 Secondly, the findings of authorisation by the Global parties and the Impact parties relate, necessarily, to these direct infringements (see s 36(1) of the Copyright Act) but the findings of joint tortfeasance are not, in terms, so confined. Nevertheless, the context in which the finding of joint tortfeasance was made shows that the primary judge clearly had in mind the direct infringements he had found relating to the activities of the Allam parties.
92 Thirdly, the findings of authorisation and joint tortfeasance were based substantially on the facts that the primary judge found to have been revealed by the email correspondence to which we have referred.
93 The primary judge then turned to consider the 54 transactions to see whether they were affected by this general body of infringing conduct. It was by reference to these transactions that the Aristocrat parties had sought to maintain their claims for damages. Ultimately only a very small number of the transactions were found to involve infringing conduct.
94 The Aristocrat parties had categorised the transactions as falling within one of five categories, described as follows.
95 The “MC” (machines in clubs) category described transactions where the serial numbers on invoices for the goods supplied overseas coincided with the serial numbers of gaming machines said to be still located in various premises in New South Wales. The primary judge inferred that the gaming machines with duplicate serial numbers that had been supplied overseas contained “infringing components” of Aristocrat gaming machines (in particular, false compliance plates). The primary judge concluded that it was not possible to identify which particular components of the machines were in fact “counterfeit”. However, on the basis that fake serial numbers had been used, the primary judge found that it was more likely than not that the infringing components included “counterfeit” Aristocrat game software. His Honour reasoned that there would have been little point in having fake serial numbers for gaming machines containing genuine Aristocrat software. The primary judge found that 16 gaming machines, in four transactions, involved infringing components. The transactions were: 34, 36, 48 and 54 (transaction 54 was not included in a table of relevant transactions provided by the Aristocrat parties).
96 The “DN” (duplicate numbers) category described transactions where the Global parties and Impact parties had issued invoices for machines, the serial numbers of which were a duplicate of serial numbers on machines which had already been shipped by them in earlier transactions. The primary judge rejected the explanation given by the Global parties and Impact parties for the duplicate numbers. As with the MC category, it was not possible to conclude on the evidence which components were “counterfeit”. The primary judge found that 56 gaming machines, in 7 transactions, involved infringing components. The transactions were: 13, 20, 28, 29, 41, 46 and 51.
97 The primary judge rejected the Aristocrat parties’ claims in relation to the remaining categories “GC” (gaming changes), “II” (infringing indicia) and “NG” (non-genuine numbers). This was because the allegations of infringement with respect to transactions in those categories were based upon the data-matching exercise carried out by the Aristocrat parties which the primary judge had rejected because the provenance of the data had not been established.
98 It is important to note that the findings the primary judge made with respect to the four “MC” category transactions and the seven “DN” category transactions were findings with respect to indirect infringement of copyright under s 38 of the Copyright Act (infringement by dealing). These findings were based on inference in light of the “five essential propositions” to which reference has been made. There was no direct evidence of infringement. No infringing article was produced. Indeed, the Aristocrat parties did not inspect any of the gaming machines involved in any of the transactions that were found to involve infringements of the copyright that was claimed. The Aristocrat parties did not identify which components of the gaming machines in the impugned transactions were alleged to infringe the copyright that was claimed. As noted earlier, the primary judge found that, on the evidence, it was not possible to conclude precisely which components in the machines were infringing or counterfeit.
The primary judge’s findings on loss and damage
99 For the purpose of calculating damages under s 115(2) of the Copyright Act the primary judge inferred that the Aristocrat parties would have sold at least a proportion of the machines the subject of the eleven infringing transactions. His Honour found that Aristocrat would have been able to sell 50% of the machines in the South American market. His Honour accepted evidence that the lost profit was approximately USD1,545 per machine or USD1,770 per conversion kit.
100 Of the 72 machines involved in the infringing transactions (16 “MC” machines and 56 “DN” machines) the primary judge found that 16 had been supplied outside the South American market. As there was no evidence as to the markets for second-hand gaming machines in other countries, the primary judge found that the Aristocrat parties had failed to prove that those sales were made at their expense. He therefore paid no regard to those machines.
101 It followed that 56 infringing machines were sold in South America and, proceeding on the basis that the Aristocrat parties would have been able to sell 50% of those machines, the primary judge found that they were entitled to recover damages under s 115(2) of the Copyright Act for 28 machines.
102 The primary judge then averaged the lost profit (“machines” and “conversion kits”) and arrived at a figure of USD1,600 per machine.
103 The primary judge then held that the Aristocrat companies were entitled to damages for USD44,800 (28 x USD1,600), converted at the exchange rate prevailing on the day before judgment (AUD48,870).
104 The primary judge allocated damages on the following basis. Because the joint venture did not commence until 1 October 2004, any transactions prior to transaction number 34 (ie transactions 13, 20, 28 and 29, all of which were “DN” category transactions) could only be supported against the Global parties. The remaining seven transactions (transactions 41, 46 and 51 (also “DN” category transactions) and transactions 34, 36, 48 and 54 (all “MC” category transactions)) would be maintainable against the Global parties and the Impact parties. Mr Allam was also jointly liable in respect of these remaining seven transactions because he was the person who was supplying the technical know-how to the joint venture and his involvement in that way must have made it clear to him that he was at the very least approving the sale of infringing components to the Latin American market. However, Tonita was only incorporated on 14 July 2006. All of the relevant transactions occurred before that date. On this basis, none of the 54 transactions could be maintained against Tonita.
105 In the end result, 16 machines (the subject of transactions 13, 28 and 29) were proved against the Global parties. Transaction 20 was not proved because the machines were supplied to Cyprus. The Global parties were therefore liable for USD12,800 or AUD13,963.
106 Global, Impact, Mr Andrews, Mr Cragen and Mr Allam, jointly and severally, were liable for the balance, being USD32,000 or AUD34,907.
107 Additional damages under s 115(4) of the Copyright Act were awarded against them, jointly and severally, in the sum of AUD450,000.
Introduction
108 In the Global/Impact appeal the appellants submitted that error by the primary judge was reflected in:
(a) the finding of copyright infringement by dealing in respect of all machines;
(b) the finding of copyright infringement by dealing specifically in respect of the 16 “MC” machines;
(c) the finding of copyright infringement by dealing in respect of the 56 “DN” machines;
(d) the admission of expert evidence;
(e) the reversal of rulings on evidence based on s 136 of the Evidence Act 1995 (Cth) (the Evidence Act); and
(f) the awarding of damages under s 115 of the Copyright Act.
109 These errors were said to be or involve: (a) denial of procedural fairness; (b) failure to bring into account relevant evidence; (c) drawing inferences and conclusions not available on the evidence; (d) findings of infringement based on exiguous, indirect and indefinite evidence; (e) the wrongful admission of evidence against the Global/Impact parties; and (f) guesswork and speculation in the award of damages.
110 In the Allam appeal, Mr Allam adopted the submissions of the Global/Impact parties in the Global/Impact appeal (but applied specifically in relation to findings against the Allam parties), and submitted that error by the primary judge was also reflected in:
(a) the finding of copyright infringement against Mr Allam in so far as the primary judge held that Mr Allam authorised the transactions from which his liability was found to have arisen;
(b) the finding of copyright infringement in relation to five of the transactions (transactions 34, 36, 41, 46 and 54) because of a departure from the pleaded case;
(c) the finding of infringement of copyright in relation to three of the transactions (transactions 28, 29 and 41) as being separate from transaction 20 (which was identical and which was not found against Mr Allam);
(d) specific findings made against Mr Allam.
111 In seeking to make good their appeals, the appellants effectively challenged every adverse finding made by the primary judge after a hearing of 26 days. We were taken to the detail of the evidence as it affected those findings. The appeals themselves occupied 8 days. Further written submissions were made after the hearing of oral argument.
The finding of copyright infringement by dealing
112 The principal question before the primary judge was whether, in the absence of direct evidence of the gaming machines that are said to have been counterfeited, it should be inferred that the appellants, or one or more of them, infringed the Aristocrat parties’ copyright and, if so, in what respects.
113 Our reference to the Aristocrat parties’ copyright is an oversimplification of the question of copyright ownership as it was raised in the course of the appeal. It is not necessary for us to explore that question at the present time. It is sufficient simply to note now that, as recorded by the primary judge at [39] and [116], the appellants did not challenge the subsistence of copyright in the literary or artistic works identified as the Aristocrat game software, EPROM labels, artwork and compliance plates.
114 The primary judge noted (at [34]) that at the heart of the case before him were the questions of whether the “mass of material” tendered by the Aristocrat parties was sufficient to satisfy their evidentiary onus, and whether the denials of Messrs Andrews, Cragen and Allam ought to be accepted.
115 The appellants made a number of submissions about the correct legal approach to be adopted when dealing with a case based on inference. These principles were not seriously contested by the Aristocrat parties. The primary judge dealt with these principles at [590]-[605].
116 The appellants submitted that where inferences are to be drawn from primary facts the appeal court is in as good a position as the primary judge and ought to give effect to its own opinion: Warren v Coombes (1979) 142 CLR 531 at 551; Fox v Percy (2003) 214 CLR 118 at 125-127; Beneficial Finance Corporation Ltd v Karavas (1991) 23 NSWLR 256 at 271. The circumstances must give rise to a “reasonable and definite inference” of infringement: Trustees of the Property of Cummins v Cummins (2006) 227 CLR 278 at [34]. The Court must feel an “actual persuasion” that infringing conduct has occurred: Briginshaw v Briginshaw (1938) 60 CLR 336 at 361; Seltsam Pty Ltd v McGuiness (2000) 49 NSWLR 262 at [136]; Nguyen v Cosmopolitan Homes [2008] NSWCA 246 at [55].
117 There was a potential issue at trial about whether “actual persuasion” was a necessary requirement. The primary judge (at [598]) noted that the decision of the Full Court in Qantas Airways Ltd v Gama (2008) 167 FCR 537, in which Branson J at [123] and [139] considered that the Briginshaw test had been replaced by the provisions of s 140 of the Evidence Act, exposed a difference of opinion on that matter with the Full Court in Communications, Electrical, Electronic, Energy, Information, Postal, Plumbing and Allied Services Union of Australia v Australian Competition and Consumer Commission (2007) 162 FCR 466 at [31]. Regardless of that difference, the primary judge found (at [924]) that the Aristocrat parties had proved their claims to the requisite standard and that he had reach a level of actual persuasion in relation to them.
118 The appellants submitted that, in determining whether the Aristocrat parties had discharged their onus, regard must be had to the seriousness of the allegations made against the appellants and the gravity of the consequences of adverse findings against them: Cummins at [34]; Neat Holdings Pty Limited v Karajan Holdings Pty Ltd (1992) 110 ALR 449 at 449-450; Briginshaw at 362-363. They submitted that the consequences here are obvious in light of the primary judge’s award of additional damages of $450,000. They submitted that this onus is not satisfied by inexact proofs, indefinite testimony or indirect inferences: Briginshaw at 362-363.
119 At this juncture it is convenient to return to the reasoning process by which the primary judge reached the ultimate conclusion that infringement by dealing had been established. We have already remarked that, in dealing with the transactions in the DN and MC categories, the primary judge, after concluding that infringement had taken place, stated that it was not possible to identify which particular components of the relevant gaming machines were in fact counterfeit: see at [846] and [870]. This statement requires further explanation.
120 At trial the Aristocrat parties did not identify which components were alleged to have been infringed, except in relation to two transactions that are not presently relevant: see at [822]. Nevertheless, after carefully considering the “mass of material” tendered by the Aristocrat parties, and the denials of Messrs Andrews, Cragen and Allam, the primary judge concluded (at [718]-[722]) that the Allam parties burned Aristocrat game software onto blank EPROMs and manufactured fake Aristocrat compliance plates for use in export to overseas markets; that Mr Andrews and Mr Cragen were aware of this; and that Mr Andrews and Mr Cragen sent, or were aware that the joint venture business had sent, digital artwork and original artwork to South America for the purpose of having it copied there. The primary judge’s specific factual findings in that regard constituted the “five essential propositions” underlying his consideration of each of the DN and MC transactions.
121 The primary judge’s findings about the manufacture of fake compliance plates, and the burning of Aristocrat game software onto blank EPROMs, were obviously critical to his reasoning process on the question of infringement by dealing. Those facts, and Mr Andrews’ and Mr Cragen’s knowledge of them, considered in the context of:
(a) transactions where the Global/Impact parties’ own records showed a duplication of serial numbers across different transactions or a conflict between the serial numbers of gaming machines supplied to their overseas customers and the serial numbers of extant machines installed in local premises; and
(b) explanations for those discrepancies which, as a matter of credit, the primary judge did not accept,
led the primary judge to conclude (at [846], [870] and [897]) that, more likely than not, the infringing components in the infringing machines at least included fake compliance plates and counterfeit gaming software. In this connection it has not been suggested that the gaming machines in the impugned transactions (as we would find them to be) were not fully functioning electronic gaming machines running fully functioning Aristocrat game software installed on those machines and supplied as genuine Aristocrat electronic gaming machines.
122 The appellants attacked the primary judge’s reasoning in that regard. However, we do not consider that the primary judge erred in reasoning in this way. The real question is whether his Honour’s findings in relation to the five “essential” propositions can be shown to have been made in error. The appellants contended that the primary judge did err in that regard. We turn to consider that challenge.
The first “essential” proposition
123 The appellants challenged the primary judge’s finding at [718] that the Allam parties burned Aristocrat game software onto blank EPROMs using Dataman software. This was the first of the primary judge’s “five essential propositions”.
124 In order to consider that challenge it is necessary to bear in mind the primary judge’s findings which we have summarised above (at [57]-[64]) concerning the contents of a particular CD-ROM (Exhibit CCC-14) and the loose HDD, and (at [65]-[66]) concerning the Georges’ Hall desktop 2 computer.
125 Of particular significance, for present purposes, are the primary judge’s findings that:
(a) The loose HDD contained information plainly connecting it to Mr Allam, as well as Dataman software (used to burn EPROMs) and a Dataman directory of file paths including the word “Aristocrat” and the names of Aristocrat games;
(b) The CD-ROM contained files which included Aristocrat game software;
(c) Mr Channa gave evidence to the effect that he saw Mr Allam fitting “chips” into a device which Mr Allam told him was used to “load and unload” programs, and that he saw Mr Allam using the device in this way approximately five times a month;
(d) Mr Allam accepted that the CD-ROM contained Aristocrat game software and had been used in conjunction with the loose HDD. However, Mr Allam said that the CD-ROM had never been accessed or used by him and had been planted by Mr Channa. He also said that the loose HDD had been planted by Mr Channa and its contents fabricated so as to incriminate him. The primary judge (at [711]) rejected these denials as being false;
(e) The Georges Hall Desktop 2 computer was Mr Allam’s and had been used with Dataman software to write binary file data to EPROM chips, despite Mr Allam’s claims that he had not used any Dataman programming device or any EPROM programs since 2002.
126 The Allam parties sought to challenge the primary judge’s findings by pointing to what they identified as anomalies in the use of the loose HDD and the Georges Hall Desktop 2 computer. These were identified in a schedule forming part of additional written submissions handed up during the course of the appeal. The Allam parties also pointed, more generally, to gaps in what they termed “the electronic record”. An explication of a number of these identified anomalies and evidentiary gaps was given in the course of oral argument and was supplemented by further written submissions by both the Allam parties and the Aristocrat parties. We were taken to the underlying evidence in some considerable detail, in both oral and written submissions. The Allam parties sought to demonstrate that “the electronic record” was either exculpatory of copying as found or, at the very least, equivocal about that activity, such that an inference of copying of Aristocrat game software by the Allam parties, and by Mr Allam in particular, could not properly have been made. We have considered the detail of that evidence and the opposing submissions of the Allam parties (which were adopted by the Global/Impact parties) and of the Aristocrat parties in respect of it.
127 Accepting, for the purposes of argument, that those anomalies and evidentiary gaps exist, they do not, in our view, gainsay the fundamental findings of fact made by the primary judge, which we have earlier summarised at [57]-[64] or, more importantly, establish error on the part of the primary judge in either making those findings or coming to his ultimate conclusion on copying at [718]. In our view those findings entitled the primary judge to conclude that the Allam parties, and Mr Allam in particular, burned Aristocrat game software onto blank EPROMs using Dataman software.
128 We note that, in coming to that conclusion, the primary judge took into account Mr Allam’s denials about his involvement in that activity, but rejected those denials on credit grounds. The primary judge was uniquely placed to undertake that particular assessment and no basis for appellate interference in that regard has been established. The primary judge also took into account the possibility that, at least in respect of the Georges Hall Desktop 2 computer, access may have been granted to other parties. Nevertheless, his Honour was unpersuaded that this circumstance was exculpatory of Mr Allam’s involvement, as found. We can discern no error in that regard.
129 Significantly, the primary judge rejected what was plainly the Allam parties’ main line of defence, namely that the loose HDD and the CD-ROM (Exhibit CCC-14) was physical evidence that had been fabricated and “planted” by Mr Channa to implicate Mr Allam in wrongdoing. We had earlier noted that the primary judge rejected that submission to be so extraordinary as to be untenable. No proper basis has been established to interfere with that finding.
130 The Allam parties also submitted that the electronic record was exculpatory of Mr Allam’s involvement in each of the transactions for which the primary judge had found him to be liable. This was because an examination of the forensic evidence with respect to the use of the loose HDD and the Georges Hall Desktop 2 computer failed to reveal operational use of those devices to burn game software at the time that those transactions had taken place (by reference to their invoice dates); that it was not possible to establish that a particular game was burned using those devices by Mr Allam in relation to the gaming machines the subject of those transaction; and that it was not established that any of the seized EPROMs comprised a full game.
131 In our view that challenge cannot be sustained for a number of reasons. First, the evidence entitled the primary judge to conclude, as a general proposition, that the loose HDD and the Georges Hall Desktop 2 computer had been used by Mr Allam in the ways found by the primary judge. Secondly, it ignores other evidence which the primary judge found to be influential in coming to his general conclusion in this regard. This evidence included the seizure of a large number of blank EPROMs, which the primary judge found to be suggestive of copying, and the seizure of Aristocrat game EPROMs from the Bankstown premises which the primary judge found to be counterfeit. In coming to this latter conclusion the primary judge was not persuaded that these were the EPROMs that had simply been stripped from used gaming machines later supplied by the Allam parties without those EPROMs. This was a finding to which the primary judge was entitled to come upon the totality of the evidence, including his rejection, on credit grounds, of Mr Allam’s particular denials in that regard. Thirdly, it also ignores the evidence of Mr Channa, which the primary judge ultimately accepted, that he observed Mr Allam burning EPROMs from an EPROM burning device. Fourthly, it ignores the use of fake serial numbers for the impugned gaming machines in each of those transactions and the reasonable inference that there would be no point in using fake serial numbers on gaming machines if the game software installed in those machines was genuine.
132 In short, it does not seem to us to be a matter of particular significance that the forensic evidence does not establish a direct relationship between a particular operation or use of the loose HDD, the Georges Hall Desktop 2 computer or of the CD-ROM (Exhibit CCC-14) and particular game software on a particular machine in a particular transaction.
133 In our view, the totality of the circumstances justify the conclusion that, in relation to those transactions, the impugned gaming machines contained Aristocrat game software that had been reproduced by the Allam parties, specifically Mr Allam.
134 It is convenient at this juncture to deal with another aspect of the appeal. The Global/Impact parties submitted that the evidence of Mr McKemmish (that was relied upon to establish infringements based on items in the possession of the Allam parties) should not have been permitted because: (a) Mr McKemmish was a court-appointed expert; (b) the Aristocrat parties then engaged him as their own expert witness; (c) his report was admitted over the objection of the Global/Impact parties; (d) he had access to “sensitive” documents and was seized of this material at the time of preparing the report to which objection was taken; (e) his report was an abuse of process; and (f) the Global/Impact parties were unfairly prejudiced.
135 The gravamen of this complaint was that Mr McKemmish may have misused information that he may have accessed pursuant to a confidentiality regime. However, this topic was not explored in Mr McKemmish’s cross-examination. Indeed, the matter was only raised at trial even though the appellants were aware of Mr McKemmish’s report almost one year beforehand.
136 The allegation of an abuse of process was not articulated and was rejected by the primary judge. So too was the contention that the report was unfairly prejudicial and should have been rejected under s 135 of the Evidence Act.
137 We are not persuaded that the primary judge erred in rejecting the appellants’ challenge to the reception of Mr McKemmish’s evidence.
The second “essential” proposition
138 The Allam parties challenged the primary judge’s finding (at [719]) that they had manufactured fake compliance plates, some of which were found at the Botany, Bankstown and Georges Hall premises. This was the second “essential” proposition found by the primary judge.
