FEDERAL COURT OF AUSTRALIA

Insight SRC IP Holdings Pty Ltd v Australian Council for Educational Research Ltd [2013] FCAFC 62

THE COURT ORDERS THAT:

1.    The appeal be allowed.

2.    The cross-appeal be dismissed.

3.    The parties file agreed orders as to costs and the quantum of general damages on or before 21 June 2013 and in default of agreement:

(a)    the appellants file and serve their proposed draft orders and written submissions of no more than five pages on or before 25 June 2013;

(b)    the respondent file and serve its proposed draft orders and written submissions of no more than five pages on or before 2 July 2013;

(c)    if any party seeks to make further oral submissions that should be indicated in the written submissions.

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

REASONS FOR JUDGMENT

1    The School Organisational Health Questionnaire or SOHQ is used to assess and analyse the organisational health of schools. It consists of 57 questions arranged under 12 headings or modules. Dr Peter Hart was the first person to reduce the SOHQ to a material form. He did this in April 1992. Between May 1990 and May 1992, Dr Hart was employed by the Victorian Department of Education.

2    Between early 2006 and October 2009, the Australian Council for Education Research Limited (ACER), the respondent and cross-appellant, reproduced the SOHQ as part of a project with Independent Schools Victoria Inc (ISV). The primary judge, in careful and detailed reasons, found that ACER infringed Dr Hart’s copyright when it used the SOHQ in the ISV project but that he had no right to general damages. His Honour awarded $10 in nominal damages to Insight SRC IP Holdings Pty Ltd (Insight Holdings) and Insight SRC Pty Ltd (Insight), the appellants and cross-respondents. At the time of the trial, those companies were respectively the owner of the copyright in the SOHQ and its exclusive licensee. However, his Honour found that the infringement was flagrant and awarded Insight Holdings and Insight $32,500 in additional damages under s 115(4) of the Copyright Act 1968 (Cth) (the Act).

3    On 30 June 2009, Dr Hart had executed two deeds that assigned for $150,000 the copyright in the SOHQ and the goodwill in Insight’s business in favour of the trustee of his family trust, Hart Cultural Lodges Pty Ltd (Hart Cultural Lodges). At this time, Dr Hart treated Insight as a bare (oral) licensee of the SOHQ and allowed it to trade, offering services utilising the SOHQ. Insight’s business was apparently successful. On 1 October 2009, Hart Cultural Lodges executed a deed of assignment of the copyright in favour of Insight Holdings in consideration of the issue of 774 further ordinary units in the Insight SRC IP Holdings Unit Trust (the Insight Trust). On the same day, Insight Holdings entered into an agreement to grant an exclusive licence of the SOHQ and other property to Insight in consideration of a royalty of 10% of Insight’s gross revenue. None of those four deeds dealt with any existing causes of action for infringement of copyright in the SOHQ. At the time those deeds were made, Dr Hart and his interests were unaware of ACER’s use of the SOHQ.

4    On 12 May 2011, Dr Hart entered into a deed of assignment, in favour of Hart Cultural Lodges, of all of his rights in respect of past and existing causes of action for infringement of copyright in the SOHQ in consideration of the payment of $300,000. That deed also assigned the copyright in the SOHQ, after including in its recitals references to the 30 June 2009 deeds and to an oral agreement between the parties made on 1 July 2007 in respect of the subject matter of one of those deeds. On the same day, Hart Cultural Lodges entered into a deed with Insight Holdings assigning the same property (i.e. copyright, past and existing causes of action) in consideration of the issue of 774 more units in the Insight Trust. In turn, Insight Holdings executed a deed granting Insight an exclusive licence of the SOHQ, together with the power to enforce any rights of action for past and existing causes of action for infringement of copyright in the SOHQ (the 2011 Deeds).

5    The primary judge found that although ACER had infringed Dr Hart’s rights as owner of the copyright, Insight Holdings and Insight had not proved that Dr Hart had suffered any actual damage under s 115(2) of the Act. He also found that Dr Hart’s rights to damages had been assigned to Insight Holdings and Insight under the 2011 Deeds. Accordingly, his Honour found that Dr Hart was only entitled to $10 in nominal damages in respect of the rights he had assigned. Importantly, his Honour found that if Insight had had enforceable rights in respect of ACER’s breaches of copyright, it would have been entitled to $130,000 in general damages.