139 It is clear from the primary judge’s reasons that his Honour used the words “fake” and “counterfeit” interchangeably and that he also used those words to connote an infringement of copyright.
140 In considering the primary judge’s reasons, it is necessary to bear in mind the full range of meanings attributable to those words and to distinguish their use to refer to compliance plates made in infringement of copyright from their more general use to refer to non-genuine or “pretend” compliance plates. An article may be counterfeit but not involve an infringement of copyright. In order to establish infringement it is necessary to show a reproduction of, or the reproduction of a substantial part of, a relevant original work in which copyright subsists according to Australian law. On the other hand, it would be apposite to refer to an article shown to have been made in infringement of copyright as “counterfeit”.
141 The Allam parties’ challenge to the second “essential” proposition was largely directed to challenging the primary judge’s conclusion (at [927]) that the seized compliance plates had been manufactured by the Allam parties in infringement of the Aristocrat parties’ copyright.
142 In order to understand that challenge it is necessary to understand the basis on which the Aristocrat parties brought their claim of copyright infringement in that regard, and the evidence on which they relied to make good that case.
143 In the Amended Consolidated Statement of Claim the Aristocrat parties alleged that each compliance plate affixed to an Aristocrat gaming machine was an artistic or literary work. As finally argued, that claim was limited to each compliance plate being an artistic work for copyright purposes. That allegation was specifically referenced to the Particulars. The Particulars, in turn, referred to the drawings for each relevant compliance plate. The drawings were identified in a table in the Particulars. The table distinguished between each compliance plate and its relevant drawing. Each drawing was identified by name, code and the year of its making. Each of the appellants admitted that the compliance plates were original artistic works. It would seem that the admission, in each case, was in respect of each compliance plate in the particular form represented by the particularised drawing. Particulars were given of 18 drawings. No issue was taken on appeal about whether a manufactured compliance plate could be an artistic work for the purposes of Australian copyright law.
144 The evidence of infringement was found, principally, in an affidavit made by Brett Hilton Parsons. Mr Parsons was identified in the Particulars as the author of the relevant drawings.
145 Mr Parsons’ affidavit was, relevantly, to the following effect. Each Aristocrat compliance plate is manufactured in accordance with a written design specification which sets out the precise layout and design information required to manufacture it. We interpolate that Mr Parsons’ affidavit makes clear that the written design specification includes, in each case, a design drawing depicting the relevant compliance plate. Mr Parsons provided a sample of several written design specifications. These were identified by him as 560603 (revision F), 572663 (revision A), 571084 (revision A), 565875 (revision B) and 565875 (revision E).
146 The following matters should be noted at this juncture.
147 First, according to his affidavit and contrary to the Particulars, Mr Parsons was not the author of any of those written design specifications, although nothing seems to turn on that fact for the purposes of the appeal.
148 Secondly, written design specifications 572663 (revision A) and 571084 (revision A) were not pleaded or particularised. It follows that the compliance plates represented by those design specifications did not carry with them any admission by the appellants about the subsistence of copyright. Moreover, Mr Parsons’ affidavit did not carry that matter further as a matter of proof, beyond asserting that each of the relevant authors was an “Aristocrat engineer”. No evidence was given by these employees. We were not taken to any other evidence that would establish the subsistence of copyright in the compliance plates represented by those written design specifications. It follows that the evidence in respect of those written design specifications, and of compliance plates conforming to them, can be put to one side so far as concerns the Aristocrat parties’ claims of copyright infringement.
149 Thirdly, each of the remaining three written design specifications put in evidence (560603 (revision F), 565875 (revision B) and 565875 (revision E)) was a particular revision or iteration of an earlier written design specification (including a drawing) that was generationally removed from each earlier specification (and drawing) on which it was apparently based. However, none of the earlier specifications (or drawings) were put in evidence. Each specification in evidence does contain a legend which describes, mostly in general terms, the nature of the amendment or amendments made by the particular revision. These descriptions do not, however, provide a visual basis on which each earlier drawing in the relevant series of specifications can be compared.
150 For example, in relation to written design specification 565875 only revisions B and E are in evidence. The legend to revision E states that the amendment effected by that revision was a change of the company name shown on the compliance plate. However, revision D, on which revision E was presumably based, is not in evidence. It is not possible to know with reasonable certainty what the drawing in revision D looked like, although the legend indicates that the amendments involved certain additions to revision C described as “P/No’S & REV’S”. However, revision C itself is not in evidence, although the legend, once again, describes in general terms, the nature of the amendments brought about by that revision. Revision B is, however, in evidence. Thus the only direct evidence of the visual appearance of compliance plates in written design specification 565875 is provided by the drawings in revisions B and E. However those revisions are generationally removed from each other and the specific appearance of compliance plates manufactured according to revisions C and D is a matter of some conjecture.
151 Fourthly, there is simply no evidence about the appearance of the other compliance plates that were pleaded and particularised.
152 Mr Parsons gave evidence that, once a written design specification has been created, another Aristocrat division creates artwork for the compliance plate. This artwork consists of an image of the compliance plate that includes a correct rendering of the lettering and Aristocrat logo. The artwork must follow the information concerning layout and dimensions provided for in the specification. No artwork relating to a compliance plate was put in evidence. There is no reason to doubt, however, that the artwork faithfully reproduces the drawing in the corresponding design specification or relevant revision of it.
153 Mr Parsons inspected 117 compliance plates that had been seized. These plates were arranged in groups according to various characteristics they displayed, such as blue-tinged anodising, glossy finishes, no rivet holes, incorrectly-sized and drilled rivet holes, incorrect rendering of the Aristocrat logo, non-standard engraving and incorrect serial number format, all of which were indicia of non-genuine Aristocrat compliance plates. He also gave evidence that the presence of hand-engraving on a compliance plate indicated that it was very likely to be a non-genuine plate. This was a particularly contentious issue. Other evidence showed that genuine Aristocrat compliance plates could bear hand-engraving.
154 Based on his inspection according to these indicia (we leave aside the matter of hand-engraving), Mr Parsons expressed the opinion that a number of the plates were not genuine Aristocrat compliance plates. The primary judge (at [740]) accepted this evidence. The question of the genuineness of 22 compliance plates seized from the Botany premises was complicated by an allegation that, as with some other physical evidence, the plates had been “planted” by Mr Channa to implicate Mr Allam in wrongdoing. The primary judge (at [740]) rejected Mr Allam’s evidence that Mr Channa had planted those plates. We would add that Mr Channa had also given evidence that he saw Mr Allam printing compliance plates. Ultimately the primary judge appears to have accepted Mr Channa’s evidence in this regard based on the totality of the evidence before the primary judge on this issue: see [750].
155 We are not persuaded that the primary judge was in error in concluding (at [719]) that the Allam respondents manufactured fake compliance plates, some of which were found at the Botany, Bankstown and Georges Hall premises. However, whether those fake compliance plates were made in infringement of copyright is another matter.
156 The primary judge (at [927]) stated that, although he had not been able to conduct a visual comparison of the allegedly infringing compliance plates with the Aristocrat parties’ original (that is, genuine) compliance plates, he inferred that “the elements of resemblance, actual use and causal connection” had been established and that an onus then passed to the Allam parties to rebut the inference of copying. The primary judge found that the Allam parties had failed to discharge that onus.
157 These findings were the focus of challenge by the Allam parties. They submitted that, although the subsistence of copyright had been admitted in certain respects, a finding of infringement could not be made in the absence of all the drawings relating to the various revisions of a pleaded specification being put in evidence. Taking revision E of written design specification 565875 as an example, they pointed to the fact that the only amendment effected by that revision was a change in company name on the compliance plate. They submitted that the only element of originality in the artistic work represented by the drawing in revision E over the artistic work represented by the drawing in revision D (not in evidence) must have been the company name. They submitted that, as no allegedly infringing plate in evidence bore the revised company name, there could be no infringement of the artistic work represented by the drawing in revision E. In short, it could not be said that the only apparently original element of the drawing in that revision had been reproduced in an allegedly infringing compliance plate. They further submitted that, as the drawings in revisions C and D were not in evidence, no safe conclusion could be drawn about the appearance of the plates made in accordance with those revisions, such that an inference of reproduction or substantial reproduction could properly be made for copyright infringement purposes.
158 In our view there is some cogency to those submissions. However, we do not think that they provide a complete answer to the allegation of copyright infringement made in respect of the compliance plates.
159 We start, first, with the fact that each of the appellants had admitted the subsistence of copyright in the compliance plates designated by the codes 560603 and 565875. These are the only pleaded compliance plates in respect of which the Aristocrat parties tendered any evidence concerning their appearance. Even then the question remains whether that evidence, in each case, was sufficient to establish infringement.
160 As we have noted, admissions were made by the appellants that copyright subsisted in the compliance plates bearing those codes. We do not think that their admissions can be read as being qualified by reference to only particular revisions of the specifications in question. This was made clear, in any event, during the course of oral argument on the appeal. It was accepted that copyright was admitted in relation to revisions B and E of written design specification 565875 and revision F of written design specification 560603: see T280 and T279 (20-24). Each of the drawings in those revisions was in evidence. In light of Mr Parsons’ evidence, no meaningful distinction, in terms of appearance, can be made between a particular drawing in a particular written design specification and the particular compliance plates made in accordance with that specification. Furthermore, we do not think it to be a point of substance that the artwork reproducing the drawings and the instructions in each revision are not in evidence. The effect of Mr Parsons’ evidence was that the artwork was simply the vector by which, amongst other things, the drawings in the design specifications were expressed in the compliance plates manufactured in accordance with those specifications.
161 In Exhibit BHP-2 to his affidavit, Mr Parsons compared, photographically, a genuine compliance plate made in accordance with revision B of written design specification 565875 (the evidence refers to written design specification 565785, but our inspection of the relevant drawings shows this to be an obvious typographical error in Mr Parsons’ affidavit) with two seized compliance plates, one designated by the letter “A” and the other designed by the description “Bankstown D”. Significantly, Mr Parsons gave evidence that genuine plates (a photographic example of which was in evidence) varied from revision B in the rendering of the “C-Tick” mark and the use of the numeral 2.8 instead of 5.8. These variations were explained as arising in a particular batch of compliance plates ordered prior to the finalisation of the specification (revision B) and artwork for that compliance plate. These variations were, in fact, errors. A quantity of compliance plates from that batch were fitted to genuine Aristocrat gaming machines and were released into the market prior to the errors being detected. Once the errors had been detected, the remaining stocks of the compliance plates from that batch were destroyed and the specification corrected and finalised.
162 The significance of this evidence lies in the fact that the seized compliance plates designated as “A” and “Bankstown D” contained these very errors. The fact that the two seized compliance plates contained the same errors provides cogent evidence that they were copied from the genuine Aristocrat plates that had been released prior to the detection of the errors in them. We would add that the plates designated “A” and “Bankstown D” were also blank compliance plates and also contained indicia that they were non-genuine. In this connection they exhibited a blue-tinged finish, whereas genuine Aristocrat compliance plates are black. Furthermore, the rendering of the Aristocrat logo on them is noticeably thicker, compared with the rendering of the logo on the photographic example of the genuine compliance plate in evidence. Additionally there are no holes in the seized plates to allow for them to be riveted to a gaming machine. Mr Parsons gave evidence that genuine Aristocrat compliance plates are manufactured with holes to allow for riveting when affixed to a gaming machine. We would add that written design specification 565875 (revision B) specifically shows those holes.
163 We have compared the photograph of the genuine Aristocrat compliance plate with the two seized compliance plates. Our own inspection shows, without question, that the seized compliance plates are a reproduction of, or at the very least a reproduction of a substantial part of, the genuine compliance plate. We are satisfied, therefore, that the evidence establishes the infringement of the copyright in the genuine Aristocrat compliance plate.
164 However, we are not satisfied that the evidence establishes infringement of the copyright in any compliance plate made in accordance with revision E of written design specification 565875 or of any compliance plate made in accordance with revision F of written design specification 560603. Indeed we were not taken to an example of a seized compliance plate said to be an infringement of the copyright in those compliance plates. Mr Parsons’ evidence does not provide any such example.
165 Moreover, on the state of the evidence at trial, we do not think it was open to the primary judge to come to the blanket conclusion to which his Honour apparently came (at [972]) in relation to all pleaded Aristocrat compliance plates. The Aristocrat parties bore the onus of proof in infringement. The evidence they put forward (by reference to some samples, a number of which had not even been pleaded) was, to say the least, inadequate to find any infringement other than in respect of the two instances which we have identified. Although the evidence justified the primary judge’s conclusion (at [719]) that the Allam parties were manufacturing fake Aristocrat compliance plates, it did not follow necessarily that those fake compliance plates were also infringing reproductions of original artistic works in which Australian copyright subsisted. This was a matter of proof by the Aristocrat parties in the absence of any admission by the appellants. It was for the Aristocrat parties to prove their pleaded case. In the present case, this could not be done by reference to “sample” evidence relating to a small number of compliance plates. Nor could it be done by effectively inviting the Court to speculate about the appearance of the artistic works in question when the evidence showed that the compliance plates could have different appearances.
166 Furthermore, evidence that the Allam parties were manufacturing fake compliance plates did not, of itself, place upon them an onus to negative the allegations of copyright infringement that had been pleaded.
167 Accordingly, although the evidence established the two instances of copyright infringement to which we have referred, the primary judge erred in concluding that any wider case of copyright infringement in respect of compliance plates had been established on the evidence.
168 We should state here that we see the case for infringement of the admitted copyright in the Aristocrat game software as turning on different circumstances.
169 As we have recorded in this connection, it has not been suggested that the gaming machines in the impugned transactions were not fully functioning electronic gaming machines running fully functioning Aristocrat game software installed on those machines and supplied by the Global/Impact parties as genuine Aristocrat gaming machines. In a copyright context this meant that the game software was, in each case, an authorised reproduction of Aristocrat game software. No case has been advanced by the appellants that, although supplied as genuine Aristocrat electronic gaming machines, the gaming machines in fact contained, for example, the game software of some other manufacturer or game software that had been written by or for the Global/Impact parties to resemble, in operation, Aristocrat games. On the appellants’ own case, the Global/Impact parties were supplying genuine Aristocrat gaming machines with genuine Aristocrat games software. The issues in this part of the case centred on the apparently anomalous serial numbers of certain gaming machines in certain transactions. The appellants’ case was that the anomalies thrown up by the serial numbers in the impugned DN and MC categories could be explained. The primary judge did not accept those explanations. The question then turned to the significance to be attached to those anomalies in all the circumstances of the case. However, in considering those matters, it was open to the primary judge to infer that the game software in each of the impugned gaming machines was a reproduction of Aristocrat game software. On this basis, the real issue was not whether the game software was a reproduction of Aristocrat game software, but whether those reproductions were licensed reproductions for copyright purposes.
The third, fourth and fifth “essential” propositions
170 The Global/Impact parties challenged the primary judge’s findings (at [720]-[721]) that Messrs Andrews and Cragen were each aware that Mr Allam was burning Aristocrat game software onto blank EPROMs and manufacturing fake or counterfeit compliance plates to be affixed to machines for export to foreign markets. The Global/Impact parties also challenged the primary judge’s finding (at [722]) that Messrs Andrews and Cragen sent, or were aware that the Global/Impact Joint Venture had sent, digital artwork and original artwork to South America for the purpose of having it copied there. The Allam parties supported those challenges.
Primary judge’s reliance on chain of emails
171 It is necessary at this juncture for us to turn to consider the appellants’ challenge to what they described as the primary judge’s reversal of certain rulings on evidence, particularly in relation to the admissibility of, and reliance to be placed on, certain email correspondence. The conclusions reached in respect of that issue bear heavily on the appellants’ challenges to the correctness of the primary judge’s findings represented by the third, fourth and fifth “essential” propositions. The significance of those propositions, and particularly the third and fourth of them, is that they establish the “knowledge” requirement of s 38 of the Copyright Act. The Aristocrat parties’ case on infringement by dealing could not and cannot succeed without that requirement being established with respect to the Global/Impact parties.
172 During the course of submissions before the primary judge, a great deal of time was taken over objections to admissibility of certain emails, both as to the purpose for which they could be admitted, and their relevance to the particularised infringing transactions. On appeal, particular issues in relation to the way in which the email correspondence was used arose. They were:
whether certain emails, held to be admissible only against the respondents from whom they derived under the “usual s 136 ruling” could then be admitted against all respondents (subject to relevance) after the close of evidence; and
whether the primary judge could rely on the contents of the emails to establish the connection between the joint venture and the conduct constituting the alleged copyright infringement.
173 It is apparent that the proceedings concerned serious allegations of wrongful joint activity. In this regard, the primary judge was mindful that he needed to be satisfied to the level of “actual persuasion” and “exactness of proof”, and specifically indicated that he had reached a level of actual persuasion in relation to the claims. His Honour did this on the basis of all the email correspondence relied upon by him as supporting the “essential propositions”. Whether or not s 140 of the Evidence Act has replaced the test in Briginshaw need not be debated in the circumstances of this proceeding. The primary judge clearly proceeded upon the basis that the allegations were serious, and sought to apply the appropriate principle in that regard.
174 Part of the rulings by the primary judge on the contested evidence involved admitting a substantial body of evidence during the trial subject to the “usual s 136 ruling”, meaning that it was admitted as evidence against one or more (but not all) of the respondents. This evidence included documentary evidence (such as the chains of email correspondence relating to the supply of gaming machines to the Latin American region) and other material (such as the CD-Rom Exhibit CCC-14, counterfeit EPROMs and blank compliance plates), which enabled the primary judge to make some “preliminary factual findings”.
175 For the purposes of this appeal, we focus on the email communications relied upon by the primary judge, as these formed an essential part of the reasoning process of the primary judge. It would appear that not all the emails referred to by the primary judge were subject to the usual s 136 ruling, but most of those relied upon by the trial judge as essential to reach the conclusions he did were subject to the usual s 136 ruling.
176 The majority of this evidence is to be found in Exhibit A1. Exhibit A1 was a bundle of documents that were extracted from documents of the Global parties available to the Aristocrat parties in around late 2006, following the initial disputes between the Aristocrat parties and the Global parties. A number of other documents were also tendered as separate exhibits.
177 The Aristocrat parties submitted that many of the email communications contained in Exhibit A1 constituted “instances of unguarded communications that make plain the true nature of the joint venture’s trade (a counterfeiting operation)”. A large number of email communications were extracted and put to the respondents’ witnesses in cross-examination. It is important to appreciate that the emails essential to the primary judge’s reasoning did not relate to any of the transactions the subject of the alleged infringements. This becomes significant when we come to address the relevance of the contents of the emails and the use made of them by the primary judge.
178 It is important to set out briefly the chronology leading up to the s 136 ruling, the basis upon which it was made, and subsequently lifted. In doing so, the purpose for which the parties, and then his Honour, used the evidence will also become apparent.
179 The chronology can be set out as follows.
180 On day one of the trial, the Aristocrat parties’ oral opening made clear they would seek to establish joint liability.
181 The Aristocrat parties said they would ask for evidence (including the email correspondence) to be admitted against all the respondents, pending a ruling on relevance. No reliance was placed upon the provisions of the Evidence Act relating to tendency evidence (see Pt 3.6). On appeal, it was accepted that the evidence was not led pursuant to Pt 3.6 of the Evidence Act. The email correspondence was, however, relevant to establishing the nature and existence of the joint venture and the witnesses’ credit. At the outset, it can be observed that whilst the emails relied upon by the primary judge may have been relevant to the nature and existence of the joint venture and credit, they could not be used to prove the particularised infringing transactions unless they were admitted under Pt 3.6. We will return to this observation later.
182 Each respondent at trial objected to the course proposed by the Aristocrat parties where provenance of the emails did not directly relate to that respondent and instead sought a ruling under s 136, or rejection under s 135 of the Evidence Act.
183 The primary judge then directed that the Aristocrat parties would need to lay a foundation for the joint venture case before evidence could be admitted against all respondents.
184 During the course of the Aristocrat parties’ evidence, the primary judge ruled that “until further order” evidence would be admitted only against the Global/Impact parties and the Allam parties respectively. Senior Counsel for the Aristocrat parties indicated that he would revisit the usual s 136 ruling when appropriate.
185 The primary judge indicated that the usual s 136 ruling was to be adopted as a “standing procedure” throughout the trial and indicated that it was not necessary to seek the ruling every time.
186 No usual s 136 ruling was expressly sought in respect of any evidence adduced in cross-examination from a witness called by the Aristocrat parties, or in respect of any evidence in chief by any of the respondents, or in respect of any cross-examination of any witness called by the respondents at the trial.
187 During the course of the trial, the parties expressly acknowledged the temporal nature of the usual s 136 rulings that would apply “in the first instance”.