Issues

6    In their appeal, Insight Holdings and Insight contended that his Honour erred in proceeding on the basis that they had not proved any loss of Dr Hart’s for which they could enforce any claim under s 115(2) of the Act. They contended that either the finding of $130,000 as Insight’s loss should be treated as the value of Dr Hart’s rights or those damages should be reassessed.

7    In its cross-appeal, ACER argued that the primary judge made two errors, each of which, if corrected, should lead to the dismissal of Insight Holding’s and Insight’s proceedings below. First, ACER submitted, his Honour should have held that Dr Hart’s assignment to Hart Cultural Lodges of past and existing causes of action for infringement failed because Hart Cultural Lodges lacked any sufficient genuine commercial interest in the enforcement of those claims. Likewise, the succeeding assignments in the 2011 Deeds failed, so ACER argued, for the same reason. Secondly, ACER submitted that the primary judge’s finding that Dr Hart was the owner of the copyright was wrong and that his Honour should have found that the Department owned it.

The legislative scheme

8    Relevantly, the Act provided that the author of a literary work, such as the SOHQ, is the owner of any copyright subsisting in the work by virtue of Pt III of the Act (s 35(2)). The rights comprehended by copyright in a work included the exclusive right to reproduce the work in a material form and to publish it (s 31(1)(a)(i), (ii)). However, s 35(6) provided that where a literary work was “made by the author in pursuance of the terms of his or her employment by another person under a contract of service …, that other person is the owner of the copyright subsisting in the work by virtue of this Part”. Additionally, s 176(2) provided that the Commonwealth or a State was the owner of the copyright in a literary work “made by, or under the direction or control of, the Commonwealth or the State, as the case may be”. Copyright was personal property and transmissible by assignment pursuant to s 196. Importantly, s 196(3) provided:

“(3)    An assignment of copyright (whether total or partial) does not have effect unless it is in writing signed by or on behalf of the assignor.”

9    An owner of a copyright may bring an action for infringement under s 115(1). So may an exclusive licensee under s 119. The Court may grant relief in such an action, including relevantly, general damages under s 115(2) and additional damages under s 115(4). Ordinarily, the owner and any exclusive licensee must be parties to proceedings in respect of an infringement of copyright, pursuant to s 120(1). In assessing damages, s 122 required that, where there is an exclusive licensee, the Court must take into account, where the exclusive licensee is the applicant, any liabilities in respect of royalties or otherwise to which the licence is subject, and any recovery already made by either the owner or exclusive licensee under s 115.

The primary judge’s reasons

10    Relevantly, the primary judge recorded the following argument as having been put by ACER :

“115    First, even assuming that the assignment of rights of action in 2011 was effective, the fact is that Dr Hart had no rights of action to assign. This was because, although prior to 30 June 2009 he was the owner of the copyright in the SOHQ, he was not using it or commercially exploiting it in any way. That was being done by Insight SRC. Therefore Dr Hart did not suffer any damage prior to 30 June 2009; if any party suffered damage it was Insight SRC.” (emphasis added)

11    His Honour then accepted that argument saying:

“118    As to ACER’s first submission, it is necessary to consider what action Dr Hart could have taken immediately prior to the execution of the Deed on 12 May 2011 by way of a damages claim for infringement of the copyright in the SOHQ. The possibilities are general damages under subs 115(2) and additional damages pursuant to subs 115(4) of the Act. As to the former, the difficulty for the applicants is that Dr Hart was not personally conducting a business involving the use of the SOHQ between the beginning of 2006 and 1 October 2009 and it has been no part of their case before me that Dr Hart personally would have exploited any commercial opportunities with ISV. Furthermore, Dr Hart did not claim that he could recover any such loss as the major shareholder of Insight SRC and that the Court could lift the corporate veil. On the other hand, what Dr Hart did have as the copyright owner was a right to nominal damages for infringement of copyright and a right to claim additional damages under subs 115(4). An award of nominal damages is appropriate to vindicate the invasion of a copyright owner’s proprietary right: Futuretronics.com.au Pty Limited v Graphix Labels Pty Ltd (No 2) (2008) 76 IPR 763.” (emphasis added)