188 Eventually, on 20 October 2008, before the close of their case, the Aristocrat parties sought to have their tender bundles, including Exhibit A1, admitted into evidence.
189 The Aristocrat parties provided an index which set out the respondents against whom the Aristocrat parties would seek to have each email admitted on the usual s 136 basis. The Aristocrat parties reminded the respondents before the primary judge that they would seek to tender the evidence against all of them if the joint liability case was established.
190 Again, no reliance was placed upon Pt 3.6 of the Evidence Act, and cross-examination on the emails was based upon credit, or establishing the existence of the joint venture.
191 The respondents made a number of objections as to the relevant respondent against whom the Aristocrat parties sought to tender specific emails. The primary judge ruled on the parties’ objections as the email evidence was sought to be tendered.
192 On day 14 of the trial, on 24 October 2008, Senior Counsel for the Aristocrat parties indicated that the Aristocrat parties’ case had closed, subject to receiving and considering amended defences from the respondents.
193 The hearing was adjourned until 5 March 2009, for the completion of evidence by the Global/Impact parties and for final addresses.
194 On 5 March 2009 a directions hearing was heard. There was no suggestion of re-opening evidence raised by the parties.
195 Thereafter, on 9 March 2009 the evidence of the Global/Impact parties concluded.
196 Between 10 and 13 March 2009, the Allam parties’ evidence was completed.
197 On 10 March 2009, the Global/Impact parties advised that their case was closed (subject to whether Mr Andrews might be required to prove a document further to a notice to produce).
198 Thereafter, on 12 March 2009 there was a further tender of evidence by the Aristocrat parties. The Aristocrat parties then advised that they had completed their case in chief, such as it had remained open.
199 The respondents before the primary judge expressed a desire to have time to analyse the Aristocrat parties’ written submissions in advance of the oral closing submissions.
200 The respondents stated that they wanted to have a clear understanding of the allegations the Aristocrat parties were pursuing, and the evidence in support.
201 The matter was adjourned to the next day, at which time a timetable was set for written submissions in advance of the final oral submissions.
202 The hearing of oral submissions was adjourned for seven weeks. On 19 March 2009, the Aristocrat parties served their written closing submissions.
203 In the written closing submissions of Aristocrat, the Global/Impact parties were characterised as the “Joint Venture”. The Allam parties were characterised as acting as executives of the “Joint Venture” and some respondents were said to be liable for their activities on the usual principle of vicarious liability. The submissions on infringement were framed in terms of the joint venture’s liability, and made no distinction between evidence that was subject to the usual s 136 rulings and that which was not.
204 On 8 April 2009, the Allam parties’ written closing submissions were served. The Allam parties recognised that Aristocrat’s joint enterprise case relied on material from Exhibits A1 and A2 and the email correspondence the subject of the usual s 136 ruling.
205 The Allam parties revealed their position that it was now too late for the Aristocrat parties to make any application to reverse the usual s 136 rulings. Nevertheless, the Allam parties made submissions on evidence that they contended should not have been admitted against them.
206 On 29 April 2009, the Global/Impact parties’ written closing submissions were served.
207 They raised the Aristocrat parties’ entitlement to apply for reversal of the usual s 136 rulings in the same way as the Allam parties had done.
208 On 30 April 2009, Aristocrat applied for a variation of the usual s 136 ruling. The primary judge made the variation and admitted all evidence on a provisional basis subject to relevance.
209 On 5 May 2009, the primary judge made the following orders:
1. All previous orders made pursuant to s 136 of the Evidence Act 1995 that had the effect of limiting the admissibility of evidence (whether by affidavit, oral testimony or documentary tender) against particular respondents while allowing it against other respondents be revoked, subject to their reinstatement by order 3.
2. All evidence whose use was previously limited on the basis that it was only admitted as against particular respondents and not against other respondents be admitted provisionally against all respondents, subject to relevance.
3. To the extent that the Court decides not finally to admit evidence referred to in order 2 above against a party or parties, the admissibility of the evidence against those parties be only in accordance with the previous orders referred to in order 1 above.
210 In his reasons, the primary judge referred to his decision made during the course of the closing submission, as follows:
932 Nor did I consider it was appropriate to exercise my discretion under s 136 to limit the evidence as was sought by the respondents.
933 I was satisfied that evidence which was admitted provisionally was admissible against all the respondents. The case of joint liability was made good for the reasons referred to above.
211 It appears from the transcript of the argument which occurred on 30 April 2009, which led to the order made on 5 May 2009, that the primary judge proceeded on the basis that it was open to him to rule that the disputed documents be admitted against all the respondents “at least provisionally”, and he would rule on admissibility upon giving his final judgment. The primary judge indicated that the documents in dispute only became relevant in relation to any particular respondent if there was “a joint enterprise”. However, it is important to bear in mind, that during the course of the evidence, the primary judge had already, albeit until further order, exercised his discretion under s 136 to limit the use to be made of the evidence.
212 Up until 30 April 2009, the position was as follows:
(a) all the parties knew that an important issue in the proceeding involved the allegation of joint enterprise or conspiracy;
(b) evidence going to prove this was admitted against some respondents but not all, and this was the limitation addressed in the usual s 136 ruling;
(c) the ruling was interlocutory and was expressly made subject to further order;
(d) whatever flexibility the respondents gave the Aristocrat parties in presenting their evidence:
(i) the respondents at all times pressed their reliance on the usual s 136 rulings;
(ii) the parties closed their case on the basis of the usual s 136 rulings still subsisting, so that that the evidence the subject of the ruling was not evidence against all the respondents until the variation was made during the course of final submissions;
(e) cross-examination did occur, without any express limitation on the use that could be made of it, on some of the disputed email evidence, but the Aristocrat parties necessarily had to rely on the content of email correspondence (and other evidence) to prove their claims;
(f) no reliance was placed by the Aristocrat parties on Pt 3.6 of the Evidence Act in relation to the emails that were not related to the particularised infringing transactions.
213 Bearing this in mind, it is important to emphasise that the emails were central to the conclusion reached by the primary judge in three ways. First, they were relevant to the findings about credit. Secondly, they were relevant to findings in relation to the joint venture and to the “tacit agreement” between the parties. Thirdly, they were relevant to the primary judge being satisfied as to “the counterfeiting operation” as alleged (see eg, [768]). As such, without the emails being relied upon by the primary judge, he could not have connected the particularised infringing transactions with the joint venture and “tacit agreement” as to the counterfeiting operations that his Honour found existed.
214 As we have already indicated, the primary judge expressly stated that that the emails were not tendered as proof of the facts stated in them, but nevertheless found the contents of the communication “revealing” (at [321]). His Honour also stated that to a large extent, the emails spoke for themselves (at [325]). It was upon this basis he made certain findings (outlined at [325]-[340]). He did not accept the explanations given about the contents of the emails by various witnesses.
215 To demonstrate the significance of these emails to the reasoning of the primary judge, it is necessary to set out in detail the email chain the subject of the rulings, and the use made of them by the primary judge.
216 There were six email chains in total, all included in Exhibit A1.
217 The first email chain was on 9 and 10 November 2004. The primary judge described it as follows, along with the relevant cross-examination:
274 The next relevant document is an email chain contained in the tender bundle between Mr Andrews, Mr Allam and a Mr Richard Foote dated 9 and 10 November 2004 that was originally tendered against the Global and Tonita respondents.
275 The first email in the chain is from Mr Andrews to Mr Foote and states:
Hi Richard
Just testing your email address – Riad will probabl;y [sic] send me the software later on tonight and I’ll forward it to you then.
276 To this email, Mr Allam replied:
hi toni
[t]his is the new version of wcard bet 50 to suit 1c 2c 5c 10c and20c riad
277 In cross-examination, Mr Cobden put it to Mr Andrews that the “new version of wcard” to which Mr Allam referred was software that was suitable to run an Olympic game called Wildcard Bet 50. Mr Andrews accepted that “wcard” meant “Wildcard”, however refuted the suggestion that the software that had been sent by Mr Allam and that was referred to in the email was an Olympic game, but “was to do with the bill acceptor that was attached to the machine”.
218 The primary judge, in relation to the email chain (and others) made significant findings as follows:
647 Indeed, the answers given by Mr Andrews to questions he was asked about the emails which I have set out at [275], [284], [292], [296], [306], [308], [310] and [319] contain further examples of his untruthfulness.
…
726 The inference to be drawn from the relevant email correspondence referred to above is that the Tonita respondents sent the pirated Aristocrat software to South America for use in the South American market: see [275], [276], [284], [286], [295], [296], [312], [316].
…
751 It is clear, in my view, from the email correspondence that Mr Andrews and Mr Cragen were aware of the fact that Mr Allam was burning Aristocrat game software onto blank EPROMs. I reject their explanations of the emails.
752 The relevant emails are those set out at [275], [284], [286], [295], [296], [312] and [316].
219 The second email chain was on 12 and 15 November 2004. The primary judge described it as follows along with the relevant cross-examination:
278 The next relevant document is an email chain dated 12 and 15 November 2004 between Mr Andrews and a Mr Kirill Mendelson, a customer of the Joint Venture who had purchased a large quantity of gaming machines for sale in the Russian market. The subject line of the emails is “Manufacturers Plates”, which Mr Andrews acknowledged in cross-examination referred to compliance plates.
279 The most relevant part of the email chain is a part of an email from Mr Andrews to Mr Mendelson, copied to Mr Cragen, as follows:
Hi Kirill
I can organise the manufacturers plates for you as per your discussions with George.
I need to let me know [sic] the exact information you want on the plates as follows
Mark 6
Date of Manufacture – do you want them all made in the same year or do they have to be a month and year
Serial Numbers – (is there a set serial number you need to use for each machine as per the import you have made or can they be random that we think up or can they be running numbers
…
You can use the XAW5…….series which is normally used by Aristocrat for their conversions of MVPs to Mark 6 or if they are an original Mark 6 then the series of serial numbers will be XAW6…………etc.
Please let me know what you want and we will sort it out for you.
280 This document was originally tendered against the Global and Impact respondents.
281 Mr Cragen accepted that this email resulted from a discussion between himself and Mr Mendelson. Mr Cragen strongly denied in cross-examination that in the discussion, Mr Mendelson had asked him to make up fake Aristocrat compliance plates. He said that Mr Mendelson had indicated that he was willing to purchase the entire Uruguay shipment for sale in Russia, and wanted two sample machines to be sent to him beforehand. Mr Cragen said that he believed that Mr Andrews’ email was a reference to the possibility of sending leftover compliance plates from Sydney on the sample machines, or using the numbers that were on leftover compliance plates that had been removed from stripped machines.
282 The email was also put to Mr Andrews in cross-examination. Mr Andrews did not accept that the email was an offer from him to arrange to have compliance plates made and have serial numbers placed on them. Mr Andrews stated that in the email, he was offering to procure original compliance plates for Mr Mendelson that had been taken off gaming machines. He said that if Mr Mendelson provided him with the information that he required on compliance plates, he (Mr Andrews) would be able to source compliance plates that contained that information from his supply of compliance plates that had come off original machines and that were kept in bins at the Botany Premises. If Mr Andrews was unable to source compliance plates containing the particular information that Mr Mendelson wanted, he said that he would have “gone back and said I can’t supply that”.
220 The primary judge then made these findings:
331 …, Mr Andrews offered to arrange for Aristocrat compliance plates with fake serial numbers to be made for a customer of the Global/Impact Joint Venture. He did so following a conversation between Mr Cragen and the customer about the supply of gaming machines.
332 This is quite clear from the email chain of 12 and 15 November 2004 and, in particular, from the extract set out at [279]. Mr Cragen accepted that the email resulted from a discussion between himself and the customer. I am inclined to accept Mr Cragen’s denial that the customer, Mr Mendelson, asked him to make up fake Aristocrat compliance plates, but I do not consider that he gave me a truthful account of the conversation which took place.
333 The inference I would draw from the email communication, and from Mr Cragen’s concession that a discussion took place, is that he discussed the topic of the compliance plates with Mr Mendelson and that he would leave it to Mr Andrews to contact Mr Mendelson about it.
334 Implicit in this is, at very least, the acceptance by Mr Cragen that the Global/Impact Joint Venture was prepared to supply gaming machines with false Aristocrat compliance plates.
…
642 There were other examples of prevarication by Mr Andrews. One was his refusal to accept that the email which I have set out at [279] was an offer to have compliance plates made up with fake serial numbers placed on them.
…
744 This is supported by the evidence contained in the emails and the inferences to be drawn from them. The clearest example is the email from Mr Andrews to Mr Mendelson and Mr Cragen set out at [279].
745 In that email Mr Andrews said he could organise the “manufacturers plates” for Mr Mendelson. It is plain that this was an offer to manufacture counterfeit compliance plates.
…
753 In my opinion, Mr Andrews and Mr Cragen were aware that Mr Allam was manufacturing counterfeit compliance plates for export to foreign markets.
754 That is precisely what Mr Andrews told Mr Mendelson that he could organise in the email set out at [279]. The email was copied to Mr Cragen.
755 Whilst I am prepared to accept Mr Cragen’s denial that Mr Mendelson asked him to make up fake Aristocrat compliance plates, I reject his explanation of the email: see [281].
756 In my opinion, the email was sufficiently clear on its face to reveal what Mr Andrews had in mind. Mr Cragen’s suggestion that the email referred to the use of leftover compliance plates from sample or stripped machines is not consistent with Mr Andrews’ statements, in particular “can they be random that we think up”.
…
869 The more probable explanation, in line with the business communications of the respondents recorded above and in particular the email set out at [279], is that Mr Andrews selected serial numbers to go on compliance plates that he knew would pass an inspection. It is for this reason that various serial numbers were duplicated on one or more invoice issued by the respondents.
…
879 I am satisfied that 11 of the 54 impugned transactions comprised gaming machines which contained infringing components of the Aristocrat companies’ gaming machines. Four of these transactions fell into the “MC” category, namely transactions 34, 36, 48 and 54. Seven of the transactions fell into the “DN” category, namely transactions 13, 20, 28, 29, 41, 46 and 51.
…
748 The emails at [279] and [289] were initially admitted only against the Global/Impact respondents but I subsequently admitted them provisionally against all the respondents. In my view, the emails were probative evidence against the Tonita respondents when considered in the light of the counterfeit compliance plates seized from the Bankstown, Georges Hall and Botany Premises and from the revelation that Mr Allam had a hand engraver.
221 The third email chain occurred on 18 November 2004. The primary judge described it as follows:
283 The next document is an email chain between a Mr Kevin Hirst, who was involved with Huricane, Mr Andrews and Mr Allam. The email chain is dated 18 November 2004 and was initially tendered against the Global and Tonita respondents.
284 In an email to Mr Andrews, Mr Hirst indicated that he was waiting for a “complete set of game Roms [sic]”. He continued:
Riad has sent only 2 color proms and both of them are blank files So he has either mis read the prom or has a defective ones.
With regard to the EPROM size the ones in the games that we have erased are 16 times the size of the files that Riad has sent for the Low res games and will require about 1-2 days to convert the Files there are 42 files involved that will require modification and I am not certain that we have all the ROMs for all the games. [sic]
285 Mr Andrews acknowledged in cross-examination that he understood this email to be a reference to a misread EPROM, that is to say that there was a mistake when copying an EPROM. However, he denied that the email referred to the exercise of copying game EPROMs on to a computer by Huricane.
286 In response to the above email, Mr Allam replied by email in the same email chain as follows:
If Kevin requires the games that I sent to him by mail, I still have the complete set of games on eprom. If he wants then I will send the games to him tomorrow by mail (express post).
Thanks
Riad
287 In cross-examination, Mr Allam denied that he had ready access to games such that he would be able to mail them immediately because he kept a master copy of the games.
222 The primary judge then made the following findings:
367 An example of this may be found in the email conversations to which I have referred above. The email referred to at [279] contains an offer by Mr Andrews to make compliance plates with false numbers. Mr Allam was the “technical guy” for the Joint Venture and it is therefore likely that he would have carried out that work. Other emails, such as those at [284] and [312], suggest that Mr Allam burned Aristocrat games onto blank EPROMs.
…
647 Indeed, the answers given by Mr Andrews to questions he was asked about the emails which I have set out at [275], [284], [292], [296], [306], [308], [310] and [319] contain further examples of his untruthfulness.
…
751 It is clear, in my view, from the email correspondence that Mr Andrews and Mr Cragen were aware of the fact that Mr Allam was burning Aristocrat game software onto blank EPROMs. I reject their explanations of the emails.
…
726 The inference to be drawn from the relevant email correspondence referred to above is that the Tonita respondents sent the pirated Aristocrat software to South America for use in the South American market: see [275], [276], [284], [286], [295], [296], [312], [316].
…
768 Moreover, the email correspondence to which I have referred at some length makes it plain that the Global and Impact respondents sanctioned, approved or countenanced the infringements of copyright carried out by the Tonita respondents: see [284]ff. Indeed, whilst there was no joint venture between the Tonita respondents and the other respondents to the proceedings, there was, in my view, something in the nature of concerted action or agreed common action; it was not necessary for the Aristocrat companies to prove an express plan mapped out by the primary offenders. The evidence more than sufficiently establishes “tacit agreement” between the parties: see Universal Music v Cooper at [135].
223 The fourth email chain occurred between 17 and 19 February 2005. The primary judge described the email chain as follows:
288 The next relevant document is an email chain between Mr Andrews and Mr Mendelson (copied to Mr Cragen) with the subject “Atronic”. The emails are dated 17, 18 and 19 February 2005 and were originally tendered against the Global respondents only. There are several relevant parts within the chain of emails.
289 First, in an email to Mr Mendelson, Mr Andrews says:
Hi Kirill
Re the Atronic shipment …
I have been advised that the plates that were to be put on the machines dont have the Atronic logos and I’m trying to get a list of the serial numbers by COB this afternoon so that I can get Riad to make them up by Tuesday next week and I’ll take them to Melbourne with me for fitting on the machines. …
I need some dummy invoices made up for say 80 machines and 50 machines by that date …
[D]id you fix up the last lot of freight … or is this being held pending the recent problems with the incorrect plates / serial numbers for the shipment of 119?
290 When questioned on this part of the email, Mr Andrews conceded that it was possible that the email was a reference to Mr Allam making up or engraving some compliance plates for the “Atronic” machines, a set of gaming machines that had been purchased from Tabcorp. Mr Andrews gave evidence that because of the way the machines were manufactured, and the practice of the Victorian gaming industry, it was necessary to arrange for the manufacture of additional compliance plates for the Atronic machines.
291 The second relevant part of the email chain is in the reply to Mr Andrews’ email from Mr Mendelson as follows:
Please make sure that the tags are attended to and for a change we have the right ones attached.
Mr Andrews indicated that he believed that the reference to “tags” in this email was to compliance plates.
292 Mr Andrews then replied to Mr Mendelson as follows:
Hi Kirill
Is there any particular year of manufacture you want on the plates or do you want me to just go with the series of dates within the numbers of the ones that have passed before (I should be able to get close based on previous lists) or do you want to nominate dates.
293 Mr Andrews acknowledged that this email was a reference to engraving on blank compliance plates the year of manufacture and serial numbers that suited Mr Mendelson, however he denied that this involved using serial numbers that were on existing lists obtained from Tabcorp because those number had been accepted by regulatory authorities in the past. He explained the practice of engraving compliance plates for the Atronic machines by reference to the Victorian gaming system, which involved putting two sets of serial numbers on compliance plates.
224 The primary judge then made the following findings:
647 Indeed, the answers given by Mr Andrews to questions he was asked about the emails which I have set out at [275], [284], [292], [296], [306], [308], [310] and [319] contain further examples of his untruthfulness.
…
747 … there was other evidence from which it is to be inferred that Mr Andrews was to make up a set of compliance plates, albeit for machines manufactured by a different gaming machine manufacturer: see [289].
748 The emails at [279] and [289] were initially admitted only against the Global/Impact respondents but I subsequently admitted them provisionally against all the respondents. In my view, the emails were probative evidence against the Tonita respondents when considered in the light of the counterfeit compliance plates seized from the Bankstown, Georges Hall and Botany Premises and from the revelation that Mr Allam had a hand engraver.
225 The fifth email chain occurred between 21 and 25 October 2005. The primary judge described this chain as follows:
306 The next relevant communications are two email chains between Mr Andrews, Mr Vladimir Trajkovski, Mr Andres Kan and Mr Cragen dated 21 and 25 October 2005. The emails relate to machines that formed part of the Uruguay transaction. The first email chain contained an email from Mr Andrews as follows:
Hi Vladimir
What has happened to all the original artwork we sent down to you for projects – I thought you were supposed to keep these and return them to us here?