His Honour concluded:

“131    The applicants claim general damages under subs 115(2) and additional damages under subs 115(4) of the Act. They have no claim for general damages because Dr Hart had no claim for general damages which he could assign to them.” (emphasis added)

12    Next, his Honour found that each of the deeds in 2009 and 2011 validly assigned its subject matter to the named assignee and was fully effective. He rejected ACER’s argument that Hart Cultural Lodges’ ownership of the copyright did not amount to a sufficient genuine commercial interest capable of supporting a valid assignment of a bare or mere right of action within the principle identified by Lord Roskill in Trendtex Trading Corporation v Credit Suisse [1982] AC 679 at 703B-E.

13    The primary judge found that Hart Cultural Lodges’ ownership of the copyright in the SOHQ in May 2011 was a sufficient genuine commercial interest to sustain the 12 May 2011 assignment by Dr Hart to it of his bare or mere cause of action for infringement against ACER. He found that Hart Cultural Lodges was part of Dr Hart’s commercial interests and that that company’s involvement in the 2009 transactions supported its having such an interest when the 2011 Deeds were made. He then held that Hart Cultural Lodges did not have to show that it sustained any loss or damage because it merely transferred Dr Hart’s rights of action to Insight Holdings in 2011. His Honour found that Insight Holdings had a genuine commercial interest in enforcing its assignor’s claims when it took the 2011 assignment. He then found that when Insight Holdings granted Insight the exclusive licence, that included Dr Hart’s existing rights of action in 2011, the former was simply passing those rights onto Insight as its exclusive licensee, which itself had a genuine commercial interest in enforcing rights of action for infringement of copyright    .

14    It is not necessary to refer in detail here to his Honour’s extensive and careful analysis of the considerable body of oral and documentary evidence led at the trial as to the ownership of copyright in the SOHQ. His Honour’s analysis was thorough and covered about 18 pages of his reasons. That culminated in the following conclusions that show the results of his Honour’s detailed consideration of events and recollections spanning the previous 20 years:

“93    First, Dr Hart created or made the SOHQ in April 1992.

94    Secondly, I do not accept on the balance of probabilities that the SOHQ was made by Dr Hart outside of his working hours with the Department. Some of the questions may have been written down by Dr Hart outside of his working hours, but bearing in mind what Dr Hart was doing during his working hours with the Department, I am not satisfied that there was the neat division for which the applicants contended. I do not think Dr Hart was deliberately trying to mislead me. The relevant events happened approximately 20 years ago and I think Dr Hart has convinced himself that events happened in a certain way.

95    Thirdly, I do not think that I can draw a clear conclusion about the development of the SOHQ from the fact of Dr Hart’s studies and research for his Doctorate of Philosophy programme. The two were linked in that both involved a consideration of the measurement of organisational health and the causes of whatever conclusions were reached about that matter. At the same time that was a matter he was addressing at work and discussing with his colleagues, and, in terms of the development and use of a questionnaire, a matter about which he had reached an agreement with Mr Conn.

96    Fourthly, the written documents, such as they are, about the terms of Dr Hart’s employment suggest that the making of the SOHQ was not a term of his employment. However, that is not decisive as the statements are very general and could not exclude the possibility that the making of the SOHQ was or became a term of his employment.

97    Fifthly, there was an agreement between Dr Hart and Mr Conn that the Department could use any questionnaire developed by Dr Hart for his own purposes and, in return, Dr Hart could use data collected by the Department for the purposes of his studies and research.

98    Sixthly, in view of the agreement between Dr Hart and Mr Conn I do not think it can be said Dr Hart made the SOHQ in pursuance of the terms of his employment. He was not required to produce it; in fact, the arrangement was that he could prepare it for his own purposes, albeit, the Department could use it. That arrangement might have been a generous one from Dr Hart’s point of view, but I am satisfied that was the arrangement. I do not think there is an issue with Mr Conn’s authority. The evidence suggests that he supervised Dr Hart’s work and I think he had the right to direct him as to what was or was not part of his employment duties.