…
If we cant get the originals back then we will have to charge the group for these sets of artwork which have a value in the local market place here of arouns$1000. [sic]
I cant believe we are sending more of the same gear down there when I was fairly sure that we had made it very plain that we were to have all the originals returned to us.
307 In cross-examination, Mr Andrews denied that the implication to be drawn from this email was that he had sent original artwork to Vladimir with the intention that it would be copied in South America, the copies distributed for sale, and the original returned to him in Australia. He said that the reference to sending artwork back was meant to convey that the surplus that was not used in the project was to be sent back to him in Australia. Mr Cragen also denied any understanding that Mr Trajkovski was borrowing the artworks with an intention of copying them.
308 The second email chain contained another email from Mr Andrews as follows:
Hi Vladimir
…
2/ I have attached a full list of all the original artwork sent – This was given to you / Dante with the instructions that these were to be returned to us here as each one has a value in this market place.
So I need to know
…
c) Original artwork was given to Tony Nuevo and this was again given with instructions for their return to us here …
309 Mr Andrews again denied in cross-examination that this email was a reference to sending artworks to Mr Trajkovski, all of which he expected to be returned to him in Australia.
310 Following this email in the chain was an earlier email that had been sent by Mr Trajkovski to Mr Andrews. The relevant part is as follows:
3. Original artwork, it was sent to us in the last seconds prior to shipping to install them in the machines to Macedonia as we did not have any graphics (what Riad sent was partial) and those where [sic] only 3 or 4 games if I remember well, we did not have time to take copies. But all of this was talked on the phone with you and Riad.
311 In relation to this email, Mr Andrews denied that he understood Mr Trajkovski to mean that he had to use some original artworks, because contrary to the understanding he had with Mr Andrews to make copies of the artwork and send the originals back, he did not make the copies. Mr Cragen also denied that he understood this explanation to be the case at the time that Mr Trajkovski had sent the email, but conceded that when he read the email now, that may be a possible interpretation.
226 The primary judge then made the following findings:
322 I reject the explanations given in cross-examination by each of Mr Andrews, Mr Cragen and Mr Allam. The explanations were, in my view, quite unconvincing and were at odds with the terms of the communications which were, themselves, reasonably clear on the face of the documents.
…
329 There were other offers to the same effect, including the email chain dated 21 and 25 October 2005, and a request from South America for artwork to be translated into Spanish: see email of 10 November 2005.
330 The email chain of 21 and 25 October 2005 is an example of Mr Cragen’s tacit acceptance of the Joint Venture’s role in the South American counterfeiting operations.
…
647 Indeed, the answers given by Mr Andrews to questions he was asked about the emails which I have set out at [275], [284], [292], [296], [306], [308], [310] and [319] contain further examples of his untruthfulness.
…
660 The second example is Mr Cragen’s attempt to explain the email set out at [306]. This was an email from Mr Andrews to Mr Trajkovski about the failure to return original artwork.
661 Mr Cobden put to Mr Cragen that the intention at the time was to send the original artwork to South America for the purpose of having it copied and then returned. Mr Cragen said initially that he did not know; he then said he did not believe that was the intention. Next he tried to explain the difficulty away by saying “but [Mr Trajkovski] kept them” and “didn’t pay for them”.
662 Eventually Mr Cragen conceded that his intention and understanding of the plan was that Mr Trajkovski would borrow the artwork and return it. He went so far as conceding that Mr Trajkovski may have had the intention to copy the artwork, but Mr Cragen refused to concede that he knew the plan to be for Mr Trajkovski to do so.
…
760 Other emails sent after the establishment of the Global/Impact Joint Venture show that both Mr Andrews and Mr Cragen were aware that Aristocrat artwork was sent by them to South America for the purpose of copying.
761 This can be seen in the email set out at [306] from Mr Andrews in which he asked Mr Trajkovski what had happened to the original artwork “we sent”. I reject the denials given in evidence by Mr Andrews and Mr Cragen that the implication from the email was that the artwork had been sent to Mr Trajkovski to be copied and returned: see [307].
227 Finally, the sixth email chain was on 10 April 2005. The primary judge described it as follows:
314 The next relevant document is an email from Mr Andrews to Mr Trajkovski and Mr Cragen dated 10 April 2005 which states in relevant part:
In future all correspondence regarding the Uruguay project and any other sensitive subject such as parts etc for this project etc is to be sent to the following address
kgbird1947@yahoo.com.au
315 The Aristocrat companies submit that this email, and Mr Andrews’ use of a web-based “and therefore untraceable” Yahoo email address, was evidence of the adoption of protocols to avoid detection of infringing activities. Mr Andrews denied that this was the purpose of adopting a web-based email address, and also denied any connection between the adoption of this email address and the discovery that Anton Piller raids were being carried out in the Vidtech proceedings. The email was also put to Mr Cragen, who said that he did not recall having received it.
228 The primary judge then found:
339 I accept that Mr Andrews adopted protocols to avoid detection of the Global/Impact Joint Venture’s involvement in copyright infringement, in particular the adoption of a web-based, Yahoo email address.
340 Although there are other innocent explanations which could have been given for the adoption of this course, Mr Andrews’ email of 10 April 2005 was written shortly after an Anton Piller raid on a business associate of his, Mr David Parry: see Aristocrat Technologies Australia Pty Ltd v Vidtech Gaming Services Pty Ltd (2006) 68 IPR 229. I cannot accept that it was mere coincidence that the adoption of the Yahoo email address and the sending of the email set out in [314] by Mr Andrews corresponded with the raids on Mr Parry’s premises.
229 The significance of the content of the emails to the findings of the primary judge is apparent from the above descriptions and actual findings. Some findings arose from the accumulative impression created by the totality of the emails. It is clear from his Honour’s reasoning that he relied on the content of the emails. Contrary to the submission of the Aristocrat parties, it is difficult to see how it can be said that the emails did become evidence of the truth of their contents through the cross-examination as, in the main, the primary judge rejected the evidence of the witnesses under cross-examination. The primary judge, as he expressly stated, clearly treated the emails as speaking for themselves. Further, the primary judge could only have done this on the basis of the contents of the emails themselves, not by reference to evidence adduced in cross-examination. Further it was apparent throughout the trial that the email correspondence referred to above was admitted on a limited basis, and this did not change by reason of the cross-examination.
230 Returning to the first issue that arose in relation to the evidence, by the time the application was made to vary the usual s 136 ruling, the evidence had closed. The effect of the variation was to lead evidence against all the respondents whereas before it was only led against specific respondents. Until the variation order they did not need to respond to it in an evidentiary way.
231 The real question was whether, on 30 April 2009, and at that stage of the proceedings, Aristocrat should have been allowed to effectively re-open the case, after the close of evidence. There are a number of matters to consider in that context, and it involves an exercise of discretion – see eg, Urban Transport Authority of NSW v Nweiser (1992) 28 NSWLR 471 at 478D per Clarke JA with whom Mahoney and Moagher JJA agreed; Daniel v State of Western Australia (2004) 138 FCR 254 at [67] and [68]; and generally The Movie Network Channels Pty Ltd v Optus Vision Pty Ltd [2009] NSWSC 132 and BMG Poseidon Corp Pty Ltd v Adelaide Bank Ltd [2009] FCA 389.
232 Undoubtedly, the trial judge purported to consider the prejudice to the parties and procedural fairness. However, the learned judge did not consider the overall interests of justice, and he did not consider the matter as effectively re-opening the case. In his reasons for judgment the primary judge seemed to suggest that he had not exercised his discretion under s 136, when in fact during the trial he had done so, and had later reversed that decision during closing submissions.
233 All parties to litigation are entitled to the benefit of the “opportunity of informed and reasonably contemporaneous assessment of relevant evidence and issues so that, with the benefit of contemporaneity, choices can rationally be made in the conduct of such an expensive and difficult endeavour as litigation”: see Gambro Pty Ltd v Fresenius Medical Care Australia Pty Ltd [2004] FCA 1025 at [21] per Allsop J.
234 The Aristocrat parties charted their own course. It may have been anticipated a variation to the usual s 136 ruling could be made after the cross-examination of opposing witnesses, but not at the time of final submissions when the course of evidence had been well completed.
235 The primary judge failed to appreciate the real nature of the application made by the Aristocrat parties on 30 April 2011 to vary the usual s 136 ruling. As we have indicated, it was to re-open the case of the Aristocrat parties. However, to allow the emails to be introduced as evidence against respondents who had not been required to respond in any way to the email evidence, even if tendered for what their contents revealed against other respondents, was to put the respondents in an unsatisfactory position.
236 This was a strongly contested proceeding, and each party was in a position to know and adhere to the rules of evidence and procedure to be applied. If the emails had been tendered against a particular respondent prior to 30 April 2009, then in a case of this complexity, a different course may well have been adopted by the respondent in question. It is important again to appreciate that by the usual s 136 ruling the evidence covered by that order was not admitted against certain respondents, even provisionally. The variation that occurred on 30 April 2009 during the course of the final addresses was to admit the evidence against all respondents, albeit provisionally subject to relevance.
237 Therefore, the position of the respondents was that on 30 April 2009 they were confronted with different evidence upon which to make submissions as to liability and relevance.
238 We do not think it was incumbent on any respondent to consider whether to re-open its or his case. The Aristocrat parties’ case was completed, cross-examination undertaken and responsive evidence led by the respondents as necessary during the course of the trial. Of course, the Aristocrat parties were entitled to lead evidence as to the alleged infringing transactions and the joint venture activities, but that evidence needed to be put before the Court, subject to specific agreement by the respondents, before the case was completed. The proper course to have followed was for the evidence to be admitted provisionally at the outset against all the respondents, and then for it to have been considered in submissions. In this proceeding, it was too late to admit the evidence during closing submissions, as it was, even on a provisional basis.
239 Putting aside the s 136 ruling and turning to the second evidentiary issue that arose, we conclude that the chain of emails should not have been relied upon by the primary judge to reach the conclusion that the infringing transactions occurred as alleged by the Aristocrat parties.
240 At this point, it must be reiterated that the applicants’ case at trial was primarily based on circumstantial evidence which the applicants sought to relate to a number of transactions in which some or all of the respondents were said to have exported counterfeit gaming machines to Latin America. A second critical point to note is that the significant emails tendered did not relate to the alleged infringing transactions. So in themselves, these emails could have had no relevance to proving that the alleged transactions occurred. However, they could have use in discrediting witnesses or proving the existence of a joint venture. This appears to be the way in which they were used by the parties.
241 The primary judge accepted that the emails were not tendered as proof of the facts stated in them. It seems that the emails were tendered without express qualification at the time of their tender. Nevertheless, we consider that the primary judge did treat the contents of the chain of emails as supporting more than just the existence of the joint venture, or as going beyond being only relevant to credit. The primary judge necessarily had to connect the particularised infringing transactions with the joint venture. The only way that he could have made this connection was to draw the inference from the contents of the emails that the respondents had the tendency to act in a particular way, that is, engage in the alleged infringing transactions.
242 The admissibility of tendency evidence is tightly regulated by Pt 3.6 of the Evidence Act. Tendency evidence is evidence of “character, reputation or conduct of a person, or a tendency that a person has or had… to act in a particular way, or to have a particular state of mind”: s 97(1) of the Evidence Act. There are specific dangers in treating evidence of tendency as being probative of the occurrence of a fact in issue. In this respect, Pt 3.6 contains a number of safeguards to limit the potential misuse of tendency evidence.
243 Under s 97(1)(a), if a party seeks to adduce tendency evidence, that party must give reasonable notice to the other party that they intend to do so. Under s 97(1)(b), the Court will only admit that evidence if it has “significant probative value”. However, the threshold requirement of notice was not given at trial; the Aristocrat parties did not seek to use the emails as evidence that the respondents at trial had a tendency to engage in the infringing conduct. On appeal, it was confirmed that the parties did not seek to rely on Pt 3.6 of the Evidence Act.
244 Whilst the emails were admitted into evidence for other purposes (namely credit, and evidence of the joint venture) Pt 3.6 guards against the evidence being admitted to show a tendency even if the evidence has a dual purpose (for example, it is also relevant and admissible to proving the existence of a joint venture): see s 95. This is to be contrasted with other provisions of the Evidence Act relating to hearsay evidence, whereby if hearsay evidence has a non-hearsay purpose (for example, is also relevant to credit) it can be admitted for its hearsay purpose: s 60. The primary judge was right in saying that he should not rely on the contents of the emails for the truth of their contents, but fell into error in doing just that in relying upon evidence that did not relate to the particularised infringing transactions. Used in this way, the evidence in the emails could show nothing more than a tendency on the part of the respondents at trial to engage in infringing transactions.
245 The error the primary judge made was to treat the chain of emails as being able to prove the particularised infringing transactions, and to use the contents of the emails to demonstrate the connection with the particularised infringing transactions with the joint activity. Without the chain of emails, the primary judge could not have found such connection to the infringements as alleged.
246 Therefore, the findings of the primary judge in relation to the third, fourth and fifth “essential propositions” cannot be supported, and the Aristocrat parties fail to prove the alleged infringing transactions, even accepting proof of a joint venture. Looking at the primary judge’s findings in relation to these propositions they extensively relied upon the chain of emails – see [751] to [752], [754] to [756], and [757] to [762]. No attempt was made by the Aristocrat parties before the primary judge or before us to prove the “essential propositions” without reference to the emails relied upon by the primary judge. It seems to be accepted that without reliance upon the emails, the third, fourth and fifth “essential propositions” cannot be supported, and the case brought by Aristocrat must fail.
247 In light of our conclusions in respect of the correctness of the primary judge’s findings in relation to the third, fourth and fifth “essential” propositions, the appeals must be allowed.
248 On the assumption that the primary judge was correct in using the emails in the way he did in making the findings represented by the third, fourth and fifth “essential” propositions (such that the “knowledge” requirement of s 38 of the Copyright Act was established), and in deference to the substantial arguments of the parties, we proceed to consider and determine the remaining issues on appeal.
249 We commence by considering some aspects of detail concerning the transactions found by the primary judge to have constituted an infringement of copyright under s 38 of the Copyright Act.
250 By 31 July 2008 the Aristocrat parties’ case on copyright infringement was pleaded in an Amended Consolidated Statement of Claim and Amended Particulars of Amended Consolidated Statement of Claim (the Particulars). The Particulars comprised 100 pages including extensive spreadsheets (identified as Annexures A and B) containing tables detailing a large number of transactions. This detail included the identification, by name, of the persons alleged by the Aristocrat parties to be the participants in each of the infringing transactions.
251 It is clear from the Particulars that the Aristocrat parties were alleging that the Global parties and then the Global/Impact parties were involved in business ventures in which they manufactured and sold counterfeit and used Aristocrat gaming machines. In other words, the Particulars acknowledged that not all transactions entered into by the Global or the Global/Impact parties involved infringements of copyright.
252 The body of the Particulars refers to the tables and makes clear that particular transactions colour-coded in yellow, red and orange in the tables were alleged to involve infringements of Aristocrat’s copyright. According to the Particulars, the different colours denoted different groupings of infringements based on the nature of the copyright subject matter alleged to have been infringed in the listed transactions. The significance of this observation lies in the fact that a great many of the transactions identified in the tables to the Particulars did not feature any colour-coding at all. Even within transactions featuring colour-coding, not all the gaming machines involved in those transactions were identified by colour-coding.
253 On one view of things this particular presentation of Aristocrat’s allegations might be seen to be consistent with the fact that Aristocrat had acknowledged that the business ventures involving Global and then the Global/Impact parties involved both the supply of gaming machines that infringed copyright under s 38 of the Copyright Act, and used or refurbished gaming machines that did not infringe copyright. If so, it might be argued, as the appellants sought to do, that the Aristocrat parties advanced a case that it was only the gaming machines that were colour-coded in the tables to the Particulars that were involved in infringing transactions. We do not think, however, that such an argument can be sustained.
254 As we have noted, the tables to the Particulars do contain a column identifying which or who of the Global parties, Impact parties or Allam parties were alleged by Aristocrat to be participants in the infringements. This column is populated with names in relation to all transactions, whether or not there is colour-coding within those transactions. This indicates that all transactions identified in the tables were relied upon by the Aristocrat parties as constituting infringements of copyright. Indeed, viewed objectively, it seems to us that this is the only sensible way to read the tables to the Particulars. There would be no point in including the other, non-colour-coded transactions in the tables, and identifying the participants in those transactions as, specifically, “participants in infringements”, if the Aristocrat parties were not making such a claim.
255 There is a further matter to which we must refer in this regard. In their written outline of opening submissions before the primary judge, the Aristocrat parties referred to red, orange and yellow colour-coding as denoting the circumstances from which it could be inferred that the designated gaming machines were part of transactions that constituted infringements under s 38 of the Copyright Act. The Aristocrat parties submitted that red colour-coding identified serial numbers attributed to Aristocrat gaming machines that were not serial numbers recorded in their databases; orange colour-coding identified serial numbers of gaming machines sold by the Global/Impact parties to customers in Latin America when the records of the New South Wales regulatory authority, the OLGR, indicated that gaming machines with those serial numbers were still located at a venue in New South Wales; and that yellow colour-coding identified the supply by the Global/Impact parties of gaming machines with games different to those last recorded by the OLGR as installed on a gaming machine in New South Wales with the same serial number.
256 The Aristocrat parties submitted in their opening submissions before the primary judge that these colour-coded categories of gaming machines supplied by the Global/Impact parties “raised very real inferences as to the likelihood of the games being counterfeit” such as to require those parties and the Allam parties “to rebut” that inference. Importantly, however, this part of the Aristocrat parties’ opening submissions was directed to certain working sheets exhibited to an affidavit made by Shelley Maree Gardner, a solicitor employed by the solicitors for the Aristocrat parties, and not to the tables in the Particulars, although the primary judge (at [540]) appears to have treated them as having been so directed. In fact the tables to the Particulars are shown to be sourced from an affidavit made by Michael John Cooley, also a solicitor employed by the solicitors for the Aristocrat parties.
257 On appeal, the parties did not attempt to explain the relationship between Ms Gardner’s working sheets and Mr Cooley’s tables, although, in each case, they appear to be derived from invoices and other commercial documents seized under Court process from the Global and Impact parties.
258 In the course of their submissions on appeal, the Global/Impact parties seemed to suggest that the colour-coding referred to in the opening submissions of the Aristocrat parties before the primary judge was the same as the colour-coding in the tables to the Particulars. However, reference to paragraph 67A of the Particulars shows that this cannot be the case. The colour-coding in Ms Gardner’s working sheets and the colour-coding in the tables to the Particulars are directed to distinctly different matters.
259 In an affidavit made on 12 August 2008 Mr Andrews exhibited a 554 page schedule (GGS4) dealing with each of the transactions the subject of Ms Gardner’s working sheets. Where particular gaming machines (identified by reference to serial number) were not colour-coded in the working sheets, Mr Andrews provided the following observation: “No comment required. The Applicants do not allege that this EGM is illegitimate”. Despite this observation, other information in relation to each transaction was provided. For example, in relation to a transaction in which Altagracia SRL is identified as the customer (later referred to as transaction 13, see below), Mr Andrews said that the invoice issued in respect of that transaction was an interim invoice and that the transaction did not proceed, the machines later being supplied to another customer, about whom he also gave evidence. Similarly, in relation to a transaction in which Alexis Ophthalmic Services Pty is identified as a customer (later referred to as transaction 20, see below), Mr Andrews said that the invoice issued in respect of that transaction was also an interim invoice that was replaced by another invoice issued to a different customer. Mr Andrews followed this process in relation to all the transactions identified by Ms Gardner. Thus Mr Andrews specifically addressed the question of the apparent duplication of serial numbers with respect to gaming machines identified in multiple commercial documents issued by the Global/Impact parties. Mr Andrews’ evidence was not, however, limited to the issue of duplicated serial numbers. He gave evidence that the serial numbers of certain gaming machines supplied by the Global/Impact parties had been erroneously recorded in a number of the commercial documents issued by those parties. He sought to explain those errors. He also sought to explain the background to the transactions in question.
260 One matter of present significance is that, through Mr Andrews, the Global/Impact parties advanced a positive case in relation to each of the transactions identified in Ms Gardner’s working sheets. However, his evidence in that regard was not limited to the particular issues raised by the colour-coding in those sheets.
261 Another matter of significance is that each of these transactions is one specifically identified in the tables to the Particulars as an infringing transaction involving one or more of the appellants as participants.
262 There is a further matter of detail to which we should refer. In final written submissions at trial the Aristocrat parties identified the transactions relied upon for the purposes of infringement under s 38 of the Copyright Act by a specific transaction number. The primary judge used these transaction numbers as a point of reference. However, his Honour was not assisted by the fact that these specific transaction numbers found no corresponding reference in the detailed particulars that had been provided.