99    Seventhly, I do not think it can be said that the SOHQ was made by the Department within subs 176(2) of the Act. It was made by Dr Hart. Nor can it be said that Dr Hart made the SOHQ under the direction or control of the Department. No one directed him to make it and he did not make it under the direction or control of any other member of the Department.” (emphasis added)

15    Michael Conn, to whom his Honour referred in the passage above, was a psychologist under whom Dr Hart had worked in the Department. The primary judge then found that the conduct of the Department subsequent to Dr Hart’s employment, that ended in May 1992, certainly supported the conclusion that it believed that he, or interests associated with him, owned the copyright in the SOHQ. He found that the circumstances in which Dr Hart made the SOHQ did not fall within ss 35(6) or 176(2) of the Act.

ACER’s submissions

16    ACER did not seek to support the primary judge’s conclusions at [118] and [131] of his reasons quoted at [11] above that Insight Holdings and Insight had no claim for general damages because Dr Hart had not used or sought to exploit the SOHQ commercially, and so, had no such claim that he could assign. Rather, ACER argued that Insight Holdings and Insight had not proved the value of any such claim and that, accordingly, his Honour was correct to have awarded them only nominal damages. ACER pointed to a sentence in its opening written submissions to the primary judge that raised an issue whether any loss had been established on the part of the assignor(s) of the choses in action. Nonetheless, ACER accepted that this “issue” had not been developed subsequently by it at all in argument or evidence at trial. Rather, both sides proceeded at trial on the footing that the real issue was whether Insight, at the time it was Dr Hart’s bare licensee of the SOHQ, would have been able to exploit the copyright in the questionnaire with ISV.

17    ACER argued on appeal that Dr Hart was not the only person who was a shareholder or unit holder in the chain of assignees and licensees between him and Insight. It contended that Insight Holdings and Insight had not established what loss Dr Hart would have suffered. ACER submitted that the loss of $130,000 that the primary judge found Insight would have suffered was not equivalent to any loss Dr Hart may have suffered and that his loss would have been some fraction of Insight’s. That was because, ACER contended, the interposition of other persons with interests in parties in the chain of assignees meant that Dr Hart could not have suffered the same loss as Insight would have suffered. ACER also argued that Dr Hart had not established any method for valuing any chose in action he had assigned. It accepted that if the appeal were allowed, a possible consequence of that argument being accepted was that the question of general damages might have to be remitted to his Honour to assess, if the Full Court were unable to do so.

18    Next, ACER argued that the primary judge erred in concluding that the assignment of Dr Hart’s chose in action for its infringement of his copyright was legally effective. It submitted that Hart Cultural Lodges had no genuine commercial interest in Dr Hart’s chose in action when the 2011 Deeds were made and so the assignment was unenforceable.

19    Finally, ACER challenged his Honour’s finding that Dr Hart, and not the Department, owned the copyright in the SOHQ. ACER invited the Full Court to consider piecemeal portions of Dr Hart’s written and oral evidence, as recorded in the transcript, together with extracts from some of the contemporaneous documents in evidence. ACER contended that this selection of evidentiary materials showed that Dr Hart had made the SOHQ to meet the needs of the Department and as part of his contract of employment. It argued that his Honour erred by placing weight on and accepting some parts of Dr Hart’s evidence rather than basing contrary findings on other parts of his evidence and some contemporaneous documents that could be read, on one view, to support ACER’s contention.

20    ACER’s challenge essentially came down to the following argument in its written submissions. It contended that Dr Hart’s evidence of the relevant conversations concerned events that had occurred 20 years earlier and was both uncertain and contradictory:

    if the primary judge relied on the conclusory statements that an agreement had been reached contained in Dr Hart’s affidavits, then “such reliance was unsound”;

    the evidence of those conversations did not support the inference that copyright in the SOHQ would vest in Dr Hart “instead of his employer”;

    Dr Hart’s written and oral evidence was “entirely consistent” with the Department having ownership; and

“Dr Hart’s oral evidence, which ACER submits should carry greater weight than his affidavit evidence, was that at the time of the relevant conversations the SOHQ had not even been conceived. Accordingly there was no subject matter for the contractual term that was found to have been agreed. That is, the conversation(s) that were relied on were too early in time.

There was no evidentiary basis for any finding by the trial judge for Dr Hart having had his ‘own purposes’ for developing the SOHQ, and accordingly that cannot provide a basis for any inference of agreement on the relevant contractual term.

ACER submits that the broader evidentiary framework as to the nature of Dr Hart’s employment, summarised above, makes it objectively unlikely that his employer would have agreed to him having ownership of a survey tool being developed on its time, using its resources, and to address an identified ongoing need for such a tool.

Finally, the documentary evidence, which is relatively contemporaneous to the conversation(s) relied on, support a conclusion that no agreement was reached that copyright in the SOHQ was to vest in Dr Hart.”

(emphasis added)

Consideration

(1)    Were Insight Holdings and Insight entitled to greater than nominal damages?

21    In Bailey v Namol Pty Limited (1994) 53 FCR 102 at 111C-G, Burchett, Gummow and O’Loughlin JJ quoted with approval what Bowen CJ in Eq had said in Interfirm Comparison (Australia) Pty Ltd v Law Society (NSW) (1975) 6 ALR 445 at 446-447 concerning the width of pecuniary remedies available in infringement cases. Importantly, Sir Nigel Bowen said (6 ALR 445 at 446-447):

“Furthermore, the circumstances in which breach of copyright arises vary widely. Various measures of damage appropriate to the particular circumstances have to be applied. This was recognised when the Copyright Act 1968 was passed (see ss 115, 116, and 122).” (emphasis added)

22    Given the common position of the parties that it was not contended at the trial that Dr Hart had no claim for general damages, we are satisfied that his Honour erred in making that finding. Indeed, in our opinion, it should be inferred that Dr Hart would have acted, consistently with his activities at all relevant times, so as to procure a contract for Insight with ISV in respect of the project of the kind the primary judge found that Insight would have made to generate the $130,000 which his Honour found it would have earned as its profit. Dr Hart had worked to ensure that Insight exploited the SOHQ and its expertise under the informal, oral or bare licence that he granted it, or treated it as having had before the formal, exclusive licence granted on 1 October 2009. The Court raised this scenario with counsel during the course of argument. Neither side suggested that Dr Hart would have sought to exploit his ability to utilise the copyright differently to his and Insight’s ordinary course of business over the years in issue, as established in the evidence at the trial. Indeed, that is the basis on which his Honour made findings that Insight would have secured some form of contract with ISV that would generate for it a profit of $130,000.

23    Dr Hart had allowed Insight to exploit his copyright in its business activities for the whole period of ACER’s infringement. There is no reason to suppose that he would have acted differently in respect of any dealing with ISV in respect of the project, had ISV dealt with Insight rather than ACER. For that reason, it is safe to infer that Dr Hart’s damage was the value of the loss of his ability to cause Insight to enter into a contract with ISV that would have generated the profit of $130,000 for Insight as found by the primary judge. Neither party at the trial asked his Honour to assess, as an alternative, the value of the loss of a chance to make such a contract.

24    An important component of this identification of what Insight’s damage would have been, is that Dr Hart wanted Insight to benefit by receipt of the profit. That is different to the characterisation urged by ACER that his damage was what might be received by him after Insight, Insight Holdings and the interposed trusts had received and made sequential distributions. Dr Hart used his efforts in exploiting the copyright to benefit Insight.

25    The donor of a gift that is destroyed by a wrongdoer before it is enjoyed by the intended recipient is not compensated by an award of nominal damages because he or she was giving away the property. Rather, the proposing donor would have the value of what he or she intended to gift. If such a gift were to be made after the destruction, the donor would have to replace it. Dr Hart was engaged in exploiting commercial activities relating to the SOHQ through his interests in Insight Holdings and Insight. There was no submission that the bare licence he had granted to Insight was a gift or not part of a commercial arrangement. Damages are intended to place the injured party in the position he or she would have been but for the wrongful act or omission. Here, that would be a sum sufficient to enable Dr Hart to have caused Insight to earn a profit of $130,000.