263 During the course of submissions at trial, the primary judge was provided with a table that categorised the specifically numbered transactions according to the five categories to which we have referred (that is, “MC”, “DM”, “GC”, “II” and “NG”). This categorisation was a point of contention by the time the appellants (as the respondents at trial) prepared their written submissions in response. They submitted that many transactions claimed as infringements by dealing had not been particularised and that the Particulars did not in any event particularise infringements based on duplicated serial numbers.
264 In our view there is no substance to that complaint. The tables to the Particulars did not confine the identified alleged infringing transactions to ones falling within or conforming to particular categories, and the Aristocrat parties were not limited to any such case. They were free to rely on the whole of the evidence that had been properly admitted against the respective appellants or otherwise adduced by the appellants in their respective defences of the allegations that had been pleaded and particularised.
265 Having made these general observations we now turn to consider the case on appeal in relation to the two categories of transactions in which the primary judge found infringements to have occurred. In undertaking this task it must be borne in mind that the primary judge’s findings in respect of each transaction within the two categories were made against the background of the five essential propositions earlier found by his Honour.
266 The DN category describes transactions (namely, transactions 13, 20, 28, 29, 41, 46 and 51) where the Global/Impact parties issued invoices for gaming machines in which the serial numbers were the same as serial numbers on machines which had already been shipped by them in earlier transactions. The Aristocrat parties invited the Court to infer that these transactions represented dealings made in infringement of s 38 of the Copyright Act.
267 In each case the Global parties submitted that Aristocrat’s case was based on the presence of duplicate numbers appearing on invoices that had been superseded. In short, the invoices relied upon as evidencing these transactions related to transactions that did not proceed and thus did not represent machines that were ultimately shipped.
268 Mr Andrews had given evidence that it was his usual practice to send proforma invoices to clients before sending the final commercial invoice. However, only transaction 13 in this category concerned an invoice which was described, on its face, as a proforma invoice. Each of the invoices in the other transactions in this category was described on its face as a “commercial invoice” or a “commercial invoice and packing list”.
269 It is necessary to descend to the detail of the evidence and the submissions made to the primary judge in order to understand the submissions that came to be made on appeal in relation to his Honour’s findings.
270 Transaction 13 is evidenced by Invoice 363 to Altagracia SRL. As we have noted, this invoice was described as a proforma invoice. The invoice was dated 17 July 2002. It was in respect of 10 Aristocrat gaming machines. The serial numbers of the machines were recorded on the invoice.
271 Mr Andrews gave evidence that this was an “interim invoice”; that the transaction did not proceed; and that the gaming machines were later shipped under Invoice 360 to a customer called Play King SA.
272 The difficulty with this explanation is that Invoice 360 showed that the sale to Play King SA took place on 14 July 2002. Given the Global parties’ case that the transaction to Play King SA was a genuine transaction, the explanation in respect of Invoice 363 could not have been correct; the same machines could not have been sold twice.
273 The primary judge accepted (at [869]) that this transaction involved the use of duplicated serial numbers that had been selected by Mr Andrews because he knew that those serial numbers would pass an inspection.
Transactions 20, 28, 29 and 41
274 Transaction 20 is evidenced by Invoice 585 to “Alexis Ophthalmic Services Pty”. The invoice is described as a “commercial invoice”. The invoice is dated 9 June 2003. It is in respect of four Aristocrat gaming machines. The serial numbers were recorded on the invoice.
275 Mr Andrews gave evidence that this was an “interim invoice” that was replaced by Invoice 770 to Servicios Internacionales Impex S.A de C (Servicios Internacionales) in Mexico, dated 4 November 2003.
276 In fact there were two other invoices bearing the number 770. One (also dated 4 November 2003) was to Faberio S de R.L de C.V. (Faberio) in Mexico. The other (dated 7 April 2005) was to Privada Labastida in Mexico. Mr Andrews’ evidence was that the invoices to Faberio and Privada Labastida were themselves “interim invoices” and that the final invoice was the one to Servicios Internacionales. Each of the 770 invoices was for four gaming machines. Three of the serial numbers recorded on those invoices corresponded to serial numbers on Invoice 585. Each of the 770 invoices also recorded the serial number of a fourth Aristocrat gaming machine as XAW233084. Mr Andrews’ evidence was that this was a mistake. The correct serial number should have been recorded as XAW233081. So corrected, this serial number corresponds with the serial number of the fourth gaming machine on Invoice 585. Thus it can be seen that the serial numbers on Invoice 585 and each of the 770 invoices corresponded.
277 At this juncture it is important to note that:
(a) transaction 28 is evidenced by Invoice 770 to Faberio dated 4 November 2003;
(b) transaction 29 is evidenced by Invoice 770 to Servicios Internacionales, dated 4 November 2003; and
(c) transaction 41 is evidenced by Invoice 770 to Privada Labastida.
278 One difficulty with Mr Andrews’ evidence that three of these invoices (evidencing transactions 20, 28 and 41) were “interim invoices” and only Invoice 770 to Servicios Internacionales (transaction 29) represented an actual supply, is that Invoice 770 to Privada Labastida (7 April 2005) clearly post-dates Invoice 770 to Servicios Internacionales (4 November 2003) by 17 months. The Aristocrat parties submitted that the Court should find that at least 3 transactions proceeded with the same set of four serial numbers (that is 12 infringing machines, represented by Transactions 20, 28 and 41).
279 The primary judge noted another difficulty: the three so-called “interim invoices” were to different parties.
280 The primary judge was not prepared to accept Mr Andrews’ evidence that these invoices were “interim invoices” issued in respect of transactions which did not proceed. The primary judge reasoned that his findings as to Mr Andrews’ credit affected the weight he would give to Mr Andrews’ explanations in this regard.
281 The primary judge noted that there was no corroborating evidence, such as emails or other records, indicating that the transactions represented by the “interim invoices” had been cancelled. The primary judge concluded that a more likely explanation was the one recorded (at [279]) in an earlier email sent by Mr Andrews to one of Global’s customers, namely that Mr Andrews himself selected serial numbers to go on compliance plates that he knew would pass an inspection. The primary judge held ([869]) that this was the reason why various serial numbers were duplicated on one or more invoices that had been issued. It is clear that his Honour intended this finding to extend to all transactions in the DN category: see [869] and [872].
282 There is, however, one matter to which we must refer. The evidence before the primary judge included an email in which Mr Andrews was asked to issue a new invoice to Faberio to a corrected address with other corrected details. The corrected address includes the words “Privada Labastida”. The request also stipulated that the invoice needed to be updated to reflect the current date. When one compares Invoice 770 to Faberio (transaction 28) and Invoice 770 to Privada Labastida (transaction 41), it is apparent that the latter includes all the corrected details, in accordance with the email, except that Faberio’s name has been omitted. We are satisfied that “Privada Labastida” is in fact part of the address of the customer (Faberio) rather than the name of a customer. This explanation does not appear to have been put to the primary judge. It was certainly not advanced by the appellants on appeal, who treated “Privada Labastida” as a customer and not part of Faberio’s address. Moreover, the appellants continued to treat the transaction involving “Privada Labastida” (that is, transaction 41) as a transaction which did not proceed, when in fact this particular evidence, supported by the email to which we have referred, tended to establish the contrary. Nevertheless, we are inclined to the view that Invoice 770 to Faberio (transaction 28) and Invoice 770 to Privada Labastida (transaction 41) are one and the same transaction and that, to that extent, the primary judge’s finding includes the double counting of four Aristocrat gaming machines.
283 Transaction 46 is represented by Invoice 5 to Casinos & Gaming Supplies in Peru. On its face, the invoice is referred to as a “commercial invoice”. The invoice was dated 14 June 2005. It was in respect of 62 Aristocrat gaming machines. The serial numbers of the gaming machines were recorded on the invoice.
284 Mr Andrews gave evidence that this was an “interim invoice”; that no machines were supplied under this invoice; and that it was replaced by Invoice 47 to Recreativos Fargo SAC. In fact “Invoice 47” was not an invoice but a packing list dated 6 June 2005 that had been issued by Impact before the date of Invoice 5 to Casino & Gaming Supplies.
285 Aristocrat submitted that 18 of the gaming machines on Invoice 5 were duplicated in Invoice 1158 to Willy Kwak. Invoice 1158 to Willy Kwak is itself dated 4 January 2005, before Invoice 5 or “Invoice 47”. Also, Invoice 1158 is described on its face as a “commercial invoice and packing list”, indicating that the machines referred to in Invoice 1158 were at least packed for dispatch.
286 The primary judge rejected (at [866]) the explanation that Invoice 5 was an “interim invoice” that was superseded by “Invoice 47”.
287 Transaction 51 is evidenced by Invoice 050830 to Mak’s International. On its face, the invoice is described as a “commercial invoice & packing list”. The invoice was dated 30 August 2005. It was in respect of 26 Aristocrat gaming machines. The serial numbers of the gaming machines were recorded on the invoice.
288 Mr Andrews gave evidence that Invoice 50830 was a final invoice.
289 The Aristocrat parties submitted that seven serial numbers on Invoice 050830 were duplicated on Invoice 050505 to Choy Espectaculos dated 5 May 2005.
290 The primary judge recorded the appellants’ submission that some of the gaming machines on Invoice 050505 may have been “substituted” at the last minute. It is apparent that the primary judge (at [872]) did not accept this submission.
The primary judge’s conclusions on the DN category
291 The primary judge accepted the Aristocrat parties’ submission that transactions 13, 20, 28, 29, 41, 46 and 51 contained infringing components. His Honour rejected Mr Andrews’ explanation regarding the duplication of serial numbers based on the issuing of “interim invoices” representing transactions that did not proceed. The primary judge found that the more plausible explanation for the duplication of serial numbers was that Mr Andrews created or obtained fake compliance plates, which included false or invented numbers, and used the serial numbers because he knew that they would pass an inspection. In all, the primary judge found that 56 gaming machines were involved in those transactions. As we have noted, however, it would appear that four gaming machines were counted twice. It seems, on the basis of schedules provided on appeal by the parties, that there may have been some other miscounting. For the reasons we give below it is more likely, in our respectful view, that 46 gaming machines were involved in those transactions.
292 The appellants submitted that the primary judge erred in a number of respects in finding that the DN category represented transactions involving infringing components of Aristocrat gaming machines.
293 First, they submitted that the primary judge should not have entertained a case brought on duplicate numbers because no case had been pleaded by reference to duplicate serial numbers. They submitted that this case only emerged in the course of final submissions and that the Aristocrat parties took no steps to amend their pleadings to include such a category of infringement. They submitted that the primary judge wrongly accepted the Aristocrat parties’ submission that this claim emerged in the evidence. They submitted that they were denied procedural fairness. Specifically, they submitted that they were denied the opportunity to lead evidence to explain the so-called duplicated invoices.
294 In this regard the appellants submitted that the primary judge should have taken into account: (a) the absence of an explanation by the Aristocrat parties as to why the Global/Impact parties and the Allam parties would replicate compliance plates; and (b) the absence of evidence from the Aristocrat parties that machines bearing the one serial number had been shipped and paid for on more than one occasion. They submitted that the primary judge (at [868]) effectively reversed the onus of proof and treated the absence of evidence from the appellants as justifying his findings on infringement.
295 Secondly, they submitted that transactions 13, 20, 28 and 29 took place between 17 July 2002 and 4 November 2003. These transactions pre-dated the joint venture between the Global/Impact parties which, on the primary judge’s finding, commenced on 1 October 2004. The appellants submitted that these transactions pre-dated any common design between the Allam parties and the Global/Impact parties. They submitted that the primary judge failed to have regard to the practice of the Global parties at this time, which was to ship machines from independent suppliers directly to customers, without itself coming into possession of the machines. It was this practice, they submitted, that was the reason for his Honour rejecting (at [216]-[223]) the so-called Play King transaction as one involving copyright infringement.
296 Thirdly, the appellants submitted that the Aristocrat parties had not alleged any infringing activity by the Allam parties in respect of transactions 13, 20, 28, 29, 41 and 46. They submitted that the primary judge was in error (at [768] and [870]) in attributing liability to the Global/Impact parties in relation to those transactions.
297 Fourthly, they submitted that the primary judge should have found that transaction 20 never proceeded and that transactions 28, 29 and 41 were in fact a single transaction. They submitted that, even if considered as four separate transactions, one of them may well have been for the original machines containing genuine components.
298 Fifthly, they submitted that the primary judge should not have entertained a case based on transactions 13 and 20 because these transactions were never pleaded as infringing transactions.
299 We are not persuaded that the primary judge erred by entertaining a case of infringement brought on the basis of duplicate serial numbers. Although such a case was not pleaded in terms, each of the transactions was, contrary to the appellants’ submissions, identified as an infringing transaction in the Particulars, noting the parties alleged to have been participants in each transaction. The Global parties were identified as participants in each of the transactions. The Impact parties were identified as participants in transactions 46 and 51. Mr Allam was identified as a participant in transaction 51.
300 As we have noted, the Particulars do not identify the circumstances relied upon by the Aristocrat parties as giving rise to the inference that infringement had taken place, but there is no indication that the appellants sought those particulars. Nevertheless, the appellants must have been aware of the significance of the fact that the particularised transactions involved gaming machines with duplicated serial numbers. Although Mr Andrews, in his evidence, made the statement, on a number of occasions, that a particular machine was not alleged to be “illegitimate”, he did give evidence seeking to explain the duplication of serial numbers by stating that certain transactions did not in fact take place. This was the case with transactions 13, 20, 28, 29, 41 and 46. There can be no explanation for leading this evidence other than that the Global parties’ considered position (and that of the Impact parties and Allam parties in turn) was that this evidence was relevant. Indeed, its apparent relevance was to explain these transactions and to urge on the Court a finding that they did not take place. Clearly, the case urged on the primary judge by the appellants was that the particular gaming machines whose serial numbers had been recorded on these invoices were not supplied as those invoices would otherwise indicate. This evidence, having been led by the Global parties and supported by the Impact and Allam parties, was available to be used by the Aristocrat parties.
301 The primary judge did not accept Mr Andrews’ evidence on this matter. We are not persuaded that the primary judge effectively reversed the onus of proof in this regard. The Global parties sought to advance a positive case that certain transactions did not proceed and, for that reason, could be effectively ignored. We have already referred to the fact that the primary judge made adverse findings with respect to Mr Andrews’ credit. It is clear from the primary judge’s reasons (at [868]) that, in relation to transactions 13, 20, 28, 29, 41 and 46, his Honour was not prepared to accept Mr Andrews’ evidence that these transactions did not proceed, unless that evidence was supported by corroborating evidence. To so find was not to reverse the onus of proof on the question of infringement. It was simply to reject particular findings for which the Global parties themselves had contended. The Impact parties and the Allam parties sought to support that position. Accordingly we are not persuaded that, by entertaining Aristocrat’s case on infringement by reason of the supply, on multiple occasions, of Aristocrat gaming machines with the same serial numbers, constituted a denial of procedural fairness so far as concerns the appellants.
302 As to the period in which certain of those transactions occurred, the appellants are correct to contend that transactions 13, 20, 28 and 29 apparently took place between 17 July 2002 and 4 November 2003. Transaction 41 is the invoice to Privada Labastida. For the reasons we have given, we are of the view that it should be accepted that transaction 41 was not a separate transaction but the reissuing of an invoice to Faberio in respect of the one transaction that took place during that period. However, the only consequence of these transactions occurring within that period, and therefore before the commencement of the joint venture, is that, if they represent infringing dealings, those infringements are attributable to the Global parties, unless a case of secondary liability can be advanced against the Impact parties and the Allam parties. Significantly, the Particulars show that the Aristocrat parties had contended that only the Global parties were participants in those transactions.
303 Furthermore, we are not satisfied that the primary judge erred, in relation to those transactions, by failing to have regard to the “practice” to which the appellants have referred. The appellants’ reference to the Play King transaction was one where the primary judge found (at [218]) that the gaming machines supplied by Global were purchased from another supplier and shipped directly by that supplier to the overseas customer, in circumstances where the machine never passed into Global’s physical possession. For that reason, as well as other reasons, the primary judge was not prepared to find that the Global parties could have been responsible for producing any infringing components which had been identified in respect of those gaming machines when inspected in Peru some years later: see at [222].
304 It is incorrect, however, to submit that the primary judge had found that there was a “practice”, in the sense of an invariable practice before the joint venture had commenced on 1 October 2004, that Global did not take physical possession of the gaming machines if supplied to overseas customers. It is clear that the primary judge considered that question on a case by case basis. The Play King transaction was one such case. Another example was transaction 32 (Invoice 893) involving a supply to “EL Muro SA” in Argentina. The Aristocrat parties had alleged that this transaction also fell within the DN category. The primary judge, on specific evidence, did not accept (at [857]) that the machines the subject of transaction 32 ever entered into the possession of the Global parties. It is clear, however, that the primary judge was not persuaded that such evidence existed in respect of transactions 13, 20, 28 (including 41) and 29.
305 The answer to the appellants’ submission concerning the absence of an explanation by the Aristocrat parties as to why the appellants would replicate compliance plates is in fact provided by the primary judge’s finding at [869]: Mr Andrews selected the serial numbers to go on compliance plates because he knew that they would pass an inspection. He created or obtained fake compliance plates which included these numbers.
306 There is one further matter we should mention. Transaction 20 involved the supply of gaming machines to Cyprus, and transactions 28 and 29 involved the supply of gaming machines to Mexico. The fact that these transactions involved supply to these countries has significance for the particular way in which the Aristocrat parties sought to prove their case for compensatory damages. It is a matter to which we shall return.
307 The primary judge found that the DN category represented seven transactions covering 56 gaming machines. Accepting the genuineness of the machines in transaction 29, and eliminating the double counting involving transactions 28 and 41, the impugned transactions involved 42 gaming machines, calculated as follows:
(a) transaction 13 – 10 machines
(b) transaction 20 – 4 machines
(c) transaction 28 – 4 machines
(d) transaction 46 – 18 machines
(e) transaction 51 – 6 machines
Total 42 machines
308 The MC category describes transactions involving gaming machines which, although recorded in invoices for machines supplied by the Global/Impact parties to overseas customers, were found by the primary judge to be located in clubs in New South Wales. The primary judge found (at [838]) that these machines represented the clearest instances of proven infringement. Four transactions were involved: transactions 34, 36, 48 and 54. In each case the Aristocrat parties invited the Court to infer that these transactions also represented dealings made in infringement of s 38 of the Copyright Act.
309 Transaction 34 was evidenced by Invoice 1045, dated 5 October 2004, to Luis Miguel Naveda Cruzado in Peru. The invoice covered 84 Aristocrat gaming machines. The serial numbers of those machines were recorded on the invoice and included serial numbers XAW603570, XAW603572 and XAW603575, serial number XAW603980 and serial number XAW605058.
310 Ms Oldfield gave evidence that, on 23 October 2007, she observed Aristocrat gaming machines with the serial numbers XAW603570, XAW603572 and XAW603575 at the Guildford Bowling and Recreation Club; an Aristocrat gaming machine with the serial number XAW603980 at the Miranda Hotel; and an Aristocrat gaming machine with the serial number XAW605058 at the Rockdale RSL sub-branch Club at Bay Street, Rockdale.
311 Transaction 36 was evidenced by Invoice 1155, dated 4 January 2005, to Cathay Entretenimientos S.A.C in Peru. The invoice covered 60 Aristocrat gaming machines. The serial numbers of those machines were recorded on the invoice and included serial numbers XAW601053 and XAW603567.
312 Ms Oldfield gave evidence that, on 23 October 2007, she observed an Aristocrat gaming machine with the serial number XAW601053 at the Ryde Eastwood Leagues Club and an Aristocrat gaming machine with the serial number XAW603567 at Concord District RSL Club.
313 Transaction 48 was evidenced by Invoice 54, dated 12 July 2005, to Princess Entertainment in Belize. The invoice covered 20 Aristocrat gaming machines. The serial numbers of the machines were recorded on the invoice and included serial numbers XAW604068, XAW604281, XAW604289 and XAW609541, and serial number XAW626367.
314 Ms Oldfield gave evidence that, on 9 November 2007, she observed Aristocrat gaming machines with the serial numbers XAW604068, XAW604281, XAW604289 and XAW609541 at the Arncliffe Scots Sport and Social Club, and an Aristocrat gaming machine with the serial number XAW626367 at Bondi Icebergs.
315 Transaction 54 was evidenced by Invoice 1201, dated 20 February 2005, to Reel Games in Florida. The invoice covered 56 Aristocrat gaming machines. The serial numbers of those machines were recorded on the invoice and included serial numbers XAW539947 and XAW559011, XAW504166 and XAW500352.