26    Accordingly, the appeal should be allowed. The difficulties in calculating how much more than $130,000 in Insight’s hands Dr Hart would have had to receive to cause Insight to receive that sum might make it convenient for the parties to agree that an award of $130,000 as general damages, in lieu of the nominal sum of $10, is appropriate. However, if the parties do not agree that $130,000 is the appropriate award of general damages to make to Insight Holdings and Insight, the Full Court will need to hear further argument on how the value of Dr Hart’s right should be quantified or whether that question should be remitted to his Honour.

(2)    Was the assignment to Hart Cultural Lodges valid?

27    In Trendtex [1982] AC 679 at 703 Lord Roskill explained, in obiter dicta, that an assignee of a cause of action will not be prevented, by principles applicable to maintenance or champerty, from enforcing it, if the assignee either has acquired a property right and the cause of action was incidental to that right or has a genuine commercial interest in the enforcement of the assignor’s claim. However, in Campbells Cash & Carry Pty Limited v Fostif Pty Limited (2006) 229 CLR 386 at 431-432 [81]-[82] Gummow, Hayne and Crennan JJ, with whom Gleeson CJ agreed on this issue (229 CLR 386 at 431 [1]), observed that in no case had maintenance or champerty been held to be a defence to, or reason enough to stay, an action that had been maintained. They observed that in Trendtex itself the proceedings were not stayed and that the House of Lords had not found a defence based on the contractual provision that was impugned as “savour[ing] of champerty” and involving “trafficking in litigation” (229 CLR at 431 [81]). The impugned clause had permitted sale of a cause of action and was found to be contrary to public policy.

28    A holding company has a legitimate commercial interest in the enforcement of a cause of action obtained by a company which had been one of its subsidiaries when the cause of action arose, even though the ownership of the subsidiary subsequently changes: Deloitte Touche Tohmatsu v JP Morgan Portfolio Services Ltd (2007) 158 FCR 417 at 426 [56]-[66] per Tamberlin and Jacobson JJ. Their Honours held that the commercial setting for an assignment of a cause of action is relevant to whether the Court can ascertain a legitimate or genuine commercial interest that exists to support the transaction.

29    Here, as the primary judge found, the commercial setting amply supported the genuine commercial purpose of Dr Hart in ensuring that interests with which he was closely connected should benefit from the exploitation of his copyrights in the SOHQ. His Honour was correct so to find.

(3)    Did ACER establish that the primary judge erred on the ownership issue?

30    ACER’s contention that the primary judge should not have found that Dr Hart owned the copyright in the SOHQ but rather that the Department did, depended on its references to parts of the record of oral and documentary evidence before his Honour. Those references were taken piecemeal from that record and did not attempt to reproduce the entirety of the evidence relevant to the fact-finding that his Honour had painstakingly undertaken in weighing the competing possible inferences that is evident from his reasons. Importantly, ACER did not point to where, in the primary judge’s reasons, his Honour supposedly erred except in his final conclusions on this issue.

31    The documentary evidence on which ACER relied to challenge his Honour’s finding on ownership of the copyright was equivocal or ambivalent. His Honour contextualised it in a manner that was open to him having regard to his findings that he arrived at as to the credibility of the witnesses. Even if other inferences could have been drawn, the onus was on ACER to demonstrate that his Honour erred in making the finding that he did. In Coal and Allied Operations Pty Ltd v Australian Industrial Relations Commission (2000) 203 CLR 194 at 203-204 [14] Gleeson CJ, Gaudron and Hayne JJ said:

“Ordinarily, if there has been no further evidence admitted and if there has been no relevant change in the law [Victorian Stevedoring and General Contracting Co Pty Ltd v Dignan (1931) 46 CLR 73 at 106-108, per Dixon J.], a court or tribunal entertaining an appeal by way of rehearing can exercise its appellate powers only if satisfied that there was error on the part of the primary decision-maker [Allesch v Maunz (2000) 203 CLR 172. See also CDJ v VAJ (1998) 197 CLR 172 at 201-202 [111], per McHugh, Gummow and Callinan JJ.]. That is because statutory provisions conferring appellate powers, even in the case of an appeal by way of rehearing, are construed on the basis that, unless there is something to indicate otherwise, the power is to be exercised for the correction of error.” (emphasis added)