316 Ms Oldfield gave evidence that, on 28 August 2007, she observed Aristocrat gaming machines with the serial numbers XAW539947 and XAW559011 at the Midnight Shift Hotel in Darlinghurst, and an Aristocrat gaming machine with the serial number XAW504166 at the Bat and Ball Hotel in Redfern. She also gave evidence that on 23 October 2007, she observed an Aristocrat gaming machine with the serial number XAW500352 at the Moorebank Sports Club in Hammondville.
317 Mr Andrews gave evidence that the gaming machines on Invoice 1201 were exported to Slovenia via Croatia, but that the machines were subsequently re-imported into Australia because the customer, Reel Games, did not pay for them. The evidence suggests that Reel Games returned the machines to Global under an invoice dated 12 June 2005. A bill of lading issued on 9 July 2005 indicates that the machines were in fact returned to Impact. Notwithstanding this evidence, the Aristocrat parties submitted that the Court should find that the original supply to Reel Games involved infringing dealings because there was no evidence that the Global/Impact parties supplied refurbished gaming machines to the New South Wales market.
Appellants’ submissions
318 The appellants submitted that transactions 34, 36, 48 and 54 took place within the period October 2004 to July 2005. This period was compared with the period August to November 2007 when Ms Oldfield made her observations. The appellants submitted that this comparison proceeded on an assumption that, with the exception of transaction 54, none of the machines had been re-imported into Australia prior to the time when Ms Oldfield made her observations in 2007. The appellants submitted that transaction 54 demonstrated that re-importation was possible and that the assumption underlying all these transactions was not justified. They submitted that a finding on infringement in relation to this category of transactions was, for this reason, based on conjecture and thus involved error on the part of the primary judge.
319 There is an immediate answer to this submission, which can be given now. Transaction 54 was special because it did involve re-importation. Mr Andrews gave evidence explaining the circumstances of the re-importation, which was that Reel Games did not pay for the machines. It seems that the reason for this was that Reel Games considered that Global had made misrepresentations about the machines. Global disputed that fact, but was quite happy to have the machines returned to it. No similar evidence of re-importation was led by the appellants in respect of transactions 34, 36 and 48. Thus it can be concluded that the Global/Impact parties had no knowledge of any re-importation apart from that involved in transaction 54.
320 There is simply no reason to think that the machines in transactions 34, 36 and 48 found their way back to New South Wales in the intervening period after they had been supplied by the Global/Impact parties. We return to this matter when dealing with transaction 48. Furthermore, it was not suggested on appeal that there was any evidence of a trade in which refurbished gaming machines were supplied to Australian customers from suppliers in Peru, Belize or Croatia, the places to which the Global/Impact parties had originally sent these machines, or from any other overseas location. The appellants’ submission, that the primary judge should have found re-importation to be likely, itself involves no more than conjecture.
321 Moreover, the appellants did not suggest that the Global/Impact parties themselves were involved in supplying refurbished gaming machines in Australia. It was not suggested, for example, that the Global/Impact parties supplied the machines returned by Reel Games in transaction 54 to any establishment in New South Wales or other location in Australia. Indeed, Mr Andrews’ evidence on these matters, whilst explaining in some detail the circumstances of re-importation in transaction 54, was conspicuously silent on what then happened to these machines once returned by Reel Games.
322 In closing submissions at trial, the Global/Impact parties submitted that their evidence was that they did not sell to end customers in the Australian market. They submitted, however, that their evidence to that effect did not exclude the swapping of machines between suppliers. If that be so, it is not suggested that the primary judge was taken to any evidence regarding the swapping of any of the machines in transaction 54 by the Global/Impact parties with any supplier in Australia who is also a supplier of refurbished gaming machines to end customers in Australia.
323 For these reasons we are not satisfied that the primary judge’s conclusions on infringement are affected by error on account of a wrongful assumption that the machines the subject of transactions 34, 36, 48 and 54 were not re-imported to Australia and later supplied to end customers in Australia.
324 However, the appellants advanced a number of additional submissions directed to establishing that the primary judge’s conclusion with respect to each transaction was otherwise affected by error.
325 In the case of transactions 34 and 36 the appellants drew attention to the fact that Tonita was not identified in the Particulars as a participant in the infringements, although the Global parties and the Impact parties were so identified. They submitted that, as Tonita had not addressed these transactions in its closing submissions, the primary judge erred in finding that Tonita was also liable. They then submitted that the primary judge erred in finding that the Global/Impact parties were liable because their liability could only arise from participation in a common design with Tonita.
326 They also submitted that the primary judge erred by failing to bring into account evidence that:
(a) the serial numbers in each of the invoices for these transactions had been misdescribed by adding the prefix XAW6, thereby incorrectly identifying the gaming machines as Mark VI machines when they were in fact Mark V machines;
(b) one gaming machine observed at Ryde Eastwood Leagues Club contained a non-genuine Aristocrat compliance plate, thus undermining the assumption that it was a genuine Aristocrat gaming machine; and
(c) Aristocrat’s own investigations of the customer in transaction 36 failed to identify any counterfeit machines sold by the Global/Impact parties to that customer.
327 In the case of transaction 48 the appellants submitted that, in respect of four of the machines:
(a) the OLGR records showed that those machines were not in any club or hotel from July 2005 and during 2006, supporting the appellants’ submission that the machines had left Australia;
(b) the asserted genuine gaming machines observed at Arncliffe Sports Club in 2007 had non-genuine Aristocrat compliance plates; and
(c) three of the machines could be traced to another supplier (IGT).
328 In respect of the one other gaming machine, the appellants submitted that its serial number on Invoice 54 had been transcribed in error.
329 In the case of transaction 54, the appellants repeated the submission that, in relation to this particular transaction, Tonita had not been identified in the Particulars as a participant in the infringement, although the Global parties and the Impact parties were so identified. The remaining issue concerned the sequel to re-importation of the relevant gaming machines the subject of this transaction, with which we have already dealt.
Consideration
330 Tonita was not identified as a participant in any of the transactions falling within this category. It does not follow from this fact, however, that the primary judge erred in finding that, in relation to transactions 34, 36, 48 and 54, the Global/Impact parties were participants in infringements, if such infringements were otherwise established on the evidence.
331 In fact, contrary to the appellants’ submission, the primary judge did not find that Tonita was liable in respect of these transactions. In [904] the primary judge concluded that none of the transactions could be maintained against Tonita because, as at the date of transaction 54 (the latest in date of all the transactions), Tonita had not been incorporated. The primary judge found that Mr Allam was liable with the Global/Impact parties in respect of these transactions because he was the person who was supplying the technical know-how to the joint venture and his involvement, in that way, must have made it clear to him that he was, at the very least, approving the sale of infringing components to the South American market. Mr Allam was not identified in the Particulars as a party to transactions 34, 36 or 54, although he was identified as a party to transaction 48. A question arises whether, in those circumstances, he should be found liable for any infringements involved in transactions 34, 36 or 54, especially when regard is had to the terms of paragraph 67B of the Particulars. This is a question to which we shall return.
332 The appellants’ submission that some of the gaming machines observed by Ms Oldfield in New South Wales in 2007 were themselves non-genuine gaming machines cannot be sustained. This submission was based on a particular aspect of the evidence given by Mr Reddy, an employee of ATA. From February 2005 Mr Reddy was part of a small team responsible for engraving serial numbers on Aristocrat gaming machine compliance plates. He gave evidence about the quality of the hand-engraving on some compliance plates produced for inspection, based on his experience since February 2005. He was, in turn, cross-examined on some very poor digital paper reproductions of compliance plates which he was asked to assume were genuine Aristocrat compliance plates. His answers were, variously, that the hand-engraving on those plates was not of the quality produced by his team at Aristocrat, or that it was “definitely not ours” or “not ours” or that it was not of a sufficient quality to have been hand-engraved by Aristocrat. As it turned out, the digital reproductions were of compliance plates affixed to some of the Aristocrat gaming machines which Ms Oldfield had inspected in New South Wales with serial numbers corresponding to some of the serial numbers of some of the gaming machines involved in transactions 36 and 48.
333 The limitations of this evidence should be recognised.
334 First, it is clear that Mr Reddy was giving evidence from the perspective of someone whose experience related primarily to engraving carried out by Aristocrat employees in the period from February 2005. Indeed, part of his cross-examination was directed to establishing the proposition, which he accepted, that, apart from one or two occasions, he had had no personal knowledge of hand-engraving that had occurred at Aristocrat prior to February 2005. It was common ground that the machines about which Mr Reddy was cross-examined were manufactured in 2003. He also accepted that he had had no experience in inspecting hand-engraving on gaming machines in the field. It is clear that Mr Reddy’s evidence must be understood as expressing an opinion about the quality of hand-engraving carried out in the factory in respect of gaming machines in the period from February 2005.
335 Secondly, even then, the opinions expressed by Mr Reddy in this regard were based on digital reproductions which, as we have noted, were poor. This was a matter of comment by Mr Reddy himself. Our own inspection of the relevant reproductions shown to Mr Reddy confirms their poor quality and would lead us to treat these particular views with some caution in any event.
336 Thirdly, Ms Oldfield was not challenged with the proposition that the gaming machines she observed in New South Wales in 2007, when carrying out her particular inspections for the purpose of this case, were not genuine Aristocrat gaming machines. There was evidence that Ms Oldfield was a person with significant experience in the gaming industry who was familiar with Aristocrat’s game library and gaming equipment and components. She gave evidence that she could recognise the features of genuine Aristocrat games and game cabinets on the basis of a visual inspection. Ms Oldfield’s evidence in chief contains an implicit affirmation of the genuineness of the gaming machines she inspected, based on their physical presentation. Her evidence was that she was able to confirm that, with one exception not presently relevant, Aristocrat gaming machines with the relevant serial numbers were physically located in the identified hotel or club premises she attended. She was not challenged on this evidence.
337 In all the circumstances, we are not persuaded that Mr Reddy’s evidence alone provides a sufficient and reliable basis on which to throw real doubt on the genuineness of the gaming machines observed by Ms Oldfield in the course of her inspection in 2007, especially when the genuineness of those machines was not raised with Ms Oldfield in the course of her cross-examination.
338 Furthermore, the fact that an inspection of various gaming premises of the Global/Impact customer in transaction 36 (Cathay Entretenimientos) did not reveal any counterfeit gaming machines supplied by the Global/Impact parties does not lead to a finding, contrary to that made by the primary judge, that the gaming machines in this particular transaction were genuine. There is no evidence to suggest that every gaming machine supplied by the Global/Impact parties to Cathay Entretenimientos was located and inspected in Peru. Indeed, the appellants’ submission overstates the evidence on which they rely. That evidence did not make good the proposition that the serial number of every counterfeit gaming machine discovered by the Aristocrat representative in Peru had been taken down and cross-checked against the serial numbers of machines sold by the Global/Impact parties, either generally or with respect to this transaction in particular.
339 The question of the alleged misdescription of some serial numbers on invoices issued by the Global/Impact parties requires further consideration. The primary judge did not make specific findings on that question, although it is clear that, at trial, the Global/Impact parties made specific submissions on that matter. It therefore becomes necessary for us to deal with those submissions.
340 In the course of the appeal we were taken to detailed evidence concerning this alleged misdescription. Although the primary judge did not make specific findings on that question, his Honour did find, as we have noted when dealing with the DN category, that Mr Andrews selected serial numbers to go on compliance plates that he knew would pass inspection, and, to that end, created or obtained fake compliance plates which included those numbers. In our view, the primary judge’s ultimate findings in relation to the MC category cannot be considered in isolation from this important finding, which was so clearly adverse to Mr Andrews’ credit – just as his Honour’s ultimate findings cannot be considered in isolation from the five essential propositions to which we have earlier referred.
341 Having made this general observation, we now turn to consider the more detailed aspects of the evidence and the appellants’ submissions in relation to it, as they concern the particular question of misdescription.
342 In relation to transaction 34, the Global/Impact parties contended that the five gaming machines that were found to be counterfeit had been purchased one year earlier in two lots (26 May 2003 and 9 September 2003) from Star Games Corporation Pty Limited (Star Games), which conducted business from Milperra in New South Wales. The invoices in relation to those purchases were in evidence. The invoices show Bondtren Pty Ltd (that is, Mr Cragen’s company) as the customer. They refer to the gaming machines as “second hand” Aristocrat “poker” machines and record the serial numbers without the XAW prefix.
343 It was common ground between the parties that the prefix XAW denotes an Aristocrat Mark VI gaming machine, as opposed to an Aristocrat Mark V gaming machine. Mr Andrews plainly said this was the case in his cross-examination, at least in relation to gaming machines in Queensland which the Global/Impact parties claimed to be the source of the relevant machines in transaction 34. It was also common ground that, but for the XAW prefix, Aristocrat Mark V and Mark VI gaming machines could have the same (that is, a common) numerical serial number.
344 When regard is had to the invoice in transaction 34 (Invoice 1045) the same numerical serial numbers with respect to the impugned machines appear with the XAW prefix, thereby identifying them as Mark VI machines. The invoice does specifically describe all the gaming machines recorded in it as “Aristocrat Mark V Slot Machines”. However, to complicate matters further, the gaming machines are also described as “reconstruida” (ie “refurbished”), thus indicating that the machines had been upgraded.
345 Mr Andrews gave evidence that the inclusion of the XAW prefix on Invoice 1045, in respect of the serial number of each impugned machine, was a mistake and that the serial numbers should have been recorded without that prefix. His evidence was that the serial numbers recorded on Invoice 1045 had been taken from a spreadsheet prepared by an employee of Tonita. Mr Andrews did not seek to identify the employee. His reference, in that connection, to “Tonita” must be taken to be a reference to the business conducted by Mr Allam under that name because, as we have noted, the company Tonita had not been incorporated at the time of this transaction. Mr Andrews also gave evidence that Aristocrat gaming machines in Queensland (from where he said the relevant machines had been acquired) use a six digit number system and that the serial number of Mark V machines “usually” started with the numeral 6. The relevant serial numbers in the Star Games invoices all started with the numeral 6. Thus the appellants’ case at trial was that, if it be accepted that the addition of the XAW prefix in Invoice 1045 in each relevant case was a mistake, and if it be accepted that, relevantly, the gaming machines supplied by Star Games to Bondtren were materially the same as the games machines supplied by the Global/Impact parties to Luis Miguel Naveda Cruzado in Peru, there was, in fact, no match between the gaming machines supplied overseas in transaction 34 in 2004 and any of the gaming machines sighted by Ms Oldfield in New South Wales in 2007.
346 The appellants made a similar submission at trial in relation to transaction 36 (Invoice 1155). Mr Andrews’ evidence was that, in that transaction, a draft invoice was prepared which showed the relevant serial numbers without the XAW prefix. However, the final invoice included the XAW prefix. Mr Andrews gave evidence that this was an error. Once again, he said that the relevant gaming machines actually supplied in transaction 36 were Aristocrat Mark V machines, not Mark VI machines. Therefore, on the appellants’ case, there was, in fact, no match between the gaming machines supplied overseas in transaction 36 in 2005 and the gaming machines sighted by Ms Oldfield in New South Wales in 2007.
347 On appeal, the Aristocrat parties pointed to the fact that Mr Andrews’ evidence on these matters was admitted on the express basis that the Aristocrat parties were not obliged to cross-examine on it. However, some cross-examination was directed to the question of the allegedly mistaken inclusion of the XAW prefix on invoices, specifically Invoice 1155 evidencing transaction 36.
348 The Aristocrat parties submitted that the cross-examination of Mr Andrews showed the conjectural nature of his evidence in that regard, based, as it apparently was, on him reconstructing, over a significant period of time, and at a much later point in time, the earlier acquisition and supply of each of the gaming machines covered by the Particulars. Mr Andrews described the process he undertook as trawling through records “eight years old” “to put together a jigsaw puzzle”. He professed no personal knowledge of the details of the gaming machines in question, which covered a large number of transactions spanning a number of years. Indeed, his evidence in cross-examination was: “All I can do is take the information that was available to me and apply it as best I could”.
349 The difficulty confronting the appellants on this part of their case is that it depends on Mr Andrews’ reconstruction of all the events leading up to each of transactions 34 and 36, to provide what is, ultimately, nothing less than a reinterpretation of parts of Invoices 1045 (transaction 34) and 1155 (transaction 36) that are relevant for present purposes. In short, the appellants’ case is that, in relevant and critical respects, each of Invoices 1045 and 1155 are incorrect; the invoices simply cannot be taken to mean what they say. In the normal course, one would be very slow indeed to accept such an assertion – particularly having regard to its self-serving nature – in the absence of clear evidence to make good the assertion, or unless the alleged errors were, on their face, obvious mistakes. That is not the present case.
350 For example, the starting point in reinterpreting Invoice 1045 (transaction 34) is the Star Games invoices relied upon by the appellants. These invoices certainly record electronic gaming machines purportedly sold by Star Games to Bondtren in 2003, with the serial numbers 603570, 603572, 603575 and 603980, but not 605058. Also, apart from Mr Andrews’ say-so, there is no evidence to show that these machines were materially the same as those with the serial numbers XAW603570, XAW603572, XAW603575, XAW603980 and XAW605058, respectively, that were supplied by the Global/Impact parties to Luis Miguel Naveda Cruzado in Peru as part of transaction 34. To complicate matters, Mr Andrews’ evidence in relation to this transaction also relied on a facsimile transmission from Star Games dated 19 May 2004, which, Mr Andrews said, listed the gaming machines delivered by Star Games in relation to that purchase. Significantly, the list of machines in that facsimile transmission does not include any machine with the serial numbers shown in the earlier Star Games invoices. This throws considerable doubt on the accuracy of the reconstruction exercise undertaken by Mr Andrews with respect to this transaction and undermines the confidence with which one can draw reliable conclusions from it. More specifically, it erodes the basis for going behind Invoice 1045 and not treating it, in relevant respects, as accurately recording the serial numbers as actually affixed to the gaming machines supplied in this transaction. Given that Invoice 1045 refers to all the gaming machines as being refurbished Aristocrat Mark V “slot machines”, we see no reason to go behind the serial numbers that are relevantly recorded in the invoice.
351 In relation to Invoice 1155 (transaction 36), Mr Andrews’ starting point was, once again, the Star Games facsimile transmission of 19 May 2004. As with Invoice 1045 (transaction 34), the facsimile transmission did not include the serial numbers of any of the relevant machines in transaction 36. Mr Andrews’ reconstruction also placed reliance on earlier invoices from Star Games, but these, similarly, do not include any record of the serial numbers of the relevant machines. Mr Andrews’ reconstruction also relied on the alleged fact that, when sold by the Global/Impact parties, the serial numbers of the relevant machines (that is, serial numbers 601053 and 603567) were recorded in an interim invoice. This interim invoice was addressed, however, to Assembly Accessories in Uruguay, not Cathay Entretenimientos in Peru. The supply of particular gaming machines to Assembly Accessories in Uruguay (as opposed to the supply of the same gaming machines to Cathay Entretenimientos in Peru) was supported by a DHL Forwarding Instruction.
352 In cross-examination Mr Andrews attempted to explain this discrepancy in his reconstruction by suggesting the possibility of “a transfer of ownership on the water” to Cathay Entretenimientos. The primary judge (at [655]) rejected that evidence as not being credible. There is no reason to interfere with that finding.
353 In our view the appellants have not established a sufficient and satisfactory basis to interfere with the primary judge’s findings that the five gaming machines relevantly identified in transaction 34 and the two gaming machines relevantly identified in transaction 36 had serial numbers matching those of gaming machines operating in New South Wales after the date on which the same machines were purportedly sold by the Global/Impact parties to their overseas customers. We are not persuaded that, ultimately, the primary judge was in error in proceeding on the basis of what, in each case, the relevant invoice showed on its face.
354 We should add for completeness that, in relation to Mr Andrews’ reconstruction in respect of transaction 34, the Aristocrat parties, on appeal, also sought to place reliance on a separate and earlier facsimile transmission from Star Games. This facsimile transmission listed eight gaming machines whose serial numbers exactly matched the serial numbers of some of the gaming machines recorded on Invoice 1045 (that is, including the XAW prefix). However, these gaming machines were not ones falling within the MC category and were not part of the infringements found by his Honour. We are, therefore, unable to see what relevance attaches to that particular submission for the purpose of considering whether the serial numbers relevant to the MC category transactions were mistakenly recorded on Invoice 1045, as the appellants had alleged.
355 The appellants’ submissions in relation to transaction 48 rely, to a substantial extent, on an acceptance of the accuracy of the so-called OLGR data tendered by the Aristocrat parties. The appellants’ submission is that the relevant machines were sold to and received by Princess Entertainment in Belize in 2005; that the OLGR data showed that the relevant machines were not installed in any club or hotel from July 2005 and during 2006; and that four machines observed by Ms Oldfield at the Arncliffe Scots Sport and Social Club in 2007 in fact bore non-genuine Aristocrat compliance plates.
356 There are a number of difficulties that confront the acceptance of these submissions.
357 First and most obviously, the primary judge, at the appellants’ urging, rejected the OLGR data, finding (at [552]) that the Aristocrat parties had not established its provenance. Thus the starting point, and essential foundation, for these submissions is missing.
358 Secondly, as we have already noted, we are not persuaded that the evidence on which the appellants rely provides a sufficient and reliable basis on which to throw real doubt on the genuineness of the gaming machines (relevant to this transaction) that were observed by Ms Oldfield in the course of her inspections in 2007.
359 Thirdly, it is not in doubt that Princess Entertainment received the relevant gaming machines in 2005. This is supported by an email dated 2 October 2005 from Tuna Arda addressed to Mr Andrews. This email refers to the relevant machines as “Aristocrat MK6” machines. Thus, even if the OLGR data is to be relied upon, the evidence would show that the relevant machines were sold to Princess Entertainment in July 2005 (according to Invoice 54); that these machines were in Belize in October 2005 awaiting customs clearance (according to the email from Mr Arda); and yet machines with the same serial numbers were present and installed in premises in New South Wales at least as early as 3 January 2006 (according to the OLGR data). In our view it seems to be most unlikely that, having been sold to Princess Entertainment and awaiting customs clearance in Belize in October 2005, these gaming machines found their way back to New South Wales and were installed at the Arncliffe Scots Sport and Social Club and the Bondi Icebergs Club within, at most, a period of three months thereafter. The more likely explanation is the one found by the primary judge: namely, that five Aristocrat gaming machines with particular serial numbers were identified by Ms Oldfield as operating in New South Wales on a date after gaming machines bearing those same serial numbers were purportedly sold by the Global/Impact parties to Princess Entertainment in Belize as part of transaction 48. In this connection we refer to our earlier findings about the likelihood of the re-importation of gaming machines the subject of transactions 34, 36 and 48.
360 As to the submission that three of the impugned gaming machines were supplied by IGT, there is an invoice from IGT dated 16 December 2004, addressed to Mr Cragen, which records the serial numbers XAW604281, XAW609541 and XAW604289 in relation to Aristocrat gaming machines purportedly supplied to him. These serial numbers correspond with the serial numbers of machines sold by the Global/Impact parties to Princess Entertainment in transaction 48. If it be assumed that the corresponding serial numbers on Invoice 54 to Princess Entertainment are genuine, then there is some evidence to link these machines with those supplied by IGT. However, the primary judge’s finding (at [872]) that Mr Andrews created or obtained fake compliance plates which included false or invented serial numbers, would lead us to exercise considerable caution before accepting that the three machines supplied to Princess Entertainment with these serial numbers were the same as the three machines supplied to Mr Cragen by IGT with corresponding serial numbers. Whilst the possibility exists that these machines were sourced from IGT, in the current state of the evidence, and in light of the primary judge’s findings on the five essential propositions, as well as his Honour’s findings about Mr Andrews’ willingness to create or obtain fake compliance plates, we are not persuaded, on the balance of probabilities, that these three machines, as supplied to Princess Entertainment, were in fact the gaming machines purportedly supplied to Mr Cragen by IGT.
361 The remaining issue raised by the appellants in relation to transaction 48 is the allegation that serial number XAW626368 was incorrectly recorded on Invoice 54. Mr Andrews’ evidence was that the correct serial number of the gaming machine was XAW626367. The appellants’ case was that, if that evidence was accepted, there is no corresponding evidence from Ms Oldfield, or any other source, of a gaming machine in New South Wales having, at a relevant time, the same serial number. Mr Andrews’ evidence was based on his reconstruction of this transaction by reference to documents which he did not prepare. He said that the correct serial number appeared on a document purportedly emanating from Impact which had been used by “Jesika” to prepare another list before Invoice 54 was prepared. The relationship between the various documents was not otherwise explained; nor was any evidence given by Mr Andrews as to his direct involvement in these events. No evidence was given by “Jesika” who, it seems, at least played some role in these events.
362 The conjectural nature of the evidence in relation to this issue is apparent. Once again, in our view, the appellants have not established a sufficient and satisfactory basis to go behind what Invoice 54 actually records. Once again, we are not persuaded that, ultimately, the primary judge was in error in proceeding on the basis of what Invoice 54 showed on its face.
Damages under s 115 of the Copyright Act
363 Before the primary judge the Aristocrat parties contended that the appropriate measure of damages under s 115(2) of the Copyright Act in the present case was the loss of profit that would have been made from second-hand or refurbished Aristocrat gaming machines, or from conversion kits, sold by the Aristocrat parties. The Aristocrat parties thus adopted a “lost sales” approach for their damages claim. The factual foundation for that case was found in an affidavit sworn by Juan Pablo Irarrazaval, the General Business Manager of Latin America for ATI. It was ATI that supplied gaming machines and conversion kits in the Latin American region.
364 The primary judge held that, in view of Mr Irarrazaval’s evidence, he was entitled to infer that the Aristocrat parties would have sold at least a proportion of the gaming machines that were the subject of some of the infringing transactions he had found. To this end his Honour inferred that, absent the infringing transactions, the Aristocrat parties would have been able to sell 50% of the gaming machines in transactions involving what he termed “the South American market”. We have used the same description elsewhere in these reasons when recounting the primary judge’s findings and the parties’ submissions in relation to those findings. However, the evidence on the question of damages was directed to the “Latin American” region. We have therefore used that description when referring to that evidence. The primary judge found that, for the purpose of assessing compensatory damages, 56 infringing machines were involved. Proceeding on the basis that the Aristocrat parties would have been able to sell 50% of those machines, his Honour found that they were entitled to recover damages under s 115(2) of the Copyright Act for 28 machines.
365 The appellants submitted that the primary judge erred in making these findings. They submitted that there was no proper foundation in the evidence from which the primary judge could reasonably conclude that the Aristocrat parties lost sales to the Global/Impact parties, let alone 50% of the gaming machines supplied in the infringing transactions that related to the South American market. They submitted that it was not enough for the Aristocrat parties to show infringing conduct on the part of one or more of the appellants; they must establish that loss or damage had occurred: Enzed Holdings Ltd v Wynthea Pty Ltd (1984) 57 ALR 167 at 183; Aristocrat Technologies Australia Pty Ltd v DAP Services (Kempsey) Pty Ltd (2007) 157 FCR 564 at [35]. They submitted that the figure of 50% found by the primary judge was one that was effectively “plucked out of the air”: The Commonwealth of Australia v Amann Aviation Pty Limited (1991) 174 CLR 64 at 119; Paramount Pictures Corporation v Hasluck (2006) 70 IPR 293 at [40]-[46]; Troulis v Vamvoukakis [1998] NSWCA 237 at 14. They submitted that the primary judge’s reasons did not reveal the process by which the figure of 50% was derived: Richey-Lowe v Australasian Conference Association Limited [2001] NSWCA 447 at [42]. They submitted that the primary judge simply did not explore the relevant counterfactual question, which was: what sales would the Aristocrat parties have obtained absent the infringing conduct of the Global/Impact parties that was found: TS & B Retail Systems Pty Ltd v 3Fold Resources Pty Ltd (No 3) (2007) 158 FCR 444 at [207].
366 In order to consider these submissions it is necessary to descend to the detail of the evidence given by Mr Irarrazaval in his affidavit and in his cross-examination. Before doing so, it is important to note that Mr Irarrazaval’s evidence was directed only to the Latin American region. In that connection Mr Irarrazaval said that, although there are many similarities between countries in Latin America, there are differences in the gaming machine markets in each country and differences in the way in which ATI has supplied gaming machines and components into those markets. For this reason Mr Irarrazaval proceeded to give specific evidence in relation to specific national markets, namely the markets in Peru, Chile, Argentina, Venezuela, Panama, Uruguay and Brazil. He also specifically instanced Suriname as a country where Aristocrat gaming machines had been sold, but gave little information about that market. Although referring to other countries in the Latin American region (such as Colombia, Mexico and the Dominican Republic) as places where ATI had supplied Aristocrat gaming machines and components, Mr Irarrazaval gave only general evidence about ATI’s activities in these countries and, even then, only as part of his introductory description of ATI’s activities in the Latin America region. He gave no specific evidence about the particular markets in those countries or the particular way in which ATI had supplied gaming machines and components into those markets.
367 The significance of this observation is twofold. First, Mr Irarrazaval’s market evidence did not concern a “South American market” as such, but particular regional markets in which market conditions and ATI’s role differed. Secondly, only transactions 13, 46 and 51 in the DN category (involving 34 gaming machines) and transactions 34 and 36 in the MC category (involving 7 gaming machines) involved a Latin American country about which Mr Irarrazaval had given particular evidence about market conditions and ATI’s role. In each case the country was Peru. The other transactions involved sales outside the Latin American region (namely, to Cyprus and the United States of America) or to countries in the Latin American region (namely, to Mexico and Belize) about which no specific evidence of market conditions or ATI’s role was given beyond certain business plans which were exhibited to Mr Irarrazaval’s affidavit. That evidence, however, is of a very limited nature. Those plans were only admitted as evidence of a plan, and nothing more. The nature and extent of the evidence of the gaming machine market in Peru and ATI’s role in that market thus plays a central role in the Aristocrat parties’ claim for compensatory damages for copyright infringement.
368 In his affidavit Mr Irarrazaval said that over the period 2002 to 2008 ATI had supplied Aristocrat gaming machines and components into countries in Latin America, including Peru. Sales of these products consisted of direct sales by ATI to customers and, in countries where there are large numbers of small customers, indirect sales via an authorised distributor. The Aristocrat gaming machines and components supplied by ATI for sale into Latin America included new Aristocrat gaming machines, refurbished Aristocrat gaming machines (consisting of Aristocrat gaming machines containing new and upgraded components), second-hand Aristocrat gaming machines, and conversion kits that enable games to be exchanged or upgraded into second-hand Aristocrat gaming machines (such as to replace counterfeit components).
369 The Aristocrat gaming machines supplied to the Latin American region differ in an important respect from the form in which they are supplied to markets outside this region: they are required to have games that are approved, and in some cases adapted, for local conditions. The games which are approved for supply in specific countries are referred to as “homologated games”. For example, as Spanish is the preferred language for gaming machine products in most Latin American countries, Aristocrat ordinarily translates the games and artwork used in its gaming machines from English into Spanish in order to sell into those markets.
370 Both new and second-hand gaming machines can be lawfully sold in Peru. However, a combination of high import duties and relatively low average daily revenue generated by gaming machines means that the gaming machine market in Peru consists predominantly of sales of refurbished machines. Mr Irarrazaval gave evidence that it was difficult to estimate accurately the number of gaming machines in Peru due to the high numbers of illegal and counterfeit machines operating in that country. He nevertheless estimated that, at the time of making his affidavit in 2008, there were at least 65,000 gaming machines in Peru operating from 769 licensed gaming venues conducted by approximately 245 companies. Despite the size of this market, it was largely unregulated in the period 2002 to 2008. In July 2006 (after the commencement of the present proceedings) only 6.2% of the “slot halls” in Peru had governmental approval to operate.
371 In 2002, Aristocrat sold 5,000 Aristocrat gaming machines (comprising a mix of refurbished machines) to three customers in Peru. None of those customers was shown to be a customer of the Global/Impact parties.
372 Between late 2002 and late 2006, ATI appointed a distributor known as Australis S.A. (Australis). Australis was authorised to sell Aristocrat gaming machine products in Peru on ATI’s behalf. However, notwithstanding the significant size of the gaming machine market in Peru, and the large number of Aristocrat gaming machines installed and operating across the various gaming machine venues in that country, Mr Irarrazaval said that Australis “had difficulty” selling Aristocrat gaming machines to customers in Peru during the period of its distributorship. Mr Irarrazaval attributed this difficulty to the high number of counterfeit gaming machines being sold in Peru by parties not connected to ATI, at prices significantly below the prices at which ATI was able to offer genuine refurbished Aristocrat gaming machines. Whether this was, as a matter of objective fact, the cause of Australis’ difficulty is really a matter of speculation. Mr Irarrazaval’s statement can only be understood as advancing an argument. He did not seek to support his statement by reference to any objective facts. No evidence was forthcoming from the distributor itself. Other evidence showed that, although Australis was authorised to sell both new and refurbished Aristocrat gaming machines, it in fact sold no gaming machines at all during the period of its distributorship. This fact alone suggests the real possibility that causes other than the existence of counterfeit gaming machines may be responsible for, or contributed to, what can only be described as its total lack of success in selling gaming machines over a four year period, including new gaming machines.
373 In this connection a number of other matters emerged, or were emphasised, in Mr Irarrazaval’s cross-examination, which are relevant to this question, and market conditions more generally.
374 First, there was a significant difference between the prices at which the Global/Impact parties and other suppliers (including two large suppliers) were selling refurbished and second-hand machines in Peru at the relevant time and the prices at which ATI was selling refurbished machines. In this connection it is to be borne in mind that the Aristocrat parties had accepted in the Particulars that, leaving aside the infringements that had been particularised, the Global/Impact parties carried on a business selling used gaming machines to overseas markets. Leaving aside the infringements that were found to have been established, that business was apparently a substantial one in which the Global/Impact parties and other suppliers (including large suppliers) were supplying gaming machines at significantly different price-points to that which ATI was seeking to supply refurbished machines. Mr Irarrazaval accepted that purchasers of refurbished gaming machines in Peru were very price sensitive.
375 Mr Irarrazaval prepared a table based on import records from the customs authority in Peru recording Aristocrat gaming machines imported for the years 2002 to 2007 by what he said were the top five suppliers, which included Global and Impact. It is difficult to draw any conclusions from this table. For a start, it is admittedly based on incomplete records. Moreover, the table does not distinguish between new gaming machines, second-hand gaming machines and refurbished gaming machines. In our view little weight, if any, can be given to it. It is certainly difficult to see what sound conclusions can be drawn from it. Nevertheless, it does not seem to be disputed that there were a number of suppliers supplying gaming machines into the market in Peru in the relevant period.
376 Secondly, Mr Irarrazaval gave evidence that, in the relevant period, gaming machines could be legitimately imported into Peru by means of special government or judicial concessions whereby import duties and other taxes could be avoided. He said that import duties were of such significance that, when other suppliers were able to avail themselves of these concessions, “price [was] quite irrelevant really” and that these suppliers “could have sold at a much higher price and we still couldn’t [sic] have been able to compete”. The evidence suggests that these arrangements no longer exist or have been curtailed. But, importantly, those arrangements were in existence at the time of the impugned transactions.
377 Thirdly, Mr Irarrazaval gave evidence, apparently based on ATI’s actual experience, that, in the relevant period, gaming machines were also smuggled into Peru. He said that the Chilean and Brazilian borders were “very open” and that gaming machines could be brought in “very easily” by truck. Mr Irarrazaval did not seek to suggest that these machines were necessarily counterfeit gaming machines.
378 Fourthly, Mr Irarrazaval gave evidence of other forms of market participation in Peru in the relevant period, such as the placement of gaming machines in venues under arrangements whereby the profit from operating the machines was shared between the supplier of the machine and the owner or operator of the venue.
379 What all this evidence reveals is that, at the time of the impugned transactions, the market in Peru had complex features which were very likely to have affected ATI’s ability, or at least its distributor’s ability, to compete on price in what was accepted to be a very price-sensitive and largely unregulated market. This was not simply because some other suppliers were offering counterfeit gaming machines, as Mr Irarrazaval had contended. The presence of legitimate second-hand and refurbished gaming machines, brought into Peru by various suppliers (including large suppliers) under various apparently legitimate arrangements (and sometimes illegitimate arrangements), and offered at a significantly cheaper price than ATI was seeking, or under other competitive arrangements (such as profit-sharing arrangements), cannot be ignored when considering the hypothetical question of what sales the Aristocrat parties would have made in Peru absent the supply by the Global/Impact parties of the 41 infringing gaming machines in transactions 13, 46, 34, 36 and 51 (spread over the period July 2002 to August 2005) into a market having, as at February 2008, approximately 65,000 operating gaming machines.
380 With one possible exception, the Aristocrat parties adduced no evidence that the Global/Impact parties had made sales to any of ATI’s customers in Peru. This was despite the fact that Mr Irarrazaval reviewed the tables exhibited to Mr Cooley’s affidavit (on which the Particulars were based) which identified the Global/Impact parties’ customers. The one exception was a business called “Flamingo Gaming”, which seems to have been a common customer. However, there was no evidence that the Global/Impact parties had sold any infringing gaming machines to Flamingo Gaming. Certainly no evidence was adduced from Flamingo Gaming itself of its dealings with the Global/Impact parties.
381 The Aristocrat parties did not attempt to prove by direct evidence that the sale by the Global/Impact parties of an infringing gaming machine was a sale that ATI would otherwise have made. It is to be noted in this regard that, whilst one section of Mr Irarrazaval’s affidavit is headed “Loss of sales by Aristocrat”, large tracts of this part of Mr Irarrazaval’s affidavit were not read by the Aristocrat parties; other parts were rejected. The result was that none of the paragraphs under this heading found their way into evidence. The only evidence bearing on the question of lost sales is the evidence to which we have referred. The appellants submitted that that evidence provided no proper foundation for the drawing of a reasonable inference that a sale made by the Global/Impact parties of an infringing gaming machine was a sale that ATI would otherwise have made. In this connection the appellants pointed to price bands, price sensitivities, no sales at all by ATI’s distributor in Peru, the fact that there was a large market for second-hand and refurbished gaming machines, and the fact that the Global/Impact parties had a large trade in gaming machines that were not shown to be infringing.
382 On the other hand the Aristocrat parties submitted in the appeal that the evidence given by Mr Irarrazaval about market conditions in “the destination markets” was sufficient to equip the primary judge to make an assessment of the likelihood of lost sales. Their submissions proceeded on the basis that the Aristocrat parties stood in the market ready to supply, by way of export from Australia, a gaming machine with a genuine version of the relevant software and bearing a genuine compliance plate. They submitted that the Global/Impact parties had not proved that their customers were in any special relationship with them such that, because of that relationship, those customers would not approach Aristocrat as an alternative supplier. They submitted that, by reason of the infringing conduct of the Global/Impact parties, they had lost the commercial opportunity to offer to sell such machines to such customers.
383 The Aristocrat parties sought to place reliance on the table prepared by Mr Irarrazaval, to which we have referred. They submitted that that table showed that as the sales in Peru by the Global/Impact parties went up, sales by the Aristocrat parties went down. However, because of the deficiencies which we have identified, we do not think that any sound conclusions can be drawn from the table. In any event, on its face, it does not establish the relationship for which the Aristocrat parties contended. Furthermore, even taking it at face value, the table cannot be rationally interpreted as demonstrating that sales by the Global/Impact parties were made at the expense of sales by the Aristocrat parties.
384 The Aristocrat parties submitted that, in reaching a determination that sales were lost, the primary judge was entitled to take into account evidence to the effect that customers wanted particular games. The primary judge’s reasons do not reveal that this was a factor in his Honour’s consideration. But even accepting that proposition in relation to certain sales (of which there was some evidence, including from Mr Andrews), we were not taken to any evidence which showed that this was the case in respect of the impugned transactions.
385 If we were to proceed on the more easily-established proposition that, in respect of the impugned transactions, the relevant customers were specifically seeking an Aristocrat as opposed to some other gaming machine, the evidence does not even establish the likelihood that, but for the supply made by the Global/Impact parties, the relevant customer would have sought supply from the Aristocrat parties, rather than from some other supplier with an ability to source and supply second-hand or refurbished Aristocrat gaming machines. It was not suggested that, apart from the Aristocrat parties, the Global/Impact parties were the only source of such supply. Indeed, the evidence plainly shows the existence of other suppliers, including those from whom the Global/Impact parties themselves obtained their supply. We were not taken to any evidence which suggested that there was any limitation on the supply of such machines, on the persons who could supply such machines or on the places from which such machines could be supplied.