32    An appellate court that has not seen or heard witnesses giving disputed evidence can sometimes discern error in a trial judge’s credibility-based findings. However, in such cases the appellate court proceeds on the basis of the record (and, if there is any, fresh evidence that has been admitted in the appeal) as Gleeson CJ, Gummow and Kirby JJ explained in Fox v Percy (2003) 214 CLR 118 at 125 [22]. No fresh evidence was adduced, and this Full Court has not been equipped with the full record below relevant to the crucial findings that ACER challenged. This is not a case where the facts on which ACER relies to overturn the primary judge’s findings were fully found by his Honour or undisputed (214 CLR 118 at 126-127 [25]-[26]). Nor did ACER submit that his Honour’s impugned findings were glaringly improbable or contrary to compelling inferences in the case (214 CLR 118 at 128 [29]).

33    Moreover, ACER’s arguments did not engage with the primary judge’s findings that, first, the SOHQ was not made by Dr Hart “in pursuance of the terms of his … employment” by the Department within the meaning of s 35(6) of the Act and, secondly, the SOHQ was not made by, or under the Department’s direction or control within the meaning of s 176(2).

34    Dr Hart had been employed by the Department in May 1990 to evaluate its existing “Whole School Approach” program. That was designed to deal with the problems of teacher stress and resulting Workcare compensation claims by teachers. During the course of that work, Dr Hart perceived that the Department’s existing survey tool and methodology for this program focused exclusively on negative experiences and, thus, was inappropriate. Contemporaneously with his work for the Department, Dr Hart was in the course of pursuing the degree of Doctor of Philosophy part-time. That study involved research into police stress.

35    Dr Hart used two “breakthrough ideas” from his PhD work to develop the SOHQ. He did this with Mr Conn under whom he worked in the Department. Dr Hart and Mr Conn, who had died before the trial, co-authored an article on this topic. In essence, Dr Hart conceived that research into psychological health and stress should examine not just negative experiences but the more complex relationship between those and positive experiences. Thus, as the primary judge found, he pursued his theories while working for the Department and began applying them in the development of the SOHQ. This factual background was evaluated in depth in the primary judge’s reasons before he arrived at the conclusions set out at [14] above.

36    One powerful consideration that supports the correctness of his Honour’s conclusion that Dr Hart owned the copyright is that, as the primary judge found and is unchallenged, for the last 20 years the Department never asserted ownership and accepted in its dealings with him that Dr Hart was the owner. ACER’s challenge to his Honour’s findings involves the concomitant conclusion that the Department at all times had acted under a mistake. This included the persons who were involved in the evolution of the SOHQ when Dr Hart worked there prior to May 1992, all acquiescing and allowing him to exploit what they should have appreciated was the Department’s property in the SOHQ. That scenario is improbable and undermines the error asserted by ACER. While those persons may not have been intellectual property lawyers, they were professionals and included the authors of learned academic papers. It is unlikely that they would all have failed to raise any concern that Dr Hart was using the Department’s property without permission, particularly in the years immediately following the cessation of his employment by the Department. This ground of the cross-appeal fails.

Conclusion

37    For these reasons, the appeal should be allowed and the cross-appeal dismissed. The parties asked that they be allowed to make submissions as to costs once the outcome of the appeal and the cross-appeal were known. As noted above, the parties should also consider in their submissions what orders should be made to give effect to the finding that Insight Holdings and Insight are entitled to greater than nominal damages.

38    In the event that the parties are unable to agree on orders to give effect to these reasons within seven days, then Insight Holdings and Insight should file and serve the draft orders they seek and written submissions of no more than five pages within a further two working days and ACER should file and serve its suggested draft orders and written submissions of no more than five pages within seven days thereafter. The submissions should indicate whether the parties seek to make further oral submissions. The Court will then consider whether it will make final orders on the papers or if it requires further oral argument.

Associate:

Dated:    13 June 2013