386 In our view, when fully considered, Mr Irarrazaval’s evidence provides an insufficient basis from which it can properly be inferred that the Aristocrat parties would have sold at least a proportion of the gaming machines the subject of the impugned transactions, beyond the speculative possibility that that might have been so. The evidence was effectively limited to market conditions in Peru. Transactions 20, 28, 29, 41, 48 and 54 all concerned other national markets of which there was, effectively, no evidence. As we have noted, the remaining transactions (transactions 13, 34, 36, 46 and 51) were spread over a significant period of time. Transaction 13 was in July 2002, transaction 34 was in October 2004 and transactions 36, 46 and 51 were in January, June and August 2005, respectively. Those transactions involved only 41 infringing gaming machines out of a total of 242 machines supplied in those transactions. That supply was into a largely unregulated, price-sensitive market of considerable size involving a number of other suppliers. In all but transaction 13 (with a total shipment of 10 gaming machines), the infringing gaming machines represented only a small part of a much larger number of gaming machines supplied in the transaction. As we have noted, the presence of legitimate second-hand and refurbished gaming machines, brought into Peru by various suppliers (including large suppliers) under various apparently legitimate arrangements, and offered at a significantly cheaper price than ATI was seeking, or under other competitive arrangements, cannot be ignored when considering the hypothetical question of what sales the Aristocrat parties would have made in Peru absent the isolated supply by the Global/Impact parties of the 41 infringing gaming machines spread over the period we have mentioned.
387 Considered as a whole, the evidence only points to the fact that ATI was one supplier of second-hand and refurbished gaming machines among many suppliers. The Aristocrat parties’ submissions proceeded upon a large measure of conjecture. Conjecture is no substitute for sufficient evidence or for facts from which inferences may properly be drawn.
388 It is not enough, of course, that we merely come to a different view on the evidence. The question on appeal is whether the primary judge was entitled to make the finding which he did. In our respectful view, the primary judge was not so entitled on the state of the evidence to which we have referred. His Honour erred accordingly.
389 In these circumstances the Aristocrat parties would only be entitled to nominal damages for those infringements by dealing which had been established. We would have assessed those damages at $1.00.
390 For completeness we should note that the appellants made submissions concerning the profit calculation undertaken by the primary judge in assessing damages under s 115(2) of the Copyright Act. The effect of those submissions was that the lost profit was, in fact, minute. In view of the conclusion to which we have come, it is not necessary for us to make any findings in relation to those submissions.
391 The primary judge awarded the Aristocrat parties additional damages of $450,000 under s 115(4) of the Copyright Act. The award was made against the Global/Impact parties and Mr Allam, jointly and severally.
392 Section 115(4) provides as follows:
Where, in an action under this section:
(a) an infringement of copyright is established; and
(b) the court is satisfied that it is proper to do so, having regard to:
(i) the flagrancy of the infringement; and
(ia) the need to deter similar infringements of copyright; and
(ib) the conduct of the defendant after the act constituting the infringement or, if relevant, after the defendant was informed that the defendant had allegedly infringed the plaintiff’s copyright; and
(ii) whether the infringement involved the conversion of a work or other subject matter from hardcopy or analog form into a digital or other electronic machine readable form; and
(iii) any benefit shown to have accrued to the defendant by reason of the infringement; and
(iv) all other relevant matters;
the court may, in assessing damages for the infringement, award such additional damages as it considers appropriate in the circumstances.
393 The primary judge noted that the principles upon which additional damages are awarded were described in DAP Services at [40]-[56]. To this we would add the following non-exhaustive references to the relevant principles: Bailey v Namol Pty Limited (1994) 53 FCR 102 at 113-114; Autodesk Inc v Yee (1996) 68 FCR 391 at 394; Raben Footwear Pty Ltd v Polygram Records Inc (1997) 75 FCR 88 at 92-93 and 102-104.
394 In making his assessment the primary judge noted (at [907]) that deterrence was one of the objectives in awarding additional damages and that an element of penalty is an accepted factor in the remedy. His Honour also noted that the Court is to have regard, amongst other things, to the flagrancy of the infringement and the need to mark the Court’s disapproval of the conduct in question.
395 The primary judge found (at [908]-[909]) that, although the number of infringing transactions ultimately proved was far less than the number claimed by the Aristocrat parties, it was plain that the appellants were engaged in a commercial exercise. Their actions were plainly flagrant and undertaken for commercial gain. The statements made in the emails when considered with much of the material seized in the Anton Piller raids showed the willingness of the appellants to engage in counterfeiting when it suited their commercial purposes. We interpose to observe that our conclusions on the admissibility of the emails as against certain of the parties do not affect the overall correctness of that general finding by the primary judge.
396 The primary judge (at [911]) also noted that he was entitled to take into account the conduct of the appellants after the acts constituting the infringement. In that connection he took into account the attitude of the appellants to the litigation in vehemently denying any involvement in counterfeiting.
397 In arriving at his assessment of additional damages the primary judge used the award of damages in DAP Services as a yardstick. In that case a Full Court (of which his Honour was a member) assessed additional damages in the sum of $200,000. In the present case the primary judge came to the view that the appellants’ infringing activities were on a scale larger than that in DAP Services.
398 The Global/Impact parties did not seek to contest the principles on which additional damages are awarded, as set out in the cases to which we have referred. Nevertheless, they submitted that this was not a case in which additional damages should have been awarded; certainly not for the sum for which they were awarded. Their challenge to the award of additional damages was based on essentially four contentions.
399 First, they submitted that the Aristocrat parties had not particularised their claim to additional damages and that, for that reason alone, additional damages should not have been awarded.
400 Secondly, they submitted that before an infringer will be liable to pay additional damages, the claimant must establish the facts upon which the Court can be satisfied, having regard to the matters specified in s 115(4): Prior v Lansdowne Press Pty Ltd [1977] VR 65 at 69. In this connection they submitted that the evidence did not establish the large-scale counterfeiting operation alleged by the Aristocrat parties, and that the primary judge made plain that no conclusion could be drawn about the identity of the components involved in the infringements.
401 Thirdly, they submitted that even though there is no requirement for proportionality between compensatory damages and additional damages, the amount awarded in the present case was wholly and unjustifiably disproportionate to the amount ($44,870) awarded as compensatory damages.
402 Fourthly, they submitted that there was no reasoned analysis by which the sum of $450,000 was determined. In this connection they pointed to the fact that the primary judge did not use as his starting point any pecuniary benefit obtained by the Global/Impact parties from the infringing activities that had been found. They also challenged the primary judge’s conclusion that their infringing activities were on a scale larger than that in DAP Services.
403 These submissions do not of themselves persuade us that the primary judge erred in awarding additional damages or in his assessment of the quantum of those damages.
404 We can see no substance in the Global/Impact parties’ submissions concerning any lack of particularisation of the claim for additional damages.
405 Paragraphs 46 and 47 of the amended consolidated statement of claim were as follows:
Each of Global, Andrews, Impact, Cragen, Tonita and Allam has done the acts alleged against it or him:
(a) flagrantly;
(b) knowing that copyright subsisted in the Aristocrat Works;
(c) knowing that the acts concerned constituted an infringement of the copyright in the Aristocrat works;
(d) in reckless disregard of the infringement of the copyright;
(e) intending that substantial benefit would accrue to him or it or persons who acquired or participated in the acquisition and sale or distribution of gaming machines that embody infringing copies of the Aristocrat Works.
By reason of the facts, matters and circumstances set out in paragraph 46 above, the Court, in awarding damages for infringement of copyright, should award additional damages under section 115(4) of the Act.
406 Although the Allam parties complained about a lack of particularisation of the claim for additional damages in their final submissions at trial (which were adopted by the Global/Impact parties), we were not taken to any material that suggested that any of the appellants sought greater particularisation than was provided by the consolidated pleading. The basis on which the claim for additional damages was advanced was stated in that pleading, although general, not precise, particulars were given. We cannot see how a lack of particularisation, in circumstances where no greater particularisation than that given was sought, precluded the primary judge from awarding additional damages. The general basis of the claim for additional damages was set out and, at the end of the hearing, the primary judge had before him a substantial body of evidence which was available to the Aristocrat parties to make good their claim.
407 As to the Global/Impact parties’ challenge to the sufficiency of that evidence, we are satisfied that the evidence, and the primary judge’s rejection, on credit grounds, of the appellants’ explanations of innocence, entitled the primary judge to find that the character of the appellants’ conduct was “cynical and flagrant”, “plainly flagrant” and “undertaken for commercial gain”.
408 In our view it is not to the point that the Aristocrat parties failed to prove their claims to the extent originally alleged. The primary judge was plainly persuaded that, nevertheless, the appellants’ conduct was part of a “commercial exercise” and that they were prepared to “engage in counterfeiting when it suits their commercial purpose”. These findings were open to the primary judge on the evidence. We can see no error in them.
409 Similarly, it is not to the point that the primary judge expressed uncertainty about the components of the gaming machines that were infringing. In this connection it is to be borne in mind that the primary judge was at least satisfied, on the balance of probabilities, that the impugned gaming machines “consisted of fake Aristocrat game software and fake compliance plates”: see at [925]-[926]. His Honour considered these to be substantial components of the gaming machines, justifying the substantial award of additional damages he made. In other words, in assessing additional damages, the primary judge was not persuaded that the infringements were merely de minimis infractions of the claimed copyright.
410 The Global/Impact parties’ submissions concerning proportionality are answered by their own acceptance of the proposition that there is no requirement for proportionality between compensatory damages and additional damages. Indeed, as DAP Services demonstrates, the fact that nominal damages only are awarded is no bar to a claim for additional damages, properly brought forward.
411 As to the final matter raised by the Global/Impact parties, it is true that the primary judge did not explicitly take as his starting point the pecuniary benefit obtained by the Global/Impact parties from their infringing activities. Nevertheless, the primary judge’s findings on infringement by dealing gave some indication of the pecuniary benefit that they had obtained. The primary judge’s assessment of additional damages cannot be read in isolation from earlier parts of his reasons. The primary judge was aware, for example, of the number of transactions and gaming machines involved in the infringements, as well as the invoice value of those transactions to the Global/Impact parties. We are not persuaded that the primary judge would not have been mindful of this at the time he came to assess additional damages.
412 More importantly, however, it is well recognised that the assessment of additional damages involves the exercise of a broad discretion, reflected in the terms of s 115(4) itself, and is a somewhat imprecise exercise: Bailey at 114. It was not necessary for the primary judge to use as his starting point the benefit derived by the appellants from the infringing activities. Here the primary judge, having sat through a lengthy hearing and having sifted through a significant body of evidence, as well as having seen and heard Messrs Andrews, Cragen and Allam give their evidence, was uniquely placed to assess the degree of flagrancy and the scale of activities involved.
413 The primary judge expressed the view that the appellants’ activities were on a scale which seemed to him to be larger than that which existed in DAP Services. The Global/Impact parties challenged the accuracy of that statement given that, in DAP Services, there were 615 infringing artwork panels sufficient to supply about 400 gaming machines. They submitted that this was a significantly larger scale of activity than found here. We do not accept that submission. It is clear that when the primary judge was comparing the activities in this case with those in DAP Services he was not merely looking at the number of infringements that had been proved. Rather, his Honour was looking at the scope of the activities that were involved in those infringements. As we have noted, those activities included the manufacture of counterfeit compliance plates and the burning of game software and involved the activities of three groups acting in concert to achieve sales of those gaming machines.
414 Although the primary judge’s assessment of additional damages was in the upper range available to him, we are not persuaded that his Honour’s award, because of its quantum, reflects error.
415 The Allam parties made two additional submissions. First, they submitted that, absent statutory damages (by which they meant an award of compensatory damages), it was not open to the Aristocrat parties to obtain additional damages. No authority was cited for that proposition. Indeed, there is authority against that proposition: see DAP Services. We therefore reject that submission.
416 Secondly, the Allam parties submitted that, on any view, Mr Allam’s involvement in each infringement by dealing was distinct from that of the other parties. In this connection they point to the fact that a number of the transactions found to involve the supply of infringing gaming machines were not transactions alleged against Mr Allam in the Particulars.
417 This submission raises a general point affecting all the appellants. As we have noted, the Particulars in relation to each of the impugned transactions were detailed and identified with specificity those persons who were participants in each transaction, including as a secondary infringer. The case was also a circumstantial one. In our view the appellants were entitled to rely on the Particulars in advancing their respective defences and in making their forensic decisions accordingly.
418 In our view it is not open to the Aristocrat parties to call in aid the more generally pleaded allegations concerning secondary liability in their statement of claim when the Particulars themselves descended to the specific detail of identifying the participants in the alleged infringements. To treat the Particulars otherwise would be to effectively ignore them in this regard. Thus we can see no injustice in keeping the Aristocrat parties to the specific case they brought. On the other hand, we can see injustice in permitting the Aristocrat parties to depart from that case, especially when they did not seek to amend those Particulars to bring the broader case ultimately considered by the primary judge.
419 Thus, had it been necessary for us to do so, we would have allocated additional damages against the appellants on a proportional basis by transaction, rather than holding them jointly and severally liable for additional damages, as the primary judge did.
420 There is another matter. The primary judge treated the Aristocrat parties as jointly entitled to damages for infringement. It is clear, however, that the owner of the relevant copyright was ATA. At [68]-[73] of his reasons the primary judge set out the respective roles and identities of each of the Aristocrat parties, and the relevant licence arrangements between them (as summarised by the Aristocrat parties). It was implicit in the Aristocrat parties’ case at trial that these arrangements were effective to confer on AI and ATI an entitlement to claim damages for copyright infringement. This position was not challenged by the respondents at trial. On appeal, however, the Global/Impact parties contended that ATI and AI were not entitled to damages. This submission, as with the rest of the Global/Impact parties’ submissions on damages, was supported by the Allam parties.
421 As we have noted, the agreement of significance in this regard is entitled “Head Distribution & Intellectual Property Licence Agreement” (the Head Distribution Agreement) that was entered into by ATA and AI after the commencement of the proceeding. However, the agreement purports to be effective, as of 1 January 2005, to appoint AI as ATA’s exclusive intellectual property licensee in respect of products worldwide other than in Australia (but including products made for export outside Australia).
422 A separate agreement entitled “Distribution Agreement” was executed on 3 May 2006 between AI and ATI and purported to be effective, as of 1 January 2006, to appoint ATI as AI’s distributor and exclusive intellectual property licensee in North America (except British Columbia), South America, the Caribbean and Latin America (except Argentina and Puerto Rico) in relation to certain defined transactions.
423 It is apparent from the manner in which the parties conducted their cases in relation to this issue on appeal (ie solely by reference to the Head Distribution Agreement), that they considered that the matter would turn on the construction and effect of the Head Distribution Agreement. It is thus that agreement alone to which we have directed our attention.
424 The appellants submitted that, at the time the allegedly infringing transaction took place, ATI and AI were not the owners of the copyright, nor exclusive licensees of the copyright owner (ATA), as required by s 119 of the Copyright Act. Thus only ATA was entitled to recover damages. The appellants noted that the date of execution of the Head Distribution Agreement was later than that of any allegedly infringing transaction and it is only a solitary clause in the agreement which purports to give it retrospective effect. That clause was expressed as follows:
The parties have caused this agreement to be executed by their duly authorized representatives effective as of the Effective Date.
The “Effective Date” was defined as meaning 1 January 2005.
425 The appellants submitted that it was not open to the Aristocrat parties to retrospectively confer a legal liability against a third party by backdating a licence. They further submitted that s 119 does not contemplate that a copyright owner can unilaterally confer an entitlement to damages on another entity ex post facto.
426 The Aristocrat parties first submitted that, having not raised this point at trial, the appellants should not be permitted to raise the matter on appeal.
427 There is some merit in that argument insofar as it concerns the appellants’ challenge to the primary judge’s profit calculation undertaken for the purposes of calculating compensatory damages under s 115(2) of the Copyright Act: see our remarks at [397]. However, that challenge is no longer relevant. Insofar as the present relevance of the question lies in identifying the person to whom damages are payable, we can see no impediment to that question being raised.
428 Secondly, they submitted that third parties to the licence arrangement, such as the appellants, are bound by that arrangement. They sought to support that position by calling in aid Deane J’s observations in The Commonwealth of Australia v Verwayen (1990) 170 CLR 394 at 444, to the effect that persons not parties to an estoppel can be affected by an estoppel. We are unable to see the relevance of that observation to the present circumstances. No issue of estoppel arises.
429 Thirdly, they submitted that “there was no criticism in the Full Court in DAP Services of the primary judge’s decision to award damages to ATA and AI, who were applicants in those proceedings”. We do not see how that circumstance impacts upon the entitlement to damages in the present case.
430 A similar question arose in The Film Investment Corporation of New Zealand v Golden Editions Pty Ltd (1994) 28 IPR 1. In that case Burchett J said (at 15):
But it seems to me there are even more fundamental flaws in the scheme embodied in the deed of 13 November 1990. In the first place, it is not possible, if the exclusive licences purportedly held by FICNZ were not valid, for Mr Wass and FICNZ to make them so retrospectively. What had been written in 1988 had been written, and they could not change a line except for the future. They did not have Parliament’s power of retrospective legislation. So any exclusive licence or assignment brought into existence by the deed of 13 November 1990 could only have operation as from that date. (I am speaking, of course, of the effect of a licence or assignment so far as third parties are concerned, which is what is in issue here.)
431 In our view that passage is determinative of the present question. It was not competent for ATA to extend unilaterally the liability of third parties (in this case, the appellants) for damages to ATI and AI via the Head Distribution Agreement, whatever effect that agreement might have had on the rights of the parties inter se.
432 Given that conclusion, damages should only be awarded in favour of the copyright owner, ATA.
Introduction
433 Cross-appeals were brought by the Aristocrat parties. Those cross-appeals concerned three issues.
434 First, the Aristocrat parties contended that the primary judge misunderstood a submission made by them to the effect that, if they were to be awarded damages for copyright infringement, it would not be appropriate for the Court to award damages in relation to the trade mark claim also. They submitted that the primary judge incorrectly treated this submission as meaning that they did not press their trade mark claim. In the result, they submitted that the primary judge failed to make findings of trade mark infringement.
435 Secondly, they contended that, although having found copyright infringement, the primary judge erred by declining to make declarations and to grant injunctions, when the circumstances of the case warranted the granting of that relief.
436 Thirdly, they contended that the primary judge erred by dismissing the proceeding against Tonita. They submitted that the primary judge had found that Tonita had infringed Aristocrat’s copyright and should have found it liable for doing so.
437 In light of the conclusions to which we have come on the question of copyright infringement by dealing, it is not necessary for us to deal in any extensive way with the second and third of these issues, save to say that, had we been satisfied that such a case of infringement had been established, we would have been inclined to the view that declarations and injunctions should be made at least with respect to the infringement of copyright in the Aristocrat game software involved in the transactions we have found to have been established. Furthermore, we are not satisfied that the primary judge erred in dismissing the case of copyright infringement against Tonita in any event. The acts of infringement relied upon in that regard took place before its incorporation.
438 It is necessary, however, for us to deal in a substantive way with the cross-appeal in relation to the allegations of trade mark infringement.
439 The Aristocrat parties submitted that their trade mark claim was maintained at all times and that the primary judge misunderstood their submissions with respect to damages as signifying that they did not press their claim for trade mark infringement beyond a claim for damages that was merely co-extensive with, and for practical purposes indistinguishable from, their claim for compensatory damages for copyright infringement.
440 They submitted that, having dealt with the copyright claims, the primary judge should have made a “consequential” finding of trade mark infringement. They submitted that this error should be rectified and the Full Court should itself make findings of trade mark infringement.
441 On the other hand the appellants submitted that, as the copyright claims fail, at least in respect of infringement by dealing, so too must the trade mark claims fail.
442 We do not accept either of these submissions. In our view there is no necessary connection between success or failure on the copyright claims and success or failure on the trade mark claims. We do accept, however, that the primary judge erred in treating the trade mark claims as being co-extensive with the copyright claims. Assuming that the trade mark claims, if successful, might not have resulted in an award of damages beyond that awarded as compensatory damages for copyright infringement (a matter on which we express no view), it was necessary for the primary judge to arrive at a determination on the question of trade mark infringement in order to consider the Aristocrat parties’ entitlement to the other relief they had claimed on that score.
443 Although the Aristocrat parties have been unsuccessful in establishing a case of copyright infringement by dealing, it does not follow that they are not able to establish a case of trade mark infringement. The present difficulty is that the primary judge made no findings of fact in relation to that issue because he saw the copyright and trade mark claims as being co-extensive in all respects, when that was not the case. Given the absence of primary findings of fact in relation to the issue of trade mark infringement, it is neither appropriate nor practicable for us to embark upon that task, as if sitting at first instance.
444 We can see no real alternative but to remit the Aristocrat parties’ case for trade mark infringement to the primary judge for determination.
445 We have concluded that the two appeals succeed. It follows that orders made on 15 December 2009 must be set aside. Each matter should be remitted to the primary judge for determination of the claims of trade mark infringement. The parties should consult and within seven days file draft orders (including as to costs) or if agreement cannot be reached, file and serve proposed orders and written submissions in support thereof.
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I certify that the preceding four hundred and forty-five (445) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justices Bennett, Middleton and Yates. |
Associate:
